Technische Bedrijfswetenschappen RuG
A Balanced Score Card Approach for Defining and Measuring the Performance
of Brand Migrations
Translating Strategy into Action
A Balanced Score Card Approach for Defining and Measuring the Performance
of Brand Migrations
Student: F.R. Anema
Coaches Lever Fabergé: Drs. A. Boonstra Drs. R.J. van den Berg
Coaches University of Groningen: Prof. Dr. Ir. F.P.J. Kuijpers Prof. Dr. Ir. J.L. Simons
Management Summary
‘A Balanced Scorecard Approach for Defining and Measuring the Performance of Brand Migrations’ is a report containing the results of research done for Unilever as part of an internship at Lever Fabergé Netherlands.
One of the key strategic thrusts of the global ‘Path to Growth’ strategy set out by the Unilever board in 2000 is the objective to reduce the brand portfolio from 1600 to 400 brands through migrating local brands to their international equivalents.
A brand migration is supposed to deliver substantial internal cost savings by a simpler
organization and increased external growth by a stronger brand. But, in the short term, a brand migration is a high-risk activity, i.e. the high risk of losing market share when consumers do not find the brand they have learned to appreciate. Through effective communication and innovation these high risks can be over won.
Amazingly enough, Unilever evaluates brand migrations by only evaluating short-term marketing objectives, which are focussed on overcoming external risks. This ‘performance definition’ of a brand migration is lacking to take into account the objectives and indicators that measure the migration performance of the internal organization and the external brand growth.
Therefore this research delivers an integral performance definition of a brand migration and a method to integrally score brand migrations, i.e. the brand migration balanced scorecard.
It was found through a case study that three additional elements of a brand, besides a name, were often migrated as well during the process, or even well before the brand migration.
These elements are the physical product, the package and the marketing position. Therefore the brand migration performance definition consists of the elements that are migrated in the brand migration process.
Interviews with managers showed, on the one hand, that the performance on achieving cost savings by simplifying the organization through brand migration is highly correlated with the migration of the physical product, the package, the marketing position, and to a lower extend the migration of a brand name. The interviews also showed that the performance on achieving brand growth through brand migration is correlated to a low extend with the migration of the physical product, the package, the marketing position, and surprisingly, a very low correlation to the migration of the name.
On the other hand, the interviews showed that the performance on overcoming short-term market risks of a brand migration is mainly correlated to the migration of name and marketing position, and not to the migration of the physical product and the package.
Therefore, in line with these findings the following recommendations are given to Unilever.
First, indeed migrate the physical product, the package and the marketing position of a brand, since it will deliver great internal benefits and to a lower extend external brand growth. But be very careful about migrating the brand name, since this research shows the low correlation of migrating a brand name with the expected internal benefits and external brand growth.
Moreover the risks of a brand migration are mainly caused by the name migration.
Second, in line with the previous point, do further study about the specific advantages a name migration should deliver, since the relationship between brand growth opportunities and name migration was heavily questioned during the interviews. In this research an answer must be found to the question whether the benefits of name migration outweigh the risks.
Third, it is recommended, depending on the extend of migration, to organize and evaluate brand migrations integrally instead of organizing and evaluating brand migrations from solely a marketing point of view. The migration pyramid that was developed in this research is a useful model to start the organization process of a brand migration.
Fourth, a brand migration should go hand in hand with organizational change. By a brand migration the organization around a brand should be centralized (internationalised) in order to achieve cost advantages. If a brand migration does not lead to a more centralized
organization, then the impact on cost advantages will be low.
Preface
After five years of studying the time for me had come to graduate from my study Technische Bedrijfswetenschappen at the University of Groningen. Therefore I had to complete the final phase of my study: executing research in practice. This report describes my research project performed during my internship at Lever Fabergé, a part of the Unilever organization. I would like to use this opportunity to thank several people who have helped me throughout my academic career.
First I want to thank Lever Fabergé for giving me the opportunity to closely study and experience the ‘Andy-becomes-Cif’ brand migration, which was very interesting and a lot of fun. I want to thank my coaches Alrik Boonstra and Roland van den Berg for their help and enthusiasm during the whole process. The whole business team, especially Yvonne van de Nieuwe Giessen and Angela Schop, thank you all for an enjoyable and educative time at the
‘cleaners office’.
Also I want to thank my coaches from the university, prof. dr. ir. F.P.J. Kuijpers and prof.
dr.ir. J.L. Simons for their valuable advice and great interest that helped my thesis in becoming what it is today.
I want to thank family and friends for their understanding and ‘thinking along the sideline’.
Last but not least, thanks go out to my parents for their great support during my study and for always being a personal ‘consultant’ to me.
Have fun reading and examining my thesis!
Utrecht, July 2002 Rutger Anema
Table of Contents
Management Summary 3
Preface 7
Table of Contents 8
Chapter 1 Introduction 11
1.1 Unilever 11
1.3 Home and Personal Care Europe 11
1.4 Lever Fabergé Netherlands 12
1.5 Unilever’s Path to Growth strategy 13
1.6 Path to Growth strategy: Brand Focus 14
1.7 Introduction problem field: How to achieve Brand Focus 15
Chapter 2 Research Design 17
2.1 Introduction 17
2.2 Conceptual design 17
2.2.1 Research objective 17
2.2.2 Research model 18
2.2.3 Central research question 19
2.2.4 Research questions 19
2.2.5 Restrictions 20
2.3 Research technical design 21
2.3.1 Thesis build-up and structure 21
Chapter 3 Theoretical Framework 23
3.1 Introduction 23
3.2 Reasons for name changes 23
3.3 Is the name change the only thing that changes? 24
3.3.1 Definition of brand migration 24
3.3.2 Objectives of brand migration 24
3.4 Measuring performance 26
3.5 Balanced scorecard 26
3.5.1 Financial perspective 26
3.5.2 Customer perspective 27
3.5.3 Internal business process perspective 27
3.5.4 Learning and growth perspective 27
3.5.5 Balanced scorecard approach for brand migrations 28
3.5.6 How to use the BSC for this research 28
3.5.7 Performance indicators 29
3.5.8 QUEST criteria 30
Chapter 4 Levels of Brand Migration 31
4.1 Introduction 31
4.2 Migrating brand elements 31
4.2.1 Brand name 32
4.2.2 Brand packaging 34
4.2.3 Brand logos and symbols 34
4.2.4 Brand character 35
4.2.5 Brand slogans and jingles 35
4.2.6. Physical product or formulation 36
4.2.7 Consumer benefit or brand positioning 36
4.3 Clustering brand elements into migration levels 37
4.4 Conclusion 39
Chapter 5 Analysing the Brand Migration Situation 40
5.1 Introduction 40
5.2 The brand migration analysis framework 40
5.2.1 Identify optimal number of brands for the category 41
5.2.2 Migration opportunity analysis for both brands 42
5.2.3 Cost benefit analysis for each level of migration 43 5.2.4 Risk/complexity analysis associated with brand migration 46 5.2.5 Timings, communication and innovation for brand migration 48
5.3 Conclusion 49
Chapter 6 Objectives and KPI’s for Brand Migration 50
6.1 Introduction 50
6.2 Internal Analysis of objectives and indicators 51
6.2.1 Research and Development 51
6.2.2 Purchasing 52
6.2.3 Manufacturing 52
6.2.4 Logistics/Warehousing/Distribution 53
6.2.5 Marketing/Sales 54
6.2.5 General 54
6.3 External Analysis of objectives and indicators 55
6.3.1 Consumers 55
6.3.2 Customers 55
6.3.3 Competitors 56
6.4 Outcome of the selection interviews 57
6.4.1 Ranking the three general brand migration objectives 57
6.4.2 Key objectives and key indicators 58
6.4.3 Selecting the brand migration balanced scorecard perspectives 58
6.4.4 Cause and effect relationships 59
6.4.5 Brand migration balanced scorecard 60
6.5 Targets and initiatives 62
6.7 Conclusion 63
Chapter 7 Conclusions and Recommendations 64
7.1 Conclusions 64
7.2 Recommendations 69
Chapter 8 Reflection and Research Suggestions 71
8.1 Reflection phase one 71
8.2 Reflection phase two 72
Literature List 73
Scientific literature 73
Articles 73
Research reports 74
Internet & Intranet 74
Appendix A Open introduction interview Error! Bookmark not defined.
Appendix B Selection interview Error! Bookmark not defined.
Appendix C Reasons for brand name changes Error! Bookmark not defined.
Appendix D Outcome category analysis Andy Error! Bookmark not defined.
Appendix E Outcome migration opportunity Andy-Cif Error! Bookmark not defined.
Appendix F Points table risk analysis Error! Bookmark not defined.
Appendix G Outcome risk analysis for Andy-Cif Error! Bookmark not defined.
Appendix H Outcome selection interviews Error! Bookmark not defined.
Chapter 1 Introduction
1.1 Unilever
What is the best way to introduce Unilever? Of course, by her well known products sold to consumers in over 150 different countries across the world and these consumers buy a Unilever brand approximately 150 million times a day1. Unilever’s mission drives this, “to meet everyday needs of people anywhere”. Products like Dove, Cif, Magnum, Calvin Klein, Knorr, Omo and Lipton are only a small selection of the massive range of Unilever brands.
But when did it all start? Unilever was formed in 1930 when the Dutch margarine company
‘Margarine Unie’ merged with British soap maker Lever Brothers. Both companies were competing for the same raw materials, both were involved in large-scale marketing of household products and both used similar distribution channels. Today, under the name of Unilever they form one of the largest international organizations within the ‘fast moving consumer goods’ business, producing a wide range of food, household and personal care products. In 1999 her brand managers delivered 1600 different brands to consumers all over the world.
Today Unilever consists of many operating companies and business groups (figure 1.1).
Unilever is divided in two divisions: Food and Home & Personal Care (HPC). Both divisions accounted for the total Unilever turnover of more than €53 billion and net profit of €1,858 billion over the year 20012.
1.3 Home and Personal Care Europe
Home and Personal Care Europe (HPCE) is the business group under the flag of the HPC division. HPCE is occupied with setting out the strategy for all the HPCE brands within Europe. Under the umbrella there are country specific Marketing and Sales Organizations (MSO), not country specific Sourcing Units (SU) and Innovation Centres (IC). The MSO’s are responsible for marketing and selling the HPCE brands in a specific country. Lever Fabergé Netherlands is one of these MSO’s. Lever Fabergé NL is responsible in the
Netherlands for marketing and selling the following brands: Dove, Axe, Organics, Vaseline Intensive Care, Impulse, Rexona, Omo, Robijn, Sun, Cif, Vim, Andy and Glorix. Not in every country do these brands bear the same name, e.g. Glorix is called Domestos in England and France, and Lysoform in Italy.
The SU’s are responsible for manufacturing the HPCE products. There are only a few SU’s as compared to the MSO’s. In the Netherlands there is one SU situated in Vlaardingen and responsible for producing Cif, Andy and Vim for a great part of the European MSO’s. The IC’s are centralised in specific countries. For Cif, Andy, Vim and Glorix the IC is situated in Milan, Italy. This research is conducted for Lever Fabergé NL.
1 Unilever Marketing Academy
2 Unilever Annual Results 2001
Figure 1.1 Organizational structure Food
Lever Fabergé Netherlands Marketing Sales Organizations
(MSO)
Sourcing Unit Vlaardingen Sourcing Units
(SU)
Innovation Centres (IC) Home and Personal Care Europe
HPCE
Home and Personal Care (Non-Food) Unilever
1.4 Lever Fabergé Netherlands
In 1998 the operating companies Lever and Elida Andrélon, responsible for respectively home and personal care, merged into the operating company Lever Fabergé, situated in Bodegraven (MSO) and Vlaardingen (SU).
At the MSO in Bodegraven, business teams run the daily business concerning a product category, the following departments are involved in a business team: marketing, sales, category management, logistics and finance. Furthermore there are departments within Lever Fabergé NL that are responsible for Home Care as well as Personal Care: sales, account management, personnel & organization, customer service and administration.
1.5 Unilever’s Path to Growth strategy
As can be seen in figure 1.2 competitors have grown faster than Unilever in recent years in both Home and Personal Care and Food. This trend worries Unilever and worries her shareholders even more.
Many of Unilever’s rivals have very clearly been concentrating their efforts on a smaller number of bigger brands (diagram 1.1). Unilever is behind this trend, and is currently behind them in growth rates3.
Therefore Unilever announced in February 2000 their strategic plan: ‘Path to Growth’ as a complete strategy to achieve this growth. Unilever promises in this plan:
• Increasing revenue to 6% per annum
• Reaching a sustainable operating margin of minimal 16% by 2004
• Delivering double-digit earnings per share through 2004
• Ranking among the three best in total shareholder return of the formulated peer group4. Path to Growth sets the strategy and identifies the funding to achieve the continued growth.
But how will Unilever achieve this path to growth? Well, in order to meet the challenging targets, Unilever identifies six components of their business as key drivers of success. These are known as the six primary ‘Strategic Thrusts’ (see figure 1.3). 5
3 Marketing Academy and Internet Research
4 Peer group: P&G, Nestlé, L’Oreal, Colgate, Danone, Philip Morris, et al
5 Unilever Marketing Academy -3%
-1%
2%
5%
7%
10%
94 96 98 2000 L’Oréal
Colgate
Unilever
P&G
HPC
-3%
-1%
2%
5%
7%
10%
94 96 98 2000
Danone
Nestlé Kraft
Unilever
Figure 1.2 Growth of sales: Unilever vs. competitors
Food
Unilever wants her resources to be committed to activities in line with these drivers of success:
• Brand Focus: Unilever wants to concentrate resources behind fewer, bigger brands that have an enduring and broad based consumer appeal, and have the best prospects for growth.
• Enterprise Culture: An enterprise culture has to be created which shapes mindset and actions everywhere in the organization towards winning in the marketplace.
• World-Class Supply Chain: A world-class supply chain has to result in fewer manufacturing sites and buying savings.
• Simplify: Cost savings will be achieved if Unilever simplifies everything she does (processes, systems, organization, etc.)
• Reconnect With Consumers: Consumers are changing, e.g. the way they are buying goods (shift from retail to ‘out-of-home’, such as schools, hospitals, gas stations, restaurants, etc). Unilever has to anticipate and respond to these changes.
• Pioneer New Channels: Reach the consumer through development of channels that are new for Unilever’s brands, or of limited scope today, such as internet, direct selling/home vending, fashion outlets, many out-of-home eating occasions and food service.
1.6 Path to Growth strategy: Brand Focus
One of the major elements of the Path to Growth strategy is Brand Focus. As Anthony Burgmans, CEO of Unilever states: “The need to focus the brand portfolio is the single biggest issue facing Unilever today and is one of the key corporate strategic thrusts”.6
But why does Unilever have to focus their brands? Over the years Unilever has built a massively fragmented portfolio. One reason is that Unilever has had an international focus early at a time when countries were largely isolated from each other. Working in this environment, Unilever developed a culture of local acquisitions and local brand mix adaptations, rather than building single name brand leaders. This may have been the right model in the past, but in today’s globalising world Unilever has to compete in a very different business climate. In 1999 Unilever was generating 77% of her business with 100 brands, but in total was managing some 1600 brands. Most of these brands were taking up more resources then the gain they provided. This was damaging Unilever’s performance, growth and because of this, the share price.
6 Local on a global scale
Figure 1.3 Unilever’s six strategic thrusts
Unilever states that there are four reasons for Brand Focus7:
1. Growth will be reached if resources are focussed (innovation, people, marketing expenditures) behind fewer, well-managed brands. Brand Focus can give brands the ability to leverage great brand ideas more effectively across markets by economies of scale and reduced complexity. Thus big brands enable bigger, better innovation to meet consumer needs.
2. The profitability of large brands tends to be higher because they provide the scale for greater cost effectiveness: in product development, brand communication development, in-store presence, and consumer understanding. As well as a higher profitability, large brands also tend to grow faster.
3. Customers or big retail chains are getting bigger and more powerful. They demand market leader products that generate high turnover. If Unilever doesn’t make a choice, the retail chains will do make a choice.
4. Competition is far more focussed, and has been building very powerful brands, with huge support behind them. Unless Unilever focuses as single-mindedly on their growth brands as the competition has done, Unilever will fail to compete with them (see diagram 1.1).
Competitor Number of brands Top brands: % of sales
Procter & Gamble 60 Top 10 brands: 50% of sales
Danone 15 Top 5 brands: 60% of sales
Colgate 28 Top 6 brands: 70% of sales
Nestlé 90 Top 5 brands: 50% of sales
L’Oréal 30 Top 10 brands: 87% of sales
Unilever 1600 Top 100 brands: 87% of sales
1.7 Introduction problem field: How to achieve Brand Focus
Unilever wants to reduce her brand portfolio from 1600 brands to 400 brands. In order to achieve this brand-focussed strategy, Unilever typifies all her brands according to the
following execution classifications (the Global Core Brands and the Local Core Brands form Unilever’s Leading Brands):
• Global Core Brands are the primary engines of growth represented throughout much of the world and are the increasingly aligned brands behind which Unilever will focus innovation and growth. These brands include brands that are already converged into the same positioning with common elements of the brand mix but are allowed to still have different names (Glorix NL, Robijn NL), and brands that are identified for migration to Global Core Brands (Andy NL).
Examples: Dove, Magnum, Lipton Ice Tea and Cif
• Local Core Brands are brands of local and regional scale and an identical brand mix behind which Unilever is investing in brand communication but only marketed in one or a few countries. The brands usually have a leading market position in a specific market segment and have a proud and well-known history.
Example: Andrélon (Netherlands)
7 Unilever Marketing Academy Diagram 1.1 Competitor benchmark
• Manage for Value Brands (‘Tail Brands’) are brands that are milked or de-listed. Milk brands are not part of the long-term portfolio. They will be maintained with minimum resource and investment and should be managed to optimise PBO (Profit Before Overhead) and cash generation. De-list brands will be discontinued or sold for not meeting minimum performance. Examples: Zeeuws Meisje, Marmite
This classification results in a major task for Unilever to reduce the massive brand portfolio of 1600 brands to 400. In the framework of Brand Focus this results in four possible routes for brands: to be migrated, sold, delisted or milked. Lever Fabergé NL, the company where this research is conducted for, is a company with experience of putting this strategy into action.
Examples are Jif/Cif and Andy/Cif (migration), Dubro (sold), All (delisted) and Lux/Vim (milked). Before continuing the Unilever definition will be given of brand migration:
“Converging one ore more brands with an identified core brand.”
Within Unilever there is a list of the Global Core Brands and the Local Core Brands
consisting out of 400 desired brands. This list is confidential, but in order to explain the whole situation, a fictional example will be given. The brand Dove is selected to be on the list of Global Core Brands, but is called Jove in Germany, positioned differently and the packages differ from the global equivalent. Jove clearly belongs to the first group in the classification, and the decision is made that Jove needs to be migrated to Dove on all aspects.
As can be guessed this is not a low risk activity. Changing the name of a brand, position and package with no clear advantage or reason for consumers will result in a lot of resistance to this change by consumers as well as by the internal organization. If the migration is not executed with care and attention, consumers might not even buy the brand anymore and switch over to an equivalent competitor brand.
This assumption is confirmed by research done by McKinsey. In this research it is said that most brand migration efforts fail and the costs of these failures are enormous. Of the 23 cases studied, from complex migrations of several brands operating in the same market to
seemingly straightforward changeovers from a local to a regional or global brand, McKinsey found out that market share was maintained in less than half8.
For pure brand migrations where two or more brands in a market combined into one, the success rate fell to 13 percent! This looks very promising for the pure brand migration Andy- Cif.
Clearly, there is a need to monitor or evaluate such a high-risk operation. The expected advantages and risks need to be determined and defined in advance. Within Unilever there is no systematic method that evaluates the performance of a brand migration. Therefore Unilever wants research to be done resulting in a methodology that is able to evaluate the performance. The following goals will be realised with such a ‘score system’. Fist of all, the performance of a brand migration can be tracked and thus be managed for a maximum result.
Secondly, with this tool the successes of brand migrations can be compared. Then it is possible to differentiate between best practices and worst practices resulting in better brand migrations in future. Therefore the objective of this research is:
Design a methodology for Unilever to score brand migrations.
8 Brand Consolidation makes a lot of Economic Sense, 1997
Chapter 2 Research Design
2.1 Introduction
The design of a research consists of two groups of activities9. The first group deals with the deliverables of the research, the conceptual design (2.2), and the second group concerns the question how the conceptual design will be achieved, and is called the research technical design (2.3).
2.2 Conceptual design
The conceptual design consists of the research objective (2.2.1). The research model explains in which way the research objective will be met (2.2.2). Out of this model the central research question will be formulated (2.2.3) and the research questions (2.2.4) with the restrictions (2.2.5).
2.2.1 Research objective
The research objective is defined as follows:
Design a methodology for Unilever (Lever Fabergé Netherlands) to score brand migrations.
The following benefits will result from such a methodology:
• The performance of a brand migration will be defined, so there will be a clear understanding by all the employees within Unilever of the underlying objectives.
• The performance of a brand migration will be tracked, and thus management action can be taken in order to maximize this performance.
As has been mentioned in chapter 1, Lever Fabergé has experience with putting the Unilever Brand Focus strategy into action. The Jif-Cif brand migration was done in 2000. And during the research period Lever Fabergé offers the researcher the possibility to closely study and experience a planned brand migration (Andy-Cif).
In order to achieve the objective of this thesis, a whole structure has been formulated and presented in the next paragraph, i.e. the research model of this research.
9 Verschuren en Doorewaard (2000) p. 16-17
2.2.2 Research model
The research model shows an overall picture of the various steps to be taken to achieve the research objective (BM = Brand Migration).
Phase One
Phase Two
Levels of BM (1)
Process of BM Assessment
(2)
Objectives BM (3)
BM Key Performance Indicators (4)
Result: Performance Definition BM
Measurement Tools BM
(5)
Result: Performance Measurement BM
Figure 2.1 Research model
2.2.3 Central research question
The central research question encloses the knowledge required to achieve the research objective. The central research question is:
How can the performance of a brand migration be defined and measured?
The central research question consists, as can be seen, of two phases: the definition and measurement phase. In chapter 1 clarification has been given on the definition of brand migration. The Unilever definition was given in chapter 1: “the process of converging one or more brands with an identified core brand”.10 In paragraph 3.2 a more specific definition will be given and the rationale behind the concept will be explained. For now the Unilever
definition is sufficient.
Examples of brand migrations are the name change of Raider-Twix in the autumn of 1989.
Since the number of migrations seems to be increasing there are also more recent examples of brand migrations, like Jif-Cif in 2001, Melkunie-Campina in 2001 and Andy-Cif in the beginning of 2002.
2.2.4 Research questions
Research questions are exploitations of the central question of the research. They help to construct partial answers. These partial answers together form the answer to the central question. A justification is given after each research question. That is, the reason that justifies the relevancy of the question for this research.
The first phase is called the definition phase and the following steps will be taken to define the performance of a brand migration. To solve the central research question the following questions have to be answered:
1. At what levels can brands be migrated?
Every brand migration is unique, requiring a unique approach. But can similarities be found in order to classify brand migrations? This classification is important for defining the key drivers of brand migration performance. The performance of a migration for example of a ‘simple’
name change should probably consist of a different set of performance drivers as opposed to the performance of a migration with a name and packaging change. This needs to be
investigated in order to find the right performance definition.
2. What does the process of brand migration assessment look like?
When thinking about migrating a brand the situation must be carefully assessed. Different choices need to be made concerning risks, timings, communication, etc. When these factors are not carefully analysed, the performance of a brand migration can become in danger. Thus, before being able to talk about the performance of a brand migration, it is important to have a clear view on the process of assessment of a brand migration.
3. What are the objectives of a brand migration?
In order to find a list of performance drivers of a brand migration it is necessary to look at the objectives of a brand migration. What benefits can be achieved where, and which risks have to be over won through a good execution of the process?
10 Unilever Marketing Academy
4. What are the key performance indicators (measuring the objectives) of a brand migration?
At this stage key performance drivers will be linked to the objectives of a brand migration.
Through interviews with brand managers the key set of performance drivers and the relative ranking will be found, resulting in a brand migration performance definition.
The second phase of the research is concerned with measuring performance and the following research question will be stated.
5. According to the definition of the performance of a brand migration, which measurement tools are needed?
For measuring the performance (indicators) of a brand migration, it is necessary to use effective measurement tools. In the academic literature there are many examples of
frameworks for evaluating strategy and activities. One of those frameworks is the Balanced Scorecard11. The practical usefulness of this method has been proven a great success. This method will form an input to finding a method to score brand migrations. Other measurement theories like SMART12 will also form an input for finding the right tools. This will result in a framework for measuring the performance of a brand migration.
2.2.5 Restrictions
There are several restrictions concerning the results and research process:
• The timeline is from the first of October 2001 until the first of June 2002
• Unilever’s Path to Growth strategy will be regarded as a fact in this research
• The research shall focus on the European market, with the Dutch market in particular
• The result of this research should be applicable within Unilever world-wide
11 Kaplan 1996
12 P.J. Meyer, Attitude is everything
2.3 Research technical design
The research technical design consists of the thesis build-up (2.3.1) and the data collection (2.3.2).
2.3.1 Thesis build-up and structure
The thesis will be built up as visualised by diagram 2.1.
Definition Phase Chapter 1 Introduction Chapter 2 Research Design
Chapter 3 Theoretical Framework
Chapter 4 Levels of Brand Migration
Chapter 5 Analysing the Brand Migration Situation Chapter 6 Objectives & KPI’s Brand Migration Measurement Phase Chapter 8 Conclusion/Recommendation
Chapter 9 Reflection/Recommendation
2.3.2 Data collection
The previous paragraphs presented the conceptual design that identifies the research questions needed for answering the central research question. The information required for solving the research questions needs to be gathered through different data collection methods. This paragraph explains which data collection method is needed for each research question.
The first research question investigates the different levels brands can be migrated. First secondary sources will be used for getting an understanding of the different brand migrations that have taken place. One of these sources is the Unilever Marketing Academy (UMA) where case material is available of brand migrations (Unilever and non-Unilever). Secondly primary sources will be used in the form of open structured interviews among managers experienced with brand migrations (see Appendix A).
The second research question defines the process of brand migration assessment. Secondary sources will form the biggest input for defining the process of brand migration assessment.
These will be checked with open, unstructured interviews with the two coaches of this thesis, both very experienced with brand migrations.
The third research question and fourth research question show a high correlation. First trough secondary sources a list of objectives will be formed and indicators will be attached to these objectives. Then with the help of primary sources, structured interviews among a lot of managers from different disciplines (see Appendix B), a selection will be made of these objectives resulting in key objectives with key performance indicators. At this stage, there is also room for additional objectives and indicators that can define and measure the
performance of a brand migration.
The final fifth research question will confront the list of key performance indicators (or the performance definition) with secondary sources about effective measurement. Off course the end result will be discussed and checked with the two coaches of this thesis, both very experienced with brand migrations.
Diagram 2.1Thesis build-up
In the next diagram 2.2 a clear view is presented of how the information will be gathered and which sources will be consulted per research question.
Research Question Primary sources Secondary sources At what levels can brands be
migrated?
Structured Interviews with managers experienced with brand migrations
Internal documentation Marketing literature What does the process of
brand migration assessment look like?
Open interviews with managers experienced with brand migrations
Product development literature Internal documentation
McKinsey and BCG reports What are the objectives of a
brand migration?
Structured interviews with managers experienced with brand migrations and other brand managers
McKinsey and BCG reports Marketing literature
Internal documentation What are the key performance
indicators of a brand migration?
Structured interviews with managers experienced with brand migrations and other brand managers
Financial and marketing literature
Market research According to the definition of
the performance of a brand migration, which
measurement tools are needed?
Balanced Score Card literature (Kaplan)
Other literature
Diagram 2.2 Sources of data collection related to research questions
Chapter 3 Theoretical Framework
3.1 Introduction
This chapter will discuss the theoretical framework of this research. The objective is to provide the reader with the definitions and the theoretical concepts used in this research. In supplying this background the reader will be ‘fully equipped’ to explore this research.
3.2 Reasons for name changes
Branding is a hot topic in boardrooms around the world because most companies recognize that a strong brand is a powerful driver of shareholder value. McKinsey analysis suggests that about half of the market value of the Fortune 250 is tied up to intangible assets13. For some of the world’s best-known companies, the figure is even higher. So why do companies take the risk of changing the name of such an important asset, one of the first visible signs of a product to consumers?
According to Kapferer 11 reasons can be found for name changes (see Appendix C). Since many of the mentioned reasons show overlap and duplicity, the list is adjusted resulting in the following categorisation that is important for exploring the boundaries of this research
(numbers are referring to Appendix C).
The adjusted Kapferer list of reasons for brand name changes:
1. Merger (2 and 4)
2. Legal/language reasons (10 and 11)
3. Cost Reduction (marketing/supply chain costs) (3, 6, 7 and 8) 4. Power against competitors/Expansion (1,5,6 and 9)
One can draw a line between reason 1&2 and reason 3&4. It seems that for brand name changes reason 3&4 often go hand in hand. Companies like Unilever try to achieve a cost reduction by simplifying the internal organization (reason 3) and use the saved money to invest in less brands resulting in more external power (reason 4).
Brand name changes because of reason 1&2 are not fully subject to this research. For example, language and legal reasons often involve the creation of a new brand name. Thus, this results in an investment in an extra brand. His is not in line with the central thought behind this research: eliminating, or even better, migrating brands to achieve cost reduction and external power.
Brand name changes with a merger as reason are different cases. Often this involves two corporate brands that become one (e.g. ABN and AMRO). It is difficult to say to which extend this research is also applicable to these cases. Therefore a case is added in this research in chapter 4 with a brand name change because of a merger: Libertel-Vodafone.
13 Court, Leiter, Loch, 1999
3.3 Is the name change the only thing that changes?
Although companies communicate the opposite, the changing of the name of a brand is the top of the iceberg of the changes that in fact take place. Most of these changes work through into the whole internal organization, and are not visible to consumers. In this paragraph the rationale will be described behind brand name changes migrations, through defining the term
‘brand migration’ and presenting its objectives.
3.3.1 Definition of brand migration
In literature many different definitions can be found for the concept of the changing of a brand name. This is not strange since a more elements of a brand or product can be migrated to a new brand or product. The next diagram shows the variety of terms used, some of them are defined from a marketing perspective and others are defined from an overall perspective.
Used Term Definition Perspective (source) Brand transfer Changes in the marketing mix (name,
position, package)
Marketing (Kapferer) Brand name
change
Change in the name and positioning Marketing (Kapferer) Re-branding Changes in name and positioning Marketing (Keller) (Brand)
Rationalisation
Component and assortment reduction Technical (McKinsey) Brand
consolidation
Reducing brand portfolio by phasing out, changing to one brand name or dual branding
Overall (Knudsen et al)
Brand migration
Converging one ore more brands with the identified core brand
Marketing (Unilever)
In this research a brand migration will be seen as a project. Since a brand comprehends not only a name, a brand migration is also often more than a name migration. In many brand migration projects the name and other brand elements (discussed in chapter 4) are migrated.
When dealing with a brand migration it is important to state to what extend will be migrated (full versus name migration) since this influences the effects a brand migration will cause.
In this research the term brand migration will be defined as:
“A project where brand elements (like name, package, logo, marketing position, etc) of one or more brands are converged to another brand.”
This definition includes ‘the whole iceberg’, not just the top. This is in line with the objectives of a migration that are explained in the next paragraph.
3.3.2 Objectives of brand migration
Different perceptions exist about the objectives of brand migration. Therefore a clear and unambiguous view will be given about these objectives. Three general objectives can be distinguished for a brand migration, which are explained through a simplified example (figure 3.1).
Diagram 3.1 Different Terms are used in literature
In this example two brands are migrated to a ‘new’ brand (e.g. Andy and Cif to new brand Cif). Successful migration might turn two brands, each possessing a 15 percent market share, into a single brand with 32 percent share. The reduction in the cost of goods sold (because the internal organization is streamlined) and the reduction in advertising and promotion (through focus) bring the operating margin up from between 5 and 7 percent to 16 percent approaching a triple effect on the bottom line. How does this work?
The first objective of a brand migration is to simplify and streamline the internal organization.
In figure 3.2 this is explained in a simple way. An in-dept analysis will be given in chapter 5.
Imagine a company that provides a certain range of hair care products to 10 different markets with 5 different brand names and consumer offerings. It is not only the name that is different also aspects like ranges, formulations, marketing positions and the volume, size and design of packages are different amongst markets. Furthermore the markets are differing in size. As can be guessed this provides a lot of complexity for the internal organization than in the case of this company supplying her products to 10 different markets with one identical brand or product.
Migrating all these components to one will result in huge cost savings. Thus, when companies like Unilever are reducing their brand portfolios, their aim is to simplify the internal
organization resulting in a great amount of cost savings on many different aspects.
The second objective is could be gathered under the first, but because of its great importance it is mentioned separately. For international companies providing premium brands or products to the market a great deal of the total costs consist of marketing and promotional costs. These costs can be cut dramatically by reducing the number of brands. For example one commercial can be made for one entire region or maybe even the world instead of producing different commercials for a different countries.
The third and last objective is closely linked to others. The money saved through simplifying the organization can be put behind ‘the new list of promising brands’. This increase of focus
Purcha- sing
Manufac- turing
Distri- bution Logistics/
Ware- housing
Marketing/
Sales
Figure 3.2 Value chain
R&D and Enginee- ring
Consumer Market Business
Market
P&L ye ar 0 End Gam e P&L Brand 1 Brand 2 New Bra nd
Market share 15 15 32
Cost of goods sold 50 52 45
Gross margin 50 48 55
Advertising&Prom otion 25 25 18
Operating m argin 7 5 16
Figure 3.1 Realizing value through migration
can accelerate other processes. Innovations can be rolled out more rapidly and brands can be better defended against competitor attacks.
The next paragraph will explain the methodology used in this research to define and measure the performance of a brand migration.
3.4 Measuring performance
One of the most well-known and widely used models to measure performance is the Balanced Scorecard (BSC) method by Kaplan and Norton14. In their book they are talking about a shift for today’s companies from industrial age competition to information age competition. This shift requires new capabilities for competitive success. No longer can companies gain sustainable competitive advantages just by rapidly deploying new technology into physical assets or by excellent management of financial assets and liabilities. These new capabilities, i.e. the ability for a company to mobilize and exploit its intangible or invisible assets, have become far more decisive than investing and managing physical, tangible assets.
As companies invested in programs and initiatives to build these new capabilities, however, the primary evaluation system consisted of monitoring progress by means of monthly, quarterly, and annual financial reports. Ideally, the financial accounting model should have expanded to incorporate the valuation of the company’s intangible and intellectual assets, such as powerful brands, high-quality products and services, motivated and skilled
employees, responsive and predictable internal processes, and satisfied and loyal customers.
These assets are the ones that are critical for success in today’s and tomorrow’s competitive environment.
3.5 Balanced scorecard
The BSC does incorporate this evaluation of the performance of intangible and intellectual assets. It provides managers with a comprehensive framework that translates a company’s vision and strategy into a coherent set of performance measures. The BSC complements financial measures of past performance with measures of the drivers of future performance.
The objectives and measures view organizational performance from four perspectives:
financial, customer, internal business process, and learning and growth. These four perspectives provide the framework for the BSC (see figure 3.315). They permit a balance between short- and long-term objectives, between external measures -for shareholders and customers- and internal measures of critical business processes, innovation, and learning and growth, between outcomes desired and the performance drivers of those outcomes, and between hard objective measures and softer, more-subjective measures.
3.5.1 Financial perspective
The BSC retains the financial perspective since financial measures are valuable in summarising the readily measurable economic consequences of actions already taken.
Financial performance measures indicate whether the company’s strategy implementation, and execution are contributing to bottom-line improvement. Financial objectives typically are related to profitability –measured, for example, by operating income, return-on-capital-
14 Kaplan, Norton, 1996
15 For the expanded version of the Balanced Scorecard see Appendix X
employed, or, more recently, economic value added. Alternative financial objectives can be rapid sales growth or generation of cash flow.
3.5.2 Customer perspective
In the customer perspective of the BSC, managers identify the customer and market segments in which the organization will compete and the measures of the company’s performance in these targeted segments. The customer perspective typically includes several core or generic measures of the successful outcomes from a well-formulated and implemented strategy. The core outcome measures include customer satisfaction, customer retention, new customer acquisition, customer profitability, and market and account share in targeted segments.
3.5.3 Internal business process perspective
The internal business process measures are focussed on the internal processes that will have the greatest impact on customer satisfaction and achieving the organization’s financial objectives. Each business has its unique set of processes for creating value for customers and producing financial results, but a generic value chain model, however, can be used for providing a template that companies can customise for their own objectives and measures in their internal business process perspective.
3.5.4 Learning and growth perspective
The fourth BSC perspective, learning and growth, identifies the infrastructure that the organization must build to create long-term growth and improvement. The customer and internal business process perspectives identify the factors most critical for current and future success. Businesses are unlikely to be able to meet their long-term targets for customers and internal processes using today’s technologies and capabilities. Also, intense global
competition requires that companies continually improve their capabilities for delivering value to customers and shareholders.
Financial
Learning and
Growth
Internal Business Process Customer Strategy & Vision
Figure 3.3 The balanced scorecard
3.5.5 Balanced scorecard approach for brand migrations
Is the BSC method, intended for measuring the performance of an organization or business unit, applicable for measuring the performance of a brand migration?
The starting point for this discussion is the fact that the performance of an organization alone can never be measured. It is the performance of the processes that are enacting within an organization and their effect on the market that can be measured. And having the objectives of brand migrations in mind (3.2.1), it can be concluded that the performance of brand
migrations can be measured by a method as the BSC.
Even more, the objectives of the BSC method and the characteristics of brand migrations show a great fit. The BSC is about measuring the performance of tangible or visible assets, but even more about measuring the performance of intangible or invisible assets, that are determining the competitive success of an organization in the long run. Thus, a great tool for measuring the performance of brand migrations since migrating brands is about migrating intangible or invisible assets. Furthermore the BSC method is a complete approach in
measuring performance of an organization with the four perspectives covering each area. This complete approach is needed for brand migrations, since migrating brands is about achieving advantages in all areas of the organization as explained in paragraph 3.2.2.
Balanced Score Card Advantages Brand Migration Characteristics Not only measurement of tangible assets,
but also intangible assets which are critical for future success
BM is about migrating intangible assets
The organizational performance is covered by four perspectives: financial, customer, internal business process and learning and growth
BM is about achieving advantages in all areas
Perspectives are linked by cause and effect relationships
BM advantages have cause and effect relationships through whole value chain Cross-departmental approach BM is about cross-departmental
advantages
Supporting the discussion about the applicability of the BSC approach for evaluating and monitoring brand migrations is an example of a case where Metro Bank16 used the scorecard as a tool to achieve focus. Metro was the surviving entity of a merger of two highly
competitive banks in the same region. The CEO saw the BSC as a way to bring the two organizations together. In this case two organizations with different strategies and identities had to be brought together by identifying key drivers in order to achieve one focussed strategy.
3.5.6 How to use the BSC for this research
As can be seen in figure 3.4 objectives have to be formulated, indicators measuring these objectives have to be found, for these indicators targets have to be set and initiatives have to be formulated on how to achieve these targets. What are the roles of these objects in this research?
16 Kaplan, Norton, 1996 p. 296-297
Diagram 3.2 Fit between the BSC and brand migration characteristics
Objective KPI
Tar get
Initiative Name
Position Package Product
First of all the objectives refer to the success factors of a brand migration. In chapter 6 the success factors will be presented for brand migrations. Secondly, the indicators refer to the key performance indicators measuring the success factors of a brand migration. These KPI’s will be presented in chapter 6. Thirdly, the targets and initiatives will not be part of this research, since these have to be assessed for each specific brand migration case separately.
3.5.7 Performance indicators
A performance indicator can be defined as any information either quantitative or qualitative:
• That is used on a historical and/or predictive basis
• That will evaluate and lead towards the achievement of an organization’s goals
• That will allow timely corrective action
Quantitative indicators can be such things as return on investment, profit and return on equity.
Qualitative indicators can be such things as market dominance, quality of service and fear of crime. Qualitative indicators are usually about perceptions and therefore in this research a quantitative indicator (or a basket of quantitative indicators) is used to act as a proxy measure for a qualitative indicator.
Fig. 3.4 Zooming in on the deliverables of this research
