Launching a new product often begs the question, "Should we introduce a new brand?" This query is a common one, especially among growing scaleups.
The answer lies in a well-thought-out brand architecture strategy—how companies organize their brand portfolio to ensure clarity, consistency, and alignment with their overarching business goals.
Why do you need Brand Architecture?
First of all, why would you want to have more than one brand within your company?
As your startup grows, it's only natural that you feel the urge to grow out of your mono-brand strategy. Reasons to expand could be:
- Access new distinct customer segment
- Enter new markets (line and category extension)
- Specific value proposition that isn't aligned with your first brand
The Four Core Strategies of Brand Architecture
Organizing multiple brands, often referred to as "Brand Architecture," comes with a spectrum of choices.
Here are the four primary strategies:
- Branded House “Masterbrand”
- Sub-brands
- Endorsed Brands
- House of Brands "Invisible Brands"
It's important to understand that the four portfolio strategies are not distinct categories, but rather a gradual range. The Brand Relationship Spectrum, created by Aaker and Joachimsthaler, illustrates how brands relate to each other in a company's portfolio.
What changes from left to right is how multiple brands appear to the consumer: Are they logically and visually connected to a parent brand or do they seem independent? In the backend, profits from the same portfolio might still go into one pocket.
Now let's look at each strategy in more detail.
Branded House “Masterbrand”
Under this strategy, everything under the house has one name, and there’s one unified voice for all products—akin to Harley Davidson or McKinsey. There’s one brand, one structure, and one focus for the consumer. Products don’t get their own brand.
Sub-brands
When you go with a sub-brand, the focus is more on the new entity than the corporate brand. For instance, Microsoft Windows. You know they belong together, but Windows also stands for something on its own.
Endorsed Brands
The tell-tale sign of endorsed brands is the word “by”. Think of Polo by Ralph Lauren. You opt for an endorsed brand when you need a new positioning but want to leverage the strong equity of the famous parent brand. This is often a transition strategy.
House of Brands “Invisible Brands”
Many different product brands are separate with no apparent connection. Typical for conglomerates like P&G, which houses both Pampers and Crest.
Choosing Your Startup’s Branding Strategy
The trend is clear among top consumer firms: a pivot towards fewer, stronger brands (see graphic for insights). Each brand is a mouth-to-feed, requiring its own slice of your budget and strategy. Ask yourself if your resources are up to the task, or if you're risking spreading them too thin.
All brands in your portfolio must have customer equity. If customers don’t know the brand or what it stands for, are you prepared to invest in it to build awareness and understanding?
If not, it would be best to remove it from the architecture and use an existing brand to cover the offering.
As a startup or scaleup, your brand awareness for your first brand is typically very low. Try to make your new product innovation bolster your masterbrand with a descriptor, like FedEx Express, iPhone 14, or Intel Core. If possible, also avoid new logo variations.
Understanding Different Types of Brand Extensions
Now let's look at your options when you decide to stay within your branded house. Brand extensions are ways companies introduce new products or services under their well-known brand names. There are four main types: line extension, category extension, customer extension, and channel extension.
Line Extension:
This involves adding new products that are similar to the existing ones. For example, Dove using its brand for body wash as well as soap, or GE expanding from incandescent to LED light bulbs. It's usually a safe choice because the products are closely related. However, if the new product fails, it will hurt your brand more than the other strategies.
Category Extension
Here, a brand steps into a completely new product area, leveraging their brand equity in a new category. For instance, Ferrari launching their own perfume or Colgate diversifying with mouth wash. This method can be challenging as it requires building trust in an entirely new category.
Customer Extension
This type targets new products at a different group of customers than usual. An example is Gillette offering razors specifically for women, or Dove catering to men's skincare needs. Changing the target audience can be risky and might not always sit well with existing customers.
Channel Extension
This involves selling new products in different types of stores or locations. A notable example is the luxury brand Versace launching a clothing line in a more mainstream fashion store like H&M. This approach can be risky for high-end brands, as it may affect their exclusivity.
Summary
Understanding your brand architecture is crucial when deciding whether to launch a new brand for a new product. Assess your resources, market positioning, and long-term goals to make an informed decision.
Whether you choose a Branded House, Endorsed Brands, Sub-brands, or a House of Brands, each strategy has its pros and cons.
If you own a small business or a startup, I generally recommend consolidating everything into one strong Branded House . It simplifies your day-to-day and conserves resources.
Brand extensions allow companies to expand using their existing brand names, but each type comes with its own set of challenges and advantages. For most startups, line extensions should be applicable without problems.
