When brands look into expanding their products or services, there’s a lot of thought and strategy that goes into their approach. Each company is different and has a way of expanding its brand without hurting its image or confusing its consumers. Having a consistent brand image is very important to not confuse your audience. This is known as the house of brands and branded houses, but what exactly does that look like? Well, let's take a look.
Different Types of Brand Extension Strategies
There are a few different ways companies can organize their brands. Here are the different types of strategies with real company examples and an analogy to best understand this.
1. House of Brands: Imagine a farm with a lot of apple trees. Each apple tree represents a different brand, like Axe, Lipton, or Suave. Even though they're all different they belong to the same farm (Unilever). They each have their own distinct identity but are owned by the same company. This is done when companies want to reach different industries with different types of products.
2. Branded House: This is like a big tree with lots of branches. The main trunk represents the company (like Google), and each branch represents a different product or service (like Google Maps, or Google Chrome). They're all connected and share the same name but have different purposes. This keeps the brand uniform and not confusing for the consumers. It's important to know that a branded house uses its brand name in all of its products or services it’s extending.
3. Endorsed Brand: Endorsed brands use their main brand to create different products within the same category but still use their main logo to represent each product, hence the name endorsed. Similar to a partnership except it’s still the same company. Using the tree analogy, you could think of it as a tree that makes different types of fruits. This tree could make oranges, pears, and apples. While they are different, they still grow from the same tree. A company like this would be Nestle. Nestle places their logo on products like Kit-Kats, Milo, Coffee Mate, etc. While these individual brands are well known on their own they are backed up by Nestle which adds to the brand identity.
4. Sub-Brands: This type of strategy creates sub-categories of new products or services within the same company, similar to endorsed brands. The best example of this is Apple. Apple does not call its phones the Apple iPhones. They are called iPhones but use the Apple logo. However, they do have other services like Apple Music but instead of the word Apple, you see their logo. Think of it like an Apple tree that grows different types of apples.
The Benefits of House of Brands
Using these strategies can have several advantages:
Targeted Marketing: Each brand can focus on a specific group of customers, making it easier to meet their needs and preferences.
Reduced Risk: If one brand has a problem, it won't necessarily affect the others. This can help protect the company from big losses.
Clear Brand Identity: With each brand having its own identity, customers are less likely to get confused or feel overwhelmed.
Challenges of House of Brands
While there are many benefits to this approach, there are also some challenges:
Overlap: Sometimes, brands within the same company might compete with each other for customers. This can lead to "cannibalization" where one brand steals sales from another.
Resource Management: Managing lots of different brands can be complicated and expensive. Companies need to make sure they're investing enough resources in each one to keep them successful.
Customer Confusion: If brands aren't differentiated, customers might get confused about what each one offers.
Importance of Brand Extension Strategies
Brand extensions are crucial for businesses that are looking to grow and reach new markets or product categories. Leveraging the recognition and loyalty established by the parent brand can offer advantages and disadvantages. Brand extensions provide a competitive advantage while extending a brand's relevance and awareness to new demographics. By carefully selecting and executing extensions, companies can maximize their success and maintain relevance in the marketplace.
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