A serious pang of entrepreneurship is behind every startup. Accordingly, many ingenious leaders may have multiple ideas and not always a solid idea of how to wrangle or deal with each product or service.
This is where understanding brand architecture comes into play. There are two high-level types of brand architecture – House of Brands and Branded House. While there are hybrid and endorsed approaches, this discussion will focus on the primary, aforementioned two.
House of Brands is where the parent or shelter company is not itself marketed at all. Instead, that company launches products or services under other names and in different category segments. Proctor & Gamble (P&G) perhaps represents the most famous of all House of Brands parent companies. The 156-year old P&G playbook has been brilliantly carried out from its written-in-the-stars beginnings. The key takeaway from the House of Brands approach is that it mitigates name equity erosion should a subsidiary suffer a setback or fail.
Branded House means incorporating the parent company name into every offshoot product or service brand name. To bring this to life, consider Google or Virgin who have name equity to share and spare. Those brand names have been affixed to several related and, seemingly, unrelated marketing pursuits. Richard Branson, CEO of Virgin, has said his team thought he made a mistake each time he added and branded another offshoot under Virgin. The reason to take this approach is to build on brand equity and credibility transfer from the parent brand. That’s what Google assures by passing its name on.
Perhaps the most common mistake for everyday startups is to overvalue their brand name equity right out of the gate. Even a successful startup brand will not have much, if any, name equity for a few years to come. Therefore taking the Branded House approach may not be particularly beneficial or strategic. Assuming the House of Brands approach mitigates risks and takes advantage of blank canvas each time a new product or service is launched. Better to plan where the main house will be built before building guest houses all over the property and figuring out where the primary living quarters belong later.