A client recently asked us, as their marketing agency, to lead an internal discussion about whether it was wiser to independently brand their business units or to keep them integrated under their master brand.
A key stakeholder in one of those business units felt strongly that the recognition they enjoyed in their niche space went far beyond that of their parent organization. Others argued that supporting multiple brands would spread their marketing efforts thin and dilute the strength of their master brand.
Who was right? As is often the case, there is validity to both points of view.
The Strength of a Branded House
A brand is more than the sum of its logo, fonts and color scheme. It’s a promise that conveys what an organization is, what it does, and why that matters.
A branded house, a company or organization with a singular, strong brand, has many advantages. It’s more efficient to communicate and manage, particularly when budgets are limited. It leverages the acceptance of the parent brand and can have more staying power.
A strong brand even can be a decision-making shortcut for potential customers and investors, according to a study of the role of brand in the nonprofit sector by Harvard University’s Hauser Center for Nonprofit Organizations. If they like the brand, they’re more apt to trust new offerings without doing much due diligence. (Those long lines for Apple Watches come to mind.)
But there are downsides to a branded house approach. If a company’s offerings are too broad, the brand itself may become muddy in the minds of prospects.
The Freedom of a House of Brands
In cases when a company is looking to define an offering that is counter to that of their parent brand, enter a new market or satisfy a need not fulfilled by the parent brand, independent sub-brands can be a necessity.
There are many industries where this is the norm: the auto maker serving both the economy car buyer and the luxury market; the beverage company with soda, sports drinks and water in their brand portfolio; the hotel chain with accommodations for a wide range of budgets. In each of these cases, a house of brands is required because the master brand would have been unable to reach all of their target markets with one message.
In a house of brands each brand is free to approach things their own way, they can create and leverage their own brand equity, and the parent organization is protected if things go wrong. One of the downsides is that multiple independent brands can be complicated and costly to properly manage.
In the particular case of our client, neither a branded house nor a house of brands is the right fit. A branded house would be too restrictive to the marketing efforts of the niche business units, while maintaining independent brands would dilute their organizational reach and stretch their marketing thin.
Endorsed Brands Have It Both Ways
In their case, we’ve recommended an endorsed brand approach, where the sub-brand is linked to the master brand in the logo, marketing copy, and a shared high-level promise. Like Nestle KitKat or Polo by Ralph Lauren, endorsed brands are simultaneously free to stand on their own while deriving credibility from their master brand.
This works for our client because, while the business unit does provide a unique offering, its high-level mission is closely compatible with that of the master brand. It would be unwise to be completely independent and lose out on the mindshare created by the parent organization.