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Group and corporate brands

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Group and corporate brands

Since 1990, there has been a basic tendency for corporate brands to be as visible as possible on the products themselves. For example, Pharmaceutical Laboratories now regard themselves as a brand in their own right and take much greater care to ensure that their brand name is clearly visible on the packaging of brands of medication.

In the professional electrical equipment sector, the name Schneider Electric appears on the packaging of products from the Merlin Gerin, Telemecanique and – in the United States – Square D brands. The back of all Nestlé products bears the Nestlé corporate brand name and the customer service phone number. It is the same for Danone, which has taken great care to create a logo for its Danone corporate brand, as distinct from the Danone commercial brand used for chilled products, and water and biscuits in Asia.

This tendency is part of a basic trend – the demand for responsibility and transparency. The company presents itself as the ultimate endorsement and no longer hides behind its brands. This also has the effect of increasing its visibility, and therefore its attractiveness to students, executives and the employment market in general.

In Asia, television ads for Procter & Gamble and Unilever brands bear in the last seconds the signature of the companies themselves. This is not the case in the United States or in Europe, although – influenced by this Asian experience – Unilever is looking for some kind of higher public visibility to boost its corporate brand profile. In Asia, however, these two companies do not enjoy any reputation and this must therefore be established.

Finally, once a company is quoted on a stock exchange, it must try to influence the share price since, over and above the financial results published on a regular basis, market predictions are influenced by the company’s name and reputation. So anything that makes people dream a little adds to its goodwill.

Companies regularly change their name and take the name of their flagship commercial brand. For example, the company formerly known as BSN changed its name to Danone Corp (it nearly became Evian Corp), while the Volkswagen group and l’Oréal group have both taken their name from their flagship brands. Mars, on the other hand, changed its name and became known as Masterfoods, as other companies are called Bestfoods (Unilever) or General Foods. So what are the reasons for these two diametrically opposed attitudes?

Capitalising on a flagship brand by applying its name to the group makes it possible to take advantage of the halo effect, even if this involves two clearly distinct sources, since the image of the one influences the perception of the other. For example, the press regularly refers to Volkswagen as Europe’s number one brand when it was not the brand but the multi-brand group that earned the title through the cumulative sales of each of its brands. In fact, at the beginning of 2003, Europe’s number one group was PSA Peugeot Citroën.

The l’Oréal group does not advertise a great deal. However, its brands use heavy advertising, along with research and development, as one of their main weapons. By sharing the name of its glamour (‘l’Oréal Paris’) brand, the l’Oréal group benefits from the impact of aninternational image that inspires confidence in shareholders and defines what they do.

It was for entirely opposite reasons that Mars took the less transparent name of Masterfoods. Apparently, it was difficult to sell brands of pet food such as Pedigree and Whiskas under the Mars corporate or group name, particularly since Mars conjures up the image of a single product, a legendary chocolate bar, which has growth limits in an extremely segmented market. There was also a risk of a negative halo effect on financial predictions.

LVMH, the initials of Louis Vuitton Moet Hennessy, uses both strategies. On the one hand, the experts are familiar with the significance of the acronym, which refers to internationally renowned luxury brands. On the other, by retaining the acronym, the group demonstrates its intention to remain discreet by placing the emphasis at brand level rather than corporate level, and leaving the brands to develop through their own creativity, publicity and the quality of their distribution. From this, it can be seen that the position of the corporate brand in relation to its subsidiaries is in fact a reflection of the group’s internal organisation. This essential part of group strategy is developed below.

Group and subsidiary relationships

In the industrial sector where external growth is the norm, the question of the status of corporate brands that have been acquired crops up again. Should they be left independent? Should they disappear? Should they be endorsed with a simple visual symbol of the parent company? Or joined to the name of the parent company? If they behave as mere holding companies such firms should not be surprised by their low public recognition.

For instance, although it was founded in 1969 and was one of the largest chemical companies in the world, Akzo remained largely unknown. No wonder: all the companies acquired had kept their own company names and brand names (Warner Lambert, Stauffer, Montedison, Diamond Salt, etc). Akzo thus acquired a poor image in terms of technology because of its lack of visibility. It had become the biggest unknown company in the world.

General Electric has defined four brand policies and specifies the conditions for their application. These policies range from:

The so-called monolithic approach where GE behaves like an umbrella brand and replaces the corporate brand which has been bought (either immediately or after a transitional period of double branding). The brands GE Silicons, GE Motors and GE Aircraft Engines have all emerged from this process.The endorsement approach where GE signs its name beside the name of the product or the company that has been acquired.The financial approach where GE behaves like a holding company and is only discreetly mentioned (X, member of the GE group).The autonomous approach where the acquired company or product makes no reference to GE.

To decide upon a policy, GE uses six selection criteria:

 Does GE control the company?Does GE have long-term commitments in this company?Does the product category have an image value? Dynamic or not?Is there a strong demand for GE quality in this industry? Is the corporate brand which has been bought strong?What could be the resultant impact on GE?

Group style and branding strategy

At regular intervals, the major industrial groups ask themselves whether their branding strategy is as effective as it could be. There are three formal types of strategy that can be implemented within industrial groups. Although the terms ‘subsidiaries’, ‘holding companies’ and ‘companies’ tend to be used in this context, structurally speaking they represent the typical figures of branding strategy – source brand (A), endorsing brand (B) and umbrella brand (C).

But beyond these terms, the impact on level-one subsidiaries (sub-brands) is self-evidently not the same. Above all, each branding architecture has organisational repercussions, with each playing a different role for the group in relation to its subsidiaries and subsubsidiaries:

The strategy in which the group is a source brand can be likened to the role of an orchestra conductor or band leader.The strategy in which the group is an umbrella brand makes it a unifier.The strategy in which the group is an endorsing brand makes it a coordinator. It is obviously not up to the branding decisions to determine the management style of a particular group – that would be a reversal of roles – but it should explain management choices and the criteria on which these choices are based.

Internationalising the group/ subsidiary architecture

The world is complex. Groups must face the fact that their different branches have a very different competitive status in different countries. In addition, in some regions high equity brands/companies were purchased as a means to penetrate the channels of distribution. This creates a question as to the longevity of these brands.

Architecture has a connotation of something nice, square and fixed. In fluctuating and fragmented modern markets, one should be careful not to harness operations under too many constraints that would prove to be counterproductive. This is why it may not be ideal to have the same branding architecture across all products/services and regions of the world.

Let us analyse the Lafarge case. This worldwide company is known for its core business: concrete and cement. Less known is the fact that Lafarge has many other branches: roofing systems, plaster, granular products and paints. If internally the goal of creating a feeling of belongingness to the group is justified, the same does not necessarily hold true as far as branding is concerned.

As for all brands, two criteria need to be taken into account. First, is the activity core or not? If it is not, it could be sold in the future. For instance, in the plaster business, if BPB (British Plaster Board) takes over Knauf, then Lafarge would become stuck in the number three position in this market. There is no reason to stay in a business where one is number three: resources might more profitably be invested in other businesses.

Second, are there strong local brands in the portfolio and are they key drivers to customer loyalty? As a consequence Lafarge has not chosen a uniform, monolithic umbrella brand architecture. It is definitely umbrella on the core activity: after acquiring the Korean Ala Cement company, this local leading company soon became Lafarge Ala Cement, or in India Lafarge Tata Cement. For noncore activities, Lafarge acts as an endorsing brand when there exist strong local names in key mature markets. This is the case for Redland in the UK, Braas in Germany and Klaukol.

Should Redland have become Lafarge Roofing UK or Lafarge Redland? Here a distinction must be made between the legal name of the company and the commercial brand. Marketing research has shown how much these names conjured emotional attachment among local professionals: the company became dual named, and the local brand became endorsed by the branch (Lafarge Roofing). However, in Malaysia from the start it created Lafarge Roofing Malaysia.

This shows that the question of the name of societies, branches and brands needs to be well understood as implying different criteria. Not all societies are brands, or divisions that are organisational classifications subject to change. Brands are made to convey values to one or many targets.