What is brand architecture?
Brand architecture is a strategic approach to organizing and structuring a company’s portfolio of brands to maximize their effectiveness in the market. It involves how a company manages its various brands and how they are related to each other. Brand architecture is particularly important for companies with multiple brands, product lines, or sub-brands. The main goals of brand architecture are to:
1. Clarify brand relationships
Effective brand architecture establishes clear relationships between all brands within the portfolio. Depending on the nature and management structure of the Group, this may include defining roles and hierarchies for brands, such as master brands, sub-brands, and endorsed brands.
2. Improve customer understanding
Where this is important the correct brand architecture can make it easier for customers to navigate a company’s product offerings and grasp how the different brands or product lines relate to each other. Customers benefit from knowing that a variety of products are linked by shared values and value propositions, or from understanding that the same maker offers similar benefits at differing price points.
3. Enhance brand equity
Aligning brand architecture to overall strategic objectives can increase brand equity across the board. This means positive perceptions and associations of one brand can how customers view others within the portfolio.
There are several common brand architecture models:
1. Monolithic model
Here the corporate brand is primary and all products and services are prominently branded with the corporate name. This approach is most characteristic of engineering groups such as GE, IBM and Samsung.
2. Branded (branded house) model
Here all companies or services use the corporate brand attributes as inspiration to brand flexibly in the spirit of the master brand. Virgin is a great example; so is Google’s range of services.
3. House of Brands model
Here multiple standalone brands each have their own distinct identity and positioning. They are not prominently linked to the corporate brand. Procter & Gamble, with its many strong consumer product brands (eg Tide, Pampers and so forth) is a classic example.
4. Endorsed Brands model
Here the corporate brand lends endorsement or support to individual product or sub-brands. The corporate brand is not the primary focus, but its association underwrites credibility and trust to the product and sub-brands. This approach is common in FMCG contexts.
5. Hybrid model
Some companies combine varied aspects of the models listed above. Some have a well known corporate brand but also maintain separate, strong product or sub-brands. Both Nestlé Group and The Walt Disney company are good examples of this.
Challenges to effective brand architecture
Many companies struggle with brand architecture, leading in some cases to suboptimal or ineffective brand market deployment. Below are the commonest for companies to find themselves with business-obstructive brand architecture.
1. Confused or careless brand thinking: brand architecture needs to be managed strategically for brands to deliver optimal returns. A holding or group that lacks a defined portfolio strategy for their brands risks obstructing business goals by hampering or inadequately supporting the brands responsible for connecting with customers.
2. Changing business context: today no market is static. What once seemed to work well can become compromised either through internal complexity or market changes. Complex firms need a dynamic approach to brand architecture, keeping it under review so as to adapt effectively and stay ahead.
3. Inconsistent execution: a firm’s brand architecture strategy may look robust yet be undermined by inconsistent implementation across divisions or sub-brands. In such cases it’s important to understand the causes of non-compliance and evaluate the cost/benefit of leaving it unaddressed as against imposing uniform discipline.
4. Complexity: some firms struggle with over complex brand architecture, overloaded with sub-brands, extensions and intricate hierarchies. If you are confused you can bet your customers are and that’s undermining your brand equity. It’s essential to strike the right balance between meaningful differentiation and being easily understood.
5. Research and customer insight: it’s important to know what customers really value in your offerings. It may not be what you imagine. Brand architecture work improves overall clarity but if you’re not sure how your value proposition wins and retains buyers then you may want to test a couple of hypotheses before you impose a particular model.
6. Mergers and Acquisitions: companies that grow through mergers and acquisitions often face challenges integrating new brands into existing brand architecture. Ideally such firms should form a regular internal ‘integration task force’ to align new acquisitions and determine their fit with the existing architecture (or whether some innovation is required to achieve a fit).
Even the most accommodating brand strategic templates can be challenged by unexpected developments – an acquisition with relevance in two existing business areas, for example – and the factors involved in arriving at a solution may be complex, unfamiliar, seemingly intractable. If the issue resists internal resolution do not allow it to begin undermining the rest of the structure. Brand consultants should be able to assist.
7. Poor communication: make sure your bring the whole company with you when you introduce significant innovations to an established brand logic. These things are difficult to get right unless you keep brand in view as a factor influencing your growth and profitability. Set those priorities appropriately and your people will know how to respond when you modify the brand architecture, or will at least have the skills to adapt when told what the changes mean for them.
8. Resistance to change: employees and occasionallly other stakeholders may see changes to brand architecture as unacceptable, especially if they are strongly invested in the status quo. Generally you can flip the energy from resistant to enthusiastic if the anticipated business benefits and execution of the changes are shared with them and look and feel like improvements on the current structure and assets.
9. Ignoring cultural differences: frequently brands cannot just transfer to a new market without adjustments to fit local language, tastes, habits etc. This can be an important reason to modify a brand provided the benefits of doing so are clear. It introduces complexity in the overall architecture but for clear and simple reasons.
10. Inadequate resources: sometimes, not always, brand architecure changes can involve substantial costs (changes to packaging on large inventories of stock, for example). These issues can lead to delays in arriving at a uniform system; what matters most is the direction of travel, not that everything is textbook perfect on day one.
Monolithic model
The Monolithic brand model strategy uses a single overarching brand identity for all products, services, and divisions within a company. This approach brings its own advantages and disadvantages:
Advantages of the monolithic brand model:
1. Brand consistency: the monolithic model ensures a consistent brand identity across all offerings. This can enhance brand recognition, trust, and loyalty among customers. The approach delivers obvious savings, reducing visual complexity to a minimum and generally keeping costs down too.
2. Economies of scale: firms benefit from economies of scale if they use the same branding elements, marketing strategies, and assets for all products and services. Managing the brand is kept simple as there is ‘no step three.’ It should be the least costly approach, easiest to manage and reasonably productive of brand recognition and equity.
3. Cross-promotion: a single unified brand means firms can easily cross-promote products and services. Customers who like and trust one offering will approve others relevant to their needs from the same brand.
4. Efficient resource allocation: operating a monolithic brand model avoids the resource drain of managing and promoting multiple different ones. Decision making is streamlined and marketing yields higher impact for less cost.
5. Strong corporate identity: a highly visible and recognizable monobrand predisposes customers, investors and the wider public to accord it high status.
Disadvantages of the Monolithic Brand Model:
1. Limited niche targeting: the monolithic model can be risky for companies that want to target diverse market segments with specialized needs. It can be challenging to create highly targeted offerings within the constraints of a single brand.
2. Risk of Contamination: if one product or service within the brand encounters a crisis or suffers a decline in reputation, it can negatively impact the entire brand and all of its offerings.
3. Lack of Differentiation: it can be difficult to differentiate specific products or services within the brand. What seems transparent from inside the firm can sometimes be misleading to market observers or potential customers.
4. Inflexibility: the monolithic brand model can constrict the vision of its owners by setting an imaginary cordon around the areas in which the brand has permission to be active. Owners and senior managers should be on guard against a pseudologic of constriction.
5. Legacy Issues: as firms evolve and expand some products or services may no longer align with their brand strategy. The solution in this case is to rebrand and either sell
or spin off into a de-branded portfolio with different management protocols.
Famous brands that use monolithic brand architecture are : GE, IBM, Samsung.
Branded model
The Branded House model (sometimes called simply, if confusingly, ‘branded’) looks similar to the monolithic model. What distinguishes it is that it unifies not by identity, by name as such, but by an idea, an attitude, a point of view.
It represents an ironic evolution of a classic industrial approach to branding a diverse business. What unites a branded house, by implication, is a spirit, an animating principle. This model is used by B2C firms with a lightness of touch lacking in the hardcore, predominantly engineering-based world of the monoliths.
Benefits of the Branded House model
1. Drives one brand idea
Because at heart these brands are designed to ‘riff’ across as many (or as few) product and service offerings as opportunity presents, it is their impalpable ‘attitude’ that defines them. Very often that is embodied in the personality and lifestyle of a publicly visible founder: in Virgin’s case, Richard Branson, a man never seen in a suit. In the case of ‘Easy‘ it is the affable Stelios, no style statement he but a no-nonsense character who has also been far from camera shy.
Does this mean such brands must foreground a charismatic founder? No. But iconic personalities can be of critical importance to them. Consider for example the radical expansion of Nike that followed the firm’s sponsorship of Michael Jordan. Jordan became the icon of a spirit that captivated the imagination of billions of people, so that eventually Nike had its own stores called ‘Niketown’ – a place to shop for everything in personal apparel, accessories and accoutrements from what had once been just a sports shoe company.
2. Present specialism
In the two illustrations above we see different approaches to identity management but both reinforce the core idea and attitude of these brand empires. Virgin’s is lighthearted and diverse, as though to illustrate that ‘Virgin is always cool but we can do lots of differnt things with the same cool approach.’ In fact the subtext is “And for my next trick …. by the way, we know you’re not a robot, neither are we.”
By contrast Easy says ‘We know you want value at a price and we don’t waste time or money dreaming up fancy ways to write and print our brand that you’ll eventually pay for if you become our customer.’ The design approach is perfectly ‘on brand’ in each case, aligning directly with the personality and values that really fix them as characters in the public imagination.
3. Cross-selling and up-selling
The Branded House model depends on a creative energy at the heart of the organisation that owns and deploys it. The same creative energy is present in monolithically branded firms but classically without a consumer audience to address. Buying decisions in B2B, particularly in industrial, engineering and highly functional sectors, are far less emotionally driven, at least in theory. Even when such brands achieve iconic status this is celebrated in fairly downbeat fashion – for example, in the (once popular) saying ‘Nobody ever got fired for hiring IBM.’
The structural advantage of these models is the same; brand strength and conceptual affinity create permission (ie credible logic) to extend into new areas and offerings for the same or similar groups of buyers. Both these models are inherently expansionary and they represent the formalisation of what historically marked the commercial behaviour of great trading dynasties such as the Medici in mediaeval Italy.
Disadvantages
1. It can be hard for this kind of business to sense limits to its logical, cohesive growth. Overstretch is a long-term danger.
2. Cross-contamination from an operating business that performs badly or becomes mired in scandal can cast a wide shadow over the performance of others in the brand envelope.
House of brands
Each brand operates independently with its own distinct identity, positioning, and marketing strategy. Like any approach this has its advantages and disadvantages, discussed below:
Advantages of the House of Brands model:
1. Targeted: this brand architecture allows one company to effectively target a broad array of defined customer segments and niches. By deploying brands of varied character and appeal towards specific audience segments the firm can establish strong market share for the product category as a whole.
2. Reduced risk: companies can enter multiple market segments and industries at low risk to the reputation of the firm as a whole. A diverse portfolio offsets the risks of relying on a single brand or product per category.
3. Containment: if one brand undergoes a crisis or loses traction for some reason, other portfolio brands are shielded from the impact. Innovation and experimentation: brands can try out new ideas, products, and marketing techniques with less risk to the broader company.
4. Strategic segmentation: firms can optimize their portfolio to support strategic market share objectives, acquiring relevance and positioning without innovation risk.
Disadvantages of the House of Brands model:
1. Complexity: a diverse brand portfolio can be challenging to coordinate effectively like Unilever.
2. Brand cannibalization: portfolio brands may compete against each other with no advantage to the firm as a whole.
3. Limits to economies of scale: unless production is consolidated, which can be costly, potential efficiencies may go unrealised.
4. Brand reputation risk: if one brand faces a significant issue or crisis this may impact the firm’s overall reputation.
Volkswagen Group is a great example of a successful House of brands. It owns a wide range of automotive brands, each with its own unique positioning and target market. Their strategic brand architecture equips them to manage this diverse portfolio effectively while maintaining a strong corporate identity.
Endorsed Brand Architecture
Under this model, the parent brand lends credibility, endorsement, or a common theme to the associated sub-brands. Companies who once adopted this model such as Marriot and Microsoft have recently stopped, in part because it crowds the identity which tends to devalue the brand. This architecture is sometimes an interim solution to minimise the shock of a change of ownership when a company is acquired.
But in FMCG (only) this system is still widely used the most famous example being Nestlé which has across a wide range of products with very visible Nestlé endorsement and Purina the swiss pet food specialist also owned by Nestlé follows that model with great success. However this approach has its own set of advantages and disadvantages:
Advantages of Endorsed Brand Architecture:
1. Leverage Parent Brand Equity: by using the parent brand’s reputation and trust, sub-brands can benefit from the established credibility and recognition of the parent brand. This can help accelerate the acceptance and success of new products or services.
2. Efficient Resource Allocation: marketing resources can be more efficiently allocated as the parent brand’s identity and resources can be shared among multiple sub-brands. This is particularly beneficial for cost-effective marketing.
3. Synergy and Cross-Selling: the endorsement from the parent brand can create synergy among the sub-brands, making cross-selling and upselling more straightforward. Customers who trust one sub-brand may be more willing to try others under the same umbrella.
4. Clarity of Brand Hierarchy: the Endorsed Brand Architecture provides a clear brand hierarchy, indicating the relationship between the parent brand and its sub-brands. This can reduce confusion among customers and stakeholders.
5. Adaptability: companies can add new products or services to the brand portfolio without creating an entirely new brand identity. This flexibility can lead to faster market entry and a streamlined brand development process.
Disadvantages of Endorsed Brand Architecture:
1. Risk of contamination: if a sub-brand suffers a crisis or a decline in reputation this can negatively impact the parent brand and other sub-brands. The endorsement works both ways and can amplify risk.
2. Complexity: managing multiple sub-brands under a parent brand is complex. One-size-fits-all approaches are a quick way to destroy value but a free-for-all is equally ill-advised. Great skill and sensitivity are called for in the management culture.
3. Issues of autonomy: sub-brands may have limited freedom to develop their distinct offering, hampering their chances to innovate and compete.
4. Competitive challenges: a parent brand endorsing multiple sub-brands can restrict the visibility and competitive edge of acquired brands.
Hybrid
While all the models above can be found in practice, the most common solution of all among diversified firms is some variety of hybrid. Nestlé, for example, also owns an array of brands not heavily endorsed such as premium brand ice cream Häagan-Dazs, Mövenpick, Perrier, San Pellegrino and Vittel. Nestlé endorses newly acquired brands only they have close synergy to the core and potential to encourage cross selling, as with Smarties, KitKat, Carnation and Quality Street.
The hybrid model may be more practical and should combine benefits of the house of brands with branded or endorsed brand model. Brands close to core brand offer will carry the brand name prominently whilst brands that reach out to less core segments and niches can use more autonomy to experiement and grow market share. The Walt Disney Company is a good example; they have an array of branded companies that are closely related and enjoy cross selling and upselling benefits, whilst the more independent brands are allowed to carve out its own space and continue to strive creatively unhindered by Disney brand constraints.
And so….
Brand architecture is a strategic issue that can be among the most challenging companies and other organisations face. Yet, like living in an untidy house, coping in an organisation with nagging brand architecture issues is often frustrating if not even baffling or enraging. Left to itself a disfunctional brand structure saps energy and resources and holds back business performance. Solving these issues endogenously is possible but few organisations possess any expertise for the task. solutions need to work well for all stakeholders and match the strategic style and trajectory of the firm.
Given the wide range of businesses that face these issues at some point it is impossible to generalise further. If you are facing or anticipating issues with this aspect of your business, seek advice, if only from people you know who may have had to tackle something similar. The steps required need not be radical or disruptive and the rewards for getting it right are always appreciable.
