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Brand architecture defines how a brand appeals to its target audience. The two primary strategies are the branded house and the house of brands. They sound similar but are built on very different foundations.
You may not be aware of it, but your company has already chosen one brand strategy over the other – even if unintentionally. Young technology companies for instance typically do not actually choose a brand strategy. They start with a unique technology and then name the technology, the product, and the company the same. So, a branded house strategy is the default.
However, as companies grow and mature, the management of their brand strategy can become a challenge. The reason, according to Hinge Marketing, is that as collective expertise grows, there is a tendency to diversify the company’s offering. To nurture and grow the profitability of new products (and/or services), companies often opt to brand each product. The likely rationale behind this approach is that it somehow legitimizes their products.
But this house of brands approach might not be the best option. Let me explain.
Branded house – the most common form of brand architecture
A branded house is the most common form of brand architecture. This model leverages the parent brand and attaches to it each child brand below it – also referred to as primary and sub-brands. With this approach, the company is the brand. An example of the branded house is FedEx. Their lineup includes FedEx Express, FedEx Ground, FedEx Frieght, and FedEx Services. Their products and services are all branded, marketed, and operated under the parent brand, which has enormous visibility and strong messaging.
The reasons to take this approach are numerous. First, a branded house is much more efficient. It’s far easier to create brand awareness and build trust if you only have one brand to manage. What’s more, the parent brand creates added value for all the products underneath it.
Second, a branded house reduces brand confusion in the marketplace. One brand, one lineup of products. Totally unambiguous.
And last but certainly not least, promoting one brand over several is much more economical. Because let’s face it; creating a well-known and reputable brand takes money. With a branded house the company channels its resources (both financial and labor) into strengthening one brand rather than diluting resources across multiple.
The challenge that many technology companies have is they do not have big marketing teams and large budgets. So unless you have the marketing resources of Microsoft, you are better off sticking to the more financially frugal branded house strategy.
House of brands – a popular B2C approach
A house of brands model has numerous child brands separate from the parent brand that stand on their own. It is most used in the business-to-consumer (B2C) space where people connect with brands and make emotionally driven purchasing decisions. A well-known and successful example is Proctor and Gamble and their numerous sub brands: Ivory, Tide, Bounce, Swiffer, Old Spice, Dawn, Crest, and so on.
Chances are good that if we put Proctor and Gamble Fabric Softener Dryer Sheets on the shelf next to Bounce, the latter would sell better. That’s because P&G have invested heavily in the Bounce brand.
Perhaps the strength of consumer branding is what influences small and mid-sized B2B technology companies to take the house of brands approach. What these companies don’t realize however is that their products (child brands) each need their own brand identity, messaging, website, and ongoing promotion to be successful in the market.
Supporting one brand is not easy; supporting multiple brands is resource- and cost-prohibitive. Significant brand confusion can also occur. I once worked for a company that launched a new product where the product had its own brand separate from the company. Unfortunately, they didn’t invest a lot of money in the product launch. The marketplace reacted by thinking the company had either been acquired or spun-off – not the message they wanted to convey.
If a company’s products all operate on the same platform, target the same audience, and/or have common elements, they are also poor candidates for having their own brand. Generally, this method is best left for large companies with diverse portfolios and deep pockets.
On the fence: Evolving into a house of brands
There’s one way that a B2B company naturally finds itself facing a house of brands situation. That’s when the company starts acquiring other firms to expand its portfolio, and those companies have existing product brands with enough brand equity to stand on their own. Oracle is a good example.
If your company buys up others that have already established customers and market presence, you’re left with a dilemma. How do you treat the two brands – your original and the acquisition? There are three approaches.
1. Keep original branding
Do nothing with the acquired company brands and allow them to live independently. An example of this is Harman International. Most of the companies they’ve acquired live on under their original brands: JBL, DigiTech, Mark Levinson, AKG, and Infinity – some of which even compete with each other. One of my previous companies, QNX Software Systems, was acquired by Harman and likewise maintained their own independent QNX brand while under Harman ownership.
2. Rebrand under the one corporate brand
This strategy happens when the main company rebrands all the acquisitions under the parent brand. The speech recognition company Nuance is a good example of this approach. They’ve acquired dozens of competitors and startups throughout their history and all of these have been subsumed into the parent brand. There’s a reason you haven’t heard much about SNAPin, TouchCommerce, BeVocal, and VoiceBox in recent years.
3. Dual brand your acquisition
With this approach, the parent company wants to keep the market relevance of the acquisition but they also want to ensure it’s associated with the parent brand. QNX is also an example of this hybrid strategy – when they were acquired by BlackBerry, they became rebranded as BlackBerry QNX.
Decide based on brand equity and willingness to invest
The approach you take after an acquisition has a lot to do with the brand equity of the child brand and the amount of money you want to invest in marketing it. Harman believed in the strength of the QNX brand so they kept the QNX brand intact complete with separate marketing department and budget.
On the other hand, Nuance wanted a strong parent brand. Their history is interesting because they started as Visioneer and became ScanSoft before becoming Nuance and making many different acquisitions under a branded house model. It will be interesting to see what happens now that Microsoft has purchased the company but I suspect the software giant will follow a hybrid strategy as they did with Microsoft Skype.
Choosing the right brand strategy impacts your business. It affects how your company and products are perceived by the market and fosters relationships that are crucial to the success of your business. So, it’s important to decide on a strategy upfront that will make sense in the long run. For most B2B technology companies with modest marketing budgets, it’s hard to go wrong with a branded house.