New trends in branding strategies

Companies do evolve in their branding strategies. An analysis of their international behaviour reveals significant trends.

Why the rise of branded houses?

An interesting classification of branding architectures is that of ‘branded house’ versus ‘house of brands’. As it names indicates, the ‘house of brands’ refers to a company which operates through well-known brands but itself remains discreet if not hidden: this is the case of the ITW (Illinois Tool Works) operating with such brands as Paslode or Spit, and well known in professional circles. Procter & Gamble and Georgia Pacific also operate that way.

The branded house is the inverse case: the company itself is the one and single brand, acting as a banner and a federating force. For Aaker and Joachimstahler (2000), the models of such architecture are GE (GE Capital, GE Medical and so on) and Virgin. In fact, it is over-restrictive to assimilate the branded house to this type of case. The branded house is a strategy by which the corporation is the source of reputation and the federating force.

This can be achieved by two branding architectures: the corporate umbrella brand (Sony, Philips, GE and Virgin are examples), and the corporate source brand, where there exist subbrands or branded subsidiaries, but the leader is the parent company. This is typically the policy followed by HSBC, which puts its name or logotype before that of all subsidiaries, as long as these subsidiaries keep their name.

Two brand architectures correspond to the so-called ‘house of brands’: naturally what is called the product brand approach, and also the endorsing brand approach. When 3M puts its name at the bottom of all its products, is it really driving customers’ perception of value? No. Although present, visibly it remains discreet: this is the sign of a ‘house of brands’. The brands of the portfolio act very independently.

Paradoxically some corporate umbrellas are also very close to being quasi houses of brands. This may look as a contradiction with what has just been said. In fact, the whole issue is that of power and organisation. Take Toshiba for instance. This conglomerate is organised in business units: computers, hi-fi, television, cookware (in Japan) and so on. Not only are the business unit directors totally independent, the country managers are also very independent.

Their role is to sell the products coming from Japan. As a consequence, there is no desire at all to coordinate the communications between business units, and for a given business unit between countries. The result is that although they wear the same name, Toshiba hi-fi products do not have the same image as Toshiba computers, Toshiba television sets and so on.

The Toshiba corporation up until now never thought of itself as a brand that needed to be managed globally as such. It is only recently that a VP was named with that objective, with worldwide responsibilities and authority. His or her first task will be to establish the Toshiba brand platform and to enforce it throughout all communications of any product in the world. Philips is itself now acting under the ‘one Philips’ internal motto.

Why do so many organisations move towards this branded house architecture to recreate identity where there is diversity, fragmentation, if not a patchwork? In modern developed markets, unlike the emerging ones, it is no longer sufficient to be known. One must also consistently evoke a set of values and stimulate emotional resonance.

This supposes some discipline and less autonomy. Sales-oriented organisations, such as those of Korean and Japanese companies, assign high sales objectives to their country managers. In exchange they have a lot of freedom. This is why their communication is generally managed at the local level.

Creating a branded house will meet resistance because one source of autonomy, and not least, advertising freedom, will be affected. However, a branded house does not automatically mean a global campaign: the spirit of the brand may emerge through different and even localised communications.

Loyalty and the rise of transverse brands

There is another reason for changing brand strategy – when the emphasis shifts from product logic to customer logic, from a desire to conquer new markets to developing customer loyalty. Accor Hotels, the European leader in the hotel industry, is a good example of a company that was able to react and modify certain fundamental principles of its brand policy.

Accor owes its success to the creative brilliance of its two founders who invented the product brand in the hotel sector. Novotel, their first hotel chain, was based on the concept of total standardisation – whichever hotel they stayed in, businessmen and women felt at home, down to the very layout and decoration of the rooms. Then they covered the different market segments with other product brands: Formule 1, Etap Hotels, Ibis, Mercure, Novotel, Sofitel and Suit’Hotel in Europe, and Motel 6 in the United States.

According to the original logic, Accor – the name of the holding company – was limited to that single function and was therefore invisible. Then, in view of the requirements of stock exchange valuation, it was decided to make the corporate brand more visible. It began to appear in small print on the hotel brochures, before being incorporated as the trade name – Accor Hotels – in the actual logo of each product brand.

The growth of the group’s market share recently led to another reassessment: the decision to move from individual loyalty programmes for each brand to a corporate loyalty programme (Accor Hotels Favourite Guest).

It was this same need to develop loyalty that led l’Oréal Paris to break with its historic brand strategy in 1995. The decision was made in response to Nivea, whose simple strategy maximised brand loyalty within an increasingly broad portfolio of sub-brands that were in direct competition with the brands in the l’Oréal group.

L’Oréal realized the limitations of a flagship-brand strategy in which l’Oréal Paris merely endorsed a large number of independent sub-brands – Elsève, Elnet, Plénitude and so on. Apart from the fact that the publicity budget was fragmented, there was no effective capitalisation. The group therefore switched from a ‘house of brands’ logic (with l’Oréal Paris as the endorsing brand) to a ‘branded house’ logic, a source brand with a basic unity and a very distinctive form.

This is when the so-called ‘dream team’ appeared on the international scene – a collection of internationally renowned top models and stars, each promoting a sub-brand from the l’Oréal Paris house, using the same creative platform and publicity signature (‘because I am worth it’).

At the same time, the l’Oréal Paris brand name became larger, more visible, and more prominent for such sub-brands as Elsève, on the packaging and in-store merchandising. Finally, the denominative logic was applied to brand extension categories that were not yet sufficiently attributed to the brand (due to its historic associations with hair products). Plénitude, the brand then in competition with Nivea, was abandoned in favour of Dermo Expertise, Pure Zone and Solar Expertise, whose more descriptive names immediately suggest competence in the area concerned.

By doing this, l’Oréal Paris was also aiming to develop real customer loyalty across the different sections of the brand and thereby make up the time lost to Nivea in this respect. In 2002, in an extension of this customer loyalty objective, l’Oréal Paris launched its first advertising campaign with a view to creating a relational database.

Industry discovers the importance of branding

When branding policy is considered, the industrial sector does not immediately spring to mind. Paradoxically, since promotion in this sector is not done through costly publicity but through catalogues, the sales force and trade exhibitions, companies do not hesitate to register trademarks. Air Liquide, for example, has registered a total of 880 trademarks (effectively, brand names).

As well as representing a considerable cost, these trademarks also create confusion and opacity further down the line, at sales team and at catalogue level. The problem is that they are specialist names which it is hoped will be passed on by word of mouth and recommendation: ‘I want some X.’ But this is quite clearly impossible as there are far too many, which is why the industrial sector is beginning to incorporate the concept of the endorsing or source brand, and even the mega-brand, which creates an umbrella for a series of specialist products.

Strategic Brand Management Related Practice Tests

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