Customer needs are constantly growing and changing, and it’s no different in the B2B space. With growing demands, chances are you may be looking to expand into new markets with new offerings. But it’s really not that simple – many companies open up new product lines or enter new categories only to lose the essence of what made them great. The difference can be found in branding, more specifically brand strategy, and even more specifically – brand architecture strategy.
So if you’re looking to get more people to buy more stuff for more years at a higher price – this article may very well be worth the read.
We’ll start with a quick recap – brand. It’s the gut feeling customers get when interacting with a product, service, or company – it isn’t a logo, identity, or product. Cultivating that gut feeling takes time and effort and when growing your company, potentially even creating sub-brands (more on that later), it’s important to have a strong brand architecture to maintain the integrity of the brand.
Brand architecture is a hierarchy of related brands or brand names, often beginning with a master brand, that describes its relationship to sub-brands. In other words, it’s a way of controlling the different brands under one parent brand or company to maintain consistency while reaching different markets and target audiences.
So we must ask; does changing your brand architecture even make sense? Let’s look at some symptoms of companies who would benefit from restructuring their brand architecture.
You may want to adapt your brand architecture if:
- You plan on creating a new offering
- You plan on serving a new audience
- You provide an array of vastly different offerings
- You serve a wide variety of audiences
- Marketing and messaging is ineffective and/or stretched thin
- Awareness is non-existent and positioning is unfocused
These are all potential situations where you can extend your offerings in an effort to increase your bottom line and, in the process, lose sight of the bigger picture: brand. Whether you offer too many options that confuse customers or offer products or services to the wrong people, your company will operate in a constant uphill battle for brand recognition, market dominance, and higher profit margins – unless brand architecture is addressed.
Let’s look at a brand that could use some work in the brand architecture department: Kodak.
When you think of Kodak, you probably think of the iconic disposable cameras they made 15+ years ago – and you’d be right. But did you know they shifted to a mostly B2B model, and opened up several new product lines including advanced materials and chemicals, digital printing presses, and software applications? Chances are – you didn’t.
Instead of sticking to the original purpose of the Kodak brand, leadership (over many years) chased profits instead of purpose and stretched their offerings across many complex, and highly competitive categories. The result – $3.8B in AGR for the year 2000, and just $1.4B in AGR for the year 2019 (pre-COVID, of course).
In essence, Kodak focused more on short-term profits and less on the needs of its customers.
Sometimes when we pursue more money, we make less of it.
What is Sub-Branding?
Before diving in, it’s important to first understand a component of brand architecture: sub-branding.
Sub-branding occurs when a parent brand (sometimes called a master brand) creates a subsidiary or secondary brand, usually for the purpose of reaching a new audience. A sub-brand is tied to a parent brand (sort of like a spin-off) with its own values and identity to set it apart.
A great example of sub-branding is Diet Coke. It’s parent brand is Coca-Cola and Diet Coke uses similar colors, typeface, and other identifiers to Coca-Cola, but it’s a different brand that caters to a different audience. Other sub-brands under Coca-Cola include Coke Zero and Coca-Cola Vanilla.
Sub-branding is effective with brands that already have high brand equity and a loyal customer base. By creating a sub-brand from a well-known parent brand, name recognition and visual similarities work in its favor. Sub-branding is used to reach new and different niche markets, giving your new offering a boost with built-in name recognition – and it’s certainly easier than creating a whole new brand from scratch.
But when should you deploy sub-branding?
Sub-branding is a good idea to implement when:
- You want to expand into new markets or reach new niches
- You need to satisfy the needs of new customer
- You want to challenge industry norms
The more your company grows, the more important it is to think about sub-branding and the structure of those brands. Brand architecture establishes an outline for how sub-brands will be organized within a company.
Brand Architecture and Types of Sub-Branding
If you are one of the many companies that would benefit from restructuring your brand’s architecture, you’ll have to determine the best type for your situation. The type of architecture is determined by the needs of your brand and the structure of your sub-brands. And now a breakdown of each type to help determine which could be right for you…
The Branded House
Under the branded house model a company has one overarching umbrella brand (the parent brand), underneath which there are multiple smaller brands (sub-brands). And these sub-brands do not function independently from the parent brand.
A popular example of this is Apple. Apple is the parent brand that has many sub-brands including iCloud, Apple Music, and Apple Pay.
The upside of utilizing this brand architecture is the built-in brand equity and customer loyalty already associated with the company name. People know and trust Apple and are more likely to trust a new sub-brand of theirs, like Apple Pay. Another plus to this strategy is that all sub-brands follow the same marketing strategy of the parent brand. This limits confusion as everything is kept under one umbrella. A strong parent brand leads to more growth in the future as offerings can easily be expanded.
Seeing as everything in this model is tied to the parent brand, anything that goes wrong with the parent brand affects the sub-brands. This could include damage to its reputation which may turn customers away from all sub-brands in the future. There are limitations to this strategy because, while there is some customer loyalty already built into the brand, if a sub-brand underperforms, that has the potential to affect the entire company.
The branded house strategy is effective for some companies but it is not a one size fits all solution. Luckily, there are two other strategies that may fit your needs if this one doesn’t.
House of Brands
The house of brands architecture, in opposition to the branded house architecture, has the parent brand take a back seat, letting sub-brands stand alone. The most well known example of this is Procter & Gamble. P&G owns many sub-brands including Tide, Charmin, Bounty, Crest, and so many more.
These sub-brands have their own brand name and visual identifiers (like color, logo, and typeface). The sub-brands also have their own marketing strategies separate from one another and separate from the parent brand. This allows marketing teams to develop tailored marketing initiatives to reach independent user groups, therefore more specificity leads to better results.
The benefits of this strategy include a greater reach. With more, independent, sub-brands, the parent company reaches a wider audience and fits their different needs effectively. There is also a greater space to take risks since there is less chance that a misstep will affect the parent company. For example, if P&G decides to try some crazy marketing scheme (Axe body spray for example) and it goes to hell in a handbasket – P&G stays in business and the P&G brand walks away unscathed.
This form of brand architecture isn’t all sunshines and rainbows however, as it requires the proper planning for essentially starting an entirely new company: operations, finances, marketing, sales, product development, the list goes on.
In between the branded house and the house of brands is the endorsed brands architecture. Endorsed brands have their own identity but are not separate from their parent brand. For example, Nestle has many different brands under its umbrella like KitKat and Coffee Mate. Those brands do not stand alone. In other words, it’s not “KitKat,” but rather, “Nestle KitKat.” And while there is still a connection to the parent brand, each sub-brand has its own, unique identity, logo, and visual aspect, aside from the use of the parent brand’s name.
The pros of endorsed brands include the fact that sub-brands do not need to build brand awareness from the ground up – they already have some level of awareness from the parent brand. With that also comes a more efficient and effective marketing strategy and brand equity from the parent brand (Nestle is already well-known).
The cons? Brand reputation is tied to the parent brand so if that brand takes a hit all sub-brands do as well, by proxy (similarly to the branded house model). Also, endorsed sub-brands need to follow the parent brand’s mission and vision which can be limiting if the endorsed brand wants to take a departure from its parent brand. In essence, endorsed brands can’t easily experiment with a new identity without first consulting their parent brand.
All in all, depending on the situation of your brand, endorsed branding can be very beneficial.
Finding the Right Architecture for You
Each organization will have its own unique set of challenges when deciding on the best architecture strategy for its brand. We alluded to several of these challenges earlier (we called them “symptoms”) to better understand which type of architecture makes the most sense in certain situations. If you are experiencing any of these aforementioned “symptoms of poor brand architecture”, it’s likely restructuring may help. However, determining which model to follow can be tricky. Here are some things to consider…
Similar audiences, similar products. For brands that have similar audiences amongst their products and similar products across their entire array of offerings, it makes sense to bolster the existing brand equity by keeping it closely held to each product line. In this case, the branded house architecture would make the most sense.
Similar audiences, different products. For brands offering different products to similar audiences, it likely makes sense to follow an endorsed brand architecture. This allows the products to build their own individual familiarity while still being able to bank on the existing brand equity of the parent brand.
Different audiences, different products. This is where the house of brands architecture comes into play. Because the audiences and products are different, brand equity from the parent brand doesn’t play a huge role. With this architecture strategy, each sub-brand has ultimate freedom in becoming known in its own category – with the parent brand working behind the scenes from an organizational and investment point of view.
Different audiences, similar products. In this scenario, we’ll look to BMW – more specifically, BMW “M”. BMW knows their M model customer is different from their standard model customer, and therefore created a tightly-held endorsed brand (“BMW M”) for a more niched market – sports car enthusiasts. The brand equity is utilized as M customers recognize the BMW badge, yet executional items (production, marketing, etc.) are all separate from the standard line.
A successful brand will adapt to the needs of its customers and outmanoeuvre the competitors and conditions in its market. So, if you’re in a position to offer up these sorts of changes, ask yourself (and your team) a few of these questions to determine which strategy is right for your brand:
- Do we have many different types of customers?
- Do we have many different types of offerings?
- Could sub-branding help customers reach our offerings?
- Are we already well-known in our category?
- Do certain offerings need to become more well-known individually?
Questions to Ask Before Building a Sub-Brand
So, you’re ready to create a sub-brand? Not so fast! Here are a few questions to ask yourself before jumping in.
What will the relationship be to the parent brand?
Not all sub-brands need to be related to their parent brand — they could stand alone. It depends on the type of brand and offering it will provide. Deciding what the relationship will be plays into the type of brand architecture you choose.
Let’s say you have a parent brand that distributes truck parts to mechanics. If you create a sub brand that specializes in truck design, it may make sense to follow a house of brands model where the sub-brand is closely associated with the parent brand. The parent brand helps the sub-brand build loyalty from it’s assumed existing brand equity.
But, if you have the same parent brand and decide to create a sub-brand that sells ice cream, it probably won’t make much sense to have a close relationship to the parent brand. The two have nothing to do with each other and could cause more confusion. In that case, a branded house model may be more beneficial.
How will you maintain consistency between parent and sub-brand?
There needs to be an element of consistency between parent brands and their sub-brands in order to capitalize on existing equity. At the point of launch, if customers do not recognize a similarity between the sub-brand and the better-known and trusted parent brand, you could lose potential customers.
This similarity could look like a consistent font, logo, or color scheme to allow customers to draw connections between this new offering and an already well-known and loved offering.
Even if your sub-brand is a separate entity from the parent brand (like in the house of brands model) there can still be an element of consistency that works in your favor. It could look like a similar framework around messaging or marketing. Or using the same CRM to maintain customer relationships. Cohesion between brands, even between brands that seemingly have no relation, is important to the overall customer experience.
Who is the intended audience?
Before settling on a type of architecture, successful brands determine the intended audience for their sub-brand. How similar or dissimilar the intended audiences of both parent brand and sub-brand are will determine the marketing strategy. The more similar the audience, the more you can lean on existing trust and loyalty brought to the sub-brand by the parent company.
However, if that audience is not related, it could be beneficial to separate the two brands since there is nothing to gain from the use of the parent brand’s name or notoriety.
Are there any risks to the parent brand?
When developing a sub-brand, it is important to determine what, if any, risks to the parent brand could arise. If the sub-brand has the potential to taint the brand equity of the parent company, it probably isn’t a good idea to have the two brands closely associated. If the potential risks posed are very high, it might not even be worth establishing that sub-brand.
An example could be a software company that wants to start offering sales training. If said company didn’t set up the architecture properly, stakeholders’ gut instinct about who the company is and what it offers may be altered.
There are a variety of practical and brand related risks that can arise when developing a sub-brand. Maybe the market for the sub-brand’s offerings is not favorable for growth – that has the potential to directly influence the growth of the parent company. That being said, it might be beneficial for the sub-brand to not be affiliated with the parent brand in order to protect the equity of the parent brand.
Do you have a long-term plan for your sub-brand?
Successful brands think about the long term. You may be starting with one sub-brand right now but what about later on? Will there be room to expand that or establish even more sub-brands? What will that look like? Make room for growth when developing your brand architecture and sub-brands. Having a long term vision not only impacts your sub-brands but also their parent brands too.
There’s no question that many brands could benefit from the power of a proper architecture strategy. The benefits are clear…
- Expansion into untapped markets
- Notoriety within niched markets
- Pre-existing brand equity from parent brand
- Additional exposure for parent brand
- Diversification of finances with the option to sell sub-brands
There is no one-size-fits-all playbook or framework for determining the best way forward. Instead, these decisions are made after several months and years, many talks about expansion, and deliberations about segmenting growth opportunities.
What is for certain, however, is that the thought of tampering with the well-oiled machine can be scary – and rightfully so. A proper architecture should be looked at as setting any sub-brands free, allowing them to flourish and garner their own recognition. And when done right, all brands benefit.
At the end of the day, this is one segment within brand strategy and it’s arguably one of the best ways to get more people to buy more stuff for more years at a higher price.
So, what are you waiting for?