Neil A . Morgan & Lopo L . Rego Brand Portfolio Strategy and Firm Performance

Most large firms operating in consumer markets own and market more than one brand (i.e., they have a brand portfolio). Although firms make corporate-level strategic decisions regarding their brand portfolio, little is known about whether and how a firm’s brand portfolio strategy is linked to its business performance. Using data from the American Customer Satisfaction Index and other secondary sources, the authors examine the impact of the scope, competition, and positioning characteristics of brand portfolios on the marketing and financial performance of 72 large publicly traded firms operating in consumer markets over ten years (from 1994 to 2003). Controlling for several industry and firm characteristics, the authors analyze the relationship between five specific brand portfolio characteristics (number of brands owned, number of segments in which they are marketed, degree to which the brands in the firm’s portfolio compete with one another, and consumer perceptions of the quality and price of the brands in the firm’s portfolio) and firms’ marketing effectiveness (consumer loyalty and market share), marketing efficiency (ratio of advertising spending to sales and ratio of selling, general, and administrative expenses to sales), and financial performance (Tobin’s q, cash flow, and cash flow variability). They find that each of these five brand portfolio characteristics explains significant variance in five or more of the seven aspects of firms’ marketing and financial performance examined.