Brand architecture is the way we organise, manage and go to market with brands. Think of it as the external face of our business strategy. To work effectively, the architecture must be well defined, reflect a clear understanding of the market and the brand strategies of our competitors, and align and support our business goals and objectives.
While there are many different models of designing brand architecture, this article will look at two approaches: House of Brands, and Branded House.
House of Brands
Most consumer product brands use the House of Brands strategy. That is, the product itself is the primary brand, rather than the company. Consider Pantene, Duracell, Nespresso and Uncle Toby’s. Most consumers would have trouble identifying them with companies that actually own them (Procter and Gamble, Nestle).
In the IT space consider the relationship between Google and Alphabet, Google’s newly created parent brand. Like Procter and Gamble, Alphabet is essentially a corporate holding company and never consumer facing – consumers won’t start ‘Alphabetting’ any time soon.
In a House of Brands model, individual products or companies can focus on what they each do best without limiting the broader group’s businesses growth trajectory. In the Alphabet example, Google will continue to operate in the search and analytics sphere which it knows best and YouTube can focus on video content, while smaller operations such as Nest Labs home appliances, Verily life sciences, Wing drone deliveries and GV, Alphabet’s venture capital business, will operate as individual companies in their own specialist areas. This opportunity for flexibility is a large part of the reason why a House of Brands model may be adopted.
Another example is General Motors. They make cars under a few brands, with Holden, Chevrolet and Opel each established brands in their own right. Underneath the Holden brand there are more brands still – Commodore, Barina, Astra and Colorado.
The risk here can be brand confusion. Brands that try to cast too wide a net risk ending up without a loyal following in any market or demographic.
Another risk is budget – organisations using a House of Brands structure will need to invest in building many brands, instead of being able to consolidate investment behind one master brand.
A Branded House is where the company brand (or a main overarching brand) becomes the dominant source of identification and meaning.
ING Group is a great example of a Branded House approach. In Australia, ING offers banking, and is known as ING Direct. Their range of finance and everyday banking options also fall under the overall brand, such as ING Orange Everyday, ING Business Optimiser, ING Living Super and ING home loans.
Another example of a Branded House is Virgin. Their host of businesses are extremely diverse: wedding dresses, trains, credit cards, airlines, a music company, a health and fitness chain, and so on. All these companies draw their energy from a single brand identity: Virgin. This stymies the brands’ independence at the product level, but the energy of the brand overall pervades and strengthens each company despite the lack of shared product commonality.
A Hybrid Model
While the examples we shared use the one strategy, it is more common for companies and brands to use a mix of strategies with different roles for different types of brand extensions.
Westpac, for example, has a number of the brands that sit within their portfolio which fit neither the house of brands or branded house model.
The endorsed brand model has been adopted where the brands, like Xylo, are newer and require the support of the more established parent brand. This endorsement allows the brands to seem more credible, while the parent brand remains distant enough to reduce the risk to its image.
The Westpac Institutional Bank uses a sub-brand approach because there is equal equity between the two products or brands, but the institutional offer sits outside of the Westpac core offer of retail finance. This allows the sub-brand to retain its own specialty within its section of the market, while also demonstrating the parent brands’ breadth of expertise.
Choosing the appropriate Brand Architecture
When choosing between a Branded House and a House of Brands (and everything in between), there are multiple factors to take into consideration before embarking on either course.
First, building multiple brands is very resource-intensive. It takes time, money and energy to build a brand. Concentrating all resources into a singular brand can sometimes be the best course of action.
Your target audience also needs to be taken into account. It can be very hard for certain brands to move from one market to another. Consumers may be confused or even hostile to what they perceive as an unwarranted move into foreign market territory.
Additionally, moving into lower value or higher risk markets may cheapen perceptions of your brand and begin to reduce its value and credibility. Creating a new brand can help that transition.
A House of Brands can be an effective mitigation strategy. In a recent example, a number of Mars bars were found to contain plastic in Germany, and hundreds of thousands of the product were recalled. There was an understandable drop in sales for Mars, however, M&Ms, Skittles and many other Mars products remained unscathed due to the minimal brand association between Mars and these other brands.
Crafting the right brand architecture for your organisation is a strategic process. When designed correctly, it allows the business to improve the cost effectiveness of its brand and marketing investment, as well as align brand positioning and value propositions appropriately with market segments to improve clarity and consistency across your organisation. It also creates a clear decision making framework for launching new products, and updating existing products, allowing the organisation to be more nimble and dynamic.
Not sure what is the right architecture for your business? Or need to screen the architecture decision you have already taken? Contact us to discuss.