Brands reflect the identity of a company. Brand strategy needs to be carefully integrated with corporate image management. With multiple brands in a company, the problem is compounded. Each brand has to reflect the total image of the company, and yet differentiate itself from the rest of the brands in the company’s portfolio. Hence, strategic brand management with its critical component of Brand Architecture requires a three-point focus – synergy, clarity and leverage.
What is Brand Architecture?
The rise of brand architecture can be linked to the fact that traditional marketing machinery is worn out because of changing consumer values, intense competition, complex markets, numerous distribution channels and a widening use of endorsed brands. Brands like Coca-Cola, Google, Microsoft operate in diverse markets over multiple channels and product lines. This results in confusion, both for the marketers and the consumers. Well-defined brand architecture hence becomes imperative.
Brand architecture is the structure of brands within an organizational entity. It is the way in which the brands within a company’s portfolio are related to, and differentiated from, one another. The architecture should define the different leagues of branding within the organisation; how the corporate brand and sub-brands relate to and support each other; and how the sub-brands reflect or reinforce the core purpose of the corporate brand to which they belong.
Brand architecture provides the blueprint for marketing decisions. Brand Architecture is the pictorial depiction of each relationship within and across the family of brands. Five dimensions define it – the brand portfolio, the roles of the portfolio brands, product-market context roles, the structure of the portfolio and portfolio graphics.
Brand architecture is the unification of branding decisions and media. This provides a sound foundation for the integration of all brands in a portfolio to synergise them into a powerful brand and identity.
Brand Architecture Objectives
Creating power brands: Strong brand offerings that synchronise with consumers’ logic and emotions, providing effective differentiation. For instance, Nestle distinguishes itself from competition, at the same time appealing to the masses.
Creating synergy: Well-developed brand architecture provides for the synergy of brands, reinforcing associations, which in turn results in cost efficiencies. For instance, Gillette uses the common thread of providing “the best a man can get” in terms of quality and speed across all product categories.
Providing clarity in product offerings: This is necessary to ensure a clear-cut identity among consumers.
Leveraging Brand Equity: Make the brand work harder by increasing its impact. One way is through brand extensions that help to realise the complete value of the brand. A major function of brand architecture is to provide a strong framework to deal with brand extension opportunities (as the risks while extending are high).
Planning future growth: Brand architecture should plan for the brand’s future. It must be the foundation for making strategic advances in the marketplace.
Types of Brand architecture
There are three main types of brand architecture system: monolithic, where the corporate name is used on all products and services offered by the company; endorsed, where all sub-brands are linked to the corporate brand by means of either a verbal or visual endorsement; and freestanding, where the corporate brand operates merely as a holding company, and each product or service is individually branded for its target market.
- Monolithic brand or Branded house Examples include Virgin Group, Red Cross or Oxford University. These brands use a single name across all their activities and this name is how they are known to all their stakeholders – consumers, employees, shareholders, partners, suppliers and other parties.
- Endorsed brands Like Nestle’s KitKat, Sony PlayStation or Polo by Ralph Lauren. The endorsement of a parent brand should add credibility to the endorsed brand in the eyes of consumers. This strategy also allows companies who operate in many categories to differentiate their different product groups’ positioning.
- Freestanding brand or House of brands Like Procter & Gamble’s Pampers or Henkel’s Persil. The individual sub-brands are offered to consumers, and the parent brand gets little or no prominence. Other stakeholders, like shareholders or partners, know the company by its parent brand.
The Brand Portfolio
The composition of a brand portfolio is imperative for the basic architectural parameter. Which brands to add or delete are major decisions to be taken. Building a brand requires adequate resources. If there are too many brands, there may not be enough resources to support them all. The task here is to choose and pick: Which brands will add value and which won’t? The brands that are not adding to the overall equity in any way need to be eliminated.
Brand Portfolios incorporate different brand roles that create synergy. This imparts a strategic perspective to the brands. Various roles include those of a strategic brand, linchpin brand, silver bullet brand, and a cash cow brand. A brand could even be a combination of more than one.
Strategic Brand: A brand that is projected to reap future sales and profits. It may be a laid-back brand that is headed towards becoming a major one.
Leesures is a strategic brand for Lee’s as it lays the foundation for a position in casual wear in India.
Linchpin Brand: A brand that holds the entire organisation together. It is a number one brand that indirectly influences a business area providing a strong base for customer loyalty. Cadbury’s Dairy Milk is a linchpin brand for Cadbury’s as it controls a critical segment in the confectionery industry.
Silver Bullet Brand: A brand or sub-brand that positively influences the image of another brand. It can be a major factor in changing, creating or maintaining a brand image. HP’s laser jet resolution enhancement is a branded feature that instantly reflects on the image of HP being a breakthrough company in printer technology.
Cash Cow Brands: Brands with significant customer bases that require less attention than other brands. The total sales may be on a decline, yet there are a group of hard-core loyal customers who do not leave the brand. The role of a cash cow brand is to generate resources that can be invested in other brands for future growth. Nivea Crème is one such example of a brand that has been extended to other skin-related products to provide resources for other brands by banking on its customer base.
Drivers of Brand Architecture:
- Firm-based characteristics
- Underlying market dynamics
- Product market characteristics and
- Nature and scope of the target market,
- The degree of market integration, and
- The cultural embeddedness of the product
With the globalization of markets and the growth of competition on a global scale, companies are increasingly expanding the geographic scope of their operations, setting up or acquiring companies in other countries, or entering into alliances across national boundaries. At the same time, with the spread of global and regional media, the development of international retailing, and the movement of people, goods, and organizations across national borders, markets are becoming more integrated. As a result, firms need to pay greater attention to coordinating and integrating their marketing strategy across markets.
- Gap analysis: Determine market understanding on various parameters like consumer needs, competition / firm’s product range, intermediary needs and plug the product in identified gaps.
A defined Brand Architecture helps a form to establish its identity in the market place, and develop a solid customer franchiseas well as providing a weapon to counter growing retailer power. They can also provide the basis for brand extensions, which further strengthen the firm’s position and enhance value (Aaker and Keller 1990).
Brand architecture helps answer the question of how to manage brands that span different geographic markets and product lines. Who should have custody of international brands, and be responsible for coordinating their positioning in different national or regional markets, as well as making decisions about use of a given brand name on other products or services?
The biggest mistake is to allow each brand to be managed in isolation because what is right for an individual brand may be wrong for the portfolio in terms of:
- Too many brands in too many segments.
- There may be too many brands in relation to consumer needs, retailer space and company ability to promote.
- Duplication and overlap.
- Gaps in priority market segments.
- Inefficiencies in operations and the supply chain.
- Diffused and therefore ineffective resource allocation.
Objective of Portfolio Management:
- Product drives customer satisfaction and revenue.
- Is essential to demand generation process
- Translates market input into
- Innovation to market process
- Pruning the current product portfolio
- Helps to achieve Goal of
- Most competitive product portfolio to meet end user need.
- Achieve optimal integral business result.
- Aligning acquired companies brands:
- The basis of brands to be invested in for future growth.
- The basis of brands selection for local or global promotion.
Portfolio Management Process:
- Prepare the comprehensive list of offering
- Do margin analysis on each product SKU to determine profitability
Minimum Annual contribution Margin (CM%) per SKU = Cost of maintaining (COM%) a SKU in system
In case the CM% < COM% drop the product unless there is any other strategic reason.
- The strategic reasons to be considered:
- Long term growth potential,
- Fighter strategy to gain market share, Complementary product line, Impact on an important customer.
- Gap analysis: Determine market understanding on various parameters like consumer needs, competition / firm’s product range, intermediary needs and identify products to plug these gaps.
- Resegment the market: Resegment the market on various axis to identify the new product lines.
So the ideal portfolio:
- Fits the company’s future vision.
- Prioritise markets and key segments and efficiently covers those priority segments.
- Ruthlessly prunes out those that do not fit.
- Fills gaps through new or extended brands and acquisitions.
- Use consistent segment definitions across countries.
- Supports marketing strategy objective
- Brand positioning
- Meets target audience needs
- Align with the Innovation to market process
- Align with order fulfillment process
- Supports product account relation
- Generates profitability for the portfolio
Benefits of Portfolio Management
- Fewer non-performing items
- Reduce management cost
- Reduce maintenance cost
- Inventory carrying cost
- System maintainance cost
- Delivery cost
- Improve profitability
- New item introduction to meet consumers needs
- Helps to become more market responsive then competition
- Supports overall Brand Promise