The right brand architecture for medium-sized B2B companies
Strategie
Brand architecture is not only a tool for organising the product portfolio, but also a decisive factor for the strategic direction and perception of a company in its market segment. A clear and effective brand architecture helps companies to communicate their brand message consistently, utilise synergies within the portfolio and react efficiently to market changes. In this article, we present the different types of brand architecture and analyse which models are suitable for different medium-sized B2B companies.
Why brand architecture?
Brand architecture refers to the structuring and management of brands within a company. It determines how sub-brands, product lines and services are positioned in relation to the main brand and to each other. A well thought-out brand architecture enables companies to manage their business units effectively and optimise brand perception among target groups.
Types of brand architecture
Branded House or umbrella brand strategy
In a monolithic brand architecture - the so-called Branded House - all products and services are marketed under a standardised brand name. This means that the main brand takes centre stage and sub-brands or product variants have only minimal identities of their own. The strength of this architecture lies in its ability to maximise brand equity and recognition through the consistent use of the main brand name.
Examples include companies such as Samsung and Virgin, which offer a variety of products under a common brand umbrella. All products and services benefit from a strong, well-established brand name that enjoys broad acceptance and credibility in various product segments. Siemens also capitalises on its established market position and trust in the brand by marketing most of its products and services under the main brand name.
Another advantage is that while all brand communication and marketing activities contribute to the core brand and thus strengthen it, the expenses for brand management and marketing remain manageable.
Advantages
Strong brand recognition and a unified brand image
Reduced marketing costs through the use of a single brand name across all products and services
Simpler brand management and less complexity in the brand strategy
Disadvantages
Limited flexibility in brand differentiation
Risk of brand overstretching if products do not consistently match the core brand
Difficulties in addressing different target groups with different needs
Individual brand strategy or House of Brands
The individual brand strategy or House of Brands involves the creation of a series of independent brands, each with its own market identity and target group. This model therefore corresponds exactly to the opposite of the branded house strategy, in which the individual brand takes centre stage. In the single brand strategy, each brand of a company operates independently of the others, which enables specific positioning and special marketing strategies.
Large conglomerates or companies that operate in several, often unrelated markets often utilise this brand architecture construct, such as Procter & Gamble, which owns numerous brands such as Tide, Pampers and Gillette, each of which is managed independently. For example, new products can be introduced without jeopardising the core brand or other brands of the company through any negative effects. However, the cost of brand management for various individual brands is therefore significantly higher than when managing a single core brand.
Advantages
Flexibility in brand positioning to effectively target specific market segments
Isolation of risks, as the failure of one brand does not directly affect other brands
Ability to diversify into different product classes and categories without diluting the core brand
Disadvantages
Higher costs for the management and marketing of each individual brand
Potential lack of synergy effects between the brands
Complexity in the corporate structure
Endorsed brands or family brand strategy
In an endorsed brand architecture, sub-brands have their own identity but benefit from the credibility and trust in the umbrella brand. This model combines the advantages of a strong umbrella brand with the flexibility of independent sub-brands. The construct thus stands between the monolithic architecture of the branded house and the architecture of the individual brands in the House of Brands. An example of this is Marriott International with its various hotel brands such as Marriott, Courtyard by Marriott and Ritz-Carlton. Carrying the name components from the umbrella brand - in this case Marriott - creates trust among customers, but at the same time allows the brand to position itself in other customer and price segments through the name affix. With the brand architecture of endorsed brands, companies that have a strong main brand want to utilise these positive characteristics while also serving specific target groups with special needs.
Advantages
Clear brand reference and benefit from the reputation of the main brand
Flexibility in the positioning of sub-brands to address specific markets
Effective balance between brand innovation and continuity
Disadvantages
Challenges in clearly communicating the relationship between the brands
Potential brand conflicts when sub-brands are in direct competition
Complexity in brand management and strategy
Mixed forms
Not all companies pursue a single strategic approach, but utilise different mechanisms between individual brands and family brands (endorsed brands) or umbrella brands. 3M, for example, markets some products directly under the umbrella brand, while other products such as Post-it or Scotch are marketed both separately and as part of the larger brand portfolio. Furthermore, in the case of major acquisitions of other companies, for example, it is often not desirable to integrate the newly acquired brand into the existing architecture, but rather to take the positive brand effects with it.
The right strategy is always individual
In the B2C sector, there has long been a trend towards marketing new services and products as a new individual brand, as this reduces risks for the core brand and at the same time offers greater creative freedom in marketing. In addition, not only product lifecycles but also brand lifecycles are generally shorter in this market, so that new brands create new attention.
There is no general answer as to whether this also makes sense in the B2B sector. B2B companies with a long-term brand heritage in particular often benefit from their history and brand image. In contrast to the extremely fast-moving consumer market, the B2B market is probably still more strongly characterised by the need for reliability, security and professionalism. Once this image has been achieved, the positioning of the brand should only be approached very cautiously. Furthermore, small B2B companies do not always have the need to address a particularly differentiated target group, which is why multiple brands would not be strategically expedient. In addition, the cost of launching a new brand is offset by the very high cost of establishing a new brand, starting with the development of a legally protectable brand. For small and medium-sized companies in particular, this raises the question of whether they have the resources to develop and maintain existing individual brands. The situation is different for new service and product launches that could jeopardise the image of the existing brand.
Choosing the right brand architecture therefore depends on many factors, including the available resources, the market conditions, the relationship between the products and the company's long-term strategic goals. Medium-sized B2B companies should choose a brand architecture that not only strengthens their current market position, but also offers sufficient flexibility for future growth.
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