A House of Brands, or a Branded House?

What happens when business growth and acquisition brings a new company, a new service, or a new product to an existing lineup? It can be good for stock price, but bad for brand equity if the acquisition is not addressed as part of the brand plan, the marketing plan, and most importantly, the business plan.

It is the responsibility of the business's Brand or Marketing Manager to understand what the resulting “house of brands” looks like, and what opportunities are available when communicating publicly, or “outside the house.” Of course many small and medium-sized enterprises do not have a Brand Manager. In these cases – and with larger enterprises as well – we are brought in when market encroachment or confusion is evident, and we are challenged with unravelling a sometimes very tangled web.

Often accelerated growth has created a variety of assets and no time to evaluate them, or the original strategy has been forgotten in the thrill of the chase. To avoid this situation, the best practice is to have a clear brand strategy – tied to the business plan – that states the overall position and that of the subsidiaries. A coherent strategy will leverage marketing efforts and produce more value. It can serve as a road map for the next acquisition too, helping to determine if it should be part of the house or remain a separate asset.

Research on consumer behaviour and perception can provide the information and impetus to align brands more closely, or to separate them for better market share. Determining whether to establish structure as a branded house or a house of brands should be based on the target audience. If the people to whom you are communicating are similar, live in similar geographic areas, and have the same psychographic profiles that make one approach logical, it can be more cost effective to manage one brand (a “branded house”). If the audiences are fragmented, however, sub-brands may be preferable (a “house of brands”) in order to communicate the right value proposition.

P&G (Proctor & Gamble) is one of the most obvious and oft-cited examples of a house of brands model. Consumers do not look for a P&G product—they look for their favorite brand of Crest toothpaste, or, to name a older but rejuvenated member of the house, Old Spice men’s products. Consumer products need to be constantly tinkered with, extended and adapted in an attempt to grab more market share against competitors.

A company’s stock price is driven by the total value of the assets and how well they perform individually and as a whole. In P&G’s case, a single product brand losing market share will not have the same effect as a company that has only one brand. In the scenario of a branded house, however, where all products and services fly under the company banner, the reputation of each product or service is very much tied to the house. Apple recently posted its first revenue decline in 13 years. iPhone sales are down 16% and 65% of the company’s revenue comes from iPhones. This is an oversimplification, but it does point to the weakness of a branded house. 

What happens when the brand name doesn’t help, but could in fact confuse matters? In that case, simpler is always better. Unless you can afford to have separate marketing budgets (and separate websites), it’s preferable to rename and try to better communicate your offerings with sub-brands connected to this name.

An example of an apt app name (say that fast 5 times!) is driversiti,
a US-based company that has since been sold. Driversiti invented a new way to improve driving safety, accessible via any smartphone. Marketing was global with fleet applications as a primary segment. A brand name was needed that could work both in the fleet and the consumer aspect. This name was perfect for its simplicity and implied meaning from both the driving action and the diversity of its current and future functionality. The client liked it so much, they renamed the company after the app.

Whatever your company structure or problem, talking to a brand expert can provide you with a clearer path to better performance, rather than letting what could be a profit centre, drift away.