If the terms ‘House of Brands’ and ‘Branded House’ are not familiar to you, this piece is designed to help you to understand how these two branding concepts may be of value to your business as it develops, meets challenges and takes advantage of opportunities.
The outward facing and corporate difference between the two is that a Branded House may have a wide a range of product and service offerings, but they all have a consistent brand that unites them, sometimes referred to as a ‘brand umbrella’. A House of Brands comprises a single company or holding group which owns and manages a portfolio of completely different brands with different names.
We would recommend that most typical SMEs should choose to be a Branded House, rather than a House of Brands. In fact, most companies are, as their default and unintended position, a Branded House, since they usually start just the one brand, generally built around their name. There are numerous reasons to maintain this status, with most involving the ability to operate at a scale that is more visible to all prospects and stakeholders, both in the real world and online. Here are some guidelines:
We would say that, wouldn’t we?! But without a brand, your business is simply selling widgets or services at their transactional value and at the risk of becoming commoditised. If well planned and executed, your brand will create additional reasons for customers to buy from you – and make your business even more successful. The term ‘Brand Equity’ describes the commercial value built by enhancing consumer perception of a brand over and above the functional value of the product or service itself. As importantly, this provides a rationale and a platform for you to expand on your range of goods and services.
Most brands can be used to cluster additional products or services around their core product, service or theme. This often propelled by customer requirements at the point of purchase or delivery. For example, if your core business is making and selling fishing rods, then you can consider extending your brand to incorporate a wider range of angling equipment. If you currently visit restaurants, pubs and clubs to conduct food health inspections, can you also offer to conduct other inspections, such as Fire Risk Assessments? In both of these examples, a well thought through brand can stretch or extend to include further goods and services whilst sharing the cost benefit with the customer of a single delivery for all their fishing equipment or a single visit to complete all mandatory inspections.
Whilst the previous two examples of brand stretch (as above note) involve simply adding additional, complementary products and services into a bigger basket, another approach is to innovate new products and services which both appeal to your core customers and benefit from their relationship with your brand.
We often see FMCG brands (Fast Moving Consumer Goods – typically as sold in supermarkets) bringing new innovations to market. A good example of this was when the producers of chocolate bars suddenly began to replicate their general ingredients, taste and packaging as ice cream bars. Masterfoods-owned Mars confectionery started the brand extension policy into ice cream, effectively creating a new category into which others, including Nestlé, quickly followed.
This was done with three benefits targeted. Firstly, to generate additional brand awareness, thereby driving impulse purchases. Secondly, to leverage the brand equity and fan base already well established. And third, it served to both even out the year given that chocolate sales are seasonally skewed towards winter, and to significantly increase overall sales across both formats.
Other similar product innovations have seen brands creating new versions of their products to serve the ever changing consumer trends, including for healthier and more natural edible products and more sustainable, environmentally responsible and circular products.
If you choose to evolve your brand’s offering to include additional goods and services, then beware that the new additions need to both deliver on your Brand Promise and to be equally as attractive and effective for your customers – otherwise at best, they will dilute your brand, reputation and success; and at worst they could destroy it. For example, consulting firm Accenture spent a reported $150 million on a rebranding, having previously been called Anderson Consulting, after issues arising from their relationship with their parent company, the accounting firm Arthur Anderson. Because the two businesses were offering different services, and reportedly competing in some areas, the use of the word ‘Anderson’ as the common name for both made it impossible for both parties to continue to use the name, despite being in the same family.
If you are going to extend your brand, make sure that you put as much thought, research and effort into the extension as you put into the original product or service, or it just might be a stretch too far…
Here are some examples of household name Branded Houses to remind us of the way that they have innovated and integrated brand extensions.
Whilst Richard Branson and his team by no means invented the concept of the Brand House, commentators who witnessed its activities and expansion at the end of the last millennium and into this one would agree that they took the concept of the Challenger Brand as their House Brand and super-charged it.
Branson made a small fortune from his music empire, but he also did so by being pretty disruptive. At that time, in the 1970s, record labels were generally called EMI, A&M and Epic, with only the Beatles label, Apple, being anything slightly unusual. So calling his label Virgin was considered rather radical by some, not to mention disruptive.
Leading on from that time, the company channelled its rebellious nature and provocative name and logo to challenge big industry sectors where they, and usually consumers, thought that things needed to change. Casually attired, they became the Plucky David that challenged the suit-wearing boards of the airline industry, the insurance sector, and Britain’s beleaguered train lines. Virgin Air, Virgin Money and Virgin Trains have all become enormously successful - and, despite being very different sectors, they are all emblazoned with that same, unchanged Virgin logo.
Interestingly, Virgin’s one high profile failure has been Virgin Cola. Why was this? It was because there were already two great, global cola brands that everyone already loved – and so while Virgin may have been the Plucky David that took on the giant Cola Goliaths, they were popular Goliaths, so we consumers did not need saving from them.
Like other long-established Japanese companies, Honda is fascinating for many reasons. But from a branding perspective, they have applied the same name, values and principles to the full range of powered equipment from hedge trimmers to Formula One cars.
On one hand, that is quite a stretch, but on the other, there is one clear and focussed idea that works hand in hand with the brand. Honda is not a car company, or a lawn mower company, or a powerboat company; Honda is an engine company.
The Honda brand is all about constantly developing and building the very best engine technology and then applying it to consumer products that need to be powered.
If you have ever wondered about the connection between Honda’s Formula One team (when they had it leading up the 2008 financial crash) and its mainly sedate cars and other products which are certainly not associated or marketed as being about speed, here is the reason that they had a team. It was a recruitment strategy! Honda realised that, in order to develop the very best engines, they needed a constant stream of the very best engineers to choose to join them, rather than their competitors, when they left University. They way they did so was to provide them with the opportunity to work at the pinnacle of earth-based engineering, which is to work on and F1 team. That’s how deeply they are invested in the promise at the heart of their brand.
Angry Birds is best known as a computer game that has been massively popular, but it has also created a huge market for branded and licensed toys, clothing, food and household goods. In fact, a reported 47 per cent of the publishers’ income has been derived from these brand extensions rather than the games themselves.
Not only has this been intrinsically successful, but it has generated funding for the ongoing development of new versions of the game, which in turn generate more branded goods and more profits!
We have included John Lewis as an example of a phenomenon that has spread in the past two decades in which retailers have mounted a challenge to their own suppliers by creating and producing similar products under their own brand name, rather than those supplying them. All the major retailers have done it, but John Lewis and Waitrose are generally acknowledged to have done a great job.
The reason for this accolade is related to the fact that these organisations, which are both part of John Lewis, already have very strong brands in which they continuously invest. Whether purchasing ‘copycat’ cereals or Pizzas from Waitrose or Egyptian Cotton Towels or crystal glasses from John Lewis, consumers have a strong sense that the products are just as high-quality as the best known names.
Having said that, most companies, and SMEs in particular, start and continue as Branded Houses. What are the reasons why they plan to be, or to become, a House of Brands?
A House of Brands can exist in numerous corporate forms, and it is not always clear how many companies, especially large ones, are structured and managed. Starting at the top, so-called Holding Companies are those which own a number of smaller companies, often called subsidiaries or operating companies. The operating models for these can range from investors who, subject to performance criteria, keep a distance and empower the management team to manage the business, to much more operational companies who effectively manage and support a group of companies. In the latter model, very often back-office functions, such as Treasury, Finance, HR, IT and Compliance are managed centrally whilst value generation and delivery are led by each operational company.
Then there are large organisations who either develop or acquire a range of different brands. These can be diverse, but more typically the company will have identified some kind of strategic fit between the brands. For example, they may have excellent relationships with retailers to whom they can provide additional value and cost benefits via the economy of scale driven by their bigger basket of products, or the company may have special expertise in, say, engineering, which it can use to help new engineering based brands to grow. It may also be that they can provide additional funding to help a brand develop across different geographies or to enter new markets.
And finally, a method often used by SMEs is to create what are called ‘Trading Names’ or ‘Trading Styles’ which allow them to market their core products and services in ways which appeal to different market sectors and niches whilst not attempting to be ‘all things to all men’. This may occur as a result of one of the cautions we mentioned in our piece about the importance of naming companies. In it, we used Easyjet as an example of a company which might be able to apply key aspects of its proposition, such as a user-friendly online booking process or its dynamic pricing model, to other sectors.
However, having decided to call itself Easyjet, this limits the models to which it can be authentically applied to the easy use of jets! So if an SME called PJ Smith Engineering, which has traded successfully in the marine sector for 40 years, sees an opportunity to repurpose those same products to sell to the education sector through the same company, it may be well advised to create a new Trading Name such as PJ Smith Educational Products.
P&G as it is often known as one of the biggest brand owners. It operates across a number of FMCG and Health and Beauty categories, but has a small number of essential common denominators – being:
Some of P&G’s brands range from Always to Vicks and include Ariel laundry products, Crest toothpaste, Fairy washing up liquid, Febreze air freshener, Gillette men’s grooming, Head and Shoulders shampoo, Olay personal products, Oral-B oral hygiene and Pampers nappies. If you think that appears to be most of the products on supermarket shelves, then you might like to know that Unilever, Masterfoods, Nestlé and Mondelēz are very similar organisations which, between them, own most of the others.
If you have not heard of LMVH, or LVMH Moët Hennessy – Louis Vuitton SE to give it its full name – it is probably because this company name only really applies to the holding organization; but as you may have guessed from the full name, it is a holding company for some, if not most, of the world’s most luxurious brands. There are more than 50 brands in the group and they include Krug, Moët and Chandon, Veuve Clicquot, Fendi, Dior, Louis Vuitton, Tiffany and Feadship.
Although this may seem like a disparate set of sectors, the High Net Worth and Ultra High Net Worth customers have a great deal in common in terms of their very different motives and paths to purchase compared with typical brands – and this company knows how to market and retail to this exclusive group.
For those not interested in cars, it may come as a surprise that Volkswagen is, in fact a group. As well as its reasonably well know ownership of Audi, it also owns Seat, Skoda, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Scania and Man.
The reason for this House of Brands is that, clearly, there is very little comparison between Skoda and Lamborghini models at either end of the scale, but even relatively little between a Seat buyer and an Audi buyer. Sensibly, and very effectively, VW have built very different personalities for each of their brands and while some market share cannibalism will occur, their marketing serves to generally avoid this.
The other reason for the House of Brands is that the group as a whole can serve these different customer profiles with different brands and models, whilst also sharing less visible aspects of the cars across the brands. For example, the more popular brands such as Seat, Skoda, VW and Audi will share numerous component parts, such as seat belts, lights and even floor pans, thereby driving economy of scale across all models without diluting the different brand personalities. For example, at one point, the key to a VW Passat costing around £30,000 was the same as the key to a Bugatti Veyron costing up to three million dollars!
Both Facebook and Google are incredible, unimaginably huge phenomena that have grown from nothing over 20 years to take over the world! But whilst both company names must rank among the most well-known, still both companies have created and acquired other brands with different names.
Facebook’s stable includes Instagram, WhatsApp, Oculus VR, FriendFeed and LiveRail – with drone maker Ascenta thought to be coming online soon. Meanwhile Google owns YouTube, Gmail, Android, Adsense, Drive and Chromebook with new services always in the pipeline.
There may be two key reasons for this. First, because tech brands tend to trend and then fade as others appear. Facebook is a good example of this as, having dominated Social Media almost since its inception, its use is now dropping off. And the second reason is related to the first, because different generations adopt and adapt to technologies in different ways – and so it is important for both Facebook and Google to serve all different groups of users in order to sell advertising that makes them the mega bucks.
In conclusion, as we have said, most brands start off as Branded Houses and many remain that way through strategic growth, whilst others have good reason to maintain and build a portfolio of brands, usually with a common thread that makes the whole bigger than the sum of the parts. Either way, distinctive, compelling and enduring brands add tremendous value if properly conceived and nurtured.
In addition, both of these approaches require either constant review and evolution or, on occasion, transformation as the result of challenges or opportunities. If you need help to unlock your branding potential, contact Mackman on 01787 388038 or pop us a message on our contact form and one of our brand specialists will be in contact with you.