Branded house or house of brands—which is right for your company?

When it’s time for reputation-building at the corporate level, the first question to be asked and answered is “What should the underlying strategy be?”

Should the company dedicate its resources to promoting individual brands and benefit from their successes—as in the house-of-brands strategy popularized by P&G and commonly applied in consumer packaged goods. Or should it focus on its corporate image, with the idea that positives created there will accrue to all its products equally—as with the branded-house approach practiced by Federal Express and many other service companies.

And what about a hybrid model, where product offerings have separate identities, but align with the parent (or master brand) in some fashion? Think Courtyard by Marriott or Crewcuts.

The answer, as you probably guessed—is it all depends. But sometimes, it’s not obvious which way to go. The mandate may be to get senior leaders in a room to flesh out which brand architecture to adopt, since the decision is not an insignificant one.

Here are a just a few, far from complete set of considerations, which will help you get started in determining the best model for your company.

1. Are your products targeting the same audience?

When products are similar from an offering and image perspective, or at least have the same consumers in common, it is easier and always more economical to organize them under a branded-house structure. In this case, the marketing budget is deployed in a focused, cohesive way, which is a positive. The downside is that individual product attributes are given less weight than they would be in a house of brands. In a very noisy marketplace, especially one where competitors are loudly touting their differentiators, this construct may put your brands at a disadvantage.

2. Are there any risks in marketing your products together?

When brands are inextricably linked, as in a branded house strategy, their fortunes tend to rise and fall collectively, and they are more likely to directly benefit or be damaged by company and/or portfolio activities. When risks are high, for whatever reason, it is better to diversify—an investment principle that applies here as well. As far as brand architecture goes, this translates to putting each brand in charge of its own destiny with a house-of- brands approach.

3. Where do brand equities within the company currently reside?

Brand equities are built over time. This means that a historical preference for one structure over another usually means that when it comes to brand architecture, the past dictates the future. Acquisitions or divestitures challenge this notion, since brand power, corporate versus products, is thrown into a state of flux. Recently, we worked in a situation where the corporate brand had been dominant, but new assets, added through an acquisition, had such strong, independent equities that we and the client agreed to a hybrid model to preserve them.

As with most strategic decisions, this one requires careful consideration of the trade-offs that result from going in one direction or another. Since course correction can be difficult, costly, and potentially even ineffective, it’s best to get it right the first time.

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