 سلام علیکم کا باتینہ حضرات، بسیم حسن ویلکم سیوڈ to the virtual university of پاکستان and lecture number 26 of brand management MKT624. The discussion at hand is brand portfolios. In the previous lecture that was talking about the number of brands that should go into one portfolio. The answer that we have not yet gotten, there are certain factors which are to be considered before we can really determine what should be the number of brands to the one portfolio. Off of that matter is the number of brands in different portfolios. Let me tell you at the beginning of the lecture that there are no hard and fast rules as to how many brands should form the one portfolio. It basically is a function of the brand's strategic role. We have got to carry out an analysis of what the function that the brand plays very strategically within the category and if you bring that into a sharper focus than I would say into the segment where it belongs. We all know that the market segment can be classified as segmentation by customer type or segmentation by customers expectations and the segmentation by product. We keep talking about segmentation by the pricing and by demographics and by quality and all those factors. But the factor of the matter is that if we have a very clear understanding of the product as the segmentation customers expectations as the segmentation and the customer type as segmentation then all other factors fall very much in place. To further elaborate on this point I would say that the quality and pricing, the two basic determinant of the buying criteria on product customer are a function of these factors because it is the pricing which you have decided by taking into account the kind of product you have introduced or managing the kind of customers you have within the target market. You know that through your brand based customer model and customers expectations which again could be the help of that model that you know about those are. And if you are very mindful of all these factors there is no way that you will go wrong while working out the pricing strategy and while working out the quality parameters. So in other words quality and pricing automatically fall in place and they become a function of segmentation that I have just talked about. Not all the brands within one line extension or within one area of brand extension can satisfy all the needs within different segments of the category or in different categories for that matter. We are going to take a look at the positioning grid or the positioning map that we discussed in one of the previous lectures. And with the help of that you will have a very clear understanding of why the one brand cannot satisfy different needs within different segments of the market. And why is it that you have to have different brands in order to satisfy different needs or in other words in order to reach different customers. It basically is because of the fact that different offerings have different positions and the not one position can cater to all the needs within different segments and therefore we need to have different positions. When we have very well crafted different positioning strategies those automatically correspond to the differentiation and hence segmentation which means that we are trying to fulfill needs in various segments of the market. So depending on the corporate objectives, the intensity of competition and the amount of resources that the company has to itself it makes the decision about the number of brands it is going to have within one particular market. And it also can be said with confidence that deciding upon the number of brands to the one portfolio is a multi-stage process which leads us to decide very analytically and in a graduating manner about the accurate number that we should have to the one portfolio. The reason I say the multi-stage process because we are dealing with segmentation and we have a history in terms of the brands that we have been managing and also in terms of the market that we have been managing in relation to our company and our brands. Now we started in one particular segment and we started responding to evolving needs and in doing so that we created new segments or we identified new segments that we defined the boundaries and pushed the boundaries and then decided where we should be and where we should not be. Therefore it is a process which is spanned over quite a long period of time which really makes us graduate from one situation to another and hence decide how many brands we should have. So in other words it is not that somewhere along the line that we think to ourselves very whimsically that we should be having like three brands here four there and five there. It is not like that. A multi-stage process has a rationale to it and it is based on certain strategic considerations which have been popping up all along the scene and which you also envision for the future to come up and you get ready to meet the challenges presented to you and the company through those needs. So we can again conclude which we keep concluding that all the good marketing strategies and all the good marketing positions basically stem from two fundamental areas never forget that fact and those fundamental areas are the areas of segmentation and differentiation. They are correlated. I mean could one just cannot exist without the other they are not mutually exclusive because the meaning one does not exclude the other. They always could go hand in hand because when you create a point of difference could you create that because you want to define a new segment and when you enter a new segment or when you define the boundaries of a new segment you are doing that because there are certain points of difference that you want to address and those get translated into needs which you are out to fulfill. The segment variation in terms of the different needs which we have to satisfy and for which we say that we just cannot have one brand or even extensions of one brand lay the basis for getting into different brands and different portfolios. One brand can be one portfolio and another brand could be another portfolio and by the same token that I would say that the one portfolio can have a lot many more brands because within that portfolio you may have extensions meaning line extensions because there are certain needs which are to be fulfilled with a while staying very close to the basic and the core value framework of the brand and therefore you feel the need to get into different segments or sub segments so this basically is a function of so many different factors or in other words because I would say this is kind of a hybrid and the strategy when it comes to dealing with brands sometimes you have just one brand with extensions sometimes you have just one brand with no extensions at all and sometimes you have different portfolios of different brands we are going to talk about those in detail maybe toward the end of this lecture or maybe in the next one depending on how the discussion on the present issue proceeds that is a very interesting and educative discussion and learning that we must speak the very intent to go for anyway back to the number I was talking about the variation within segments why those variations cause us to start thinking about different brand names to satisfy different needs I will try to explain that with a graphical illustration which is going to be very interesting as you can see from this illustration we have four major segments of the market and these four major segments are divided by the two axes one is the price axis and the other is the quality axis the price goes to the vertical and quality moves to the horizontal pricing at the bottom is the lowest pricing and at the top is the highest pricing and same holds true for quality which is the lowest toward the left end of the axis and the highest toward the right end of the axis now let us talk about the lowest segment in terms of the pricing and quality I am talking about the pricing and quality because these two determinants are the functions of the types of customers and customers expectations and the product or service that you offer to sell now taking a look at the bottom most pink quadrant is a segment in itself red dots denote competition and the green one is your brand you are operating into the area of hospitality meaning you own a chain of hotels and the objective at hand is that you want to diversify into different segments and you want to diversify from the top most of the segment which is the blue segment at the right upper corner of the grid now while operating there it goes without saying that you are offering the very high quality and very high pricing from there you are wanting to move downwards I think it goes without saying if you move downwards with the same brand name and a very low price and you also define the quality parameters in a very different way meaning you offer a very different set of promises and carry a different contract for the customers there is no way that you can do all that with the help of the same brand name that you have in the uppermost quadrant which means the upscale segment of the market what is going to happen is the variation within the segments is going to be so large that the customers in the red segment which is the lowest they may not object to the brand name that you are going to offer those customers but customers in the uppermost segment are going to be upset because they will say maybe the brand carries the same quality and they are just overcharging or they may start developing the kind of perception that the brand actually offers the very low quality and the set of promises because they are offering there is definitely something fishy about it and they are going to deteriorate and hence start losing loyalty towards your brand so this is one example of moving downwards and while moving downwards because you have to insulate yourself from the dynamics of the one segment in relation to the dynamics which the marketing practices in that segment offers meaning the dynamics of the situation in the red segment are very different whereas those are again very different when it comes to the topmost segment now by the token I have just explained to you you also can take a very good look at the remaining two segments where we have competition and also we are trying to position ourselves with our presence now again the question is whether we are going to go there with the help of some kind of brand extension or could we are going to go there with a new brand the answer is not very difficult to imagine I think that you should be going there with a different brand name so in other words if you are going to operate in four different segments of the market you should ideally have four different brand names so that those four brand names could have their boundaries to look after they do not really have an impact across the boundary lines in negative terms because you have different sets of promises for all those different segments so we can conclude from this discussion or rather this explanation that the variance in terms of the segments being too broad نیسیسٹیٹ that we go for the different brand names and if the variance within segments is not that broad we may go for some kind of extension but let me give you another example with the help of the same positioning map if you take a look at the uppermost segment of the market in terms of quality and pricing and which automatically gets translated into customer type the expectations and the product you will see that we are trying to position ourselves at two different points within that segment meaning we are trying to have two different positionings now the question is whether we should go for the same brand name in the shape of an extension or we should go for a new brand name when it comes to dealing with the product or the service that we offer at the bottom of this upscale segment you are looking at the segment very carefully and you know that you already have the one hotel which is right at the top and it is right at the top of the market in terms of pricing you are charging a premium price and that's the highest possible price which anyone within the market is charging and the quality in which you are offering also happens to be the highest because it is at the right most end of the quality spectrum the question that flashes into our minds are we going to have the same brand name for the one which is at the bottom of this upscale segment I think the answer should be no because you are going to do something with the price meaning a lower price I don't say a low price but a lower price within the context of this particular segment so this is something very contextual you have to go by the dynamics of this particular segment the question is if you charge the same price let us talk hypothetically of course the customers are walking into the hotel which is X1 and which is the topmost hotel maybe inclined to kind of down trade to the hotel which you have introduced at the bottom of this very segment because they may perceive the quality differential not that much but the price differential whatever it is it may create some kind of perception a very strong perception in consumers mind that that is where they should go because the service that is offered is excellent the environment the total disposition which the hotel carries is so good that there is not much of a difference between this one because it has been used to so we better walk into the one which they have introduced now now if you introduce that hotel with the same brand name this is what is going to happen what I am talking about meaning this is going to win over for the most of the customers who have been loyal to the uppermost hotel if you give this hotel a different brand name what essentially you are doing is you are playing a very strategic and a different ball game what you are doing is trying to contain your competition around that green dot these hotels within the competition are creating a problem for you in the uppermost one of course you have competition there as well but in order to make sure that the upper part of the segment or the sub segment so to say has to be insulated from the competitive onslaught which might stem from the bottom of the segment meaning from the bottom most sub segment of this particular segment you are going right there in order to fight competition there so what you are doing is you are protecting the boundaries of that sub segment by making yourself present there and keeping the competition to your uppermost sub segment insulated and keeping the competition off limits so to say this is what I meant by the variance in the segmentation and I can say that variance in segmentation corresponds to a different positions you have seen it in a very convincing way how different positions dictate different brand names because you with the help of a different position are playing a very different strategic game within the same segment of the category so a multiple brand the policy therefore corresponds to a segmented market where these expectations of customers are not only different but which also are viewed by customers as incompatible I think it goes without saying that the customers within the boundaries of the upscale segment see the other segment which is the lowest part of the market and which may be characterized by a two star hotels do not look at the two segments as being very compatible to each other they look upon these two segments as the very two different markets and they wouldn't like to be categorized as part of the same market so this is what is meant by consumer expectations for the various segments and this is what is meant by segments not being compatible in the eyes of the customers the obvious upshot the result of these strategies is that you can safeguard the boundaries in terms of your sales and not only you can safeguard the boundaries you can increase sales in the segments which basically is the objective that you increase the value either by introducing the same brand by we have extensions or by introducing new brands and develop a portfolio or different portfolios which offer added value and hence make positive contributions towards the overall financial position of the company and that is what the whole game of strategic management is all about so we can say that as a comparison and conclusion that while the brand extensions correspond to a strategy of the market domination and competitive advantage while low cost the multiple brand portfolio is a logical consequence of the differentiation and just cannot coexist with the concept of low costs because it entails rather it compromises economies of scale it has to have a higher level of technical expertise if not a higher level at least a varied levels of expertise in terms of technical know-how and it is something which requires specific sales networks and added advertising budgets we know by now why and how brand extensions try to dominate the market while low costs it is because of the low costs that we like to get into extensions and we know that the chances of success there are higher as compared with entering the market with a new brand a new brand is much more costlier it carries more risk and it involves the more time and energy and the more time and energy more risk and the higher costs they are all a function of what I told you that you need to have specific sales networks but why I would explain that and detail later you need added budgets because you are dealing with different brands you are not dealing with just one brand which has been around and the core of that brand is going to offer a spin over all those that part of the range so the difference between the brand extensions and multi brand portfolios are very clear by now and it is all because of the nature of the differentiated positions that the company may like to occupy within the overall category of various markets that they like to go for different brands now I've been talking about low cost in relation to the brand extensions while I gave you the comparison as part of the conclusion but this does not mean that managers who are handling multi brand portfolios do not care about costing at all the high costs are the concern of the managers and this is the one factor which never escapes their attention even while operating within huge portfolios where the managers like to cut costs and I can give you examples from different industries for example from the electronics industry what managers do that they like to differentiate toward the end of the assembly line meaning they like to get into some kind of fragmentation in terms of the features maybe also in terms of benefits but more so in terms of features and less so in terms of benefits toward the end of the process what do they do that because they like to kill two birds with one stone and they like to kill two birds in the following way they cut costs because that's one of the objectives that you have to produce very high quality by remaining within one costing framework and the other birds which they kill the same stone is that they still maintain a lot of common features within the basic product by way of using the same assembly line and fragmenting only toward the end of the process when they go for a lot of common features they save costs and the save costs by way of reaping the benefits of the learning curve the concept that you must have learned in one of the courses maybe operations management or the one so it is the learning curve which really attracts or induces the managers to go for a lot of common features the most important point to consider here for the managers is if they are handling different portfolios meaning if they are producing different brands which are supposed to satisfy different needs within different segments then they are not to bring in the common features to the point of undesirability there has to be a level of common features which is a desirable level up to which none of the consumers or customers are going to object but if it is a case of just changing the brand name and just bringing about a few cosmetic changes here and there then the customers they definitely are going to the stage they evolved by saying well this amounts to the proliferation which is not really necessary because all the features are just about the same and we do not really see any meaningful differentiation so in other words you as the business managers have to maintain a balance between the factor of cost and the factor of maintaining the common features that lays the foundation for different brands and that necessitates for the business managers to go into the area of brand portfolios I think of understanding by way of examples and by way of illustration of the concept of segmentation and positioning makes it very clear why is it that we go into creating the new brands after we have started feeling the limitations of the concept of brand extensions now let us summarize all this by way of the positive sides by way of the factors that really the business managers to get into the multi brand portfolios as a summary we can say it is the collective play which really makes it very important for the business community as a whole to go for the different brands it is not only on part of just one company it is on part of all the companies within the market meaning within one particular market there are respective roles to build up the market and like it is said the one brand just can never satisfy all the needs and therefore the one brand just cannot form the whole market now in order for the market to be vibrant in order for the market to be very diverse you have to have different players within the category who are playing their respective roles in relation to the positions they create in other words which they are out to satisfy so it is the collective and a huge combination of the satisfaction of needs on part of all the players that the total market is formed in other words everybody is out to communicate with the customers when everybody is communicating with his customers we are all communicating with the total market and it is the aggregate effect of that communication of that awareness that the people really get exposed to all the brands and all the products that are available on the market so combined advertising and communications on part of all the players develop a combined view of the total category so in other words it is the multiplication of different players because the way it makes the market very vibrant and their presence from that point of view becomes very important from this we can talk about another factor which is the factor of market coverage when we have so many different players playing their new roles within the category they are of course going to cover the market in a better way the whole market just cannot be covered by just one brand even if the brand has so many different extensions that's very important to keep in mind the market coverage is achieved with the help of the multiplication of players because it is on part of those different players that they try to reach so many different markets you are strong in this particular market and the else is strong in another market and so on and so forth and this is how you cover the markets this of course doesn't mean that you leave one market for the other and the same happens with the other player and the same keeps happening down the line now that you compete each other in all the major markets but there are certain markets where not every player has the means to reach so the overall coverage is the market in terms of geography and also in terms of the customer type also in terms of the customer's expectations and also in terms of different differentiated products that is done for the help of so many different players so that is what the factor of the market coverage is all about now let me add something here that the market coverage that can also be achieved by one player to a very large extent you might start questioning how come that is possible well if one player is a major player and is very resourceful that player might like to come into the same market where two or three different brands and this precisely is the concept that I've been discussing so far it is because of the multiplication of presence of different players if one of the players takes on so many different roles meaning if that player wears so many different hats in so many different situations the player is going to have the character of a multiple player but basically that points down to the factor of coverage which is possible only if you have so many different players who form that market so in other words yet again you can say that there are so many different price quality indexes and not all the price quality indexes meaning PQIs can be satisfied by just one player there is a limit to the ability and capability on part of just one player to do whatever that player can do within one particular market and like to say there is only so much that you can do yet another factor which really motivates managers to get into multiple brand policy and to get into multiple brand portfolios that it keeps competition away and it gives competition a very effective fight let me take you back to the positioning map in which you saw the positions which you would like to occupy as the owner of a hotel chain that is wanting to move into so many different segments right from the top most meaning 5 star of the hotel, of the chain to the lowest possible one which is like the 2 star hotel chain and when you are making an entry into the segments where you were not before you are doing that with a different brand and why you are doing that you know that when you are doing that you are giving competition an effective fight and keeping competition off limits in relation to your strong brands which are other brand names you keep competition involved in one particular area you define that boundary of the competitive fight and keep competition busy there and that is how you keep the competition out also if competition is contemplating to get into the upper most segment of the market which is the 5 star of the market and you keep that competition very involved at the lowest at the end of that particular segment maybe you are giving the competition so much hard fight that competition is out of resources to start implementing the strategy of going into the upper most to the 5 star category or the sub segment because you are draining your competition off the resources which the competition had to themselves and now your competitors think it is not really very pragmatic to move out of that sub segment they would like to consolidate their position there by fighting you there first before they move out another factor that goes into the favor of the multi brand policy is that it protects the image of your core brand all those brands which are successful and which carry a very good image a new brand which is successful does not hurt the image of the existing brands conversely if it was an extension and if it wasn't successful it would have some negative implications for the brands which have been existing before the creation of this extension so this is the way it really protects the image of the strong brands and it therefore is an inducement for the business managers to start considering this factor before they make the decision whether to extend or to get into something new yet another factor is that the multi the brand portfolio is very well welcomed by the retailers meaning it responds to the retailers in a very effective way why because different retailers in different parts of the market cater to the needs of different customers they carry different kinds of brands because they invite together to their stores various customers from various demographic backgrounds and as a matter of fact the identity of the retailers is characterized by the kind of brands they carry it is because of that factor precisely that you like to go to one of those supermarkets which has the highest level of image because you say well that retailer sells the top most brands and you do not like to go to a supermarket or a small retailer that does not really sell those brands meaning those upscale brands so the distinction between the retailers is the obvious automatically that there are different levels of retailers and those levels cater to the different levels of needs of different levels of customers in terms of their demographic background a retailer and a middle class area of one particular market is very different from a retailer in the upscale area of the same market so it is because of that factor that all the retailers have got to be stocked with different kinds of brands if you have just took the one brand even with extensions that is not going to help retailers because of its stocking and all that and the market is not going to be effectively covered as a matter of fact the character of retailers also the supplements the factor of the market coverage that I talked about earlier and it also supplements the factor of the multiplication of the retailers within the category because they all have implications right down to the retail level and that is why I said that the brand management is not complete unless it takes care of all the stages right from the version down to the point because your product or your brand is going to be sold it has to communicate it has to look after and take care of all the stages of all the phases that fall between those two ends another factor which makes it very essential for the business managers to go into the multi-brand portfolios is that the multi-brand policy that takes over with extensions feel limited as a matter of fact the multi-brand policy emerges from the limitation of the brand extensions the one brand with extensions just cannot fulfill all the needs if the one brand wants to fulfill all the needs of all the segments within the category then consumers are going to be confused how consumers offer that matter customers are going to be confused can be explained with the help of an example within the area of electronics just look upon yourself as a manufacturer of electronics making televisions for example you have to fulfill the needs within the different segments well if you carve out for yourself a path which is just one brand one segment of the policy and strategy that's something else but that is not what happens in the marketplace because if you confine to that you're going to be attacked by your competitors and you're not going to feel insulated the only feeling that makes you feel insulated is that you get into other segments also so that you fight everywhere and keep competition busy when everyone keeps busy everyone else this is how everyone feels kind of secure so you are a manufacturer of electronics making televisions and you want to address needs within three different segments one segment is which just does not care about the pricing factor because this segment is very highly conscious of the technical innovations no sooner than an innovation takes place customers within this segment like to go to the market and buy a new set of television you are dealing with a very different segment altogether the other segment is which is economy and travel this is the kind of segment that thinks to themselves that we are basically concerned about the features meaning the basic features and as long as the television serve the purpose for the family whether we don't care about the technical innovations because they keep taking place every second month so does that mean that we are going to buy a new television set every second month so we shall rather stick to the one that we have until this really wears out so you are dealing with a different segment altogether and your strategy here is going to be very very different meaning a different statement of positioning flow out of which all the strategies relating product brand name communication everything another segment which you are dealing with is the one which wants to have a very reliable and durable product this again is a very different segment from the ones that you have been addressing before I mean technical innovations oriented price oriented and now you are dealing with who are durability and reliability oriented so you should be building a brand or you should be building a product in the first place that is very reliable and you are going to build in certain features which are going to address that particular need and then that is going to address that particular positioning and then you are going to have a compatible campaign which is going to offer a compatible the kind of communication because you talk about that particular position and that position is the position of reliability and durability so look at these three segments and the ones you have really understood the essence of the three segments with a different with a shape and form that you are going to be convinced that you need to have three different brands now those three different brands are going to be produced by one manufacturer who is you and you are going to take on the role of a manufacturer that is kind of a multiple player offering with a multi brand portfolio to the category to the overall category of televisions so this is how a multi brand portfolio works as a conclusion we can say that you have to relate different features and different benefits to different customers and you do all that with the help of segmentation and differentiation and this once again proves the fact and substantiates the statement which I keep making from time to time that all the marketing strategies flow out of two fundamental areas number one segmentation and number two differentiation having said that let us now also take a look at the constraints which the multi brand portfolio may have because everything also has a negative side first of all while we get into a multi brand portfolio we have got to make sure that the brand that we are going to introduce does carry a very clear meaning you will recall the factor of the cost savings this factor that never leaves attention of business managers whether they are dealing with extensions or they are dealing with multi brand portfolios they are always out to consider where they really can economize while economizing you must avoid the point of undesirability in terms of differentiation or in terms of the features which may not be too different from another brand which you are offering another constraint which has to be taken into very serious consideration because customers otherwise are not going to accept the new entry which is going to go down the history of marketing as a failed brand because it was not very meaningful another constraint which the multi brand portfolios have always remain a prime objective of all the businesses all the businesses have to keep costs to the within a certain range and while doing so that they get into so many similar features relating different products and like I pointed out earlier those similarities that they should not get to the point of undesirability meaning similarities that they must not expose themselves through the point of undermining the brand's capital having talked about all the good points and the constraints relating the multi brand portfolios we are now all set to make the decision what is it that we should be doing because we are now at a stage because we have to develop the strategic model the way we always do at the end of every concept at the end of every stage so going just by the token of the model that we developed toward the end of the brand extensions we have to look for the opportunities in both areas we have to analyze and assess the potential each of those offers and then we have to go for the brand strategy which is a true reflection of just about the rightmost positioning that we want to create for the brand by the rationale meaning the reason for being and then we get into a very pragmatic framework of executions and tactics with all this the multi brand portfolios stand concluded and we now have a very good understanding of what kind of brand could we should introduce line extension brand extension or we should develop a portfolio and what should be the numbers and all that let me talk in the next lecture about the strategies that we must have at work in order to decide what is going to be just about the right portfolio and after that we stand absolutely concluded with the kind of brands that we should have thank you very much I look forward to seeing you in the next lecture