Brand portfolio architecture depicts how member brands co-exist, each playing a defined role, having its own goals and operating within a prescribed scope. Brand portfolio architecture creates clarity and offers strategic decision-making with regard to how brands are managed, individually and collectively.
Before implementing brand portfolio architecture, it is best to consider which primary organizing structure works best for you. For more information read, “Organizing Your Brand Portfolio”
Without a formal framework for how those brands place in the portfolio, confusion would prevail. Worse, cannibalization and unnecessary proliferation of brands could occur.
There are three basic brand portfolio architectures.
1) House of Brands (Unconnected brands)
2) Endorsed Brands (Endorser brand + Endorsed brand)
3) Branded House (Single Master brand, Master brand + Descriptor OR Master brand + Sub-brand)
HOUSE OF BRANDS
A house of brands is a set of unconnected stand-alone brands that focus on growing individual market shares with respect to the target audiences they cater to. This portfolio architecture keeps the parent company away from the limelight, minimizes channel conflict, hides the common source of the offerings, facilitates the pursuit of different pricing or quality strategies, avoids any negative impact caused by the parent or member brand on the rest of the portfolio. It avoids dilution of either the parent or the offering due to strong associations that may exist with either.
There are downsides to this architecture type. It may not be possible to leverage the equity of a single brand across multiple product-markets. Each brand would require its own brand building and marketing budget. Low profit brands would have less resources at their disposal to devote to marketing. Examples of a house of brands include Procter and Gamble, Swatch Group and Unilever.
In this portfolio structure, the parent/master brand offers its name as a stamp of credibility and assurance to the endorsed brand. At its strategic discretion or depending on the significance of the parent/master brand’s connection with the product class, the endorsement may be obvious (strong), mild (token) or weak (shadow).
Strong endorsements are prominently visible placements of the relationship between the endorser and endorsed brand. The endorser usually has an established product-market fit or is the primary driver of the purchase decision. For example, 3M and Post-Its.
Token endorsements are less prominent but still within sight. The endorsed brand is the primary driver and draws a sense of credibility as a result of the endorser. This is a good strategy if the endorsed brand is new and could do with some reassurance. This portfolio structure allows the endorsed brand the opportunity to create their own personality and associations. For example, the Nestlé logo on the back of a Maggie product.
Shadow endorsements are least prominent, in fact, almost absent. If at all, there is a small presence of the endorsing brand lost in the accompanying literature, on the product packaging or a simple mention on the website. Links are not publicized and even when discovered associations are often not cross-pollinated. The parent company is not often known until it decides to build equity in itself. This portfolio structure allows maximum freedom to the endorsed brand to build its own personality. Good examples of shadow endorses are restaurant chains, for instance, Yum Brands.
Another form of endorsement is a linked endorsement. Here, certain elements of the parent/master brand are shared with the endorsed brands. McDonald’s is a perfect example where it shares the prefix ‘Mc’ with its product offerings – McNuggets, McMuffin, McDonuts. Another example is CitiBank, CitiFinancial, CitiCards, CitiBusiness, etc.
Benefits of endorsements
Endorsements can work both ways. It can help build credibility in the brand being endorsed or create an opportunity for the endorser in a new product-market context, one that it has long-term interests in. For instance, when Nestlé acquired Kit-Kat, it added the Nestlé endorsement which enhanced its own image in the UK.
In a branded house the master brand takes precedence. This portfolio architecture provides the best clarity to customers. Master brands can exist alone or with the addition of descriptors or sub-brands. Descriptors are basically indicators/descriptions of the offerings expressed in generic terms. Take FedEx for instance. You have FedEx International Next Flight, FedEx International Priority, FedEx International Economy, FedEx International First etc. Another good example is Virgin. The associations and characteristics of Virgin are well known and hence it serves as a single umbrella brand for its many businesses like Virgin Airlines, Virgin Rail, Virgin Music, Virgin Vacations, Virgin Hotels, etc. This allows Virgin to capitalize on economies of scale when it comes to branding.
Sub-brands operate in close proximity with master brands and are restricted in terms of creating a unique brand image. They can add to or modify the associations of the master brand. Sub-brands can help master brands with wide scopes enter specific segments. Sub-brands allow the master brand to compete in product-markets it would not ordinarily fit. They come into being when a classification is necessary to mark the new offering and the use of descriptors are not apt. Imagine every vehicle in the Honda line-up being named Honda or Honda Car (descriptor). Creating a sub-brand like CR-V or Accord allows the sub-brand to create a class and associations of its own.
When a sub-brand develops as much equity as a master brand to drive purchase decisions, a co-driver strategy is in play. Example – Apple iPhone, Microsoft Surface Pro or IBM Thinkpad. When a sub-brand gains equity to drive purchase decisions on its own, it’s perhaps time to consider shifting to an endorsement strategy. The key is to decide who plays the driver role in the purchase decision.
The above brand portfolio architectures are not hardwired. Many companies use a combination of these during the course of business. Amazon, for example, uses multiple architectures. A branded house – Amazon.com (single identity) Amazon Music, Amazon Drive, Amazon Photos, Amazon Web Services (descriptors). A house of brands – Alexa, Echo, Prime, IMDb, Audible, Zappos, Fire, Kindle, etc. along with various endorsement types.
Hybrid architectures are difficult to manage and warrant large budgets to maintain and reinforce. As a principle one must consider a branded house as a starting point before exploring other brand architectures.