When I was writing my book, Brand Portfolio Strategy, I would ask executives which firms had excelled in developing a brand portfolio strategy. The most mentioned firm was L’Oréal. L’Oréal today maintains an admirable “house of brands” strategy in which some 20 brands are used to span the relatively narrow area of cosmetics and skin care in the US. There is a high level of clarity, differentiation and leverage.
The portfolio is first divided into four groupings, with little overlap in customers and outlets. Out of the 20 L’Oréal brands, four are “consumer products” and are distributed through drug and discount stores, 13 are “luxury products” distributed through department and specialty stores, four are “professional products” used by hairstylists, and four are “active cosmetics” sold to dermatologists and other specialists.
Within each grouping the brands have very distinct positioning. Consider the four consumer product brands. Maybelline New York (Maybe she’s born with it, maybe its Maybelline) is trendy, innovative and infused with New York energy. L’Oréal Paris (Because you’re worth it) is affordable luxury with excellence around the beauty Claudia Schiffer. Garnier (Take care) is inspired by natural ingredients and dermatological science. Softsheen & Carson [i](My style, my way)[i/] is focused on women of color who are looking for confidence, individuality and flair. All are highly differentiated with strong positions that connect to their audience.
In addition, L’Oréal Paris is aggressive with branding innovations such as Pro-Retinal A or Silk & Shimmer Conditioning Technology and is giving them legs. They have a host of sub-brands and endorsed brands such as L’Oréal’s Age Perfect, Couleur Experte, and Feria. Finally, the firm also generates descriptive umbrella brands such as Eye Studio, Instant Age, and “Can I help you?” the L’Oreal Paris’ community site. Each brand has a role and the portfolio as a whole has energy and coherence.
Consider, in contrast, Shiseido, much more of a branded house, which spans a wide quality/price spectrum and struggles to resonate in segments targeted by L’Oreal, especially in the US and Europe.
There is too little attention paid to the brand portfolio and how each brand needs a role and reason d’être. In part this is due to decentralized organizations that fail to coordinate brands and in part this is because portfolio strategy is simply neglected.
However, a faulty portfolio strategy can result in marketplace confusion, wasteful internal competition, misallocation of resources, ineffective marketing, aimless brand proliferation, new product naming mistakes and lost opportunities to leverage strong brands.