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Mark Ritson: Google, Coke and John Lewis mark a big week for brand architecture

By June 29, 2018No Comments

ritsonOf all the aspects of brand management that are important but undervalued, brand architecture must surely top every marketer’s list. Most companies have more than one brand, but an amazing proportion of firms rarely give enough thought to how many of them should actually exist and the manner in which these brands should, or should not, be combined or kept apart when presented to customers.

At first sight the topic of brand architecture appears relatively unimportant. Surely there are more vital questions than an organisational chart. In reality, getting this part of your brand strategy right has enormous implications for profitability, operations, marketing impact and ultimately the overall success of the company.

It has been an interesting week for the topic of brand architecture. Three of the biggest companies on the planet have just made significant structural changes to their brand architecture and each move tells us a lot about the focus and long-term ambitions of the companies in question.

READ MORE: Asda and Sainsbury’s must balance unity with differentiation to make their merger work

Over at Google, it’s a time for focus and killing. Three years after a house of brands was created with the Alphabet corporate brand as the holding company, Google – the biggest by far of the brands that populate the Alphabet portfolio – is now cutting back.

AdWords, the advertising system that Google created 17 years ago to monetise search is being renamed Google Ads. Meanwhile, DoubleClick – the software that monitors both ads and the users that browse them, which Google purchased 10 years ago for $3bn – will now form part of Google Marketing Platform and Google Ad Manager.

The move is important because it signals a significant change in the way Google presents its services to advertisers. A messy, slightly confusing house of brands has been removed and replaced with the architecture known as ‘branded house, different identity’, beloved of most big consulting firms.

Spreading the fixed costs of a campaign across a broader number of brands is a clever way for Coke to keep promoting brands while spending less money.

Google is now the only brand, with the different identities like Ad Manager or Marketing Platform nothing more than product descriptors. This singular suite of offerings should now work together in a more seamless and customer-focused way. Google now has just one brand to track, position, sell, protect and grow.

Google’s move away from multiple brands and towards a single branded-house approach is evidence of the more general trend in marketing towards operating fewer brands. There has been a harmful fallacy among many companies that more brands will make you more money. That’s true, but only if you have the competence and investment levels to run that many brands and only if you look at top line revenues. If you are interested in profit, growth and strategic efficiency, fewer brands usually offer very much more.

The benefits of brand-killing

I’ve spent much of my consulting life working with companies not creating brands (I leave that to the upbeat, useless marketing firms) but removing them. I love killing brands but keeping the sales intact for the client. The result is more profit, more focus and the chance – ironically – to then acquire or develop new brands. Killing brands, it turns out, is a fantastic strategy for growth.

A year ago Coca-Cola made that very same decision and removed sub-brands like Zero and Life, making them all into product variants under a branded-house structure in which the marketing investment would focus on the Coke brand.

While the brands within the company’s portfolio are not changing this year, this week did see a subtle change in how they will be promoted this summer. Coca-Cola will run a summer campaign with a series of experiential prizes. Nothing new there. But the offer will straddle not only Coke but also several of the company’s other beverage brands. You will see the competition advertised on Sprite, Fanta and Dr Pepper cans as well as Coke.

The move is unusual. Traditionally the big players like Coca-Cola, PepsiCo, Unilever and Procter & Gamble operated house-of-brands structure and were steadfast in their separation of the different brands in their portfolio. Separate teams used to run each brand and that resulted in distinct marketing campaigns and often open competition between sister brands.

But the world of FMCG marketing is – to use the inevitable but uncomfortably accurate cliché – now disrupted. First came the threat of private labels with their branded-house structures and lower price points. Then came the digital shift and new channels of distribution. The barriers to entry for smaller, independent brands also lowered as marketing communications added less expensive, more accessible digital options. Worst of all, the standard stimulants of the 20th century – sugar, corn syrup, caffeine – became increasingly unpopular among market segments, causing significant declines in market demand.

READ MORE: P&G’s Marc Pritchard on protecting brands against the threat of ‘mass disruption’

The result for a company like Coca-Cola is the biggest and most threatening change in its history. Everything that made Coca-Cola a winner in the 1980s now threatens to ruin the company as we head into the third decade of the 21st century. No matter how good the marketing and sales teams at Coca-Cola, there is no way they can do anything except endure a gradual decline in their carbonated beverage portfolio in the coming years. Not death, but decline. Unavoidable decline.

While the company looks for diversification, Coca-Cola must find a way to protect the profits of its existing offer and keep their brands uppermost in the minds of target customers. This summertime shared promotional strategy offers one such solution. Advertising is a significant cost for Coca-Cola and spreading the fixed costs of the campaign across a broader number of brands is a clever way to keep promoting brands while spending less money doing it.

Finally, and perhaps most mysteriously, we have the announcement that two of Britain’s biggest and most popular retail brands are forming a closer, more transparent bond. John Lewis and Waitrose will both change their names and add the suffix ‘& Partners’ to their names in September.

Both John Lewis & Partners and Waitrose & Partners are owned by the same company, John Lewis Partnership (JLP). According to the holding company the name changes signal a new strategy to strongly differentiate both retail brands in the face of declining high streets profits. As yet, and it is early days, the move is mysterious to say the least.

In brand architecture terms JLP is moving from a house of brands, in which almost no consumers would have drawn a link between Waitrose and John Lewis, to an endorsement structure in which the two companies’ linked names ensure that the brands are now more closely and explicitly aligned in the minds of target consumers. What that link delivers for Waitrose and John Lewis is yet to be revealed but it’s a big strategic move and clearly signals the leadership team at JLP are up to something.

So, an interesting week for brand architecture. One company was killing, one was sharing and one was linking. Only time will tell if these structural moves actually pay off.

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