There are many different types of portfolio architecture, however, the three traditional variations are ‘endorsed brands’, the ‘house of brands’ and the ‘branded house’. These terms have evolved over time and have their own advantages and disadvantages.
The branded house variation involves having all brands — both endorsed and company-owned — represented in one portfolio under one name. This is a common method that spreads brand equity evenly across all sub-brands. For example, Virgin acts as the ‘parent’ brand which is then used across all sub-divisions such as Virgin Galactic, Virgin Atlantic, Virgin Active, Virgin Books and Virgin Racing. Another example of a branded house portfolio architecture is FedEx. The FedEx brand hierarchy uses its brand equity to amplify each service, bringing FedEx Ground, FedEx Office, FedEx Logistics and FedEx Freight under one clear articulated umbrella. In each of these examples, the sub-brands (in this case product and service brands) each become subordinate to the main entity. This main entity is often referred to as a ‘master brand’.
The benefit of a branded house approach is that audiences will make assumptions based on existing perceptions of the master brand. For example, if consumers have a positive opinion of Virgin, any new enterprise with the ‘Virgin’ moniker will immediately benefit through direct association. The risks of using a branded house approach are similar; if there are negative connotations associated with a master brand, it can be problematic when creating new sub-brands.
The portfolio architecture process can have a huge impact on how people perceive a business, so it’s important to take the time and effort into making sure that you’re doing it right. The key is to find order in chaos and establish hierarchy — with each product reflecting your values clearly as well as acting strategically for the future of your company.
House of brands
The house of brands portfolio architecture is essentially the complete opposite of the branded house. While there is often a master (or controlling) brand, they have little to no influence over how each sub-brand looks, speaks or acts. There are occasionally common brand values shared across the portfolio, but the diverse nature of these structures means this is less important. These structures often involve different products, services or departments within a business, each representing its own portfolio respectively. This is particularly common in group structures where diverse offerings are contained.
For example, Proctor and Gamble (P&G) own a huge range of consumer brands, each holding their own unique identities and brand equity. Most consumers will be unaware of the P&G brand at all, meaning product brands such as Head and Shoulders, Pampers, Fairy, Oral B, Old Spice and Gillette can all pursue their own brand, marketing and advertising activities autonomously. Other brands that use the house of brands portfolio architecture are GlaxoSmithKlein (GSK), Pfizer and General Motors (GM).
This structure has the advantage of combining a variety of different product and service offers with limited crossover branding, allowing each sub-brand to be laser-focused on its target audience. The main disadvantage of a house of brands is that almost no brand equity is built within the master brand. This can result in a diluted portfolio with a lack of focus. That is not always important (and can in fact be beneficial), however, it is advised that the pros and cons are carefully weighed up before going down this route.
How to develop a clear brand architecture
A portfolio architecture should be developed so that it can clearly display the characteristics and goals of a company. It is important to take into account what type of portfolio architecture would work best for your business, as there are many different types available today. One way to create order out chaos is by establishing an easy-to-navigate portfolio based on preferences and goals.
There are many ways to develop a brand architecture for your business. One of the most efficient methods is to establish a process that outlines the pros and cons of each product, then explores different ways of categorising them based on those traits. Through trial and error, you can uncover different ways to define your portfolio, establishing order and a clear way for your audience to navigate.
‘Endorsed brands’ is a term used to describe when a company endorses other companies products, typically by paying or offering incentives in the form of product discounts. This type of portfolio architecture has been used throughout modern history and was popularised as a marketing technique during the industrial revolution. This method of portfolio navigation is useful when direct ownership or control is not established across all sub-brands or assets. A good example of endorsed brand architecture is with modern football stadium sponsorship. While most sponsoring companies do not own the stadiums themselves, a deal is often brokered where the name and branding are changed for a set period of time. For example, the Emirates Stadium, Etihad Stadium and Allianz Stadium and Allianz Arena are all examples of a brand indirectly adding a football club to their portfolio through sponsorship means.
Another, more traditional example of the endorsed brands’ portfolio architecture is Marriott hotels. Each location has its own identity, however, this is underpinned with the ‘By Marriott’ line. While this can be simplified as a ‘badging exercise’, it is important to stress that endorsed brands sit somewhere between the branded house and house of brands methodologies. The pros and cons of an endorsed brand structure vary depending on which side of the spectrum the specific brands sit. Since this system is a compromise of the previous examples, some brand equity is shared across the portfolio with unique identities and target audience being retained.
If your business would benefit from a new approach to strategic development, please get in touch and we will be happy to advise on the best route forward. We recommend that a strategic audit is undertaken before starting new strategic work to ensure it uses a solid evidence base.