I’ve written pieces before about how, especially in a B2B space, the value should be built into the mother brand, not the sub-brands or products. (Let’s leave aside the issue of whether they’re brands or products - that’s a whole other topic). What’s on my mind at the moment is just how difficult it seems to be for organisations to grasp the nettle, manage their portfolios on the front foot and kill off or merge the products that aren’t needed.
In our work, there always seem to be far too many products. Either from legacy acquisitions or from marketing making new names and logos — but the key challenge seems to be doing something about it. I’m constantly surprised at the collective lack of understanding, urgency and action from organisations around the potential solutions. I would have thought they’d be jumping at the chance to make some changes - to fix the leaks - because to me it’s obvious what the impact is of taking no action. They bleed value.
You can have the best brand in the world; but if your product range is confused, sprawling and duplicated, your end-user will be looking to buy from a competitor who just makes it easier. It’s a complexity tax that your customer shouldn’t have to bear.
I appreciate that I’m the one with the objectivity and that these things may not be as obvious when you’re inside the client organisation, but I’m not convinced they’d be as unengaged if one of their machines on the production line was only running at 50%. A man with a bag of spanners would arrive pretty quickly to get things back on track.
So, they’re hidden from view, not revealing themselves cleanly in a P&L or a balance sheet. The challenges are seeded well before they manifest themselves, and they grow organically, eventually reaching a point like an out of control garden that needs tamed and cut back.
So, why does it happen?
I think there’s probably just a lack of thought around it, and this stuff just ‘happens’ to them. It’s not actively managed. Very few B2B think ‘we need to have a conscious position on our brand and our range architecture’. Indeed quite a few don’t think they need to bother. And that’s fine too - when things are going well. But things change and when you get to a point that you can’t navigate your way through your own portfolio, let alone consumers, you have a problem.
Silos in organisations like to create new things. Different parts of the biz operate in bubbles. And it’s messy. On the one hand, it’s a question about brand architecture, and on the other, it’s about selling products to customers. This essentially spans three divisions within an organisation: product development, sales and marketing. They’re all competing for influence and power, and I guess the voice of the consumer can get lost in this struggle. It takes strong brand leadership and an intuitive understanding of human behaviour to solve these problems.
Here are two great examples…
I know it’s trite to tell an Apple story, but they’re always so damn good! So, the story goes that once Jobs returned to Apple, he was supposedly asked by a friend which of the Apple computers they should buy. Apparently, Jobs was stumped. There were just far too many products. Apple had been making products to satisfy requests from retailers, not with a view to the end customer. So, after a few weeks of meeting with the product people, Jobs had heard enough. He decided that there were only two questions consumers should have to ask in order to decide which Apple computer was right for them. Are you an everyday consumer or a Pro? And do you want a portable or a desktop? In one bold move Jobs killed 70% of Apple’s range. A year later, the nearly bankrupt company turned a healthy $309 million profit. It’s that simple. Behavioural economics tells us that the simpler the product range, the easier it is to make a choice, which means you’ll make more sales.
Similarly, the HBR have a great article on this subject and cite the example of McDonald’s. In the early 2000s, their growth was flat, and they attempted to solve this by adding more diversity to their menu - which, on the face of it, might seem like a good idea. But sales remained flat. It wasn’t until they turned the problem on its head and actually simplified things, consolidating their menus and extending breakfast offerings that sales jumped. Same-store revenue increased by 6% and the stock rose by 40%. Turns out that what customers responded to wasn’t more products, but a tighter focus on what they already offered. The underlying trouble had been that McDonald’s had been working from an inside-out perspective: creating ‘solutions’ that worked for their infrastructure and operations. As the HBR article says, the lesson is that growth is best achieved by making things simpler for your customer rather than for you.
Both of these examples are of very well known B2C brands, but they weren’t immune to making the mistakes of adding and adding to their product lines - until they made very little sense. In Apple’s case, it took a visionary leader and very clear thinking about what customers want. In McDonald’s case, it was much more a case of trial and error until they found the right solution. But both these organisations bled value until they finally managed to get the business back in growth.
And that’s the really fascinating thing to me. The experience we’ve gleaned in this space over the past several years suggests that businesses don’t appreciate just how much value they’re losing with poorly organised portfolios. They’re paying hundreds of millions of dollars for companies, but giving no thought to how they should be integrating the brands and product portfolios. Not through malicious intent, but just through a lack of awareness and a focus on other more immediate priorities.
So if you’re fighting with your range architecture, product names or mother brand and think you could do with an objective view - give us a shout. We might not make you $309 million in year one, but we’ll give it go!
Brand architecture is just one of the topics that we cover in our podcast, The Good Round Up. Have a listen to get more of our take on this topic.