What can you learn about brand portfolio strategy from Marriott's $13.3 billion acquisition of Starwood Hotels & Resorts? Harvard Business School Senior Lecturer Jill Avery joins host Chris Linnane in The Parlor Room to answer that question and discuss how Marriott overcame the challenge of managing its robust 30-brand portfolio.
Jill Avery, Senior Lecturer of Business Administration, C. Roland Christensen Distinguished Management Educator
Credential of Leadership, Impact, and Management in Business (CLIMB) program (HBS Online's most comprehensive offering that features a module on personal branding taught by Avery)
"The Marriott-Starwood Merger: Navigating Brand Portfolio Strategy and Brand Architecture" (HBS case co-authored by Avery)
Chris Linnane:
The Parlor Room is an official podcast of Harvard Business School Online.
Jill Avery:
As we look across the marketplace, we see firms choosing branded house. We see firms choosing House of Brands, and there doesn't seem to be any pattern or any rules that we can take from that. So how should a manager think about that? What's the magic behind crafting a brand portfolio strategy and the brand architecture to knit those brands together?
Chris Linnane:
Welcome to The Parlor Room, where business concepts come to life. My name is Chris Linnane. I'm the creative director of Harvard Business School Online. On this episode, I'm so excited to be joined by HBS Professor Jill Avery. Professor Avery is an expert in marketing and branding with a particular focus on consumer behavior and brand management. We discussed the world's largest hotel brand to gain deeper insights into the art of branding. This is a really fascinating topic. I won't delay us any longer. Let's jump right in. Welcome to The Parlor Room. We have a shared history in the MFA. We do. Yes.
Jill Avery:
I did not.
Chris Linnane:
Know that. Yes. So your role…
Jill Avery:
I'm on the governance board of the museum.
Chris Linnane:
I went to school at that museum.
Jill Avery:
You did? You went to the SMFA?
Chris Linnane:
I did, and I have one little story if I could share with you. I loved it, please. But I went to, and this is the perfect example of the SMFA. I went to my orientation. I was 17 at the time. I was younger for my grade, and it was still summer, and I walked into the lobby trying to figure out what was going to happen. Jill, it was overwhelming for me. There was a woman with no clothing on who was knitting an outfit onto herself.
Jill Avery:
Performance art. Yes.
Chris Linnane:
Very performance artist-based. But what was so wonderful about the school was being able to go to the museum anytime and see some of that artwork. It's a beautiful place, and we went there and did an interview for upcoming project. Yeah. Can you tell us a little bit about both of those projects?
Jill Avery:
Yes, of course. I'm super excited to be creating two courses for Harvard Business School Online. The first is called Creating Brand Value, and it's all about how do the brands that adorn our products create value for consumers and for companies. And we'll get into topics that range from what is the value of a brand to brand storytelling, to the nuts and bolts of brand management. How do we manage brand crises? How do we manage brand extensions, brand portfolio strategy? We'll talk about brand valuation, we'll talk about brand loyalty and customer relationships. So super excited about that course. I'm also developing a course on personal branding. How do we apply everything that we know about branding products and services to branding our most important product, which is ourselves. Every time we apply for a job or vie for a promotion or try to land a new client or try to land a new date, we have to market ourselves. And so how do we apply the theories of branding to brand me to understanding how to best express and communicate our own personal value proposition about the difference that we'd like to make in the world?
Chris Linnane:
So you've brought us a lesson on brand portfolio strategy.
Jill Avery:
Well, I'm going to situate us into a case that happened back in 2016 when Marriott International, one of the leading hotel brands of the world acquired Starwood Hotels and Resorts for $13 billion was a major acquisition, and what it resulted in was the marrying of Marriott's 18 brands with Starwood's 11 brands creating a very large, very robust brand portfolio of 30 brands that now needed to be managed.
Chris Linnane:
That's a ton. That's a ton of brands. It is. How does that work?
Jill Avery:
Imagine if you're the brand manager of this portfolio, you have to make sense of this. You now have 30 brands. You have to make sure that they're covering the market, but they're covering the market without a lot of overlap or interference amongst each other. That's the job that brand managers, Tina Edmondson and Brian Elli at Marriott, were charged with. How do you make sense of 30 brands? Do we have too many? Do we have too little? How do we connect them together? How do we separate them apart? All of those questions are swirling through their brains.
Chris Linnane:
I'm sure 30 brands, but what do you mean by connecting the brands?
Jill Avery:
Yeah, so Marriott has the option of either keeping the brands completely separate or knitting them together via what we call brand architecture. Should certain brands be connected to others either as a parent brand and a sub-brand or as a brand with an endorser. For instance, Marriott in its portfolio has a brand like Courtyard, and Courtyard doesn't stand on its own. It's a brand that's endorsed by the Marriott parent brand, so we call it Courtyard by Marriott. So that knitting together, that brand architecture is another big decision that the brand managers need to make.
Chris Linnane:
So the brands that they acquired and the brands that they had, where are the conflicts?
Jill Avery:
So a lot of the brands that they acquired were in the same categories as the brands that they had homegrown. So for instance, both companies operated in the luxury segment, both operated in the premium segment or the self-select segment. And so as the brand portfolio came together, there were opportunities for the brand managers to say, where is their overlap and where do we need to pull brands further apart to make sure that they are differentiated from each other to make sure that they each had a unique point of difference so that they weren't cannibalizing each other or creating customer confusion, if you will, about what does that brand stand for? What does that brand stand for?
Chris Linnane:
I am not an Airbnb person at all. I will never do it. I've never done it. I'll never do it. I don't like the idea of sharing sheets and trusting someone to clean them. So I really, well, there's a lot to it, but I like the idea of a hotel just being totally taken care of. So I care about that stuff. I remember joining the Starwood guests program, I think it's called the Rewards Program, and that was really good because I'd never, that was my adult move. I joined a club thing and every once in a while I'd stay at those places and I even got some free nights out of it. But this whole merger doesn't work with that kind of thing. Right. It caused a problem for me.
Jill Avery:
Yes. So I think you're referring to the Starwood Preferred Guest Program, which was the loyalty program that Starwood Hotels offered to its customers. It was very popular prior to the merger. Customers were devoted to Starwood preferred guests or SPG as they used to shorthand it. It was a differentiator for the parent company because people wanted to stay within the ecosystem. It was a really strong brand for frequent travelers who would often choose a hotel or even drive a little further to get to a hotel if it was part of the Starwood Preferred Guest program. So one of the challenges from a branding perspective is what do you do with that brand after the two companies come together? Because suddenly Marriott has two reward programs. It has Marriott rewards, it has Starwood preferred guests, does one subsume the other. Do you maintain two brands? These are all fundamental brand portfolio questions that the company has to grapple with. Marriott takes an interesting solution to that problem where instead of maintaining both reward programs and instead of preferring one over the other, do you take all the Starwood preferred guests, people put them in the Marriott Rewards program? No. Marriott says, you know what? This is an opportunity for us to add a 31st brand. Let's create the new brand of Bonvoy, which becomes the name of the Combined Rewards program and the ecosystem of travel that the newly combined companies can offer to consumers.
Chris Linnane:
So I wonder if I try to log into my old SPG account, well it just kick me to the Bonvoy system. Maybe I still have points.
Jill Avery:
I don't know. You'd have to check that out. That would be
Chris Linnane:
Nice. Something to work on later today. Alright, so if we go back to the beginning of the problem, why wouldn't Marriott just put their name on everything? Yeah.
Jill Avery:
So why do we have 30 brands in the first place? How did this come to be? Marriott and Starwood both pursue what we're going to talk about as a house of brand strategy. It's where we decide rather than putting one brand across the entire portfolio of products that we offer, we're going to create individual brands to cover different products in the marketplace. Some companies choose what we call a branded house strategy. Companies like Yamaha for example, put the Yamaha brand across a quite diverse offering of products. Yamaha, for example, sells Yamaha guitars, Yamaha pianos, Yamaha drums, but they also sell Yamaha motorcycles, Yamaha engines, lots of different products, all sharing the same parent brand. That's called a branded house strategy and there's efficiencies to that. We have one brand, we manage it across a suite of products. We get a lot of supply side efficiencies. Marriott and Starwood says, no, we need to have a house of brand strategy. We need different brands to cater to different consumers, different consumer tastes to cover the market more thoroughly. We're going to do a house of brand strategy.
Chris Linnane:
Why do Yamaha and Marriott use such different strategies?
Jill Avery:
That's what's fascinating about brand portfolio strategy is there's not one easy answer to this question of how many brands should I have in my portfolio and how should I brand them? What's the architecture by which they are knitted together either under the same brand name or lots of different names? As we look across the marketplace, we see firms choosing branded house, we see firms choosing House of brands, and there doesn't seem to be any pattern or any rules that we can take from that. So how should a manager think about that? What's the magic behind crafting a brand portfolio strategy and the brand architecture to knit those brands together?
Chris Linnane:
We talked about Marriott's brand portfolio problem. How do managers handle this dilemma?
Jill Avery:
Yeah, so let's just start by talking about what is a brand portfolio. I'd like you to think about a brand portfolio as a portfolio of assets, much as we would think about a stock portfolio as being a bunch of different stocks that collectively come together to create value for the holder of that portfolio. So too, with a brand portfolio, each brand is an asset, and our hope is by bringing those assets together in a portfolio, we can create something that generates more reward at lower risk by bringing those things together so the whole becomes more valuable than the parts. Arnie Sorenson, who is the CEO of Marriott at the time of the acquisition, talks about his brand portfolio as being populated with brands that are individually distinctive and collectively powerful. And that's what we're looking for in brand portfolio strategy. We want to make every brand in the portfolio as strong as possible stand on its own with strength and resonance, but we also want to knit those brands together into a portfolio that's greater than the sum of the parts. So how can we think about brands working together to communicate to consumers? How can we provide through brand architecture wayfinding through this portfolio as a consumer approaches the shelf here, how do we help them make a decision? How do we help them understand how these brands are connected to each other and part of the bigger Marriott Bonvoy ecosystem?
Chris Linnane:
What are the benefits of a branded house versus a house of brands?
Jill Avery:
So a branded house has a lot of efficiency benefits. If we think about it from a supply side, it's one brand that we have to create. It's one brand that we have to support. So every time Yamaha advertises any of its products, the Yamaha brand gets brand awareness, brand knowledge attached to that. It's a much more efficient way of allocating marketing dollars, marketing personnel's time, and just organizational effort. Lots of operational efficiencies to a branded house. It just makes things simple. If we have the same brand across product lines and we see companies like Apple, we see companies like Virgin pursuing that branded house strategy to capture some of those efficiencies on the house of brands side, some of the benefits are more demand side driven. House of brands allows you to customize each brand exactly to your customer target and that product category, and so you're getting much more distinctiveness, much more connection between the meaning of the brand and the product that's bearing its name. So usually you're trading off supply side, efficiencies for demand side effectiveness,
Chris Linnane:
What are the risks then for a brand of house or house of brands? There must be just as many.
Jill Avery:
Risk reduction is also something we want to think about when we're managing a brand portfolio because we want the parts to add up to a bigger hole, but we also want to make sure that a problem with one part doesn't contaminate the whole portfolio. If you think about that in the context of a house of brands, because the brands are separate, if something happens that is a crisis on one brand, that meaning transfer doesn't move across the portfolio. So for example, if a celebrity spokesperson on a certain brand does something that harms the brand, that doesn't travel to any of the other brands in the portfolio in a branded house because the brands are so tightly connected and the meaning transfers across all of the product lines. If there's a mistake, if there's an error, if there's a crisis anywhere in the portfolio, it's like a contagion. It goes across the whole portfolio. So much higher risk of meaning contagion in a branded house versus a house of brands. I think one of the other challenges with branded house brands is that the meaning of the brand gets stretched too far across quite divergent product categories. Virgin is a great example where the Virgin brand adorns an airline and a soda. What does the Virgin brand mean in that situation? In
Chris Linnane:
2004, I was in a rock and roll band and Virgin put out an MP3 player around the same time as the iPod, and it came preloaded with my band's album on it, on it from them.
Jill Avery:
I'm impressed.
Chris Linnane:
I was at the time I thought, this is it. This is good news. I think no one ever bought one,
Jill Avery:
And that's the contagion risk, right? When Virgin puts its name on a product, that product successor failure is going to reflect back on all the other products in the portfolio. I don't remember that product no one does, but if it was a quality issue, then that quality halo, that negative halo is going to reflect back on all the other products in the portfolio.
Chris Linnane:
It definitely had a negative feedback effect for me because I looked at other version things and I was like, I got by your MP three player, so I know it's not good. But then I went on their plane, I'm like, this is really nice. What's the right number of brands to have Marriott or other brands? What's the right number? How do you know what the right number is?
Jill Avery:
Yeah, it's a really important question and I think hard to answer with a general rule. So what I would say is more is better, but less is more. Now that sounds a bit contradictory, so let me unpack that a little bit more is better. When we're building a brand portfolio, we want to have enough brands to cover the market. So first thing we need to think about is what does the market look like? Do consumers have different needs? Are there different types of consumers out there? We're looking for what we call customer heterogeneity, right? How similar or different are customers in the marketplace? If consumers need different things, then we probably need to add different brands to be able to customize and personalize and create distinctive offerings for each of those needs. So more is better from a market coverage perspective, but less is more. Less is more recognizes that carrying large brand portfolios comes at a cost. There's some inefficiencies. If we're adding brands that have a lot of overlap, a lack of distinction, we're creating opportunities for cannibalizing ourselves and we're adding operational inefficiencies to the system. The last thing we want to do is to have brand proliferation. Too many brands because there's a lot of inventory expense, manufacturing expense, and possibly consumer confusion to create inefficiencies in the system. So more is better, but less is more. If
Chris Linnane:
There's one thing that I should remember from this lesson, what is it?
Jill Avery:
Brand portfolio strategy is about finding the portfolio of brands where each one can be individually distinctive, but that the portfolio as a whole can be collectively powerful.
Chris Linnane:
I have questions for you from listeners, learners. You ready for some? Excellent.
Jill Avery:
Yeah. Bring it on.
Chris Linnane:
This one's from Belo in Massachusetts: Can you explain how storytelling helps in creating brand value and how can companies use it effectively?
Jill Avery:
Thanks for the question, Belo. It's one of my favorites actually. I love talking about brand storytelling. Stories are so important in the world of branding. Why? Because stories make everything more memorable, more believable, emotionally engaging. If you think about advertising as the quintessential place that brands tell their stories, if I give you a list of facts in my ad that's not very compelling. If I am embed those lists of facts in a story with exciting, empathetic characters with a plot that draws you in and brings you along with a conflict, a monster, an adversary to be overcome, and I leave you with a moral or a message at the end, that's going to be a much more memorable ad, it's going to be a much more engaging ad. It's going to lead to greater brand awareness. It's going to lead to greater brand liking and connection, and hopefully to stronger brand purchase.
Chris Linnane:
This one is from Christian in Cambridge. I'm guessing this Cambridge, the Massachusetts one. If you had to choose a brand that you believe perfectly embodies its mission and vision, which one would it be and why?
Jill Avery:
Hey, Christian, that's a great question. There's so many wonderful brands that bring their mission to life through everything that they do. I guess if I had to put my finger on one, I would probably point to Nike. Nike is all about bringing out the athlete in everyone and doing it in a way that breaks down any of the boundaries that we put in place to say, Ooh, I'm not an athlete. I can't do that. Nike's advertising slogan that it's used for over 30 years, just do It is all about not making excuses, not putting barriers or boundaries in the way, but just getting yourself out there moving, using your body, becoming the athlete that all of us have within us. I think everything that Nike does in its advertising, in its marketing, in its branding is laser focused on that attitude of just do it. It permeates their corporate culture, permeates their advertising, permeates the kind of partnerships that they pursue and feature. I think that's a company that I think really lives its mission through its branding.
Chris Linnane:
Okay, so Kai in Miami wants to know the following: If you had to pick one TV spot that you felt was perfect, which would it be and why?
Jill Avery:
Ooh, Kai, that's putting a lot of pressure on me. I've watched a lot of advertising in my life. The perfect television spot. I'm going to show my age here, Kai. I am going to go way back to the eighties and to the launch of the first Macintosh computer by Apple, and those of you who are my age may remember seeing it live. Those of you who are younger, Google it. It's worth it. It's an ad that tries to tell the story that Apple is introducing a computer so different that it's going to take on the giants of the computer industry. It's an ad that features an audience of people watching somebody on a stage monotonously drone on about existing technology. It has a big brother theme to it where the audience is just nodding and nodding and not really processing. Just going along with what the speaker is saying.
Suddenly a young woman comes in with a sledgehammer and she hurls it against the screen, and the talking head on stage is shattered and stops talking. That ushers in the new era of Apple and the Macintosh and the ability for this audience to wake up, to think differently, to be creative, and to lean into how different they want to be. From the corporate IBM-led PC era that has come before, it was an ad that ran, I believe, only once on the Super Bowl, but it goes down in the annals of history in marketing history as one of the most creative and impactful ads of all time.
Chris Linnane:
If Kai was to ask me the same question, I have an answer.
Jill Avery:
Excellent. Let's hear it.
Chris Linnane:
Commercial for a product called My Buddy. I don't know if you remember my buddy, my buddy and me. It was for a lonely boy who had a doll that looked like another lonely boy.
Jill Avery:
Can you sing that jingle again for
Chris Linnane:
Us? My buddy, my buddy, my buddy and me like that, but it made me feel less lonely, Jill.
Jill Avery:
Excellent.
Chris Linnane:
It feels extra creepy to talk that way. See what happens. Yeah, I'm going to say that and it was a little creepy. Yeah, I like, it was really creepy. I had to put it out there just to see how you'd react to it. Alright, thank you for being here. Thank you for your patience. I did spring on you kind of last minute that there's a video component to this podcast, so I appreciate you going with the flow on this.
Jill Avery:
My pleasure.
Chris Linnane:
If you'd like to learn more and stay updated on Professor Avery's upcoming courses on creating brand value and personal branding, visit theparlorroompodcast.com and don't forget to follow us on LinkedIn, Facebook, Instagram, TikTok, and X for more exclusive content. I'm Chris Linnane. Thank you for listening. If you are enjoying the part of the room, please share the show with your friends and subscribe, rate, and review it wherever you get your podcasts. Thank you.
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