Branded House vs. House of Brands: What's the Difference?


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Branded House vs. House of Brands: What's the Difference?

The way your brand is structured can have major effects on the way people perceive your business. Whether it's a branded house or a house of brands or something in between, how can you tell what type of brand architecture is right for your company?

Episode Outline

*This transcript has been edited for readability.

What is Brand Architecture?

Chris Wilks: Today we're talking about brand architecture. What it is, why it's important and how to get it right. Let's start by first defining the term brand architecture. What does that mean? What is a person referring to when they say brand architecture?

Charity Ndisengei: Brand architecture is really how an organization clearly structures or organizes its different brands, products or services. You can call it a happy marriage between your brand strategy and your product portfolio.

The one thing that Jonathan was saying, the last time we spoke about this was, he referred to it as a family tree. And what was that example, Jonathan, you gave around how you use the surname?

Jonathan Fisher: A simple way to think about it is, when you get married, do you take on the spouse's last name, right? Versus having a hyphenated name or keeping your name independent? And so in a very simple analogy, when you talk about different architectural models that are out there, I often use that as an example to help somebody visualize very quickly how architecture works.

Bo Bothe: And there's a cost to each of those. For those that are married, there's a cost and a benefit to each of those things.

Chris: So I actually love that, because you were explaining to me the difference between the different brand architectures and the approaches and the three main ones are branded house, house of brands, endorsed brands, and then there's hybrid approaches of those other main ones. Talk a little bit about the differences or maybe describe each of those three.

How is Branded House Different from House of Brands?

Charity: Sure. So when you talk about brand architecture, it's really a spectrum from left to right. So at the very left, you've got your branded house, which is a company like McKinsey for instance, or Apple. It's a single brand for all of its operations. And on the far right, you have your house of brands, which is a company that opts for a holding company which comprises of a series of unconnected brands like Procter & Gamble.

So Procter & Gamble has brands under it like Pampers and Tide. Those aren't necessarily linked to the master brand. Yum! foods is the same. So under Yum!, you've got KFC, you've got Pizza Hut, Taco Bell. And then in between, you've got this endorsed brand. And an example of an endorsed brand is like Nestle: Nescafe by Nestle. So it borrows from the mother brand, but isn't necessarily trading by the mother brand.

Jonathan: An easy way to think about an endorsed brand is seeing both brand identities in proximity to each other. And in some cases, even in a direct lockup with each other. So some people have a hard time confusing, I think, endorsed brands with hybrid brand model strategies. So I always try to say, think of that hyphenated marriage name analogy as an endorsed brand strategy.

Bo: Sticking on the naming thing, you see this all the time with actors and actresses and different people, such as Bennifer or whatever. But at the end of the day, it really comes down to value and strategy and not just brand strategy, but corporate strategy.

Is the value of this brand alone greater when endorsed by, or is the value of this product better when it's brought up into the branded house, or is it better on its own?

In some cases, when you'd start talking about products, shelf space comes into mind, different types of markets you're trying to go into, value differences between the products, with a low end and a high end. How do we handle them? But it's the same thing. When you go back to these actors and their partners or others, they've built a brand in the marketplace, and sometimes they take on a name.

Sometimes they use it sometimes and sometimes they say, no, I'm going to keep my own name. Because Madonna is Madonna and nothing's going to change no matter how many times I get married, I've got to keep that because this brand is its thing.

Chris: Yeah. It's got plenty of equity in it, right. So, you already started touching on it Bo a little bit, but what are some considerations whenever you're deciding which architecture to take on and which one suits your company best?

Bo: I think you have to think about where you want value to end up. There's a cost to having different names. When you and your partner have different names, there's sometimes confusion. And so that confusion is something you have to work through.

But if you're starting a company, like Apple, then you've got "i"-products, but there's still all sold by Apple. The logo on the back of the thing is the Apple logo.

The value goes up into the overall brand because that brand's built on innovation and they want the innovation to flow into all the other products, and some of that's stock price driven. But some of that is just the way that the customer or consumer wants to handle the product.

Charity: Yes, certainly from a market perspective, it's also looking at what markets you want to play in. So where you want to play actually really matters. If you're wanting to deliver your products in one market, there may be a single strategy or single brand strategy is important. But if you want to be in multiple markets, you might want to look at a different strategy because one brand in one place might not mean the same thing in an another.

Clarity around the purposeful storytelling that you're wanting to tell is important. So you have to clearly articulate value for your brand and what it delivers to your customers and employees and other stakeholders you'd want to take into account.

And then of course, there's culture. Nowadays we say brands are culture and culture is branding. So if your single-product brand culture is stronger than your corporate culture, then you might want to use that brand as your lead brand. But it also defines what your internal culture is.

So Coca-Cola for instance, they gather around opening happiness and defining what happiness is and how that drives that culture. Whereas Fanta, for instance is about sharing the fun. So everything about the culture of that specific business unit is driven by that. So there are a few things to consider.

Brand Architecture and Risk

Jonathan: Risk and liability is another factor that can often play with a branded house, where all the brands are the same. It's also referred to as a master brand strategy or a corporate brand strategy. If a major catastrophe happens and it affects the brand, it affects everything under the brand.

In a house of brands where everything's disparate and separate for the most part, if something happens, somebody dies, food poisoning, something blows up, whatever it might be with one of the brands or products or services, it only affects that brand and it doesn't affect all the other brands.

So risk and liability strategies are often part of these conversations. Also long term strategies, such as spinouts. Are you rolling up and absorbing? We've worked with companies that have grown from 250 people to 5,000 people and absorbed 25 companies over the period of a decade. We had to determine their long term vision and what they were going to be doing with the brands they're acquiring.

We've also seen them go through restructures and then spin out and divest and sell off certain products or service lines, especially when you do a lot of work like we do in the middle market. Sometimes you want a hybrid model because you intend to buy a service, absorb components of it, but then maybe sell off components of it.

So really kind of working through those strategic business goals and having a good, clear vision, thinking about the value in equity, thinking about the risk, thinking about the markets is important. And some buyers, they love one product and they hate another product and the company goes and brings the other product and then wants to convert it over.

I know my daughter's a Samsung fan and she will never use Apple. And so, it doesn't matter what Apple comes out with. She'll just never switch it. So, brand loyalty and equity as it exists today is also part of these strategies in these conversations that you have with clients.

How Apple Changed Their Architecture Strategy

Bo: Honestly, that's one of the weirdest things. When Apple bought Beats, they wanted the technology, but they left the brand in the marketplace. And I think that's a place where Apple deviated from their strategy.

We've done this before with some of our clients where emotion gets valued greater than good business decisions. Trying to make this person happy or this customer happy or this kind of thing, especially legacy brands, can end up hanging on too long.

And then there's cost. There's a cost to managing that brand, whether it's an equity piece or it's just a pure ad campaign. At the end of the day though, if in that case you want some sort of audio technology then do you roll those in? Well, no, this is a unique brand. I can use it.

So even if you do have a branded house, there is a place where it's not truly a hybrid brand, but you need to let this hang out there for a while. And a while can be 10 years, three years, five years, as long as it's deliberate, as long as it's intentional.

Charity: I think that begs for the need for flexibility as well, around when you are picking your strategy, what strategy you take. In the Beats instance, Apple made a very clear decision to be flexible around its process because it offered an opportunity to access a market that was a non traditional market.

Bo: And they could get inroads into a new market and new demographic. So it was intentional, but it does seem different when you're a certain way. Then you have to market to that, which I think they did while avoiding being a huge advertiser. Their advertising is very, just emotional. They did a good job with Dr. Dre and Beats.

They started with incorporating him and his brand into the initial advertising. And then over time transitioned that equity into the Apple brand and have left it in the market. But you don't see a lot of Beats commercials.

And so Charity, you tagged onto something very, very, very important, which is that you can use your brand architecture, and then in turn strategy, to tap into a new market or a new audience or a new demographic or a new product.

And not just corporate wise. Yes, they got a new IP. Yes, they got some interesting stuff. Yes, their wireless technology got better, but they also got a whole new audience and they were able to youngify and change their brand in a way they probably couldn't have without that brand moving into it.

Jonathan: Yeah. I mean, when you look at the story of equity, we've seen smaller brands be acquired by larger brands, but the larger brand has a horrible amount of equity and reputation. And we've seen the smaller brand gobble the larger brand's structure sometimes.

We've also seen brand strategies where you don't want your name associated with the weaker entry-level product line. And so you want to create separation. So it all goes back to conversations and research strategy, but there's a lot to unpack when you're working with companies on these decisions.

The Risks of Different Approaches

Chris: So, are there any risks involved with specific approaches to others? Jonathan, you mentioned the risk of a branded house when one business unit or one segment of the brand has a misstep and it filters throughout.

But you're talking about a flexible approach. Is there a risk in not being consistent in your approach? Are you going to confuse the marketplace perhaps?

Jonathan: Yeah. There are different types of risk. There's legal liability type risk, there's brand reputation risk, there's cost risk, there's time-to-market risk. In a master brand, or branded house solution, it's much faster to bring a product to market. There's less risk. The equity's already there. And in a house of brands, there's a lot more risk bringing an unknown product to market. Costs, time to market and all that are part of that risk equation to it.

There are pros and cons with every single strategy that's out there. There is no guaranteed solution all the time for anybody. So there are risks, but the risks generally are associated with cost and time and liability for that most part, speed of adoption, those types of things. Those are the big categories of risk that we see most often in this.

I think there is the unspoken risk of culture that you have to also consider. There is an emotional attachment to brands. Think about brands that the public was told are going to be sunsetted. And then they're like, "No." And they rush out and buy them. I think it was like the Twinkies thing, little Debbies or something was sunsetted, those kinds of things.

But there's also just that cultural risk, especially with mergers and acquisitions. Continental Airlines and United was a big, big risk. Continental was not perceived one way versus United's cultural perceptions. And so you have to also consider the cultural and emotional attachments of people truly letting go of these brands and adopting the new brand in that process.

Charity: And I think when you talk to culture, you need to think beyond just your customers. It's your internal stakeholder too. The opportunity cost, they could be losing valued employees.

Chris: Yeah, yeah. No I mean, one thing that I think is enlightening to me when we were talking about this previously was that there's more of a heavy lift if you go with, for example, a house of brands, because you're having to maintain a lot of visual assets and different languages. But if you're under a branded house model, then the brand is kind of set and everything kind flows off of that.

Bo: Yeah, I think that goes all the way. I think that goes all the way from an investor standpoint, all the way down to the customer. So if there've been a bunch of acquisitions and one company doesn't even know they're a part of another company or a part of the big company, there's a lot of confusion with your internal audience. Then they don't understand the full scope and scale of the value they provide.

From a corporate or investor standpoint, you've got to be really clear on where the value is in all of these brands and how that flows through to my investment in the one entity. And then that needs to tell the shareholder, oh man, look at the value of all these products and I understand how they work together and I understand what they do.

The perceived value of product and company goes up. And so thus, the value of the multiple and the value of the stock goes up on top of the fundamentals and whether they're a well run company.

Then there's the internal piece Charity was talking about where, do I work for Proctor & Gamble? Does this organization make sense to me? And that stuff matters. I mean, it may be in the back of somebody's head, but that still affects people in today's world with communication, that still has an impact, which then turns into the customer value.

How to Build Your Brand Architecture

Chris: Great. So what does this process look like when you're trying to determine whether a house of brands or branded house or a endorsed brands approach or hybrid approach? Where do you start? What are the things that you look at and consider?

Charity: Well, I think for me, the one thing that I would recommend is starting off with your mission vision values and understanding what it is that we are doing as an organization. What is our singular mission? Once you have decided what your mission is, you start evaluating the products and the services that you have against those what that mission, vision and values is.

And then you need to ask yourself a few questions.

  • How are these brands actually performing against this master brand?
  • How are they performing in terms of the goals of the master brand or the overall master brand?
  • How does the market perceive these brands?
  • Does the perception align with where we're going from MVV perspective?
  • Are the brands clashing in terms of brand portfolio and the position within the market?

And then start asking yourself very hard questions around the architechture:

  • If they aren't aligning, do we need to pull them up into a brand?
  • Pull them separately into a separate sub brand?
  • Or review our entire portfolio altogether?

I think it starts off with being clear on what your MVV is, and then you can make clear decisions on each of your products and offerings.

When we do a brand assessment, we look at it from the business strategy to the market's perceptions of the brands themselves. So it's really kind of a SWAT analysis that goes through and asks all these questions that Charity threw out there. You want to look at the strengths and weaknesses, both from internal and external and competitive angles.

  • Is it the thing that's driving the highest need and want?
  • Are we positioning it the right way?
  • Is it differentiated enough?
  • Is it our true core competency or strength in what we're delivering? Or is it just an ancillary secondary value?

I see variable services and products all the time generated just because, if you're a manufacturer and you love to invent, you constantly manufacture, but that's not necessarily the smartest strategy out there.

So I would always stipulate that you want to look at it from those perspectives and then think of it as a Venn diagram where they are truly aligned in the center with the strongest positions that you could pick and strategies that you can pick for that conversation.

Bo: There's this balance between your corporate strategy and intention, the audiences that you work with and then the culture that you want to build or the brand perception that you want to put out in the marketplace. The product matters.

Going back to the Beats example, Beats changed the demographic of Apple in a certain way and that was intentional. They may have gotten different kinds of benefits than they thought, but the intention is what matters. And so I think you have to look at these different pieces, not just from a financial standpoint. Is this brand going to add certain amount to the bottom line? Can I grow it?

Coming back to the cultural piece, does this product fit? Is the way the product's built and developed, is how it makes money, is the audience that it reaches out to, are those all things that add back and can easily be connected to your brand?

We see this in the B2B space all the time, where a company in X city buys another company in Y city and the brand in X city isn't known in the brand in Y city. So they say, "Well, let's just leave the brand in Y city out there because nobody's going to know who this new brand is and we'll lose market share if we change the name or we do whatever." Sometimes people don't realize that if you're looking at overall brand value of your entity, you've got to end up changing that name.

And then you have to consider your different audiences and what they expect from that product or service or your overall product or service that should be considered very thoughtfully.

Sometimes we see the finances make sense and somebody goes and buys something, but man, their audience is completely different and they didn't think about it. Or man, the way they make money or price things is really different and they didn't think about it or they just strip the name off. Then they don't think about the regional implications or the cultural implications with doing it.

Jonathan: Yeah. I mean we have these conversations every month. I had three of them this month with companies that were merging, companies that were rolling up, companies that were adding new products. This was the conversation with the CEO, with the CFO, with VP and CMOs.

You have to drill down into this SWAT, it's almost like management consulting and not marketing at the start of these projects because so much is affected by sunsetting a brand or changing a manufacturing line or dealing with the legal requirements of trademarking something. That these have huge impacts. But constantly we see companies that just rent out and bought something that it could just fold in.

Charity: That decision made no sense.

Jonathan: It made sense to the consultants on the ground at the time who were just number crunchers. But it made no sense from a brand marketing standpoint. It's shocking to us surprisingly, but also not at the same time. Because we've done it for so many years. How little attention is paid to these kinds of conversations during these acquisitions and spinouts and roll ups and launches, it's surprising.

Three Tips for Your Brand's Architecture

Chris: So I'm going to close with this and put you guys on the spot here a little bit. So what's one piece of advice you'd give to a company that's going through this process, considering their brand architecture? If you had to pick just one piece or the most important thing to focus on, what would that be?

Bo: Mine would be, understand fully where you want value to live or where you need value to live. I think that's one question that I don't read in a lot of textbooks and I don't see a lot of conversation around. Everything we've talked about: risk, confusion, culture, values, all that stuff goes into that. And some of that depends on market.

We come to it from a B2B perspective. We used some B2C examples today, but from a B2B standpoint, it's even harder because you make assumptions that somebody knows brand X in this marketplace for this or corporate doesn't matter and branding and logo and all that stuff doesn't matter. People just buy our product.

Well, you're commoditizing yourself at that point. So if you're not deliberate, at least having the conversation about where the value is going to live at the end of the day and what your intention is with that value, you're missing a big part of the conversation. 

You'll have to figure it out at some point. I think that's something, if you're really smart about at the beginning and deliberate about your hypothesis, about where you want value to live, I think you will be more successful in whatever you execute moving forward.

Charity: I would just add onto what Bo said around being deliberate. If you are able to be deliberate, you are able to consistently position your brand or deliver your brand consistently. And that boosts sales, it's been said by over 33%. Brands with a clear architecture are three times more visible and are clear on how they can be consistently presented. It's absolutely imperative that you are deliberate around those choices that you make because of that.

Jonathan: I would say do your homework from the internal, external and competitive perspectives and not just the financials as it relates to the brands. And I would encourage you to use a third party when doing it because customers will not be honest with you if you try to do it yourself.

Bo: And I think to build on that, Jonathan, you won't be honest with yourself either.

Jonathan: Yeah. There's frequently what we call the rose colored glasses effect. It really helps companies evaluate these conversations when there is a third party in the room that is objective and neutral and unbiased, because the brand product managers will tell you one thing because they want to protect their territory or their products. And the numbers guys will tell you another thing, because they just think they can lock something off or trim something out.

So bring the brand people into these conversations, look at it from that three legged stool, that Venn diagram analogy. And then you've got a true 360 degrees of data that you can put the value and the strategies into that Charity and Bo have discussed.

Chris: Well look guys, this has been really helpful and really insightful. I really appreciate you guys taking the time. Thanks a lot.

Bo: Thanks Chris. Great job guys.

Charity: Thank you so much Chris.

Jonathan: Thanks Chris. Bye now.