The three architectures
A holding company has three brand architectures to choose from. The first is the master brand: the holding company’s name is on every product or service, and the customer buys the brand, not the product. P&G’s Tide, Pampers, and Gillette are master brands. The second is the house of brands: the holding company’s name is invisible, and each product or service has its own brand. Unilever’s Dove, Hellmann’s, and Ben & Jerry’s are house of brands. The third is the endorsed brand: the holding company’s name is in small print, and each product or service has its own brand that is endorsed by the holding company’s name. Marriott’s Courtyard, Residence Inn, and Ritz-Carlton are endorsed brands.
The three architectures are not equally available. A holding company that has been operating as a house of brands for thirty years cannot become a master brand without rebuilding the customer’s association with the holding company’s name. A holding company that has been operating as a master brand for thirty years cannot become a house of brands without giving up the brand equity in the holding company’s name. The architecture is a 5–10 year decision, and the choice is a 5–10 year decision because the cost of switching is the brand equity in the existing architecture.
When the master brand is right
The master brand is right when the customer is buying the holding company’s reputation, not the product’s features. The B2B services holding company whose customers are buying the holding company’s ability to staff the engagement, the consumer products holding company whose customers are buying the holding company’s quality control, the financial services holding company whose customers are buying the holding company’s balance sheet — these are master-brand customers. The brand equity is in the holding company’s name, and the architecture should make that equity visible.
The master brand is wrong when the holding company’s name is associated with a category that the customer is trying to leave. A holding company that has a strong brand in a declining category is going to dilute that brand by extending it to adjacent categories. The architecture should be a house of brands or an endorsed brand, with the holding company’s name invisible, and the customer should be able to buy the new category without the holding company’s reputation in the old category.
When the house of brands is right
The house of brands is right when the customer is buying the product’s features, not the holding company’s reputation. The consumer packaged goods holding company whose customers are buying the product’s taste, the software holding company whose customers are buying the product’s features, the apparel holding company whose customers are buying the brand’s style — these are house-of-brands customers. The brand equity is in the product, not the holding company, and the architecture should make the product’s brand equity visible.
The house of brands is wrong when the holding company is a single category leader, or when the holding company is in a regulated industry where the holding company’s reputation is the regulatory shield. A single-category leader should be a master brand, because the brand equity is in the holding company’s name. A regulated industry should be a master brand, because the regulator’s relationship is with the holding company, not the product.
When the endorsed brand is right
The endorsed brand is right when the customer is buying the product’s features, but the holding company’s reputation is a meaningful secondary signal. The hotel holding company whose customers are buying the hotel’s location and amenities, but who are reassured by the holding company’s reputation for quality; the financial services holding company whose customers are buying the product’s yield, but who are reassured by the holding company’s reputation for stability; the B2B SaaS holding company whose customers are buying the product’s features, but who are reassured by the holding company’s reputation for product discipline — these are endorsed-brand customers. The brand equity is split between the product and the holding company, and the architecture should make both visible.
The endorsed brand is wrong when the holding company’s reputation is either much stronger or much weaker than the product’s. A holding company with a much stronger reputation should be a master brand; the endorsed brand dilutes the reputation. A holding company with a much weaker reputation should be a house of brands; the endorsed brand dilutes the product.
The operating cadence
The architecture decision is a 5–10 year decision. The operating cadence is quarterly. Once a quarter, the holding company reviews the architecture, the operating decisions, and the brand equity. The output is a one-page operating report: the brand equity by brand, the operating decisions by brand, and the implied operating response (more, less, hold) for each brand.
The operating cadence is quarterly because the brand equity is slow-moving. A brand that is gaining equity is going to be gaining equity on a quarter-to-quarter horizon (the customer’s memory is changing on a quarter-to-quarter horizon); a brand that is losing equity is going to be losing equity on a quarter-to-quarter horizon. The operating decisions are made in the same cadence as the equity, not in the cadence of the holding company’s reporting.
SOURCES & FURTHER READING
- [1]Aaker, D. A., & Joachimsthaler, E. (2000). Brand Leadership. Free Press.
- [2]Kapferer, J.-N. (2012). The New Strategic Brand Management (5th ed.). Kogan Page.
- [3]Ries, A., & Ries, L. (2002). The 22 Immutable Laws of Branding. HarperBusiness.
- [4]Chernatony, L. de. (2010). From Brand Vision to Brand Evaluation (3rd ed.). Butterworth-Heinemann.
- [5]Keller, K. L. (2013). Strategic Brand Management (4th ed.). Pearson.
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