How understanding latent customer needs can help develop better brand positioning strategies

In the ideal scenario each brand in the portfolio serves a specific market segment, cannibalization is minimized and maximum brand equity is accrued for the parent company.

Marketers who understand the unmet or latent needs in the market are able to align Brand Positionings within the portfolio with these latent needs, or create new Brand Positionings that stretch the parent brand into new markets. By understanding the nature of Brand Architecture using the Conversion Model™ to determine how equity flows between parent and sub-brands, marketers are able to establish whether sub-brands should be positioned as part or separate to the parent brand.

In this article we present a case study where we measured the latent needs in the market, aligned theses with the current Brand Positionings, and used the Conversion Model™ to assist the strategic thinking behind the Brand Architecture.

First, some concepts

Before we get into the case study as such, an introduction to some of the concepts of brand management is in order.

The Brand Foundation is a useful tool in understanding and integrating information about the brand. One dimension of particular interest is that of Relevance. Relevance is simply the extent to which the brand meets the needs of different groups. A brand may have a product quality, but if that quality is not relevant to the market it is not going to be successful. Following on from Relevance, the Brand Position is the space in the consumer's mind that the brand wants to own (for example, FedEx owns 'Next Day Delivery' ). Brand Positionings, in turn, fall within a broader Brand Strategy that moves the brand closer and closer to the Brand Ambition (the big vision). However, having Brand Positionings without having Relevance is useless, and this is where understanding the latent needs in a market helps.

Why are Brand Positionings and Brand Ambitions important when we think about Portfolio Management ? What happens when you have more than one brand in your portfolio ? Should they all have the same Brand Ambition ? Not necessarily. Each brand should feed into an overarching Portfolio Ambition (the ambition of the parent brand). Each individual brand ambition should operate synergistically to maximise the flow of equity to the parent brand. That's the theory. In practice, it seldom happens.

There are several ways in which companies structure their brands to achieve the objectives of the business strategy. When a Masterbrand architecture is used, equity flows from each sub-brand to the parent brand (because each sub-brand carries the parent branding). When using a Standalone or Portfolio architecture, equity does not flow to the parent brand but remains within each sub-brand (because the sub-brands do not carry any parent branding). In Shared (Endorsed) architecture each sub-brand accrues its own equity, but also allows for some equity to flow to the parent brand. In a Shared (Overbranded) architecture equity flows to the parent brand, but each sub-brand also accrues some of its own equity. Finally, what is called a Hybrid architecture is the most difficult brand architecture to manage. Some brands allow equity to flow to the parent brand, while others keep equity to themselves.

The case study

The parent brand (referred to here as 'Acme Corp' to protect confidentiality) in our case study is an international industrial machine and tool manufacturer. 'Acme Corp' operates in three sectors and owns several sub-brands. Within the tooling sector, the market is saturated with many different competitor brands, large and small. Generally brands in the market lack differentiation and customers use several different brands regularly.

A couple of the 'Acme Corp' brands are co-branded with 'Acme Corp' while the others are branded separately. Each 'Acme Corp' brand competes with the other brands in the portfolio and cannibalization is rife. 'Acme Corp' does not have a strong Portfolio Ambition. Each brand in the portfolio should serve separate groups, but 'Acme Corp' brands actually serve the same customer groups and so cannibalization rife. 'Acme Corp' therefore needed guidance with managing its large portfolio of brands. How should 'Acme Corp' manage its Brand Portfolio to maximise growth and minimise cannibalization?

The main objectives of the study were to: define the Brand Positionings of the different brands in the 'Acme Corp' portfolio: align the Brand Positionings with the latent needs of the different groups in the market to create Relevance: decide which brand(s) within the 'Acme Corp' stable should represent 'Acme Corp' for each customer group (using Conversion Model™); and finally align these brands to strengthen the Portfolio Ambition, rebranding and merging if necessary.

In Step One we used Latent Class Analysis (a form of cluster analysis) to explore the latent needs in the market. The market was divided into four groups based on people for whom (1) Technical Support, (2) Value/Cost, (3) Business Support, and (4) Leading Brand/Value were the most important drivers.

Step Two was to define the Brand Positionings of each 'Acme Corp' brand. The Brand Positioning is often best seen in the brand's advertising. In the absence of other information, the Brand Positioning of each brand in the 'Acme Corp' portfolio was determined by investigating the messages on each brand's website. We then attempted to align the Brand Positionings with the latent clusters we found in Step One.

In Step Three we used Conversion Model™ to determine which brands were healthy and attractive, and based on this analysis of how closely each brand was aligned with the latent needs in the market, we were able to make recommendations as to which brands should be rebranded or merged into the strongest and best aligned 'Acme Brands'.

We recommended that Brand A should be rebranded as 'Acme Corp' to create a synergistic 'leading and technical expertise' offering. That brands B, C and D should be merged and relaunched in an effort to change customer perceptions and improve customer equity, leveraging the 'business support' offering. That brand E be positioned as the 'cost option' brand in the market. And we also suggested that a brand offer of 'Innovation' could be made attractive to customers in the market and Brand W could be positioned in this space.