Brand Pruning-A wisely used tool in the Marketers’

Arsenal.
By
Rajkumar Dasgupta,Sr. Lecturer/Dr. Harish Pareek,Asst Professor
NSHM Business School,Kolkata

Abstract:
Brand Pruning though relatively new term in the text book of Marketing has been used
by the Marketing dept. for quite some time, Company dealing mostly with White Goods
and FMCG products are realizing its potential for simple reason- Increase the
profitability through pruning the non profitable Brands and marginally profitable Brands
from the product line. This Paper has tried to focus on systematic theoretical approach
towards Brand Pruning with warning for putting a last effort to revive it.

Introduction

Brand Pruning can be defined as a process by which a company cuts of those Brands
and line brands, which has less contribution on its bottom-line or some times top line as
well. This is almost a continuous process particularly for FMCG and white goods in India.
(Kotler-2000).

The theoretical part of Brand Pruning is relatively new, although it has been practiced by
many companies from ages and decades but nonavailability of a comprehensive
literature is a major hindrance. The earliest records of advocating Brand Rationalization
process can be traced in the early 1930s; Neil McElroy was a manager who supervised
the advertising for Camay soap at Procter & Gamble. The consumer products giant
ignored Camay but spent money and paid attention on its flagship product, Ivory.
Naturally, Ivory stayed the leader while Camay struggled for survival. Annoyed, McElroy
drafted a three-page internal memo in May 1931. He argued that P&G should switch to a
brand-based management system. Only then would each of its brands have a dedicated
budget and managerial team and a fair shot at success in the marketplace. McElroy
suggested that the company's brands would fight with each other for both resources and
market share. Each "brand man's objective would be to ensure that his brand became a
winner even if that happened at the expense of the business's other brands. However,
McElroy did not carry the argument to its logical end. (Kumar-2004)

Seven-plus decades have gone by since McElroy wrote his famous memo, but brand
pruning has remained an unwritten chapter in the marketer's handbook and an
underused tool in the marketer's arsenal. Companies spend vast sums of money and
time launching new brands, leveraging existing ones, and acquiring rivals Brands. They
create line extensions and brand extensions, not to mention channel extensions and sub

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brands, to cater to the growing number of niche segments in every market, and they
fashion complex multibrand strategies to attract customers. Surprisingly, most
businesses do not examine their brand portfolios from time to time to check if they might
be selling too many brands, identify weak ones, and kill unprofitable ones. They tend to
ignore loss-making brands rather than merge them with healthy brands, sell them off, or
drop them. Consequently, most portfolios have become chockablock with loss-making
and marginally profitable brands.

Moreover, the surprising truth is that most brands don't make money for companies.
Research shows that, year after year, businesses earn almost all their profits from a
small number of brands—smaller than even the 80/20 rule of thumb suggests. In reality,
many corporations generate 80 percent to 90 percent of their profits from fewer than 20
percent of the brands they sell, while they lose money or barely break even on many of
the other brands in their portfolios. For example, Kumar(2004) analysed the cases of
four MNCs’:

Diageo, the world's largest spirits company, sold 35 brands of liquor in some 170
countries in 1999. Just eight of those brands—Baileys liqueur, Captain Morgan rum,
Cuervo tequila, Smirnoff vodka, Tanqueray gin, Guinness stout, and J&B and Johnnie
Walker whiskeys—provided the company with more than 50 percent of its sales and 70
percent of its profits.

Nestlé marketed more than 8,000 brands in 190 countries in 1996. Around 55 of them
were global brands, 140-odd were regional brands, and the remaining 7,800 or so were
local brands. The bulk of the company's profits came from around 200 brands, or 2.5
percent of the portfolio.

Procter & Gamble had a portfolio of over 250 brands that it sold in more than 160
countries. Yet the company's ten biggest brands—which include Pampers diapers, Tide
detergent, and Bounty paper products—accounted for 50 percent of the company's
sales, more than 50 percent of its profits, and 66 percent of its sales growth between
1992 and 2002.

Unilever had 1,600 brands in its portfolio in 1999, when it did business in some 150
countries. More than 90 percent of its profits came from 400 brands. Most of the other
1,200 brands made losses or, at best, marginal profits.

In our country Hindustan Lever used to have more than 110 Brands prior to 2001 then
the company realized that it is handling too many Brands which are not contributing to its
bottom-line but incurring cost and consuming valuable Management time. Now, HLL is

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focusing with its 35 odd Power Brands instead of 110 Brands and the result is quite
visible. (HLL Annual Report-2004).

The Impact of a bouquet of brands and their respective contributions of the Total
revenues of a company can be reflected from the following examples of various
multinationals worldwide.(Unilever & P&G Here), Consider the following graph:

Unilever-2000 Proctor & Gamble-2001

8%

25%
50%

97%
75% 92%
50%

3%

Percentag Percentag
Percentag Percentag
e of Total e of Total
e of Total e of Total
Brands Revenue
Brands Revenue

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( Source:Singh, Lamba- Journal of Marketing Jamnalal Bajaj Institute of Management
Studies.-2005)

We can see in both the cases a handful of Brands contributing the most of the Total
Revenue.

Utility of Brand Pruning: The main utility of Brand Pruning is enormous they
can be like this:

• Reduction of production, Advertising and promotional cost.

• Brand Pruning enables a company to concentrate and focus on its core Brands
which typically earns the company the most of the profits.

• Brand Pruning reduced the invaluable Management time which was earlier
focused with the not so profitable Brands.

• With the help of Brand Pruning the company can identify its weak Brands, may
try to revive it with proper positioning or drop it from its portfolio.

• Without Systematic and regular brand Pruning the company may lose its focus
from its core Brands.

• Brand Pruning helps the brand managers to identify the major loss making
Brands and marginal Brands.

• This identification enables a company to formulate future strategy for more

effective Brand Management.

PROCESS OF BRAND PRUNING

A) Methodology as proposed by Singh & Lamba-2005:

ALIGNMENT WITH CORE COMPETENCE

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The Brand Portfolio of a Corporate should be in alignment with its Core Competence in
order to reduce vulnerability of failure. This shall enable evolving brands (niche or mass)
that define clear customer segments, positioning, end customer value, brand
promise delivery and brand relevance, also minimizing the complexity and cost in
managing a portfolio in the process.(Singh & Lamba-2005)

Core
Competence

Access to Perceived
Preventing
wide variety customer
Imitation
of Markets value

Three aspects are relevant in this regard:

• It provides the brand portfolio potential access to a variety of markets.
• It enables significant contribution to the perceived customer benefits of the end
product
• It enables uniqueness for the brand preventing imitation.

This feature should be the first question asked at all stages of brand killing and
nonadherence of the same creates a case for brand pruning.

BRAND PORTFOLIO ANALYSIS SHEET

The next step in analyzing the dormant brands in a portfolio of brands is in examining
them from the following 3 aspects:

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A ratio of less than 1 implies that although the brand contributes comparatively lower to
Total Revenues than Profits, the Economic Power of the brand is strong. However, a
ratio considerably more than 1 is a cause of concern as the brand is consuming
resources without adding to the bottom-line. As shown in the Table below, Kimberly
Clark is in a much better position than Colgate Palmolive in the same year as it defies
the 80:20 principle i.e. 20 % brands contribute to 80 % revenues.

It is necessary for a firm to analyze whether there is enough justification for its
expenditure on promoting a brand. A competitive comparison shall also support in
qualifying the brand as a “cash generator” or a “cash user”. Let me analyze the following
Graphs.

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( Source:Singh, Lamba- Journal of Marketing Jamnalal Bajaj Institute of Management
Studies.-2005)

Aligning Regional Performance with Consistency of Image (Positioning)

Across various Regions

Unsatisfactory performance in a region can be a result of bad positioning or

misunderstood identity. In such a scenario, the brand can hurt the other brands of the
company and thus becomes a case of brand pruning. As shown in the example below,
when we map the regional performance of the brand and the image, we find that an
inconsistency in the case of Brand Y in Region 3 might be a result of an inconsistent
image, which might be harmful to the other brands of the same company. On the other
hand, the consistency of image and performance in the case of Brand X shows
favourability for the brand. Also if within the same category 2 brands have the same
image but negative and positive performances respectively, it implies an overlap.

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Where: VFM= Value for Money

X-Axis – Regional Performance (High Market Share……………Low Market

Share).
Y-Axis – From a super value product to a low quality one.
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All these 3 elements should be considered together while analyzing the brand portfolio
thus determining which brand to be pruned based on unsatisfactory performance
on these parameters.(Singh,Lamba-2005)arkin

The above exercise thus addresses the following issues:

• Is the Brand in alignment with the business design?

• Does a Regional Brand have enough mass to service or does it overlap with an
offering from the same stable?
• Are advertising expenditures on a brand justified?
• How many brands (% terms) are miniscule contributors to the topline and
bottom line?
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 • Is brand performance in a particular region, fallout of a faulty image?
• Do our customers think our brands compete with each other?
The answers coupled with resolving people’s issues viz. inter-brand rivalry; emotional
attachment to the brand; can bring in front of the company a clear picture of the brands
that are necessarily losing money. This gives rise to a new question which may be
considered as an ultimate one.” How to Kill/Prune a Brand”!

b) Brand rationalization process II(

After the company has realized that it needs to rationalize its brand portfolio, it can use a
simple four-step process to achieve the above:

1. Brand Profitability analysis

The rationalization process can be started by orchestrating groups of senior executives
in joint audits of the brand portfolio. Such audits are useful because most executives do
not know which brands make money or how many brands are unprofitable. To calculate
the profitability of each brand, firms must allocate fixed and shared costs to them. That
can prove to be a complicated task resulting in long and bitter debates between
managers.

Executives view each brand from their own particular perspectives and put forward
arguments about the problems they will face if it is dropped. That collectively results in a
ustification for almost every brand in the portfolio. However, when executives look at the
big picture together, they uncover the problems. They reluctantly extend a degree of
upport to the program despite their job- and turf-related concerns.

2. Pruning the Portfolio

In the next stage, companies have to decide how many brands they want to retain. They
can deploy two distinct but complementary models to do so:

MODEL 1
Under this model, companies can choose to keep only those brands that conform to
certain broad parameters. A committee of senior executives and company directors can
be set up to draw up these parameters. That's a good way to push ahead with the
rationalization program in a large organization, since the appointment of the committee

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signals top management's commitment to the task.

Such a high-level committee is also necessary because the process inevitably becomes
an opportunity to check if the company should exit some markets or countries where all
its brands perform poorly.
Parameters which can be used to prune the portfolio can be:
• To retain only those brands that is number one or number two in their
segments, as measured by market share, profits, or both.
• Companies in fast growth industries can choose to keep brands that display the
potential to grow rapidly.
• Manufacturers that depend on retailers for sales can focus on brands that draw
shoppers into stores.
Individual parameters are not either-or criteria and can be combined to arrive at their
filters.

MODEL 2
In this model, companies can identify the brands they need in order to cater to all the
consumer segments in each market. By identifying distinct consumer segments and
assuming only one brand will be sold in each segment, executives can infer the right
size of the portfolio for a particular category. Companies can decide which brands to
keep in each market in a number of ways:
General parameters can be considered akin to those that were applied to the entire
portfolio, such as market share or growth potential, to select the brands to focus on in
each market.
The market can be re-segmented and those brands can be identified that are needed to
cater to the new segments. For instance, firms can segment markets based on
consumer needs rather than by price or product features.
Companies can use both approaches also. For instance, they may start by rationalizing
brand portfolios category by category and, when they still find themselves with too many
brands, apply the portfolio approach to complete the task. And the process can easily be
reversed.

3. Liquidating Brands
After companies have identified all the brands they plan to delete, executives need to
reevaluateeach of them before placing it on one of four internal lists: merge, sell, milk, or
kill.
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Merging Brands
Companies can opt for merging brands when the brands targeted for elimination have
more than a few customers or occupy niches that might grow in the future. Executives
can transfer product features, attributes, the value proposition, or the image of the
marked brand to the one they plan to retain. They can do this around the same time they
drop the brand, not before or after. By advertising the change and using promotions to
induce consumers to try the replacement brand, marketers can get people to migrate
from one to the other. However, merging brands is tricky. During Unilever’s brand re-
organization process, Antony Burgmans, Unilever’s Vice chairman, warned his
marketers, "You are not migrating brands but migrating consumers."

Selling Brands
Companies can sell brands that are profitable when they don't fit in with corporate
strategy. They might be profitable but in categories that the company does not want to
focus on. In such cases, the brand's market value is often greater than the value the
company places on it, making it a good candidate to put up for sale.

Milking Brands
Some of the brands that companies want to delete may still be popular with consumers.
If selling them is not possible because of either strategic or sentimental reasons,
companies can milk the brands by sacrificing sales growth for profits. They can stop all
marketing and advertising support for such brands, apart from a bare minimum to keep
products moving off the shelves. They can also try to save on distribution costs and
reduce retailer margins by selling only on the Net. Finally, the organization should move
most managers off the teams that handle these brands. As sales slowly wind down,
companies maximize profits from these brands until they are ready to be dropped
entirely.
Eliminating Brands
Companies can drop most Brands right away without fearing retailer or consumer
backlash. These are the brands for which they have had trouble getting shelf space and
buyers in the first place. To retain what customers they do have, companies can offer
samples of their other brands, discount coupons or rebates on the replacement brands,
and trade-ins.

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4. Growing the Core Brands

The fourth and final step in the brand portfolio rationalization process is not
destructive, but creative. At the same time that corporations delete brands, they should
invest in the growth of the remaining brands. There may be hesitation in doing this
because profits would soar as they drop brands. But they should not forget that forget
that the business is also shrinking in terms of sales and people, which can cause as
much trouble as the proliferation of brands did. Stagnation could set in, and
demoralized managers might leave the organization. Sensing that the firm has lost its
appetite for innovation and risk, rivals can also move in aggressively. Companies can
reap the benefits of brand deletion only if they reinvest the funds and management time
they have freed either into the surviving brands or into discerningly launching new ones
and taking over other brands. Establishing a brand portfolio rationalization program
shouldn't be a priority solely for marketers. It has to be a top management mandate,
especially since companies’ contract when they delete brands. While the profit payoffs
come early in the program, it takes firms anywhere from three to five years to recoup
revenues, depending on the number of brands they delete. So, clearly, the top
management team needs to agree to the financial objectives as well as to the timetable
for their achievement. The team also has to buy time from shareholders, who usually
prefer measures that deliver earnings per share increases in the next quarter. Done
right, however, a brand portfolio rationalization project will result in a company with
profitable brands that is poised for growth.

Signs of Brand Pruning

There are some telltale signs left behind by the brand killing managers. This would help
identify whether a company is on its way to destroying a brand. Under no circumstances
should one conclude that if one clue is present, "Pruning" is happening there.

Sign 1: Constant cuts in ad budgets year after year.

Sign 2: More sales promotions than advertisements
Sign 3: More emphasis on "push" than on "pull".
Sign 4: Little or no emphasis on consumer research and contact.
Sign 5 : Non-marketing people in charge of marketing.

Examples of Companies Pruning Their Brand Effectively

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Electrolux: Take, for example, the manner in which Electrolux rationalized its portfolio of
brands in the professional foodservice equipment market in Western Europe. In the late
1990s, the consumer durables manufacturer offered a range of equipment that included
ovens, chillers, freezers, refrigerators, and stoves for professional kitchens in hospitals,
airports, cafeterias, hotels, and restaurants.

Before it attempted a turnaround, Electrolux conducted market research in 1996 and

found that many customers were willing to pay premiums for leading brands. At almost
the same time, CEO Michael Treschow announced a rationalization of the company's
portfolio of 70-plus brands. That's when Electrolux executives realized that if they
replaced the 15 small brands in the professional market with a few big brands, they
might just be able to make money. That still begged the question: How many brands did
Electrolux need to cater to customers in this market?

Having four pan-European brands, instead of 15 local brands, allowed Electrolux to

manage the brand portfolio more effectively. The company developed international
marketing and communication tools, such as new advertising and showroom concepts,
Web sites, newsletters, road shows, and exhibitions, to ensure that customers perceived
each brand as the best in its segment. Electrolux was also able to design more
appropriate products for the brands because it better understood the needs of its
customers. The resulting economies of scale and scope helped turn around the fortunes
of the business. Although Electrolux deleted 12 brands, the division's sales never fell.

Indian Example: The following is an illustration of how Electrolus changed the

consumer mind from Kelvinator towards its core Brand in a phased but very effective
manner.

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POWER BRAND FOCUS & CUSTOMER RETENTION: Defocusing on loss-making
brands normally leads to better resource allocation to stronger brands. An analysis of the
same is shown below:

Expenses Saved on Killed Brands Renewed Focus on Core Brands

Advertising and Promotional Expenses Reduction in Brand Cannibalisation
Reduction in Factors producing eliminated Focused advertising and promotional
Brands spends
Consolidated Purchasing expenses Effective supply chain
Improvement in Operating Margins Supporting core Brands with best
managerial talents
Improvement in bottom line Enhanced Product developmental efforts
Renewed Positioning

(Singh,Lamba-2005)

The performance of the HLL, HPC division just after the implementation of the “Power
Brand” strategy, as shown in the table below serves as an apt illustration in the portfolio
consolidation process.

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(Singh & Lamba-2005)

CUSTOMER RETENTION: From the consumers’ point of view, certain steps need to be
taken. These include, i) gradually streamlining ranges and harmonizing products thus
making the value proposition less distinctive; ii) harmonizing pack design and logotypes
so that consumers loyal to discontinued brands gradually learn to appreciate the visual
language of the brand that is staying; iii) Developing a joint strategic brand position so as
to achieve a gradual transition of the brand proposition in the consumers’ mind. (Singh &
Lamba-2005)

Disadvantages Of Brand Pruning-A note of Caution

• KILL THE BRAND, NOT THE PRODUCT: A pruned brand might possess
qualities that are the core behind consumer loyalty. Incorporating these qualities
in the mother brand in case of merging brands, advertising the change and
inducing the customers to buy the replacement brand, the marketers should try
to migrate these customers. Sales promotions like sampling and discount
coupons could be carried out in this regard. (Singh, Lamba-2005)

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 • LOCALIZED BRANDS: Certain brands that are added to the portfolio, although
are low contributors to Total Revenues serve as entry barriers for competitors to
enter certain regions. Phasing out these brands could mean customer anger.
So, advertising enough for regional sustenance should be carried out, reducing
emphasis on a national scale. (Singh, Lamba-2005)

• LEGAL SAFEGUARDS: While selling a brand, the marketer should create legal
safeguards preventing use of the brand name for a limited period of time, thus
ensuring that these brands don’t return as rivals. (Singh, Lamba-2005)

• HERITAGE BRANDS: These are outdated Brands, but enjoy a sense of loyalty
and emotional involvement amongst the marketers who initiated them. These
need to be eliminated, in a gradual manner, keeping the people’s issue in mind.
(Singh, Lamba-2005)
• COMPETITOR IMPACT: In a belief that the organization has lost its urge for
innovation in its process of killing brands, competitors speed their activity.
Rational reinvestment of funds at this stage should be undertaken by the
company in its core brands thus retaining competitiveness. (Singh, Lamba-
2005)

• EROTION OF BUFFER BRANDS: Many FMCG companies simply retains the

prunable Brands only to engage the shelf space of the retailers so that the
competitors Brands cannot get any space in the shelf.(Example HLL’s Breeze is
a buffer Brand to Nirma’s Nima Rose.)

• EROTION OF CONFIDENCE: If a Company starts Brand Pruning in a regular

manner then the psychological impact may be negative to a consumer who
used to see that Brand in a regular manner in the retailer’s shelf.

Alternatives to Prune a Brand

The BrandCheck brings forth a set of short listed brands that need to be killed
taking into account certain few considerations. There are 2 key parameters that
need to be considered while evaluating alternatives:
• Brand Power: the level of awareness enjoyed by the Brand and the
period for which it has been in the marketplace.

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 • Economic Power: the Contribution of the brand to Profits and Revenues
of the parent company.

(Singh & Lamba-2005)

Resultant Alternatives:

SELL THE BRAND: This is possible when the Brand is an attractive proposition for
another company due to Brand Power. However, being undifferentiated from the
brands in the same category of the parent company, the Economic Power is low.
Also the Brand does not fit into its business design.

EXTRACT: In a scenario wherein the market is niche, customer loyalty is high and
brand elimination shall lead to negative publicity, harvesting the brand with minimal
advertising enough to sustain the loyal base is recommended (a cash Cow).

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ELIMINATE: Wherein continuation of a brand can only lead to negative PR, and there is
absolutely no alignment with the business design/core competence, it becomes
necessary to divest the brand without paying a head to customer/channel reaction.

MERGE THE BRAND: High Economic Power with a significant consumer base, but an
undifferentiated positioning leads to merger with a master brand in the same product
category by transfer of attributes. Existing customers carry on with brand transition, and
a new larger overall customer base is created.

Corporate Branding : As companies in various sectors move from a product centric

strategy to a promise-centric strategy, killing sub-brands and stressing a corporate brand
allows a corporate identity that can be flexible in its offering.

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LEGAL CONSIDERATIONS: In certain areas laws prevent use of a brand name thus
killing a brand in exchange for an alternate brand name.

(Singh, Lamba-2005)

Example of a Brand, Which Refused to Die

Coca cola attempting to kill Thumps-up in India in the late 90's is a perfect example of a
brand refusing to die and come back even stronger after the attempt due to its dynamic
presence in the mind of consumers.

The entry of Coke, in 1993, made things complicated for the soft drinks market in India
and the fight became a three-way battle (one including of Pepsi). That same year, in a
move that baffled many, Parle sold out to Coke for a mere US$ 60 million. Some
assumed Parle had lost the appetite for a fight against the two largest cola brands;
others surmised that the international brands seemingly endless cash reserves psyched-
out Parle. Either way, it was now Coca-Cola's, or Coke has a habit of killing brands in its
19
portfolio that might overshadow it. Coca-Cola apparently did try to kill Thums Up, but
soon realized that Pepsi would benefit more than Coke if Thums Up was withdrawn from
the market. Instead, Coke decided to use Thums Up to attack Pepsi.

From a brand that was virtually unchallenged to a brand that was stifled, Thums Up
stormed back after a near death experience. The brand proves that its strength lies not
just in its taste but also in its performance. The grown up tag is an enduring one and will
probably counter Pepsi for a long time to come.

Conclusion

In today’s cluttered scenario wherein a consumer is exposed to more than 1500

advertising messages a day, encounters more than 200 edible oils, 150 soaps and 90
Toothpastes on the shelves of grocery stores to choose from, and thus is constantly
evolving, the term focus seems to get lost.

This makes Brand Pruning not just a marketing issue, in which a suboptimal portfolio
dilutes marketing messages and confuses customers; it also directly affects corporate
profitability. According to the research of Anocha Aribarg and Neeraj Arora (2003), a
multibrand firm can improve its portfolio profit by carefully managing variant overlap by
Brand Pruning. Ill-defined and overlapping brands in a portfolio lead to erosion in price
premiums, weaker manufacturing economies, and sub-scale distribution. In a slower
economy, the problems of an underperforming portfolio are even more acute. While
adding brands is easy, it becomes difficult to harvest the value in a brand or to divest it.

Most companies haven't put systematic brand-Pruning processes in place. Mainly

because executives believe it is easy to erase brands; they have only to stop investing in
a brand, they assume, and it will die a natural death. They're wrong. When companies
drop brands clumsily, they antagonize customers, particularly loyal ones. In fact, most
attempts at brand deletion fail; after companies club together several brands or switched
from selling local brands to global or regional brands, they were able to maintain market
share less than 50 percent of the time. Similarly, when firms merged two brands, in most
of the cases the market share of the new brand stayed below the combined market
share of the deleted brand.

Therefore, Brand Pruning to be used as an effective tool in the Marketer’s arsenal, first
priority will be to get managers at all levels of the organization to back the decision
maker because brand Pruning is a traumatic process. Brand and country managers,
20
whose careers are wrapped up in their brands, never take easily to the idea. Customers
and channel partners defend even inconsequential and loss-making brands. There will
always be pressure from senior executives to retain brands for sentimental or historical
reasons. Indeed, brand rationalization programs have often become so bogged down by
politics and turf battles that many companies are paralyzed by the mere prospect.

Contact:

Rajkumar Dasgupta, Sr.. Lecturer, NSHM Business school,124 BL Saha Rd. Kolkata-53

Cell:09830933820,

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