House of brands VS Branded House: which one is the better strategy for brand managers to follow?
Whether out of academic interest or sheer circumstances you might have heard of the these two important portfolio management concepts. The Branded House and House of Brands are two portfolio management strategies that define how a family of brands owned by one parent company interact, relate and operate in harmony with each other.
Brand Portfolio management is a pressing issue that companies need to address as it diversifies its products and services. Some call it a part of growing pains but as the brand portfolio of a company multiplies, it needs to focus its attention on creating structure around all of its brands and bring order to chaos.
Types of Brand Architectures
Brand Architecture types are fairly stable. While the House of Brands and Branded house are two primary examples of portfolio management strategies, others like Hybrid models and Endorsed Brands are just as visible in the real world.
House of Brands
In the house of brands archetype individual products and services are treated as its own brand. The brands within this model have the freedom to create its own positioning, have a unique voice and personality. Usually, a brand within this category will have its own visual identity, unique logo, communication style and tone.
For a better understanding check out these House of Brand examples.
When we think of General Motors, we immediately think of a Cadillac or Chevrolet.In fact the power of its Sub-brands are so big that it often overshadows the parent company. Currently GM owns several car brands. The brand is also a defense supplier, Financier and Auto Parts seller with most of its subsidiaries having a brand identity of its own.
The fact that GM offers it customers such a wide range of products and serves more than one large group of customers is one of the primary reasons GM has chosen to go for a house of brands model.
Nestlé might not be the first name that comes to your mind when you think about ethical brands but they are a prime example of house of brands. The company owns over 2000 brands in 150 countries. What’s even more surprising is that there are multiple brands for the same Nestlé product.
But doesn’t having separate brands for one product create redundancies? - or so one reddit user asks.
Product diversification comes with the risk of cannibalisation. As reddit user palcatraz explains - Nestlé operates in over several countries and serves a large group of customers. Often, two brands of the same product covers different target markets by creating separate brand positions.
Nestlé water brands like Perrier is positioned for higher-end markets where as Purelife caters to the masses.
Pepsi has a similar model to Nestle. The company uses its large distribution network to its advantage to distribute as many brands as possible.
Pros & Cons
There are several advantages to employing the House of Brands Strategy:
- It provides more elasticity in terms of brand positioning, communication and audience targeting.
- Avoid the one-size-fit-all philosophy and tailor strategies that’s specific to to a target audience.
- Distance itself from the Brand positioning and” Baggage” that comes with the parent company.
- Minimize Risks. If one brand suffers a PR disaster the other brands are not affected.
- Better allocation of resources. By understanding each brand’s position managers can allocated budgets more effectively across their portfolio.
Like all aspects of life every thing has its downsides:
- Managing differentiated brands can be expensive.
- The larger the portfolio the harder it is to bring order to chaos.
- Sub-brands can not rely upon the main brand to bolster its reputation.
- It can confuse customers about the parent companies true identity --
Is GM a reliable defense constructor? Aren’t they only good for making consumer vehicles?
A Branded House is a stark contrast to the house of The House of Brands. In the Branded House architecture one brand, the parent company acts as the cornerstone and all products act as a sub-brand under the brand. In most cases, you will find Branded Houses share the same look & feel to their sub-brands.
See these Branded House examples to understand how they work.
Apple is not only an exceptional brand, it is a prime example of a Branded House. It’s core line of products Macbooks,Iphones and Ipads share a unified brand experience that is honed to perfection by the parent brand. Apple is laser-focused in its positioning as premier tech company that delights its customers through get product design and experience. This positioning is strongly echoed in all its products. When you buy an apple product you know you’re buying something that’s top of the line.
Some describe Kirkland as the ‘Non-brand’ Brand. Kirkland’s vast portfolio of products are well known to Costco shoppers who seek value. Much like Great Value and other grocery store brands, Kirkland offers customers something cheap accompanied with Costco seal of approval.
Xiaomi is a company that provides customers with amazing products at affordable prices and little to no compromises compared to its competitors. Smartphone manufacturers often use the Branded House strategy to build their brands. However, as the brand grows it does find itself in the need to create off-shoot brands (like the Pocophone from Xiaomi).
Pros & Cons
Some of the Pros of a Branded house include:
- One unified brand strategy offers a simplified solution for all products.
- Saves cost by not having to manage separate brands.
- Customers are more accepting of new products that come under the same brand umbrella.
- As the main brand grows, the sub-brands automatically receive recognition.
And the cons are:
- A one-size-fits-all strategy might not work for some products.
- Your reputation as a brand is place all in one basket. If one brand suffers a backlash all brands go down with it.
- It is difficult to maintain one brand identity across hundreds of brands and still keep the individual brand’s uniqueness intact.
- Mergers and acquisitions comes with its risks (When Microsoft acquired Skype users lose trust in it).
Also see: Rancon is an example of a branded house in Bangladesh. See how COdesign brings together 20 Rancon brands under one umbrella in its revamped visual identity.
Hybrid Brand Portfolios
Brand managers would benefit to think of a House of Brands and a Branded House as a spectrum rather than two isolated concepts. It is better to treat the two strategies as two opposing ends joined by several hybrid models in the middle.
The Hybrid Brand is a mix of these two architectures and usually employed after a merger takes place.
Disney is the king of acquisition in the entertainment industry. In addition to existing Disney properties, they’ve acquired Marvel Cinemas and 21st Century Fox among others. Both acquisitions were large and came with a string of large intellectual properties such as Marvel’s Avengers and the Star Wars franchise.
Despite its largess Disney still promotes Marvel and Lucas films separately with the sub brand’s identity intact. While some companies might have scrapped the brands in favor of one master brand, Disney realizes the value owning two iconic brands adds to its company.
Microsoft was mostly a branded house for a large part of its existence - - think Microsoft Office and Microsoft Internet Explorer. But it too has acquired some other companies as it grew. Some of its big name acquisitions like LinkedIn and Skype does not include the Microsoft name owing to the fact that both brands enjoy its own brand equity and a loyal fanbase. Microsoft is smart in realizing that including LinkedIn and Skype to the Microsoft name could alienate customers and diminish the sub brands’ hard earned brand reputation.
Amazon has a branded house with its products like Amazon Fire, AWS and Amazon Kindle. But the world’s largest Ecommerce store also owns Zappos,wholefoods and Diaper.com.
It is noteworthy, that there are several reasons why a hybrid company doesn’t swallow a sub brand into the master brand. Case in point with Zappos and Amazon, the former is known for its excellent customer service and quality for a price proposition, the latter is known for being cheap and lax when it comes to quality. Despite belonging to the same category, the two companies couldn’t be further apart.
A fourth type of Brand Management strategy is known as the Endorsement model. These are the brands that you usually see with the “brought to you by” tagline accompanied by a logo of another big brand name company.
Check out this prime example of Endorsed Brand
No Marriott is not the endorsed brand here. Rather it’s the brand that endorses a line of hotels and inns. Over the years, Mariott has placed its seal of approval on several brands that it sees fit to carry the Marriott emblem. An Endorsement by Mariott is more a certificate of standards rather than a sign that you’re residing in a Marriott hotel.
In Marriott’s case, the parent company owns a number of smaller chain of Inns. While inns are in the same product category as Marriott hotels, they don’t necessarily blend in well with Marriott’s aesthetic and brand positioning.
Why Brands prefer the endorsement model?
Marriott can if it wishes, rebrand its inns as a Marriott hotel. But any visitor would tell you that the none of Marriott’s subsidiaries measure upto the parent company. That is why the endorsement acts as a one-way channel to bolster the sub brands without affecting the parent.
Between the blurred lines
If I’m brutally honest, there were times writing this article when I was confused if one of the mentioned brands were a house of brands or branded house. But you could be excused to making this mistake because brand portfolios are constantly evolving and companies continue to buy out other brands. A company that might be a branded house today, might become a hybrid tomorrow.
Xiaomi is not the company it once was.
A few years ago, Xiaomi was much closer to a branded house than it is today. Xiaomi’s new brand Pocophone came out with the tag of a “flag-ship killer” and is now treated as a separate brand of its own accord.
Xiaomi might have brought out the Pocophone in a different brand name because they felt their phones were associated with affordability and low-range functionality in comparison to the market. The new Brand, free from Xiaomi’s reputation was quickly adopted by the market and created a loyal fan following.
A branded house within a House of Brands
Google might be a Branded House but it is a part of a house of brands within its parent company Alphabet. Just one step up the ladder from Google, Alphabet holds companies like Nest and Fiber; two companies that are distinctly different from Google and its products.
But why abandon the world’s most renown name and put it in the rear seat?
When Sundar Pichai took over Google in 2015 and Larry Page became Alphabet’s head honcho the shift signified the role of Google as a company that’s bigger than search. Alphabet brings about a fresh start for the giant which was all to well known for doing one thing for too long. With the new house of brands, Google’s cousins are free to establish their own name in the market.
Marriott owns Ritz Carlton
Marriott owns a large number of hotel chains including the Ritz Carlton. As mentioned earlier, Marriott endorses most of its chains with a Marriott emblem but Ritz seems to be an exception. Rather, the company keeps a distance from the luxury brand fearful that mixing the Marriott name with Ritz Carlton might undermine the brand’s name as luxury residence.
Building your Brand Portfolio
If your companies growing and you’re fortunate enough to diversify your product line, you should think of adapting a brand architecture mentioned above. Before you build either house of brands or branded houses, or something in between ask yourself (and your customers) these following questions.
How similar are your products from one another?
As a Design Agency, my company COdesign always tries to create brands that are tailored to their customer. If you’d ask one of our designers to slap a hospitality logo on a car, you’d definitely see some odd reactions.
Let me explain, hospitality and automobiles are two very different industries. Where healthcare logos call for humane and comforting aesthetics, automobiles are bold and brash.
For products that are innately dissimilar it is better to create separate brand entities. If two brands have vastly different target audiences, selling the same story would be like preaching to the choir and heathers with the same gospel. In other words, it just doesn’t work.
Does the brand come with baggage?
We discussed Marriott and Microsoft earlier as two companies which have strong brand positions and customer sentiment about the brand. Both companies needed to distance itself from its sub brand because of the opposing brand values of its acquired brands.
If your customers have a strong belief about your brand that might either damage or alienate a brand it is better to keep a barrier between the parent and the child.
If you’re rebranding are you ready to bear the risks?
A new branding effort comes with a whole set of risks. Will the existing customer accept the new brand? Are new customers attracted to it? Is it too late to introduce a brand in a crowded market? All these things need to be taken into consideration when you're rebranding an acquired brand into the branded house. Similarly, the same argument applies to when you split a product from the parent company to create its own identity.
What about costs?
The biggest disadvantage of a house of brands is the cost of maintaining different brands. There’s the upkeep of hiring different managers, creating separate marketing agencies and developing brand assets. Are the costs worth the benefit? That’s quite the food for thought.
We never said this was gonna be easy
Even the biggest companies make mistakes when choosing a brand architecture. But know that as your company grows diversification will be inevitable. The silver lining in growing pains however is that some problems are nicer to have around than not.