| Issue 67 |

How do you develop an umbrella brand?

If you are currently managing or considering managing more than one brand in the near future, it is important that you effectively and wisely plan your umbrella brand. Here are several key points that you should take into consideration in order to advance your business goals:
 

• How many brands is your organization capable of supporting?
  • For example: If your marketing budget is 200,000 NIS per year, and your competitors spend an annual average of 100,000 NIS per brand, you will probably be able to seriously support only two brands.

• What are you supposed to do with brands that are not backed by a budget?
  • You can consolidate some of them (under one brand). The weaker brands – the ones that customers are less familiar with – will be consolidated under a stronger, more renowned brand with a better image.
  • Some can be milked – meaning, continue offering these brands as part of your product mix, but do not spend any money on marketing and advertising them.
  • Others can be cancelled – according to the 80-20 rule (Pareto principle) – many brands are not profitable and you should consider discontinuing selling them.
  • Even huge corporations consolidate and optimize their brand umbrella. And if they do it, then you should also focus and concentrate your marketing efforts.

   

• How do you effectively manage your remaining brands – the ones you have a budget to support?
  • If the brands belong to the same category (such as snacks or suits), they should ideally “cover” more market segments, meaning address the needs of various customers with differing preferences. This way, the brands combined will attract more customers, instead of “biting” into each other.
  • For example – the High-Low (Pincer) Strategy proposes an expensive and high-end brand alongside a cheaper and more basic brand. This way, you attract customers away from the other market competitors.
  • Another example – When Pelephone wanted to add a younger customer base to its repertoire, it developed a new brand, Escape, which spoke in a younger, hipper language that appealed to the younger generation.
  • A final example – The General Motors’ (GM) Diversification Strategy, which at its heyday offered six product lines (and brands) of cars in differentiated price categories. The price of each product line was planned so that it would be at the upper margin of quality and price compared to the competitors’ cars in the same category. For example – the cheap line (Chevrolet) was slightly more expensive and of better quality than the cheapest model on the market (Ford’s), and therefore attracted customers that wanted to upgrade their cars. Concurrently, the Chevrolet line was cheaper than cars in the next price category, and attracted customers that wanted to buy a somewhat cheaper car, but of a similar quality to the cars in that category.

   

• Should our organization be presented as a “super-brand”, which contains the other brands that we market?
  • There are pros and cons in turning the organization’s name into a brand in itself.
  • The main advantage is that the super-brand “radiates” its advantages to the brands it contains. For example – Toyota, as a super-brand, radiates reliability to all the secondary brands (the various car models) that it sells.
  • Another advantage is that the super-brand gets stronger each time it is mentioned in advertisements for the secondary brands. In other words, this is very effective marketing that “rides” on marketing the secondary brands.
  • The main disadvantage is that if the super-brand’s reputation is damaged, all the secondary brands beneath it may also subsequently be damaged.
  • An additional disadvantage is that there may be an incompatibility between the super-brand and some of the brands it contains. For example – if the super-brand is geared to conservative customers, it cannot contain a “bold and mischievous” secondary brand.

   

• So when should you develop a super-brand and secondary brands under it?
  • Only when the super-brand (your organization) offers important and unique benefits and values, and on the condition that these values and benefits fortify the values and benefits of the secondary brands (and do not conflict with them).
  • For example: Unilever, which is a global brand, branded itself around the value of “vitality”. This value is compatible with and supports all the various food and cleaning brands that Unilever markets. In this case, Unilever’s various secondary brands (Lipton tea, Blue Band margarine, Knorr soups, Dove soap, Axe deodorant, etc.) are independent and separate. The Unilever symbol only appears on the packages but is not a part of the secondary product’s name.
  • Another example: Virgin, a super-brand, offers a clear benefit – Breaking the rules for you (our client). Behind this super-brand is a group of companies, all called Virgin, but belonging to different industries: a chain of record stores, an airline, a direct insurance company, a soft drink company, and more. In this case, the benefit that all the companies in the group offer is identical to that which the super-brand offers. They all “break the rules for the customer”. Therefore, they all have the same name (Virgin Airlines, Virgin Records, etc.).

• And what do you do when you have a budget to support only one brand, and the company has several?
  • You need to choose two options – promoting a brand that is the company itself, and promoting the company’s leading product line (which is a major part of the company’s business).
  • The choice should be based on what we mentioned here before.
  • If the company as a brand is less well known than its leading product line, which generates the bulk of its revenues – the budget should be spent on supporting this product line.
  • In other cases (for example – when customers are not familiar with the company and its product lines), an assessment must be made about what will lead to more desirable business results – supporting the entire organization as a brand, or supporting a specific brand that belongs to the organization.
  • This requires an in-depth examination, and depends on many factors: the business strategy, the values and benefits that can be attributed to the organization and those that can be attributed to the secondary brand, the planning range (five years forward, or maybe the upcoming year – because quick results are a must?), the competing brands, the prevalent perceptions among the customers, and more.

   

• What is the most important thing to remember?
  • Branding in general and planning an umbrella brand in particular – is something you must plan in the long term. Investing in a brand requires patience.
  • If your business is in trouble, and therefore the goals that you set are for the short term, do not invest in new branding. First undergo internal optimization and move towards becoming profitable. Get back on your feet before you try running forward.
  • Developing an umbrella brand must be focused – according to the industry, the competitors, customer behavior, and the reputation of your brands. There are no magic tricks. Invest in market research and in-depth discussion before you make any decisions.

   Good luck building a strong and productive umbrella brand!

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Ideas for innovations in wristwatches

 
The following ideas were developed using various thinking tools, and do not exist at present (to the best of our knowledge):

1.  A wristwatch that shows your friends’ tweets or Facebook statuses – which change on the hour (the watch has a wireless connection to the Twitter / Facebook site).
2. A “regular” wristwatch that signals whenever your blood pressure or heart rate are too high (a medical element integrated in a regular watch)
3. A watch-buckle whose straps are a belt (holds up your pants and reminds everyone what the time is)
4. A wristwatch in the shape of a pendulum clock (design idea)
5. A wristwatch with a magnet built into the back (so that you can stick it to the fridge or on any other magnetic surface)
6. A watch with only a minutes hand, and 60 markings (shows the exact minute, since we can usually guess the hour of the day)
7. A wristwatch that lights up in special colors on weekdays and holidays (with the option of programming birthdays, anniversaries, etc.)
8. A watch that combines a hypnotic element (for example – a rotating coil that helps you fall asleep when you look at it)
9. A vibrating wristwatch that massages your arm (and maybe even prevents arthritis of the wrist)
10. A pocket wristwatch – a wristwatch with removable straps that you can turn into a pocket watch
11. A wristwatch that has a magnifying makeup mirror (on the front or back of the face)
12. A wristwatch that has a built-in bottle opener at the back (useful and accessible)
13. A digital wristwatch that displays the time in 3D (the time and the hands “jump” out of the watch

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Haute couture or prête à porter?

In the fashion world, a product can be either prête à porter (ready to wear) or haute couture (custom tailored).

Our world (B2B high-tech product sales) is somewhat more complex. A product can either be ready to wear – an off-the-shelf (OTS) product, or it can be a project – made from scratch according to the customer’s needs. It will usually be somewhere in the middle – gray is the new black, isn’t it?

And how does all this affect our sales strategy? The effect is fundamental. The project component of the product, or in other words, the amount of customization that the product requires to meet the customer’s needs, has a direct effect on the sales process, the product’s sales cost, the product’s price, and its profitability.

In general (with exceptions of course), the greater the amount of customization, the more complicated the sales process, the greater the manufacturing company’s involvement in the sales process, and the higher the sales cost and product price.

So how can this rule help us?

During the first stage, we need to see that there is compatibility between the magnitude of the project component in our product and the price range that we have set for the product (the range between the target price and the minimal price). If there is an incompatibility, we have a problem in defining the product. For example, if our product needs to be sold for $1,000, but it requires a technician to spend two days working on-site at the customer, then we have a problem…

During the second stage, we need to decide what sales avenues will suit our product.

Let’s start with the simplest case: When we have an off-the-shelf product, our involvement in the sales and installation process needs to be nil. We want to attain a maximum of potential customers, sales and revenues and therefore, we should (as a start up), choose strong and existing avenues that suit our product – with independent sales and support capabilities.

If your product is not a pure off-the-shelf product, then the situation is somewhat more complex. The product’s degree of customization will not be the only factor affecting the choice of sales avenues. In order to be more accurate, you should check what comprises the project portion. A product may contain a project component for two main reasons:

1. The actual product needs to undergo a change according to the customer’s requirements.
2. The product does not fundamentally change but needs to be adapted to the customer’s environment.

In principle, adapting the product to the customer’s environment is meant to require less familiarity with the product than changing the actual product. On the other hand, it may require a familiarity with the customer’s environment, which we may not necessarily have, and also a degree of confidence that the customer has in us as a company (we’re a start-up, remember? And therefore dubious to start with).

Local system integrators, especially those that know the potential customer, can help a great deal in the sales process of a product that requires significant adjustment to the customer’s environment.

When the product itself changes, the company’s involvement in the sales process will be very high, and there will usually be a need for direct sales (supported by local representatives).

The rules that I gave here are very general. Of course, things can change within and among industries and products. But I hope that this article will make you think about several things:

1. How should the product be planned, from the standpoint of flexibility and customer customization, so that we will earn a maximum profit from it? What can we do to simplify the product’s implementation in the customer’s environment?
   
   Example: In one of the companies I worked at we had to provide the product with capabilities that would prevent it from causing the customer’s network to go down during a malfunction. Even though we could have developed such capabilities ourselves, in order to save costs for the customer and on paper and to earn more money from each sale, we found that it made more sense to rely on existing products from renowned companies. The pros: increasing the customer’s confidence in our solution, reducing the impact of our product on the customer’s environment, simplifying the sales processes, and even new sales avenues – representatives of the renowned companies whose products we used.
    
2. How should we choose sales avenues? Which representatives are best suited to us? What will we gain and what will we lose if we work with them?

The size and composition of the product’s project component are not the only factors influencing this decision. I will discuss more considerations and some unconventional ideas of how to choose representatives in the next column.
 

• The column was written by: Neta Weinrib, an expert on marketing technological products. Information about Neta appears here.
• More information about marketing assistance for technological products appears here.