Branding Strategy Insider helps marketing oriented leaders and professionals like you build strong brands. BSI readers know, we regularly answer questions from marketers everywhere. Today we hear from Xiaolu Liu, a management consultant in Beijing, China who has this question about managing brands in the consumer packaged goods space.
“I’m working with a large Chinese food conglomerate, helping them design their brand management system and would like your help in understanding how a brand management system works in large consumer goods companies such as P&G, Unilever, J&J, Kraft, Nestle etc.. The following questions come to mind.”
1. “How should a large consumer goods organization maintain control to ensure consistency in brand management, while remaining innovative, flexible and relevant to the changing consumer market dynamics?”
Thanks for your questions Xiaolu Liu. Most consumer packaged goods companies (CPG’s) have organized into global business units and local operating companies. Using P&G as an example, they have global business units (GBU’s) which are responsible for setting business goals and strategies; developing, qualifying and manufacturing products; and developing marketing programs and plans. The GBU’s have bottom line P&L accountability and are led by true General Managers. The local operating companies—know as MDO’s—are the “go to market” arm for the GBU’s in each market. Each MDO is led by a country manager. They are responsible for developing the right distribution and merchandising plans to launch new products into their market with retailers, and are charged with the on-going management of retailer relationships, local market PR, media planning and buying, regulatory agencies, etc. They do these tasks on behalf of all of the GBU’s, and thus operate with “one voice” to retailers and the local market on behalf of all GBU brands.
Each GBU has an annual review with senior management, including the CEO, to agree to their revenue and profit goals, both short and long term, along with their 3-5 year strategies, and plans for achieving the goals. Generally, strategic choices are framed as where to play and how to win choices and there is great focus on product innovation and marketing. Each GBU generally maintains a small global group which is responsible for developing the above strategies, tracking performance across regions, and doing high-level “success and reapplication” analysis. For example, they will routinely analyze best performing markets and try to isolate factors which are common to successful markets. Or, they will identify highly successful product launches, marketing programs, etc. and distill these successes into a set of success principles which can be easily reapplied across other markets. These groups often lead global R&D initiatives, including development of new technology, strategic partnerships and so on.
2. “How should the company ensure efficiency in budget allocation?”
Resource allocation is generally in-line with the strategic plans. GBU’s earmarked for high growth, high investment will be treated differently than GBU’s with lower growth strategies. Each GBU is generally given a P&L target by corporate, these are then cascaded to the regions, and then to the local markets. Local markets simultaneously build their forecast from the bottom up, and there is some negotiation from top down/bottom up to reach the target P&L. MDO goals are set as the aggregation of the GBU revenue targets, and they are evaluated on their revenue goal less their local market costs.
Within a country, the brand(s) within a GBU will do an annual business review where they analyze and identify the key business drivers and ROI of their various marketing investments. Typically, most markets are now using market mix modeling, where they build a regression model which uses marketing plan elements as independent variables versus weekly store sales as the dependent variable. This enables them to identify the single variable impact of each marketing variable, which is key to allocating spending across marketing plan elements (e.g. TV vs. Print vs. Digital vs. Display, etc.). Within each marketing plan area (e.g. Digital), a market may use outside vendors to conduct more granular analysis to further refine the marketing mix. For example, in the US, P&G might work with Nielsen to understand the impact of different kinds of digital ads, how ads perform across different web sites, how different TV creative units perform, how TV ads perform by program, etc. Some marketers are even measuring advertising and media in close to real time (e.g. weekly data).
3. “What brand management processes and procedures should be standardized and how?”
Annual Business Review Process: Typically, there is a standard business review template that mandates a finite set of data and analyses that every brand is expected to do. This would usually include: business performance (revenue, share, profit) over 5 years, brand equity performance in the absolute and versus competition; overall lessons learned (e.g. what worked, what didn’t work and why); new consumer insights and opportunities; advertising and media learnings; trade learnings (e.g. pricing, promotion, distribution, shelving); mix modeling learnings; and competitive learnings. Annual Marketing Plan Process: The marketing plan template is standardized along a who (target audience), what (our value proposition), where (distribution channels), how (communication channels, media, advertising, pricing, promotion, etc.) and sometimes when (e.g. entry point, seasonal, etc.). Brands must show how their marketing plan proposal quantitatively builds up to the agreed volume, share and profit goals. Brand spending is typically shown across 5 years, and is broken out into standard groupings like: Advertising, Consumer Promotion, Trade Promotion, Indirect Brand Spending (e.g. commercial production, talent fees, etc.), Market Research/Consumer Insights, and Testing. Every brand is mandated to set aside ~5% of its budget to test new ideas for future growth.
4. “What metrics, measurements or KPIs should be put in place to track and evaluate brand performance?”
Business And Marketing KPI’s: These are standardized so that there is a common currency across all brands in all markets. For example: market share, brand equity metrics, advertising effectiveness, marketing spend as % of revenue, etc. The brand data by market is aggregated by the GBU’s to look for patterns, learnings and opportunities. This enables the GBU’s to set global benchmarks for best in class performance by category and brand for each metric. Best in class brands are studied extensively to understand how and why they achieved their results and these are then codified and shared as part of P&G’s “search and reapply” philosophy.
5. “What are the roles and responsibilities of the corporate headquarters marketing department versus that of business units? Do you know any companies that have detailed brand management guidelines for all aspects of their brand management?”
Global brands generally have centrally controlled brand positioning statements and packaging. Local markets have some limited leeway to operate within these guidelines. Occasionally, exceptions are made for rare and extenuating circumstances. There is always a healthy tension between the global brand “police” and the local markets which are constantly testing the bounds and trying to create new and better approaches. Some GBU’s will go so far as to create global advertising campaigns (E.g. Pringles) for use across markets, but this is the exception. Usually, advertising is produced locally for the large markets, and regionally for smaller markets. Most GBU’s will have several “proven” campaigns that they are using across the world at any given time, but local markets can usually opt out for something different IF they have data proving its better than the proven global campaigns.
Xiaolu Liu, we hope these answers help you construct the best brand management system for your client.
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