Analysing Strategic Brand Management

“Though it comprised brands catering to different consumer groups ranging from premium (La Prairie) to mass (Nivea), Beiersdorf’s brand portfolio remained highly concentrated as compared to its competitors” [“Beiersdorf AG’s Business Portfolio”, para 5 of the case study]. Identify the characteristics Peculiar to Beiersdorf’s Brand portfolio.

Beiersdorf Brand – Product Matrix

Brands

Skin care

Sun care

Body Care

Baby Care

Face Care

Bath & Shower

Deodorants

Fragrances

Lip Care

Hand Care

Anti-age

Colour Cosmetics

Hair Care

Foot Care

Men’s grooming

Others

Nivea

La Prairie

Juvena

Eucerin

Florena

8×4

Labello

Hansaplast

Beiersdorf’s brand Portfolio Characteristics

As seen in the Beiersdorf’s Brand-Product Matrix, Beiersdorf’s brand portfolio contains eight brands namely: Labello, Nivea, 8X4, La Prairie, Juvena, Eucerin, Hansaplast/Elastoplast, and Florena. Amongst these brands, the most prominent is the Nivea brand, which the company uses as the umbrella brand for broad skin care and personal care. Most brands have sub-brands. They include Nivea, La Prairie, Eucerin, Hansaplast, and Florena). The other remaining brands have no sub-brands.

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Nivea, being the umbrella brand and the most dominant brand, has fifteen sub-brands with each sub-brand extensively extended so as to meet the specific needs of the customers based on gender, age groups, and functional benefits. The sub-brands are: Nivea Cream, Nivea Visage, Nivea Beaute, Nivea Hair Care, Nivea Body, Nivea Soft, Nivea Hand, Nivea Sun, Nivea Deodorant, Nivea Intimate Care, Nivea Baby, Nivea Lip Care, Nivea Bath Care, Nivea for Men, and Nivea Visage Vital.

Ucerin, as a brand, also has several sub-brands. They include Face Care, Hair Care, Deodorant, Body Care, Lip Care, Hand Care, Foot Care, Sun Care, and Anti Age.

Hansaplast’s sub-brands are: Plaster, Wound Care, Foot Care, Scar Reducer, Sport, Insect Bites, and Pain Relief.

The sub-brands within Florena are: Face Care, Body Care, Hair Care, Skin and Hand Cream, and Florena for Men. La Prairie has only three sub-brands, which are: Skin Care Treatments, Fragrances, and Color. 8X4 is known for the Deo Sprays and Roll-ons, Labello for the Lip Care, and Juvena for skin care.

If we keenly consider the above brands, we realize that similar sub-brands are offered. Nivea and Ucerin offer almost similar products. This is a very important strategy in market coverage. Here, the company widens its target group as it targets different consumers, market segments, and channel distributors. In so doing, the company maximizes its coverage for both the available customers and the potential customers. This ensures that none of the customers is ignored. The company has also achieved in maximization of overlap. This ensures that there is reduced or no competition among the brands themselves.

Beiersdorf’s brand portfolio characteristics come with various benefits. First, the risks are lowered. The company operates within a wider market range as it maximizes the coverage on customers. The umbrella brand Nivea has good image that makes the sub-brands to enjoy benefits of reduced risks.

In case of a contamination or loss of image in one brand, the other brands do not suffer. Even if a product within the umbrella brand fails to meet the expectations of the customers, the other products do not suffer from the same. This is because; the company has committed itself in improving the brand image and has succeeded in attracting customers’ confidents in the products. Beiersdorf Company also enjoys great economies of scale. Due to the existence of the parent brands, the costs incurred in production, research and development, distribution, market research, etc are greatly reduced. With this portfolio, the focus on the segmentation strategies is also enhanced. Over the years, Beiersdorf Company has been seen as the market specialist. Its products have globally emerged as market leaders.

The extension strategies at Beiersdorf Company are Line extensions, and Category extension. Line extension has been used in the introduction of new products so as to target the potential customers and market segments in the same product class. In such a case, the parent brand is made use of. Category extension has also helped the company to conquer different product categories.

As a result of the extensions, the company has enjoyed various benefits, among which are: good image creation, risk reduction, great efficiencies in packaging, labelling, production, and marketing. Also, there are high chances of gaining distribution, as the cost of introductory and marketing are greatly lowered. The costs of developing new brands are also eliminated. At the same time, consumers are assured of varieties of products.

David A. Aaker and Erich Joachimsthaler said, “The challenge is to create a brand team where all the sub brands and brands fit in and productive” in The Brand Relationship Spectrum. Discuss the Beiersdorf’s Brand architecture strategies on the basis of brand relationship spectrum.

The business environments today have radically changed the roles of brand managers as they are faced with global changes, channel dynamics and market fragmentations. The high costs in creation of new brands put a lot of pressure on the brand assets. Due to these complexities and pressures, the brand managers are faced with several challenges that call for proper understanding of both the relationships and structures. “Brand architecture” gives the ultimate solution. According to Aaker and Joachimsthaler (2000), brand architecture is defined as the organizing structure of the brand portfolio where the brand roles and the nature of brand relationships are defined. Well-defined brand architecture can minimise wastage, confusion, and market weakness; as it promotes synergy, leverage, clarity, and opportunities.

The Brand Relationship Spectrum

On the basis of brand relationship spectrum, Beiersdorf has adopted the “Branded House Strategy”. Here, Nivea is the umbrella brand. Nivea provides the global umbrella under which a wide product line operates. The products include Nivea Body Care, Nivea Face Care, Nivea Hand Care, Nivea Men’s Care, Nivea Sun Care, Nivea Bath Care, Nivea Lip Care, and Nivea Deodorants. With this kind of brand architecture strategy, there is a lot of clarity, synergy, and leverage.

Beiersdorf enjoys maximum clarity, as the customers know exactly what is offered. From a branding perspective, it is very easy to understand the brand since all the products within the brand communicate the same message. This enhances clarity as compared to several individual brands where each brand has its own associations. Customers easily know, understand, and recall the brand. Communication partners and the employees also benefit greatly from the clarity and the focus on a single dominant brand. As compared to other strategies, the question of brand priorities or the need to protect the brand does not arise.

In addition, Beiersdorf enjoys maximization of synergy. Participation in one product market, say, Nivea Face Care, creates associations and visibility which helps other products like Nivea Body Care, Nivea Men’s Care, among others. Innovations and improvements in quality of one product enhance the brand in other products as well. Furthermore, an exposure of the brand in one product creates visibility, which enhances the brand awareness in all the other products. In most contexts, there is a lot of input and efforts in umbrella brand Nivea so as to build its overall image.

This strategy provides room for more cost effective means in launching of new products and brand extensions. When a new product is to be introduced into the market, the promotional costs are greatly lowered. Due to the existence of the same brand name, new products always have increased chances of customer acceptance since they carry the same brand name. Building of the new product awareness from scratch is totally eliminated. In terms of brand promotion, Beiersdorf enjoys economies of scale. The resources are channelled more effectively due to the fact that only one brand is promoted.

One of the disadvantages of this strategy is the possibility of brand dilution. If not properly monitored, there can be dilution of the umbrella brand Nivea when product proliferation occurs. All products may not have the same positioning theme. Any deviation from the umbrella brand’s positioning will result into the dilution of the main positioning theme of the entire branded house. The company may also be forced to forgo a lot of market opportunities when the opportunities fail to fit into the positioning of the parent’s brand.

If one brand fails, there can be adverse negative impacts on the entire branded house due to the fact that all the products carry same brand name. Any controversy that involves a single product can adversely affect the other remaining products. With the branded house strategy in a large market share, it becomes extremely difficult to maintain the quality position or the good image of the umbrella brand. The ability of the company to target specific groups is also limited as compromises are always required.

The brand name adds value to the new products due to its value position, the credibility, and the communication efficiencies resulting into cost advantages. Beiersdorf’s master brand always makes the products more appealing to the customers, thereby making the brand equity to be leveraged in the new context. Nivea offers great visibility to its new products. At the same time, there are great reductions in the costs of promotions and advertisements, packaging and displays, and brochures, as the prior brand building efforts are adopted and used directly.

Beiersdorf’s Nivea brand has excelled in meeting the varied needs of the customers due to its relevance. The position of the brand is high and proper, with the high products’ value forming the basis of pricing. Nivea brand equity is strong as a result of the perfect marketing strategies, which include advertisements and promotions. Due to its excellent products, we deduce that the company properly understands the needs of the consumers as it monitors its sources of brand equity.

“Though all the brands in Beiersdorf’s portfolio were carried as independent identities, all these brands were further extended rigorously across various product categories.” [Section: “Evolution of Beiersdorf AG’s Brand Portfolio”, para 11 of the case study]. How did Beiersdorf employ its brands as strategic growth vehicles?

The Ansoff Growth matrix

Market penetration

Beiersdorf Company always concentrates in selling its existing products into the existing markets. In so doing, the company has managed to achieve the following:

There has been an increase in the market share of the company’s products. Considering the Nivea brand as an umbrella, the company has very competitive strategies in pricing, and marketing (including sales promotion and advertisements). Other brands like Ucerin, Hansaplast, Florena, and La Prairie have also managed to maintain the market share.

There has been security in dominance of the growth markets – the strong image, which the Nivea umbrella brand has created in the market, has resulted in the security in the dominance of the growth market. Even though the company faces stiff competition from other larger companies in the region, it has managed to thrive as a result of the great image of its Nivea brand.

The company maximizes on the increased usage of its products by the existing customers. Nivea brand products have always made the market to be unattractive for its competitors. This is as a result of the great satisfaction that customers derive from the Nivea products. These products are always associated with quality and reliability. This is an image that always appeals to the customers. Also, the company heavily invests in market research and innovations, as it releases into the market the tailor-made products. The company’s management team is highly competent. The brand managers always understand the customer needs. They always try to maintain the relevance of the products through constant inspections. The company understands that Nivea brand forms its bulk for sales. It therefore tries by all the possible means to ensure that the brand remains relevant, as its quality remains high.

Market Development

This is the strategy applied when the company wishes to sell its existing products into new markets. Beiersdorf Company has greatly achieved in applying the market development strategy, especially for its Nivea brand.

The company continuously exploits the potential geographical markets. The great expansion of Nivea into the global market attests to this. The company’s products have been the market leaders in various countries including China, Russia, the Czech Republic, Slovakia, Saudi Arabia, Bulgaria, Romania, Ireland, Guatemala, Belgium, Netherlands, Switzerland, Portugal, France, UK, and USA, among others.

The company achieves this by:

Creating new distribution channels, which ensure that the product is made available in the desired geographical location. The company has opened up various stores in various parts of the world.

Product exportation – In the absence of Beiersdorf’s products in an area identified as a potential market, the company always resort to exportation of the products to that specific location.

The company has in most cases used the pricing policy so as to attract the potential customers. This has greatly helped in the creation of the market segments.

Finally, the company concentrates on its good image as it uses unique packaging to uphold its perceived quality and value. The consistency in the packaging style greatly helps in maintaining customers’ view on the quality of the product.

Product Development

This is the growth strategy where firms aim at introducing new products into the existing markets. This is the strategy, which Beiersdorf Company has greatly succeeded in applying.

Since the establishment of Nivea as a broad skin care and personal care brand, various products have been introduced into the market. This has been greatly accelerated by the great quality and satisfaction, which is associated with the Nivea brand.

In introducing new products under the existing brand name Nivea, the company always enjoys economies of scale, as there are great reductions in costs. The new product also enjoys great acceptance and positive perception in terms of quality and service. The new products that are developed always appeal to the market.

Diversification

This growth strategy involves the introduction of new products into new markets. This strategy is very risky and companies always avoid it. Beiersdorf Company is not left behind. In this case, the company moves into a market, which it has no experience about. Just incase the company is compelled to use this strategy; then, it must assess the risks and have a clear idea of the possible gains.

Kevin Lane Keller said, “Building a strong brand involves maximizing all then characteristics” in The Brand Report Card. Evaluate the success of Nivea brand as a true global brand using the ten parameters given in the article quoted.

Keller (2000) gives ten parameters saying that a successful brand is one that excels at delivering the benefits customers truly desire.

This first parameter is quite evident in the case of Nivea brand. A range of products offered under the umbrella brand Nivea completely satisfies the varied needs of the customers. The Nivea For Men face care highly meets the demands of its consumers. In 2006, it emerged as the best product in Chinese men face care market. The key drivers include NIVEA SUN, NIVEA FOR MEN, NIVEA deodorant, and NIVEA body. NIVEA FOR MEN has been the market leader in various parts of the world including Russia, the Czech Republic, Slovakia, and Saudi Arabia.

Nivea Deo has been the market leader in Croatia, Romania, and Thailand. NIVEA SUN has likewise been the leading brand in Norway. In the men’s shaving products category, Nivea products have always been in the lead in Germany. These products include the creams, the gels, and the foams; which highly satisfy customers’ demands.

The rapid growth in the Nivea brand is an indication of customers’ satisfaction with the brand’s products. In 2003, NIVEA SUN emerged as the market leader in Italy where it continues to extend the lead to date. This also confirms the great satisfaction, which the consumers derive from the Nivea products.

The introduction of NIVEA VISAGE YOUNG into the young market segment in 2003 has created a very big impact. Greatest successes of Nivea brand in the year 2003included the outstanding performance of Nivea Lip Care, which took the market lead in UK. NIVEA FOR MEN also became the leader in the after-shave and the facial market in Poland and United States. NIVEA VISAGE has always been the strongest brand on face care market in various parts of the world including Bulgaria, Romania, Ireland, and Guatemala.

Other Nivea products that have registered impressive market leads due to great customer satisfactions includes the Nivea Hands which took the lead in Belgium, Netherlands, Switzerland, and Portugal in the year 2004. NIVEA FOR MEN came into the records as the first brand in Asia to launch complete whitening range for men. In every subsequent launch of Nivea’s products, there is a great advancement in the skin care item. The Active Firming, which is the most advanced men’s skin care item, was launched in 2005 in France and UK, before it captured the entire world market.

For a new Nivea product to be introduced, the customer needs must first be considered. This is why all the new products perform extremely well in the market. They completely satisfy the needs of the customers. The Nivea men’s products are tailored especially to the needs of men’s skin.

In the second parameter Keller (2000) says that the brand should stay relevant. Strongest brands have their brand equity tied to the quality of the product or the service. In the above discussion, we have seen that Nivea upholds quality as customers derive great satisfaction from the various Nivea products. It goes without saying; therefore, that Nivea brand has remained relevant in the market. Other intangible factors considered in brand relevance include user imagery or the type of person using the brand. In most cases, all the users drive great satisfaction from Nivea products, a key indicator of the brand’s relevance. Another factor is the usage imagery or the situation in which the brand is used. Nivea brand has proved to be relevant in all the situations. Nivea has maintained its good image, which represents quality, sincerity and competence. Nivea brand has managed to stay on the leading edge without losing site of its core strengths.

The third parameter, is that the pricing strategy should be based on consumers’ perceptions of value. It is always difficult to achieve a perfect balance of product quality and cost, as the producer would always aim at maximizing the profit while the customer aims at lowering the expenditure. However, at Beiersdorf, managers try to understand the relationship between the product quality and price. This is very important to the company since, if the company continues with the production of high quality products and charges low prices on the products, it risks running at a loss. At the same time, if the company charges higher prices which do not match the quality of the product, then, it risks losing customers. The fact that Nivea brand continues to generate profit to the company and at the same time remains the market leader; is a perfect indication that the product quality and the price are greatly linked.

The image which Nivea brand displays automatically improves the value of the brand. Nivea brand, being a world leader in customer satisfaction, has a great value. With the improvement in the quality/value of the Nivea products, there has been a remarkable link with the pricing. The quality of the product and the price are always directly proportional.

The fourth parameter is the brand position. A well-positioned brand always attracts attention of the customers. Even in the peak of competition, such brands keeps up with the competitors by creating both points of parity and points of difference, which helps in acquiring advantages over the competitors. Nivea’s product quality and superiority has made it extend its global market lead beyond what the competitors can achieve.

Considering Consistency in the brand as the fifth parameter, In order to maintain a strong brand, there must be a balance between the continuity in marketing activities and the necessary changes that are needed so that the brand remains relevant. The brand must maintain its image, and the marketing strategies must not confuse customers either through sending conflicting messages or otherwise. Since the introduction of Nivea’s first advertisement in 1912, titled “With the likeness of a Lady,” Nivea has not had any conflicting or misleading advert.

As per another parameter Nivea brand portfolio and hierarchy always makes sense. Nivea is the umbrella brand under which several product operations take place. The sub-brands under the umbrella Nivea brand in most cases target different market segments. With the common brand name Nivea, there is maximum market coverage thus contributing to equity of the portfolio.

In addition, the brand makes good use of a full range of marketing activities in building the brand equity as dictated by the seventh parameter. The company spends heavily in promoting the brand and at the same time concentrates on the brand quality. This has helped in building the brand equity.

Nivea brand managers always understand the importance of the brand to customers. This is why there is a lot of innovation and constant introduction of new products, which satisfies the customers’ desires. Before an introduction of a new product, an extensive market research is carried out which reveals to the brand managers the exact desires of the customers. The company then embarks on production of a product, which is in line with the customers’ needs. The company heavily invests in the Nivea brand through extensive research, innovations, marketing and promotions. The quality and image of the brand has not changed.

Due to the overdependence of the company on Nivea brand, brand audits are always carried out at depth. This is done to ensure that the quality and relevance of the brand remains intact, as any slight change may lead the company into great losses. Nivea brand is successful according to the ten parameters.

Discuss the role of Nivea as an umbrella brand. Identify the critical factors that Beiersdorf utilised to successfully extend the Nivea brand.

Roles of Nivea as an umbrella brand

The main role of Nivea as an umbrella brand is the addition of value to the products operating under it. It also contributes toward the addition of value to the new products that are introduced into the market, and operating under the umbrella brand Nivea. It achieves this through: addition of links which contribute to value positions; provision of credibility; sharing the visibility; and generation of communication efficiencies. By so doing, Nivea brand facilitates new product acceptance. These roles are discussed hereunder.

Enhancing the Value Proposition

Over the years, Nivea brand has built a great image that is appealing to the customers. The quality, consistency, and customer satisfaction of Nivea brand has stood the test of time. Because of this, new products introduced under the umbrella Nivea brand are highly accepted by the customers. In so doing, Nivea brand improves the image of the new product, and at the same time reduces the risks that may be perceived by the customers. The probability of the new product in gaining distribution and trial is also increased greatly.

Generation of Communication Efficiencies

The introduction of a new product calls for the creation of distinct packaging, promotions and advertisements. This is costly considering both the time and the economic aspect.

However, with Nivea as the umbrella brand, there is great reduction in packaging and advertisements costs. This greatly reduces the cost of introducing a new product and the follow-up programs in marketing. This results into great enjoyment of the economies of scale. The synergy also tends to be high.

In general, an umbrella brand is very important as it completely eliminates the costs in developing a new brand and the associated risks. At the same time, it enhances great efficiencies in marketing (advertisement and promotional) expenditures. It also allows for efficiencies in packaging and labeling.

Provision of credibility

After enhancing the value preposition, Nivea brand creates credibility in the products that operate under the umbrella brand. Customers will always consider the new product as reliable. At the same time, customer risks are eliminated. This great credibility is as a result of the Nivea products, which have maintained their credibility over the years. Customers do not worry about the new product as there is always a preformed opinion on the new product which is created by the umbrella brand.

Visibility

The umbrella brand Nivea provides great product visibility for the new products introduced under the brand name. Visibility makes it possible for a new product to, not only gets an offering considered, but also implies positive organizational and production attributes.

Other than the aforementioned roles, Nivea brand enhances the perception of Beiersdorf company image as it improves its strength, uniqueness, and favourability. To customers, the umbrella brand conveys the deep company meaning and at the same time assures the customers of variety of quality products. The brand increases the market coverage as it also gives room for subsequent extensions.

The critical factors that Beiersdorf utilised to successfully extend the Nivea brand

Beiersdorf Company actively engages in evaluation of the customers’ desires before it can introduce any new product into the market. The company spends on extensive market research, innovation, and application of technology in creation of the new product. This is the main reason why the Nivea brand has a great image and the associated customer satisfaction. Nivea products are tailored according to customers’ desires. This is the main reason for its extension.

Nivea brand is well positioned and always attracts the customers. Due to Nivea’s product quality and superiority, it always conquers the market. This has favoured the brand in terms of competition from other companies. Beiersdorf Company employs a unique packaging for Nivea products that is highly attractive. This brings clarity in the brand and minimises the chances of brand confusion.

Beiersdorf Company has also invested greatly towards extension of the brand. The company extensively advertise its Nivea brand also participate in other marketing strategies so as to maximize the awareness on its umbrella brand. The end result is the increase in sales. This directly creates extension. The company has enjoyed great and consistent marketing strategies over the years.

The great improvement in value of the Nivea brand is another strategy for its extension. The overall image of Nivea brand depicts quality and competence. Customers always look for quality so that they can derive maximum satisfaction from the product.

The prices of Nivea products are average considering the product qualities. Customers would always find it very economical in using the Nivea products.

The competence of the management team at Beiersdorf Company plays a very important role in Nivea brand extension. The brand managers always know and deeply understand the importance of the brand to the customers. This puts the customers at a very high position of enjoying great satisfaction from Nivea products.

Nivea brand has always remained consistent in quality and price. Due to this consistency, the company finds it very easy to extend the product. With the good brand image that already exists, it is very easy to develop a new product, as the costs are greatly lowered.

Kevin Lane Kellar and Sanjay Sood said, “Brand extensions, however, can be a double-edged sword……..” in Brand Equity Dilution. Discuss the challenges in extending the Nivea Brand.

On the basis of the study of Kellar and Sood (2003), brand extensions in the Nivea brand has come with a series of challenges. When a brand extension fails to be successful, there is great damage posed to the umbrella brand. This can result into great loses if the extension is not prorely monitored. Brand extensions therefore pose great risks of brand equity dilution. The continuous extension into sub-brands for Nivea greatly weakened the Nivea’s strong brand image.

Because of the great image of the umbrella brand Nivea, there was a high customer acceptance to its sub-brands. As the extension continued, there was the dilution of the brand image as a result of the presence of Nivea brand across almost all the heterogenous products. Beiersdorf company was faced with major challenge in launching Nivea into new areas due to the brand equity dilution. This created a lot of dificulties in ensuring the maintenance of loyalty to the brand core values.

A case of inconsistency can be depicted in the Nivea brand extension. Some of the Nivea products gave customers an experience which is not consistent with the expectations of the umbrella brand. This changed the customers’ impressions about the entire brand leading to equity dilution. For instance, the expansion of Nivea Hair Care into colorants diluted the brand equity. Also, the Nivea’s brand philosophy, which was strongly based on gentle skin care, could not allow for the use of chemical treatments in the product.

Also evident was the presence of Nivea in contrasting product categories. The two products which greatly fell under this situation were the NIVEA VISAGE and NIVEA VITAL VISAGE. These sub-brands were posed with greater challenges in trying to preserve their respective product identities.

However, Nivea’s strong image has played a very important role. Its strength dictates that for there to be a noticeable brand dilution, there must be a very strong experience which is unambiguous and easily identified. Most of the negative effects of brand extension for the Nivea parent brand have weak expoerience and mostly ambiguous thus are ignored. Another factor that has saved Beiersdorf Company from brand equity dilution is the diagnosticity. Customers’ evaluations of the extension products bear little influence to the parent brand, as the extensions of the Nivea brand are not indicative of the quality of the parent brand. Some of the unsuccessful failures can be linked to lack of adequate awareness among customers. Due to the fact that consumers might not have heard the extension product or service, the parent brand survives. It is also evident that the brand extension has greatly improved the sales and at the same time reinforced customers’ knowledge about the parent brand Nivea. This is why there has been a remarkable increase