At its core, brand portfolio strategy determines the number of brands that a company’s portfolio should contain. It explains how to deploy those brands within the business and in the market. A long-term approach to growth is provided by establishing each brand’s strategic roles and including what it should contribute to the company.
An Approach Toward Establishing and Managing a Portfolio of Brands
Brand portfolio strategy dictates the relationships brands should have with one another. The concept of relationships between brands is often referred to as brand architecture. The exact components of a comprehensive brand portfolio strategy vary based on the company and the nature of its business. Still, most brand portfolios should address several key questions discussed in detail here.
What is Brand Architecture?
The terms “brand portfolio strategy” and “brand architecture” are often used interchangeably, but the latter is a distinct, critical component of the former.
Brand architecture is a central component of brand portfolio strategy because it articulates the explicit, market-facing relationships that brands within a portfolio have with each another. This principle is almost entirely externally focused.
It is imperative to establish a brand architecture that makes it easy for outside stakeholders to view quickly, understand it immediately, and know which offer works best for them.
A simple and clear brand architecture has a logical organizing principle, few levels of hierarchy. It follows a rigorous set of guidelines that ensure a consistent expression and execution in the marketplace. This includes the visual identity and verbal expression of brands and the naming conventions for product and service offerings.
Branded House vs. House of Brands
David Aaker, widely considered the father of modern branding, introduced a continuum framework for brand portfolios that is still widely embraced. Aaker refers to one end of the brand portfolio spectrum as “branded house,” a portfolio where the master brand (usually a corporate brand) acts as the dominant brand. In this situation, descriptive sub-brands have a minimal role in establishing market-facing equity and driving business results.
GE is an excellent example of the branded house approach. The master brand serves as the main asset applied to every product and business unit.
At the other end of the spectrum is “house of brands.” Here, independent, standalone brands—each with a minimal connection to the corporate brand—have the greatest equity and represent the primary face to the market.
Unilever is an excellent example of this, for its product brands like Dove and Hellman’s, have more consumer equity than the corporate brand. Independent brands are the primary conduit to customers in a house of brands.
Five Factors for Every Company, of Any Size, in Any Industry
While the considerations for companies deciding where to reside on the brand spectrum vary, five factors apply to every company, regardless of size or industry.
1. Number of Customer Segments
Companies should consider the number of distinct customer segments they serve and are attempting to target. A well-positioned brand is targeted toward a single customer segment and can only serve that segment (and, at most, one or two others) exceedingly well. Therefore, the more distinct customer segments in the market that the company seeks to serve, the more brands required to do so effectively.
2. Range of Breadth of Offer
This factor is closely related to customer segments. One of the fundamental premises of brand extension is how brands should be defined by something more than the product category or categories in which they compete. Brands, however, have limitations in terms of how far they can stretch across different categories. Even the most celebrated brands can only stretch so far. As a rule of thumb, the more product categories in which a company competes, the more likely its portfolio will need to reside on the house of brands side of the spectrum.
3. Corporate Brand Relevance
Some businesses deem the company behind the products and services more important than others do. Professional services is an industry where the master brand is critical; clients often buy the brand as much as its service offerings. In these cases, it makes sense to go to market with a strong focus on the corporate brand. Firms like McKinsey & Company, Boston Consulting Group, KPMG, and Ernst & Young are quintessential branded houses that rely heavily on their master brands. The more established and relevant the corporate brand is, the greater its ability to reside on the branded house end of the spectrum.
4. Investment in Branding
The extent to which a company is willing to invest in building brands determines where it should reside on the brand portfolio spectrum. Brands are assets and require significant investment to develop, launch, and maintain. This includes expenses and ongoing investments like advertising, market research, and digital activation. These costs mean that a house of brands portfolio requires more financial resources to support than a branded house portfolio.
5. Commitment to Talent Development in Branding
Brand management also requires human resources; companies need human talent to build and maintain strong brand assets. Organizations should thus consider the extent to which they’re willing to invest in recruiting and developing employees with the necessary skills to drive brand leadership. A house of brands portfolio almost always requires more internal brand and marketing talent than a branded house portfolio.
No matter where on the spectrum of house of brands versus branded house a company falls, differentiation remains essential for success. If individual brands are not compelling (or if a branded house cannot rely on a sufficiently compelling corporate brand), it will fail to break out of the brand monotony that characterizes modern-day marketing.