What Is Brand Portfolio Architecture?
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.
Without a formal framework for how those brands place in the portfolio, confusion would prevail. Worse, cannibalization and unnecessary proliferation of brands could occur.
Before diving deeper into brand portfolio architectures, it is worth understanding how portfolio organization can help keep portfolio architectures in check. For more information on that, check out my article on Organizing Your Brand Portfolio.
There are typically three basic brand portfolio architectures.
1) House of Brands (Unconnected brands)
2) Endorsed Brands (An Endorser brand + Endorsed brand)
3) Branded House (Single Master brand, Master brand + Descriptor or Master brand + Sub-brand)
A fourth type emerges from successful branded house or endorsed brand strategies – Stand Alone Sub-brands.
HOUSE OF BRANDS
A house of brands is a set of stand-alone brands that focus on growing individual market shares with respect to their scope of activity and the target audience they serve.
This portfolio architecture keeps the parent company away from the limelight, minimizes channel conflict, hides the common source of offerings, facilitates multiple pricing or quality strategies and avoids any image risks or negative impact caused by the parent or a member brand on the rest of the portfolio.
There are, however, downsides to this architecture type. It may not be possible to leverage the equity of a single brand across multiple product-markets.
Each brand requires its own brand building and marketing budget. This leaves smaller and less profitable brands with fewer resources to spend on marketing efforts.
Famous house of brands examples include Procter and Gamble, the Swatch Group and Unilever.
In this portfolio architecture, the parent or master brand offers its name as a mark of credibility and assurance to the endorsed brand. At its strategic discretion, the endorsement may be strong (formal), token (casual), or shadow (almost hidden) in nature.
Strong endorsements have prominently visible placements and suggestive of the nature of relationship between the endorser and endorsed brand. Relative sizing and proximity of logos tends to be an indicator of strong endorsements. The endorser is usually the primary driver of the purchase decision. They lend their credibility and reputation to the endorsed brand. Examples of strong endorsements include 3M, Calvin Klein and Marriott.
Token endorsements are less prominent but still visible. Again, the size and proximity of the endorser is an indication of the type of relationship. The endorsed brand takes on the primary driver role and leverages additional credibility as a result of the endorser. This portfolio structure allows the endorsed brand the opportunity to create its own personality and associations. For example, Kellogg’s and Corn Flakes or Kellogg’s and Rice Krispies.
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 back of product packaging or a casual mention on the website. Links are not publicized and even when discovered associations are often not cross-pollinated.
This portfolio structure allows maximum freedom to the endorsed brand to build its own personality. A good example of shadow endorsement is the restaurant chain, Yum Brands.
A fourth type of endorsement, although relatively rare, 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 ‘Citi’ – 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, one that it has strategic interests in. For instance, Nestlé acquired Kit-Kat and used an endorsement strategy to enhance its own image in the United Kingdom.
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 and sub-brands. Descriptors are basically indicators of the offerings expressed in generic terms.
Take FedEx for instance. You have FedEx International Next Flight, FedEx International Priority, FedEx Freight, FedEx Ground 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 architecture allows companies like FedEx and Virgin to capitalize on economies of scale when it comes to brand building exercises.
Sub-brands operate in close proximity with master brands. They draw energy from the master brand, can add to and modify the associations of the master brand. Sub-brands can help the master brand with a wide scope to enter specific segments or compete in product-markets that it may not ordinarily fit.
Sub-brands come into being when a classification is necessary to mark the product or service offering and the use of descriptors is not apt. For instance, imagine every vehicle in the Honda line-up being named Honda or Honda Car or Honda SUV. Creating a sub-brand like Acura, Accord or CR-V makes more sense to create a distinct class and association.
When a sub-brand develops enough equity to drive purchase decisions, a co-driver strategy comes into play. When this happens, it’s worth considering a possible shift to an endorsement strategy.
Sub-brands typically operate as co-drivers and both the master brand and sub-brand benefit mutually from the relationship. They are often referenced together. Consider Toyota Prado, Ford Escape or Samsung Galaxy as examples of the use of master brand + sub-brand.
When a sub-brand develops enough equity to drive purchase decisions on their own, the co-driver strategy tends to fade. A key indication of a shift is when customers refer to the sub-brand without the need to mention the parent or master brand. Examples include iPhone, Surface Pro or Thinkpad.
When this happens, it’s worth considering a shift to one of the endorsement strategies mentioned above. Apple is prime example of this shift. Apple’s sub-brands like Mac, iPhone, iPad and iPod became so strong that they were almost always referenced without the prefix ‘Apple’. Apple eventually dropped its name replacing it with its logo instead.
The above brand portfolio architectures are not hardwired. Many companies use a combination of these architectures over the course of business. In fact, some of the examples mentioned above fall into this class.
Consider Amazon who uses multiple architectures simultaneously. A branded house – Amazon.com (single identity) Amazon Music, Amazon Drive, Amazon Photos, Amazon Web Services (master brand + 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 portfolio architectures.
As master brands, sub-brands and endorsed brands mature, diversify, get modified or created, the portfolio architecture organizes itself accordingly.