Portfolio Strategy: the X-Factor Guide

[Post by David Nichols, Group Managing Partner and Head of Invention]

Like most of the UK, we are glued to the X-Factor (Idols in most other part the world). Such is the power and success of the programme that it takes up a full 2 hrs of prime-time Saturday night TV, and then another hour on Sunday night for the results. Over dinner last night, we got talking about how the show’s creator, Simon Cowell, has discovered the power of portfolio strategy!

In previous years, Cowell seemed to identify the likely winner pretty quickly, and then lavish attention on this contestant during the show. And the winner then got most of Cowell’s support and budget once the show finished. All the winnners so far have been solo artists, with Leona Lewis and Alexandra Burke having become seriously successful. The best-selling album of 2009 also came from one of Cowell’s other talent-show winners, Susan Boyle from Britain’s Got Talent.

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However, this year we see a different pattern. It feels to us like we have a portfolio of performers, with a noticeably broader variety of acts in with a chance of winning: a female solo artist, a male solo artist, a boy band, a girl band and a Susan Boyle-style ‘older’ artist.

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This approach shows the benefits of a good portfolio:

Target different segments
With a well-chosen bevvy of brands (performers) in different segments (genres) Cowell can extract more value from the market, without cannibalisation. This is classic portfolio strategy and it works whether you are selling chocolate bars, heartburn remedies or music acts. Identify the segments in the market, tightly target an offer against each one, whilst using as much common in the value chain as possible, and your returns will soar. This is not a new approach – Unilever, P&G, Reckitt-Benckiser and others have been doing it for years. But to do it all at once, from the base of just one TV show – that is truly a marketing feat.

Economies of Scale
By launching a portfolio, Cowell will not just create more revenue, but his percentage profit will go up for each one. Why? Economies of scale. If he has two, three or even four star acts, he will only have to book the O2 concert venue once, and all of them can perform. The websites will share management, along with everything else. His whole business machine can do four stars cheaper per star than just one. 

In conclusion, a good portfolio strategy has a series of well differentiated brands, each targeting a different segment of the market, rather than duplicating effort. This allows you to increase revenue, and spread fixed central costs over a bigger revenue base.

And who will win the X-Factor?  We already know. It’s Simon Cowell.

For more insights on how to create a brand portfolio strategy, check out this earlier brandgym blog post.