Short term vs long. Regional reach vs national. Diversification vs focused niche. When does it make the most sense to keep one singular Branded House vs a collective House of Brands? Understanding which type of strategy is appropriate for an organization's objectives and resources is a crucial step in building a successful brand and should be clearly defined before the brand is presented to consumers.
- House of Brands: A brand like P&G has a parent brand and then a number of consumer-facing brands loosely connected back to the parent - brands like: Crest, Iams, Bounce, Vicks, & Pringles. The House of Brands pushes equity to the individual niche brands.
- Branded House: A brand like FedEx has one master brand even though it offers a range of services - Ground, Custom Critical, Office, and Supply Chain. The Branded house funnels all equity back to the master brand.
Both of these strategies can be effective, but their effectiveness largely depends on where the business is in its life cycle, how far it reaches, and how proven each niche service is within the marketplace. Before deciding on either of the aforementioned strategies, an organization should determine whether it is a:
- Emergent Brand: New brands typically have the hardest time focusing. What will customers resonate with? What service will make us the most money? Can we survive limiting our offerings? Since the brand is still finding its legs, its smart to keep it as one singular entity - a branded house. This allows equity to build even as the focus may shift and mature throughout its formative years.
- Maturing Brand: A maturing brand begins to refine itself - asking the tough questions: 'what business should we be saying no to', 'where should we invest into our own identity' and 'what type of customer is our ideal'. A business at this stage may have many lines of revenue streams, but none may quite be ready for its own niche. After reaching mature status, brands may decide to expand through pursuing:
o Business Diversification: As the business continues to grow, multiple services may begin to branch out from the core. As these ancillary businesses begin to grow, the real question of moving from a Branded House into a House of Brands will rise to the surface. Are we Toyota trying to create Lexus, or are we Mercedes creating the C-class?
o National Reach: If a brand grows to the point of national reach, this is where I believe the Branded House can really payoff. Having invested most, if not all, of the accumulated years of goodwill, equity, and reputation into one identity can provide an organization with more opportunity to gain momentum as a national brand-name. However, this is not always the case. There are certainly times where branching off from the parent can allow a subsidiary to take a risk without marring the reputation of the parent.
Determining whether a brand should pursue a House of Brands or Branded House strategy is dependent on where the brand is in its life cycle as well as its resources and goals. Strategies do not need to be stagnant however, as they can be adapted as the brand grows. A brand may start out as a Branded House in the beginning then slowly grow into a House of Brands as it expands and grows more successful. As with many aspects of branding, there is no right approach to building a successful brand but only the approach right for you.
About the author:
Craig Johnson is the chief strategist and co-founder of Matchstic, a premier branding agency. Matchstic helps organizations create passionate brands that are memorable, relevant, and lasting. Specializing in brand development through strategy, positioning, business & product naming, identity and brand audit services, Matchstic's brand architects forge positive change and accomplish business objectives through creative thinking and smart design.
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