As a general rule, chaos is not the best business strategy.
That may seem like an obvious bit of wisdom, but you’d be forgiven for thinking otherwise by looking at the brand architecture of some the today’s brands.
Often the result of mergers, acquisitions, or just good old-fashioned unchecked growth, too many companies these days have wound up with a collection of brands, divisions, products, and services that can only be described as chaotic.
A clear, intuitive brand architecture is the best way to guard against chaos and unpredictability. A strong brand architecture brings your range of offerings into focus, letting you better cross-promote them and gain control over how your business is perceived by consumers.
What is Brand Architecture?
Brand architecture is the organizational structure of a company’s portfolio of brands, products, and/or services.
Effective brand architecture includes an integrated system of names, symbols, colors, and visual vocabulary informed directly by the consumer thought process. That’s because key to brand architecture is your customer’s mental organization—how they conceptualize your business and its portfolio of offerings, and how each offering satisfies their needs.
Brand architecture defines both the breadth and depth of your brand. Not only does it provide clarity around the organization of your offerings and how they are understood by consumers, it also influences customer behavior by maximizing the transfer of equity between your brands and sub-brands. If a customer has an existing relationship or positive association with a master brand, for example, they are much more likely to try one of its sub-brands.
Brand architecture is ultimately about managing perception. Externally, it helps your customers and other stakeholders make sense of a multifaceted organization. Internally, it can serve as a valuable tool for optimizing marketing efficiency and performance. But the benefits don’t stop there.
Brand Architecture Types
In its most common iterations, brand architecture falls into one of four categories: branded house, house of brands, endorsed, or hybrid.
Let’s take a closer look:
A branded house includes a strong master brand with divisions that feature the master brand name alongside a product or service description. Examples include FedEx and its extensions FedEx Express, FedEx Ground, FedEx Freight, etc.
The branded house architecture capitalizes on established customer loyalty where audiences care less about product features or benefits than they do about the central brand promise they know and love (in the case of FedEx, “When it absolutely, positively has to be there overnight”).
Additional benefits of the branded house approach include more efficient marketing and advertising spend and positive equity spillover between sub-brands. Of course, spillover can be negative as well. A problem with one sub-brand can wind up being a problem for the entire brand.
Another risk inherent to a branded house strategy is dilution: when a brand is positioned too broadly across multiple service categories, its meaning can become too diffuse.
House of Brands
A house of brands architecture features a collection of distinct, familiar brands under a parent brand that customers may or may not be aware of. The parent brand is primarily important only to the investment community.
The brand extensions in a house of brands system essentially endorse each other, while the parent brand realizes the benefits. You find this in brands like Proctor & Gamble and its vast array of products across multiple industries.
Products within a house of brands architecture sometimes feature their parent brand’s identity on their packaging by way of a small logo or address. Some brands choose not to disclose the relationship at all, because of specific strategies around pricing, perceived quality, or target audiences.
In an endorsed architecture, there is a parent brand and associated sub-brands, all of which have unique market presences. The sub-brands benefit from their association with, or endorsement from, the parent.
The relationships between the sub-brands within an endorsed architecture is often mutually beneficial, each benefitting from the strength of the other. Examples include Marriott and its various sub-brands across the price spectrum, from the Ritz Carlton to Fairfield Inn.
An endorsed strategy is one where you’ll find messaging like “brought to you by…”. Endorsement limits a business’s reputation risk and offers more positioning alternatives than a house of brands approach, for example.
Finally, a hybrid brand architecture comprises some combination of the above iterations. In the case of Alphabet, Google is allowed to operate in the space it knows best, search and advertising, while smaller brands, like Nest, Sidewalk Labs, and Calico operate as individual companies in their own specialized verticals.
A hybrid model offers the flexibility of having multiple tiers of distinct hierarchies, including varying levels of market-facing brands subservient sub-brands.
Many companies that have adopted the hybrid strategy have done so out of necessity, though. A hybrid architecture is often more of an ad-hoc approach borne from mergers and acquisitions, rather than a proactive brand strategy.
The Benefits of a Strong Brand Architecture
A common misconception is that brand architecture is only for large, complex organizations. But even small businesses can see measurable improvements in performance by better organizing their offerings.
Regardless of your company’s size, effective brand architecture can enable you to…
- Target the needs of specific customer segments. Brand architecture enables you to segment your messaging so that each of your target audiences hears what they want to hear and gets precisely what they’re looking for.
- Significantly reduce marketing costs. When brands are architected in a logical, intuitive way, your marketing efforts are exponentially more efficient. With opportunities for cross-promotion between brands, marketing is more effective as well.
- Clarify positioning and messaging. Nothing increases the efficacy of your brand positioning like clarity. Clearly articulating positioning and messaging is like giving your brand a high-performance tune-up.
- Facilitate growth and bolster stakeholder confidence.The modular nature of an intuitive brand architecture makes it easier to add brands, products, or services as your company grows. And future-minded brands are a reassuring sign for investors and employees alike.
- Enhance customer awareness. When a brand’s various divisions are not clearly delineated, they must rely on the parent brand to capture the attention of the marketplace. Brand architecture gives a parent brand the power of diversification by highlighting the unique strengths of its distinct sub-brands.
- Build and protect brand equity. The upshot of all of the benefits above is the ultimate competitive advantage for any company: brand equity. Growing your brand equity gives you compound returns as industry authority and marketplace valuation grow with it.
How to a Create Strong Brand Architecture
How do you create a brand architecture that benefits both your company and your customers? Firstly, don’t over-complicate it. The purpose of brand architecture is to make your offerings clearer, not more convoluted.
There are 3 simple steps toward defining a sound, intuitive brand architecture: Research, Strategy, and Migration.
The best brand architecture starts with research into brand awareness, loyalty, and associations. Only with research can you know how your audience understands (or doesn’t understand) your key offerings.
Conducting one-on-one interviews with internal and external stakeholders, and then testing the insights you glean with more widely distributed online surveys is the best way to understand how and why your customers make decisions.
Research data will tell you which brand architecture type will best support your business strategy. It gives you information you need to parse your offerings or divisions in a way that makes sense to those you serve.
In the strategy phase, you determine the optimal brand architecture type for your business’s unique needs. Each type offers a different way to leverage (or not leverage) the master brand.
How closely do you want to associate your sub-brands or extensions to your parent brand? This question is particularly relevant if you’ve recently undergone a merger or acquisition (and even more relevant if a former competitor was involved in the process).
The best way to answer this question and others is to create illustrative examples of multiple architecture alternatives, identifying the pros and cons of each. Evaluate each alternative against pre-determined criteria to ensure objective evaluation.
Prioritize clarity in the connections between sub-brands, divisions, products, or services. Cross-promotion between brands doesn’t work if customers are confused by the correlations between your extensions. The more common elements there are among your brands, the stronger the synergy is between them.
Lastly, be realistic when it comes to budget and resources. Make sure to create a system that you can reasonably expect to support given the manpower and capital you have available.
The final step is to create a blueprint for the system you’ve organized and outline a plan for migration. This includes a naming structure and identity system that clearly delineate your various sub-brands or extensions in a way that aligns with your overarching brand strategy.
The visual and verbal breadcrumbs that result from a tightly constructed blueprint are key to helping customers and other external stakeholders navigate your brand architecture.
Developing management tools such as decision trees for future architecture decisions will ensure that you continue to get the most out of your chosen architecture as your brand continues to grow.
Factors to Consider When Creating a Brand Architecture
There are many factors to consider when deciding which brand architecture type best suits your business’s unique needs. We’ve outlined six of the most important ones below.
By taking into consideration each of the following concerns, you can mitigate the risk that is inherent to any brand restructuring.
It’s important to evaluate both the strength and flexibility of the existing equity in each of your brands. Do you risk losing valuable brand equity by consolidating brands after a merger or acquisition? Can an existing brand’s equity reasonably be leveraged to promote another?
Proctor & Gamble can’t exactly leverage the equity of its Head & Shoulders brand to promote other products in its portfolio like batteries or cold medicine. The resulting confusion would be problematic for all the brands involved.
Internal factors like values and company culture are just as important as external ones when structuring your brand architecture. If you’ve acquired a new company with a radically different culture, it’s important to ask whether it makes more sense to merge it or keep it separate. Certain divisions operate better with a level of autonomy that isn’t compatible with a codependent marketing strategy.
A branded house approach demands that all entities be on the same page when it comes to positioning and personality. If that doesn’t seem likely, or even possible, another architecture type needs to be considered.
Growth strategy should be front of mind when determining brand architecture. Does your business model entail pending mergers, acquisitions, or alliances? Do you plan to expand your product or service lines in the near (or even distant) future?
Your brand architecture should support and enable successful growth by providing strategic latitude for each brand. The right approach will allow you to identify underperforming brands and avoid the exposure that comes with a single-brand strategy.
Perhaps the most important factor is the market or markets in which your company operates. If your business targets a single market, a branded house can boost brand awareness, optimize marketing spend and bolster reputation. If you have products or services aimed at significantly different markets, multiple brands can help to protect each market from the other, mitigating risk and ensuring differentiated messaging.
By acquiring natural foods brand Odwalla, Coca-Cola was able to participate in a fast-growing market segment that would have been otherwise unavailable because its association with junk food.
Distinctiveness is the driving force behind branding diversity. Unable to compete in the luxury car market, Toyota launched Lexus. The Ritz Carlton is able to retain its luxury status by keeping a branded distance from its parent company, Marriott, and other, more budget-conscious sub-brands in the Marriott family.
Another key factor is how much disruption you’re willing to endure with a reorganized brand architecture. Every rebranding initiative entails a certain amount of risk. The important thing is to measure that risk against the long-term gain you stand to realize.
Realigning lesser known products under a well-known brand is relatively risk-free. Rebranding well-known products with a new and unfamiliar parent brand runs the risk of confusing and/or alienating a brand-loyal customer base.
Last but certainly not least among factors to consider when creating your brand architecture is cost. Maintaining a slew of separate brands is always going to be costlier than organizing all of your offerings under a single brand.
It’s also expensive to rebrand the packaging, signage, and digital assets of multiple brands and consolidate them under a new single entity. Intangible costs like brand equity need to be considered as well.
Building a solid brand architecture isn’t easy, which is why branding agencies exist. Ultimately, it’s about parsing the nuances of your brand and, with the help of meticulous research, deciding how to leverage each of its offerings to best benefit the whole.
By carefully considering each of the important factors listed above, you can mitigate the risk associated with any revised brand architecture. Remember, the goal of brand architecture isn’t simply to come up with clever names for your products and services. It’s to create clarity from chaos, and sharpen the edge of your ongoing branding efforts.