Branded House or a House of Brands

Branded House or a House of Brands

Tue, 26 Apr 2016

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. Take for example the following products: 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 P&G, Alphabet is essentially a corporate holding company and never consumer facing – consumers won’t start ‘Alphabetting’ any time soon. You can read more about Google and Alphabet in an earlier blog of ours here.

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 sphere which it knows best – to be single-minded at search and analytics – 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: Holden, Chevrolet, Opel etc., each of which are strong brands in themselves. Underneath the Holden brand there are more brands still - Commodore, Barina, Astra and Colarado.

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.

Branded House

A Branded House is where the company brand (or a main overarching brand) becomes the dominant source of identification and meaning. ING Group is an example of a Branded House approach. In Australia, ING offers banking, and is known as ING Direct. Their range of finance and every day banking options are not given individual product brands- hey have descriptors such as ING Orange Everyday, ING Business Optimiser, ING Living Super and ING home loans. In this example, ING serves as the sole brand, and the product names serve as descriptors, secondary to the master, or house brand. 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 change, 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

Importantly, brands don’t have to choose just one strategy. Many examples of Branded House and House of Brands use the one strategy (e.g. P&G, Nestle). However, more commonly, companies and brands use a mix of strategies with different roles for different types of brand extensions.

Consider, for example, Westpac. A number of the brands that sit within Westpac’s portfolio fit neither the house of brands or branded house model. The endorsed brand model has been adopted where the brands are newer and require the support of the more established parent brand, e.g, Xylo. 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 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. This becomes a brand stretch issue i.e. how far can the brand stretch? 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. A recent case in this regard is the Mars bar product recall throughout Europe. When 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. However M&Ms, Skittles and many other Mars produced products remained unscathed. This was 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 will produce a number of effective outcomes. It will allow the business to improve the cost effectiveness of its brand and marketing investment and it will align brand positioning and value propositions appropriately with market segments, improving clarity and consistency across your organisation. It will also create 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 here and we will provide you with our brand architecture screener, which considers business and brand implications and customer impacts.

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