One of the questions that we often have to address with new clients is how they are organized…brand architecture is the fancy word. Some clients are comfortable spinning off new companies when they develop a new product or look to expand horizontally to a new business sector—a House of Brands. Others create business units that operate independently but must conform to a corporate set of brand guidelines—a Master Brand. Understanding which branding model a company should choose is based on many factors. There may be good reasons to launch different companies if they are making competing products. A House of Brands is an expensive proposition since each new company has to be marketed independently. With a House of Brands if one company fails, or has a bad reputation, it only takes down that entity and does not tarnish the parent company. With a House of Brands, if something untoward happens to one business sector, it may have an adverse effect on the whole company.
Pepsico’s House of Brands
Glancing at the New York Times last week I saw a wonderful example illustrating Pepsico‘s House of Brands. I, for one, had no idea that Pepsico owned Gatorade or Starbucks—two signature brands that have very different brand personalities. And certainly the wholesomeness that is part of Quaker’s brand might conflict with the junk food identity that is Cheetos. There are many good reasons to keep them separate.
A different perspective is told in an article that ran in the New York Times on January 6 on the new BMW slogan. BMW is the classic example used to illustrate a Master Brand. Rather than promote many different car models, BMW promotes one. Recently they launched new brand advertising. The article notes, “The new advertising depicts the BMW as the “ultimate driving machine,” whatever the model. The tagline has been used continuously by BMW since it was created in 1975. This of course is significantly cheaper than having to support all of the different brands that Pepsico supports. But Master Brands do have challenges. As Renée Richardson Gosline, an assistant professor of marketing at MIT Sloan School of Management, notes, “a campaign that emphasizes a consistent brand essence is powerful, but BMW has to keep in mind that luxury consumers seek distinction, even within the brand. So, along with the egalitarian message that all BMWs are ‘ultimate driving machines,’ BMW has to make owners of different models each feel special as well, by building relationships with the owners of each model.”
Choosing whether to adopt a House of Brands versus a Master Brand should not be made by default. While brand architecture is not always looked at, it is critical and will effect everything a corporation decides from mergers and acquisitions to naming conventions. At the very least, determining a company’s organizational structure should be a mandatory part of any brand exercise.
