All companies with a portfolio of brands have a Brand Architecture, but the question is do they have a Brand Architecture Strategy?
Most marketeers only think about their Brand Architecture Strategy during times of change such as mergers, acquisitions, launches and when rebranding, as they get forced to look at the bigger picture. This often unveals issues that until now have been luring in the dark, such as bad brand reputations, negative spill-over effects between brands or lost growth opportunities to name a few.
In this post we will look at different types of Brand Architecture structures, so you can lay out a smarter strategy than you have today.
What is Brand Architecture?
If you have a Brand Portfolio, you automatically also have a Brand Architecture.
A Brand Portfolio is a term for all the brands that you are managing, and a Brand Portfolio Strategy is an internal business strategy of how you manage this portfolio when expanding into new target groups, markets or categories. As an example, Lego launched Lego Friends to have an offer more suitable for girls, and Coca Cola launched Coca Cola Zero as Coca Cola Light did not have a strong enough appeal to men. This enabled both companies to maximize sales rather than having brands competing against one another for customers’ attention.
A Brand Architecture, on the other hand, is an outward-component of your Brand Portfolio Strategy with the purpose of making it easy for customers to see the links between your brands, find what they are looking for and to understand what your company has to offer. For Lego and Coca Cola, you recognize the brand architecture in the way the parent brand name is linked to the new brand name. We will soon learn that this is not a coincidence, but a strategic choice due to the benefits of the Brand Architect type called “Sub-brands”.
The Five Brand Architecture Types
The most popular Brand Architecture types are Branded House, Sub-brands, Endorsed Brands and House of Brands as established by Aaker and Joachimsthaler’s framework called the Brand Relationship Spectrum.
“Spectrum” is a key word here, as it is normal for companies to navigate between structures from time to time. In recent years especially, with globalization and digitalization, we have seen more “Hybrid” structures and have thus added this as a fifth type to the mix.
We will now go through the advantages and weaknesses within each of them so you can find the best match for you.
1. Branded House
A Branded House have one parent brand as the umbrella for a wide product-range, possibly also across categories. An example of this is Virgin, with Virgin Airlines, Virgin Fitness, Virgin Music and so on. All of them are linked to the parent brand through use of logo, colour and serving the purpose of “changing business for good”.
Is this structure the right one for you? This structure makes for a consistent brand experience that minimizes confusion for your customers. You get economies of scale and synergy effects, thus making it easier for you to build brand equity for each individual brand and as a whole for the portfolio.
On the other hand, by putting all your eggs in one basket, there is also a risk of negative spillover effects. In addition, it can also be both expensive and hard to conduct big changes in the future. In other words, if you believe that you have one brand that can hit homerun across markets, categories, target groups and even tackle geographical and language barriers, a Branded House is the structure for you.
The second type, sub-brands, also use the parent brand as the main frame of reference but makes the individual brands more distinct by adding new associations. Examples of this are the Lego and Coca Cola examples, but also Microsoft and Microsoft Office, Nivea and Nivea Q10 or Sony and Sony PlayStation.
Is this structure the right one for you? This structure gives credibility in new markets or categories and freedom to create a separate brand image for the sub-brand. It is thus a great way for you to test out new territories whilst limiting the risk compared to launching everything under one name.
There may be some instances however where some categories will naturally be out of reach due to a mismatch with your parent brand. If Nivea, for example, wanted to launch a razor product, the name Nivea Razor might seem as a mismatch from the consumer’s point of view due to the roughness of a razor and the softness of Nivea. An Endorsed Brands structure might be smarter.
3. Endorsed Brands
Endorsed Brands are less linked to the parent than sub-brands as they have unique names but uses elements from the parent as a discrete quality guarantee.
A shadow endorser is not connected visibly to the parent brand, but many consumers still know about the link, such as the car brand Lexus produced by Toyota.
A token endorser is more visibly connected to the parent brand, for example through including a piece of the logo or another brand element such as the Unilever “U” on the back of Dove products.
Last but not least, linked name is when you create a family of brands linked by a common name with either an implicit or explicit link to the parent brand. An example of this is Nestlé with Nespresso and Nescafé, or McDonalds with Big Mac, McNuggets, Egg McMuffin and so on.
Is this structure the right one for you? With this structure, you increase the flexibility further but also limits the synergy effects even more than what was the case for sub-brands. It, therefore, depends on the nature of the categories and target groups you want to reach to decide if Sub-brands or Endorsed brands is the best structure. A rule of thumb is that the more farfetched the category is from the parent, the closer to Endorsed Brands you should go.
4. House of Brands
The fourth structure is House of Brands, where all brands are independent stand-alone brands. An example of this is P&G with Gillette, Oral-B, Head & Shoulders and Pampers to name a few, or Yum! who is the parent brand of Taco Bell, Pizza Hut and KFC.
Is this structure the right one for you? This suits your portfolio if you want to maximise the impact on a market, category or target group, and want a clear positioning and targeted value proposition for each brand, without having to worry about negative spill-over effects or being limited by parent brand associations. On the other hand, this is the only structure where you totally lose out on all economies of scale and synergies.
In reality, almost all companies use mixed brand portfolio strategies in at least one case, thus demanding a Hybrid Brand Architecture. One example is Amazon that have brands such as IMDB (House of Brands), Amazon Prime (Sub-brands) and A9 (Endorsed Brands).
Is this structure the right one for you? If you want the best of both worlds, this might be the structure for you. You might want to stick to a Branded House structure in your home market, but exploring a mix of structures in new markets. It is a great way to keep your customers happy, to avoid confusion while paving the way for future offers. At the same time, however, remember that you lose out on the potential synergy effects and might need to ask yourself if you are doing yourself a grave disservice.
Choosing your Brand Architecture Strategy
By going through the pros and cons of each structure, you will find the one that suits you the best. But remember that your Brand Architecture should not be treated as a static part of your Brand Portfolio Strategy, but rather something you monitor and modify continually. Especially given the dynamic nature of international markets and changing competitive environments.
By evaluating your Brand Architecture on a more continuous level you are more likely to:
- Identify brand positioning opportunities before your competitors
- Avoid high costs of rebranding or shutting brands down
- Launch new brands that will survive longer
- Uncover new markets and target groups more quickly
- Maintain long-term brand consistency and build stronger brands
- Feel more confident of your strategic brand choices
We recommend that you review your structure at least annually, in a bottom-up process where you look at each brand and ask yourself:
- How is this brand performing?
- How is this brand perceived in the market?
- Is this aligned with how we initially mapped out our architecture?
- What can we change in the architectural structure to better reach our goals?
Hopefully, you can now get started on your own Brand Architecture Strategy.
Best of luck!
If you are looking for further advice on how to build better, stronger brands then our branding team can help you. Feel free to explore our services via our branding page or get in touch here. If you want to become a better brand builder, we also recommend you to read our blog post on how to build strong brands.