59© 2009, American Marketing AssociationISSN: 0022-2429 (print), 1547-7185 (electronic)Journal of MarketingVol. 73 (January 2009), 59–74Neil A. Morgan & Lopo L. RegoBrand Portfolio Strategy and FirmPerformanceMost large firms operating in consumer markets own and market more than one brand (i.e., they have a brandportfolio). Although firms make corporate-level strategic decisions regarding their brand portfolio, little is knownabout whether and how a firm’s brand portfolio strategy is linked to its business performance. Using data from theAmerican 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 72large publicly traded firms operating in consumer markets over ten years (from 1994 to 2003). Controlling for severalindustry and firm characteristics, the authors analyze the relationship between five specific brand portfoliocharacteristics (number of brands owned, number of segments in which they are marketed, degree to which thebrands in the firm’s portfolio compete with one another, and consumer perceptions of the quality and price of thebrands in the firm’s portfolio) and firms’ marketing effectiveness (consumer loyalty and market share), marketingefficiency (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 brandportfolio characteristics explains significant variance in five or more of the seven aspects of firms’ marketing andfinancial performance examined.Keywords: brand management, strategic marketing, marketing planning, customer satisfaction, market shareNeil A. Morgan is Associate Professor of Marketing and Nestlé-HustadProfessor of Marketing, Kelley School of Business, Indiana University(e-mail: [email protected]). Lopo L. Rego is Assistant Professor of Marketing, Tippie College of Business, University of Iowa (e-mail:[email protected]). The authors gratefully acknowledge insightfulcomments and suggestions in the development of this article from BarryBayus, Tom Gruca, Leigh McAlister, and Rebecca Slotegraaf; the NationalQuality Research Center at the University of Michigan for access to theAmerican Customer Satisfaction Index database; and the financial sup-port of the Marketing Science Institute.eral different brand portfolio strategy decisions. For exam-ple, some researchers have suggested that portfolioscomprising a larger number of brands can enable a firm toachieve greater power than channel members and can deterthe entry of brands from rivals (e.g., Bordley 2003;Shocker, Srivastava, and Ruekert 1994). Conversely, othershave highlighted the greater manufacturing and distributioneconomies and relative advertising and administration effi-ciency of portfolios comprising a smaller number of brands(e.g., Aaker and Joachimsthaler 2000; Bayus and Putsis1999; Kumar 2003). Similarly, while some researchers haveadvocated the scale and scope economy benefits of sellingbrands across different market segments (e.g., Lane andJacobson 1995; Steenkamp, Batra, and Alden 2003), othershave warned that doing so may dilute the value of a firm’sbrands (e.g., John, Loken, and Joiner 1998; Morrin 1999).Furthermore, some researchers have argued that firmsshould build portfolios in which their brands are comple-mentary to one another to allow for stronger positioning ofeach brand in the minds of consumers and greater advertis-ing and administration efficiency (e.g., Aaker and Joachim-sthaler 2000; Bayus and Putsis 1999; Kumar 2003). How-ever, others have argued that greater competition for thesame consumers and channels among the brands in a firm’sportfolio can deter the entry of rival firms and lead togreater efficiency in a firm’s resource deployments (e.g.,Lancaster 1990; Shocker, Srivastava, and Ruekert 1994).Such divergent and often conflicting viewpoints in theacademic literature are also reflected in business practice, inwhich firms that have similar resources and operate in thesame categories often make radically different brand port-folio strategy decisions. For example, in the confectionarygum category, Wrigley markets a large number of differentbrands with multiple and often competing brands in each ofthe taste (Juicy Fruit, Wrigley’s Spearmint, Doublemint,Managers and scholars are increasingly focused onlinking resources deployed in developing market-ing assets with firms’ financial performance (e.g.,Rust et al. 2004). From this perspective, the marketing lit-erature provides a well-developed theoretical rationale (e.g.,Keller 1993; Srivastava, Shervani, and Fahey 1998) and agrowing body of empirical evidence (e.g., Barth et al. 1998;Madden, Fehle, and Fournier 2006; Rao, Agarwal, andDahlhoff 2004) linking brands with competitive advantagefor the firms that own them. As a result, it is widelyaccepted that brands are important intangible assets that cansignificantly contribute to firm performance (e.g., Ailawadi,Lehmann, and Neslin 2001; Capron and Hulland 1999; Sul-livan 1998). However, in practice, most large firms operat-ing in consumer markets own and market a set of differentbrands (i.e., they have a brand portfolio) and make firm-level strategic decisions about this intangible brand port-folio asset (Aaker 2004; Dacin and Smith 1994; Laforet andSaunders 1999). Yet little is known about how a firm’sbrand portfolio strategy affects its business performance(Anand and Shachar 2004; Carlotti, Coe, and Perry 2004;Kumar 2003).In the literature, logical but opposing arguments havebeen advanced regarding the performance benefits of sev-60 / Journal of Marketing, January 2009Extra), breath-freshening (Winterfresh, Big Red, Eclipse),oral care (Orbit, Freedent), and wellness (Alpine, Airwaves)segments. Its major competitor, Cadbury, markets only fourbrands (Bubbas, Hollywood, Dentyne, and Trident), eachof which is aimed at different segments. Similarly, in thelodging industry, Ramada markets a single brand acrossmultiple value and midmarket segments, while Marriotaddresses the whole market, using a portfolio of ten majorbrands, several of which compete with one another (e.g., inthe suites segment, Residence Inn, Springhill Suites, andTownePlace Suites).Remarkably, despite these opposing theoretical view-points in the literature