CMOs: Getting rid of brands won't necessarily make your life any easier ~ Brand Mix

Wednesday, January 28, 2009

CMOs: Getting rid of brands won't necessarily make your life any easier

Photo: cobalt123 (Flickr)

In these troubled times, as companies see their sales slump and dark days ahead, marketers are battening down the hatches, eliminating non-core businesses and looking for ways to cuts costs and save money.

For CMOs such times, hard to deal with as they are, nevertheless provide an opportunity to push for changes that otherwise might be impossible. For those that have been frustrated trying to manage a complex portfolio of brands and products in a organization with independent-minded business units, this may seem like the perfect time to strike. What better chance to kill these two efficiency-draining birds with one stone? How much simpler, organized and controllable life would be with just one brand, run from one place, run by one person? If you are a CMO tantalized by this opportunity, hold on there just one minute. Here are a couple of things to bear in mind.

1) Fewer brands = less loyalty and less brand equity: Neil Morgan and Lopo Rego published the results of a 10-year study on brand portfolio strategy in the January 2009 edition of the Journal of Marketing. Their examination of 72 Fortune 500 companies concluded that brand portfolio strategy has a significant impact on a company's financial and marketing performance. The study shows that, while a small portfolio of brands has important advantages over a large portfolio (in terms of both marketing spend efficiency and market share), these advantages come at the expense of customer loyalty, brand equity and consistent cash flows. Efficiency has its price.

2) There are better ways to solve organizational challenges: David Aaker was interviewed by strategy+business about his new book: "Spanning Silos: The new CMO imperative." In the interview, Aaker makes the case that siloed marketing, where individual business units do their own thing, is inefficient and incompatible with an era of globalization. But he also points out that breaking the silo mentality can be a big challenge especially in companies that have developed a strong, decentralized culture, a distrust of centralized marketing and have incentive schemes that reward silo behavior.

As Aaker points out, typically an aggressive move to take authority away from silo managers is a recipe for failure. But in these economic conditions, that direct approach may have a better chance of success for the brave of heart. Otherwise, he recommends that CMOs find less threatening ways to boost communication and cooperation.

What I think is certainly not the right approach is to use brand architecture to try and solve such intractable organizational issues. Given that reducing the number of brands generally leads to a more centralized and standardized marketing system, it's tempting to go this route just to break down silos and get better control of marketing activity. This might work from an internal, organizational perspective but it's also likely to lead to sub-optimum brand strategies that make serving customers needs that much more difficult.

No easy answers, I'm afraid.

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