When a company grows, or in any case that the company serves different segments, it has to decide if it should use one single brand or different brands. Usually when a company starts, the name of the company is the name of the brand that the company uses to sell its products. This is usually called a corporate brand, or a parent brand, or a master brand, that is to say, the brand which identifies all the products of the company. When it grows, it can decide that that brand is not useful to serve all different customer segments. The reason for this is very simple. We know that a brand is a set of associations. If a brand wants to serve a specific customer segment that means that through the brand, the associations that this brand includes are specifically selected for that customer segment. Different customer segments have different expectations, so one reason to choose different brands is to try to convey the message that basically each segment has its own brand, and the brand is different from the brands sold to other customer segments. The company has to find a way to manage different brands within a brand portfolio. The brand portfolio is the combination of brands that the company sells in a market. One typical tool to manage this combination of brands is the so-called brand architecture. Brand architecture is a model which helps defining a number of things: first of all, the role of each individual brand within the portfolio. Not all brands can have all roles. Each brand can be defined with a specific role that it has to take into the market. The second point is the relations across brands. If every brand has a role, it should be clear to the company the combination of the roles as a combination of specific objectives to be achieved in the market. The third one is the relationship between the brand and the customer segment that the brand wants to serve in the market. Let's go a bit in depth into the roles. In a brand portfolio a company can have brands which have a strategic role. What does it mean? Those brands are the brands which should ensure the company with a future in the market. These brands are strategic because they are growing, because they are appreciated by the market, so the efforts of the company in terms of investments and attention are focused on these brands because these brands should ensure the next step in the market, the future of the company in the market. There are other brands whose main role is image and/or prestige. These are brands which are included in the portfolio because they are so sophisticated in terms of quality, they have such a high image, that they provide, to the overall portfolio, sophistication and image. Entry level brands on the company, or low entry brands, are brands whose main objective is to cover the bottom part of the market. In every market and business you can figure out there are a number of consumers who are not so sensitive to the quality of the value proposition, they are not sophisticated in terms of tastes or preferences, they just want an average or really low priced product or value proposition. These brands are able to cover that part of the market. And then there is another kind of brand: Flankers brands. Flanker brands are brands whose main objective is to take market space away from competitors. The focus is on competitors. For different roles for brands, we can assume that for those the performance measurements should be different. For a strategic brand, the performance measure should be growth, sales, and market share, because this is the objective they have to achieve and so the measure should be consistent with these objectives. On the other side, entry level, lower entry brands, they have to cover the bottom part of the market so it's a matter of volume, so sales in terms of volume. Prestige brands on their own are able to contribute to the image of the portfolio and of the company which produces them. The main performance indicator will be image, how these brands contribute to the image of the company. For flankers brands against competitors, the most important indicator is market share. So there are different roles and there are different performance measures. Having a clear idea of the roles of the brands, if a company has a portfolio made of different brands, should be able to differentiate them, and the main reason is to avoid internal cannibalization, that is to say internal competition. Remember that your competitors should be outside of your company. If your main competitors are within your company, you are basically playing the game of your competitors. One way to avoid cannibalization is to have a clear positioning for each brand. But if there are many brands, the point is which is the relation between the master brand, the corporate brand, and each individual brand? In this case, the company can adopt different branding strategies. One branding strategy is to have each individual brand as a single brand and no parent brand at all, that is to say the brand of the company, the corporate brand does not appear to consumers. This is called the House of Brands strategy. A company is a sort of house of brands, but it does not show its own corporate brand. A typical example in the chocolate bars market, Mars, the US company, has many different brands. So Mars, for consumers, is an individual brand, it's not a corporate brand, because they don't know that the same company also owns Snickers, Bounty, Maltesers, and M&M's. These are all individual brands included in the portfolio, but for most consumers, there is no knowledge of the fact that Mars is the company that owns all of them. The opposite strategy is the Branded House strategy. Through this strategy, the company uses its corporate brand, usually the corporate name, with all the products they sell in the market. This is a typical strategy used for example for coffee store chains. Starbucks is a typical example. Or two very important coffee chains in UK like Costa and Nero use exactly the same approach. In every store you enter, you always find the same corporate brand. There are two branding strategies in between. One is closer to the Branded House, the other one is closer to the House of Brands. Closer to the Branded House is the so-called Sub Branding strategy. The two brands appear to the customer, the corporate brand and another individual brand. The point is that the corporate brand has more importance than the individual brand. So the individual brand is just an articulation of the corporate brand. Also the Endorsement strategy which is the other one is similar in terms of the fact that in this strategy the company uses two levels of brands, the corporate brand and another individual brand. But the difference is that with an Endorsement strategy, the corporate brand is just an endorser, that is to say, most of the emphasis is given to the individual brand. You see it through the visuals, so the brand elements of the individual brand in the endorsement strategy are more evident to the consumer than the parent brand, whereas with the Sub Branding strategy, the emphasis is given to the corporate brand, so the visuals of the corporate brand are more evident than the visuals of the individual brand. One example of the endorsement strategy is Nestlé. When you buy Nespresso or Nescafé or Nestea, you know that that Nes means Nestlé. Obviously the main emphasis is given to the individual brand, Nespresso. But the fact that the prefix Nes- reminds you of the company behind, Nestlé it’s a typical example of an endorsement strategy. One good example of the sub branding strategy could be McDonald's with the creation of McCafé. You know that McDonald's is a corporate brand. But McCafe resembles, very much, the parent company, the parent brand, McDonald’s; although it is an individual brand. It’s the brand that McDonald's uses to brand the coffee shops, the coffee stores. One nice example of the sub-branding strategy in the coffee market is LavAzza. LavAzza is the largest Italian coffee maker and you find the brand LavAzza, the corporate brand, on every single product the company sells. But then the company uses a lot of sub-brands and these sub-brands usually identify specific product lines. So you have LavAzza qualità oro (Italian: Golden quality LavAzza), LavAzza qualità rossa , LavAzza A Modo Mio, and so on and so forth. (Italian: Red quality LavAzza) (Italian: LavAzza My Way) You find that the main emphasis is given to the corporate brand and then you identify as a consumer that there are sub-brands specifically devoted to your specific tastes or needs. The company can use different branding strategies. How can you to choose among them? Obviously the House of Brands that as we have seen, basically means that many different brands are included in the portfolio and they are evident to consumers as individual brands is a matter of effectiveness. The company tries to maximize the effectiveness of its efforts in the market. Why so? Because each individual segment can identify a valuable position, named by a specific brand, which is referred to by its needs and desires. With the Branded House approach, you have completely different advantages. Basically, these advantages are a matter of efficiency. If you use one single brand on all the products you sell, you can have synergies on the commercial level, communication level, and production level. With one communication campaign with the focus on the corporate brand, you can have positive spillover effects on all the products the company sells. Obviously the two also have disadvantages, and the disadvantages are inefficiency for the House of Brands strategy, and less effectiveness for the Branded House strategy. Why is there less efficiency for the House of Brands strategy? Because obviously if you have many individual brands and you want to support them in the market, you need to invest in each single brand in terms of communication, distribution, sales for promotion, and events. If you have a Branded House, you just need one communication campaign. On the other side, a Branded House has less impact in terms of effectiveness, because the same brand should be good for every target customer, and if customers in the market perceive themselves as different compared to other target customers, obviously the fact that the brand is always the same can reduce the productivity of the investment the company makes in the market. That's why, in the last few years, the two strategies in between have been most used by the food and beverage companies, because with the two you can combine the positive effects of the House of Brands strategy and the Branded House strategy. In fact, having two levels of brands, the corporate one and the individual one, you can play with just two levels to communicate to your target customers or the specificity for the value proposition, or the strength of the corporation that is behind the individual brand. It's a matter of focus. If you want to give more emphasis to the specificity of the value proposition for a specific target segment, the endorsement strategy allows you to do this. If you want to focus your positioning more on the strengths, the values, and the positive associations of the corporate brand, the sub-branding strategy is the one that's good for you.
