Most companies now recognize that brands are powerful marketing assets. As the world becomes increasingly complex, brands serve as familiar beacons of trust to consumers, and make their buying decisions much simpler.
However, while many companies are focused on building their individual brands, one of the biggest challenges they face is how to structure and manage their portfolio of brands–to create the right “brand architecture.” Why? Brand architecture defines and orders the relationship between brands, the corporate entities and families of products and services. Ultimately, the architecture creates a system, like a road map, that helps consumers and key corporate constituents to navigate easily among brands and make the right choices.
As branding systems evolve to address more complex corporate needs, it’s important for companies not to lose sight of the fundamental aim of branding–that of guiding customer choice and building lasting relationships with them. To assess whether their current brand system remains the best solution, we recommend that organizations step back and take a fresh look. This need becomes more critical as changes in the marketplace impact how companies develop and organize their portfolio of brands. Among the key drivers we see that will continue to effect changes in brand architecture:
- The pace of technological change, which is shortening product life spans. From product innovation to parity to obsolescence is a much faster route, making effective brand building at the product level more difficult.
- Ever-increasing channels of communications, the Internet and new global markets, which are creating new opportunities to create truly global brands.
- A growing sophistication in the way companies view brand equity and manage their brand development, which is leading to new, better models of brand architecture.
In this article, we’ll look at the two basic brand architecture models that companies traditionally use. We’ll offer an assessment of their respective strengths and weaknesses. Finally, we’ll introduce new models and some emerging trends in branding architecture that are offering new solutions.
Traditional two-tiered brand architecture: two models
Traditionally, brand architecture is comprised of two major tiers. The top tier is the corporate or parent brand. The second tier comprises the “sub-brands”–the different families of products and/or services and the divisional brands. Given these two tiers, there are two divergent models that companies have typically developed in creating and managing their brands:
Tier one focus: Companies that develop the corporate or parent brand as the umbrella for overall products and services. AT&T and American Express are two good examples of strong parent brands.
Tier two focus: Companies that primarily support their product/service brands. This is the route taken most consistently by consumer goods companies like Procter & Gamble and Bristol-Myers Squibb, but also in large measure by many other consumer-oriented companies.
While there are obvious benefits in creating powerful corporate and product brands that hold real equity with consumers, there are also limitations to the two traditional models. On the one hand, the focus on the parent brand is more efficient–as long as that parent brand is broad enough to provide a conceptual umbrella for the breadth of its products or services, and still effectively differentiate the products from its competition. On the other hand, the second model builds strong brands at the product level. However, it can be quite expensive to support.
Even if companies take a somewhat mixed strategy in building corporate and product brands, rarely is there even-handed support of both tiers, and not often are the two seen as a whole rather than separate parts. For the purposes of this article, however, let’s focus on exploring the issues surrounding the two traditional models.
One: A product-centric approach
In the traditional model, the bulk of marketing dollars is usually spent supporting the bottom tier–a company’s products and services. While this enables a company to market multiple products and services and to communicate relevant differentiation for specific brands, it becomes a problem for a company with changing products and lines. Here are three essential limitations:
- Cost. Supporting product or service brands requires significant financial investment. Often, marketing efforts are spread across different business units and geographies–which creates duplication of effort and inefficiency. Furthermore, the brand messages communicated are often more aimed at short-term sales generation and sacrifice building a brand equity that will position the brand for the longer term. It should also be pointed out that building a new brand is more costly than in the days when broad-based network television could efficiently reach large segments of the target audience. Today, with more fragmented communications channels, those economies of scale are more difficult to achieve.
- Dissonance. From a consumer viewpoint, multiple messages coming from the same company can be confusing. This becomes compounded when the models and brands keep changing. In addition, when the company’s focus is on discrete products, it is often more difficult for the company to integrate messages across product or service lines, to rise above specific product messages and speak more directly to broader consumers wants and needs.
- Churn. Companies whose primary brands are centered on products or services and their attributes are increasingly faced with challenges in realizing long-term equity from their brands. Since such brands are often rooted in product attributes–faster, more cleaning power, more memory–they must constantly evolve to meet changing consumer needs and match competitive innovation. Ultimately, these attributes create little real relevance and differentiation. Nowhere is this more evident than in the technology category itself. However, as technological advances affect almost every sector of industry, fewer companies are immune to this problem.
In this scenario, one ballyhooed product introduction follows another. This kind of churn does little to build long-term relationships with consumers, another key to building strong, enduring brands.
Two: Corporate-centric approach
The clear wisdom of investing in a strong corporate or parent brand cannot be underestimated, particularly as the marketplace becomes more global. It is obviously efficient from a marketing standpoint, enabling a company to focus on building a single powerful brand over time rather than a myriad of smaller product-based brands.
However, while once the corporate brand stood firm over the course of time, increasingly in the past quarter century, we’ve seen that change is constant. Thus, reliance on the corporate brand alone has some inherent risks. Here are some examples:
- A company whose corporate brand image is rooted in their products and services or category of business risks being seen over time as outmoded. Kodak, for instance, is associated with traditional photography and thus is having a more difficult time competing in the digital arena. In contrast, the Sony brand name is providing a strong entree into this category.
- A corporate image can become too narrowly defined to embrace new lines of business. An example of this is Kellogg, long associated with breakfast cereal, or Campbell’s, known largely for its soups.
- Finally, as the merger activity of the past year has again dramatically demonstrated, corporate brands often represent business units that are continually regrouping–merging and acquiring, setting up strategic alliances and entering new markets. The real strength of a corporate brand can sometimes be seen in sharp relief during a merger, when one corporate brand is joining another. Chase subsumed the Chemical name even though Chemical was the acquiring company, while Exxon and Mobil have kept both names together.
Overall, one of the primary risks for a corporate brand that has become outmoded or narrow is losing relevance. Remaining relevant is critical to a brand’s success over time, as is retaining clear differentiation. If a brand is perceived as too broad, the customer is unclear as to what it stands for. While a general image of quality and trust are important to establish, those alone are often not sufficient enough to build competitive leverage in the marketplace.
New trends in branding architecture
These marketplace issues are engendering new branding solutions. We are working with a number of companies to move beyond the two traditional models–to create brands at a new stratum that leverage the benefits of both the corporate and product models.
A new tier: One of the most innovative solutions is to create a new model that introduces a new, third tier sitting between the parent and the product/service brands. This tier serves as a platform for marketing efforts that is valuable from a number of perspectives.
One major advantage of this approach is that it sets up a more efficient marketing model, particularly for product/service-focused companies. It enables a company to bundle together products or services at a new level. This means that companies can focus dollars on fewer brands. It also provides an opportunity to create brands that can be targeted to segments of customers and their specific needs, more effectively communicating brand benefits. Ultimately, these “higher order” brands can be more relevant and distinctive to the end user–and work to the end goal of making branding decisions easier for consumers. Look at Microsoft, which has been forward thinking in creating its brand architecture. Microsoft has built a tier of brands that bundle together its products to aim at a specific market. Office, for instance, was created to include Excel, Word and other business communication products. Its Office identity tells consumers that they’ll get the software programs they require for general business use–it succeeds by communicating a fundamental consumer need.
In other cases, this new tier provides a platform for a new brand that allows the parent brand to stretch through endorsement. It can be tailored to specific market segments, enabling the company to expand in a new category of business. An excellent example is IBM. To expand its presence in the world of e-commerce, IBM created e-business as a global brand. The new brand serves as an umbrella for all of IBM’s business lines with the on-line economy. Recent studies by IBM have shown that the new brand has already begun to give the company conceptual ownership of e-business worldwide.
Kellogg is a good example of a company that has introduced a new brand that enables it both to expand into a new category of business and to speak better to customer needs. The company is introducing a new brand called Ensemble to help Kellogg enter the new functional foods category. Ensemble will serve as a global branding platform for a full range of functional foods products that are aimed at consumers who share a common lifestyle and outlook on what they seek in food products.
A cautionary note: The creation of such new mid-tier brands works better for certain kinds of companies. Again, companies in the technology business and/or with products that have briefer life cycles are more likely to benefit from a higher order brand that links it more closely to the corporate brand. In addition, this approach will work well for companies with global brands or groups of brands that can speak to specific customer segments or benefits.
In evaluating their overall approach to branding, companies will need to look beyond individual brand equities, and examine the relationship between their corporate and product or service brands.
We believe that more companies will focus energy on the second tier of brands-whether simply the product/service brand taking on a new role or indeed a creating a new tier in the overall brand architecture. These brands will provide a communications and marketing vehicle for bundling a changing set of products and services. We’ll see more brands that are less rooted in product and more conceptual in nature. And we’ll see a more synergistic relationship between the tiers of brands. The result will be more efficient and a more compelling brand communication.
To accomplish this, companies will need to look at how brand management itself is structured in the organization. Marketing and communications will have to be more centrally organized to enable companies to implement new brand solutions across lines of businesses and geographies. In addition, team-work across the company will be critical.
Finally, companies will have to be creative and visionary about the direction of their brands. In doing so, they should look beyond the immediate quarterly returns or annual plans to a long-term strategy. Corporate mission–meaningful and visionary–must drive the brand-building process in the future.
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