How many brands is the perfect number? It’s a delicate balance for management and is more of an art than a science. If you expand too much, it’s costly for the additional marketing and attention needed. If you don’t have enough brands, you miss opportunities to gain market share and incremental revenue. This is where the line in the sand is drawn between automotive giants.

Ford and General Motors have drastically cut their number of brands since the recession, helping them return to profitability. On the other side, Volkswagen and Chrysler have drastically increased the amount of brands under their respective umbrellas. Which strategy will position the companies for future success? I’ll explain two key topics — brand portfolio and architecture — and show you why companies on one side of the strategy could be in trouble.

Portfolio and architecture
With my background in marketing, I’ll take a quick second to brief you on the difference of these two factors. A brand portfolio, as you probably guessed, is how many brands are under a company’s umbrella. Think how Coca-Cola also owns Sprite, a different name brand. The problem with having numerous brands is creating an efficient architecture. If Coca-Cola has five spinoffs of coke — Vanilla Coke and Coke Zero, to name two — and only regular Sprite, it is competing more with itself rather than expanding its market share. At some point, the cost in creating additional spinoffs outweighs the revenue that it can generate. Crossing that line in the sand would hurt Coca-Cola’s ability to generate maximum profits.

Ford and GM are taking the opposite strategy. because they learned a valuable lesson during the recession. They found that their brands were too costly and inefficient and lacked compelling marketing to stay profitable. It wasn’t until then, when sales practically disappeared, that they were forced to cut slacking brands and refocus on their core to rebuild a strong portfolio. Let’s dig into the details and see the change in brand numbers.

By the numbers
GM went from nine brands in the U.S. market 10 years ago down to four currently. It killed off Pontiac, Saturn, and Hummer in 2010. It also sold off Saab, which has since been killed. Before the recession, it closed the doors on Oldsmobile. Ford has made similar moves to cut five of its brands, now sitting at only two — Ford and Lincoln.

With the opposite strategy, Volkswagen is up to 12 distinct brands after adding Porsche last year. Chrysler has increased its brand count up to nine, including the Alfa Romeo, which has been absent since the mid-’90s.

“We’re going against the grain,” Chrysler-Fiat CEO Sergio Marchionne said. “Ford has decided to go with an oval strategy across the whole range, and we’re the only ones that keep on carving up or have carved up our brand-name portfolio into more distinct pieces.”  

More complicated
The soda analogy was nice and simple. …read more
Source: FULL ARTICLE at DailyFinance