<BASEFONT=3marketin.aspmarketin.aspBrandleverageAbrandcangrowquicklyifitsownerbuildsonthefoundationofperformance,personality,andpresencetocreateinnovativestrategiesforexpansionthroughfocusordiversification—DAVIDC.COURT,MARKG.LEITER,ANDMARKA.LOCHTheMcKinseyQuarterly,1999Number2,pp.100—110BrandingisahottopicinboardroomsaroundtheworldbecausemostCEOsrecognizethatastrongbrandisapowerfuldriverofshareholdervalue.Indeed,McKinseyanalysissuggeststhatabouthalfofthemarketvalueoftheFortune250istiedtointangibleassets.Forsomeoftheworld’sbest-knowncompanies,thefigureisevenhigher.Intangibleassetsincludemorethanjustbrands,ofcourse.Nonetheless,ourresearchintotheconnectionbetweenbrandstrengthandcorporateperformanceat130consumercompaniessuggestsstrongbrandsgenerate,onaverage,totalreturnstoshareholders(TRS)thatare1.9percentabovetheindustryaverage,whileweakerbrandslagbehindtheaverageby3.1percent.Whydobrands“work”forcustomers?Thereasonsarefamiliar:theysimplifyeverydaychoices(ashopperwhoregularlybuysCrestdoesn’thavetoagonizecontinuallyovertoothpaste),reducetheriskofcomplicatedbuyingdecisions(IBMmainframesandBoeingjetsaresafechoices),provideemotionalbenefits(Tiffany),andofferasenseofcommunity(AppleComputerandSaturn).Strongbrandsarethereforeenormouslyattractivetoseniormanagers,whoseinterestisfedbyanynumberofbooksandarticlesonhowtogetandkeepthem.Butanyonewhothinksseriouslyaboutbrandingsoonrealizesthattherearebasicallytwokindsofstrongbrands:thosethatarefocusedandthosethatarediversified.Nearoneendofthespectrum,Dellhasmaintainedafocusedlinkbetweenitsbrandanditscoreproductline:personalcomputers.AttheotherendisDisney.Inthe1950s,thatcompanytoohadafocusedbrand,whichsignifiedworld-classanimation,mainlyforchildren.Today,Disney’sbusinessesincludefilms,television,publishing,software,themeparks,hotels,cruises,andevenanentiretown(Celebration,Florida).Thecompany’snamenowrepresentsthebroaderconceptof“wholesomeentertainmentandlivingatanyage.”Dellhasdecidedtoremainfocusedfornow,whileDisneyelected—andmanaged—todiversify.ThecrucialquestionforCEOsiswhichcamptheywanttobein.Astheseexamplesshow,astrongcompanycandowellineither.Butwhenwebrokedownthefiguresshowingthatstrongbrandsearntotalreturnstoshareholders1.9percentabovetheindustryaverage,wefoundthatfocusedbrands(suchasDell,Levi’s,Sprint,andGillette)earn0.9percentmorethantheaverage,whilediversifiedbrands(suchasDisney,GE,andAmericanExpress)earnnolessthan5percentmore(Exhibit1).Atleastthreefactorsappeartobedrivingthesuperioreconomicsofdiversifiedbrandleverage.First,leveragingabrandwidelytendstospreadbrandmanagementsupportcosts.Second,thetendencyto“convergence,”inwhichhithertoseparateindustriesbegintomerge,meansthatnewmarketopportunitiesareopeningupinmanyindustries.Third,relationshipbenefitsseemtohavegrowingimportanceforcustomers;indeed,relationshipbuilding(throughloyaltyprograms,betterservice,andabetterunderstandingofcustomers)maynowcountformorethanfunctionalbenefits.Asrelationshipsoutstripproductsinimportance,leveragingbrandsmakesmoreandmoresense.Thisisnottosaythateverycompanyshouldpursuealeveragedstrategy.BICstartedoutmarketingaverysuccessfulbasic19-centballpointpen.Itthentried—unsuccessfully—toleverageitsvaluepositionintosuchluxuriesasfragrancesandsuchnecessitiesaspantyhose.Hindsightsuggeststhatthecompanyshouldhavestayedput.Likewise,inthe1980sGucciwentt...
