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Type and role of brands

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Type and role of brands

Let us look at a roll of adhesive tape. At the top and in large letters we find the name of the general public commercial brand name Scotch. Down and to the left we find 3M, or the company’s corporate brand. Finally, under Scotch, comes the name of the product itself: Removable Magic Tape.

As we can see, there are three brand levels here, and a descriptor (or designator):

the company’s corporate brand 3M; the commercial brand Scotch, which acts as an umbrella brand for all the mass or general public products;the brand of the product line Magic Tape;the designator specifying what kind of Magic Tape it is: ‘removable’.

3M is familiar with this three-level strategy. Many remember the advertising nickname of ‘Gratton’ (‘scratcher’ in French) on all the products of the Scotch-Brite line (scouring pads), under the commercial brand Scotch, from 3M. The raton laveur (raccoon) had appeared in Scotch-Brite advertisements, and suggested the nickname ‘Gratton laveur’, which then appeared on its packaging.

The strategy of Nokia appears much simpler: here there is only one brand level. Everything is Nokia, followed by a serial number or code name that serves only to identify a reference, a code name that will be null and void in six months, given the speed at which the ranges in the field of telephony are rotated. Moreover, it is common to say, ‘I’m going to buy “a Nokia”’, without giving any other name. Then people specify which model they want to the salesperson by recalling the particular characteristics desired (‘the one with this and that function and a very flat design’ and so on).

As for Apple, the company has opted for two brand levels, Apple itself and iPod or iMac, named after the famous Macintosh. Apple’s star products have all had their own name (sub-brand), except of course for the early ones that made the company’s reputation. They were called Apples (1, then 2 then 3) and then a variant name.

At l’Oréal also, the policy is not to mention the group name but to build the brands on star products (also called franchises) with their own names. For example, Garnier (the other global general public brand of the l’Oréal group) has built its reputation on the Fructis range, or the Recital line. Renault has built its reputation on brands that all have a name (Twingo, Clio, Megane, Espace, Vel Satis).

What explains the choice of architectures with one, two or even three brand levels? It is principally the market, its level of segmentation and the option of whether or not to lean on the corporate brand for support.

Products with very rapid rotation make it impossible to use anything other than a single brand name (Nokia, Samsung, Sony Ericsson, Sage and so on). It takes time to install a particular product brand.

In big industry, work is done by project: the name summarises the company’s competence, stature and power, the professionalism of its men and women, the underlying culture. This is why big industrial companies like to capitalise all their shares on a single name. Nevertheless, taking public works for example, as invitations to tender are done through trade bodies, the groups have a twolevel brand policy. Vinci suggests the power of a leading group, Via is the reputed global brand in road construction.

In the mass market, where products are largely similar, it is necessary to help create perceptible differentiations. Brand names contribute to this. Pepito by Lu was aimed at children from 6 to 10 years, then Prince by Lu took them on to the age of 15. The first name also makes it possible to confer an intangible personality on the product, an added value in comparison to the distributor’s copy.

Which role for which brands?

In the above example of the removable Scotch Magic Tape from the 3M company, it is easy to understand how each level plays a specific role. The manner in which the consumer talks about the product indicates which of these levels plays the leading role, that of seller (the motivator), the one in which the perceived value resides.

The consumer rarely says ‘I want a 3M.’ On the other hand, the manager of a clinic or hospital, hospital attendants and doctors will find it easier to emphasise 3M. In their eyes, all the professionalism of a company that, through its innovations, has been able to create products so useful to surgeons at the most critical moments of surgery resides at this level.

When you buy a KitKat Chunky from Nestlé, you are buying first and foremost ‘a KitKat’ in its larger version (here called Chunky to increase the perception of volume and size), under the obvious auspices of the ‘better living brand’ Nestlé. If you turn over the product, you will see the corporate brand Nestlé itself (with its characteristic nest), which acts as a supreme guarantee, morally responsible for all the products made by its factories around the world, a kind of manufacturer’s brand. Let us note that this manufacturing brand Nestlé is also present on the back of the regional European commercial processed meats brand Herta.

Through these examples may be distinguished the roles of:

Motivator, the anchor point for value.Source of value for products. The commercial brand Nestlé applied as the aegis above all products indicates that these carry its values of taste, health and family.The producer’s moral endorsement and responsibility, where the company supplies a telephone number that customers can call to report any deviation that they consider unacceptable, anywhere in the world. This is a manifestation of the demands of corporate social responsibility (CSR). Yesterday we said, ‘Big is beautiful’; today we say, ‘Big is responsible.’The designator of the specificity of the reference in question – when we say KitKat Chunky, to specify which one we wish to buy.An identifier of the origin: this is the role of the manufacturer’s brand.

The accumulation of levels damages clarity, and appropriation by the client. It should therefore be combated, and only the indispensable levels should be kept. The debate on the presence or absence of the corporate brand on mass-market products cannot be decided only by questioning consumers. Of course, if they were asked whether they see any reason to keep the name 3M on the packaging, the majority would say no: they don’t know 3M.

Since the logo evokes nothing for them, they regard it as useless. However, the strategy cannot be based on this point of view alone. The legitimate ambition of enhancing the group’s value on the stock exchange implies an awareness that cannot be built up through colossal advertising budgets, the money for which must necessarily be taken from the brands’ operating budgets. It is therefore better to profit from the millions of stealth contacts offered by the products and the communication they make.

For this same reason, the Accor symbol appeared in the lobbies of all the group’s hotels, regardless of brand. This made it clear that all of these hotels, previously presented as independent or even competitors, were in fact members of the same family. There was a loss in differentiation and probably in emotion, but Accor rapidly gained from it recognition as the leader in hotels and services in Europe.

A major alternative: branded house or house of brands?

The brand architecture is the coherent response given to the three questions examined above:

How many brand levels should be used? One single level, or two? In other words, should brands be created to designate the activities or the professions or the products themselves?What linkage exists between these brand levels? This goes back to the question of the respective roles of the brands: where is the value located, who endorses whom, and so on?What visibility should the corporate brand have? And what role?

The answers to these questions are not independent. In reality they form six types of overall response, with precise impacts that go far beyond the descriptive (what name or symbol is in large font, or in small, at the top or the bottom) and concern the offer itself. They affect its content, its values: that is, the degree of variety that a brand can offer under its name. These overall responses or branding architecture types number six in total. From this point on we shall distinguish the following architectures:

the product-brand strategy and its variants, the line and range brands;the flexible umbrella strategy; the masterbrand strategy;the maker’s mark strategy;the endorsing brand strategy;the source brand strategy.

These strategies are responses to the market. They may be structured along two axes (see Figure below), according to whether the value sought by the brand relates more to power and stature on the one hand, or personalisation, differentiation and identity on the other.

Positioning alternative branding strategies

At one extreme, the strategy known as the corporate masterbrand is characterised by a single and unique brand level, often the corporate name, and that of the company itself. The whole of the company that adopts it must then fall into line with the brand’s values, and be the carrier of these values. Either something is IBM, or it is not. Brands in the industrial and public worlds and the services sectors (banks, insurance, consultancies and so on) typically follow this strategy. Here, reputation is linked to reassuring size and power.

At the other extreme we find the productbrand strategy. In this strategy, the company is not identified at all. This is the case with brands of LVMH and Procter & Gamble, which does not strongly identify itself on each of its brands (Ariel, Tide, Pampers, Always, Dash, Swiffer and the rest). This makes it possible to function in the same market, for example washing powders, with a portfolio of apparently competing brands. The car manufacturer PSA also functions via a productbrand strategy: you can buy either a Peugeot or a Citroën, but not a PSA.

Architectures with two or more brand levels represent a compromise between the power requirements that push for a single dominant name (masterbrand) and the personalization requirements that push for segmented daughter brands, each having a clearly differentiated identity. In fact, generalised automobile brands attempt to capitalise on their name (Volkswagen, Toyota) but boost the attractiveness of the models themselves by means of a name that acts as a brand (Golf, Passat, Yaris, Prius).

It is also possible to classify these architectures according to the degree of constraint that they impose downstream, at the business, product and market levels. In this respect, the Americans distinguish between two basic alternatives: ‘house of brands’ or ‘branded house’ (that is, a basket of different brands or activities brought together under a single aegis) (see Table below). These alternatives lead back in fact to the degree of constraint and coherence imposed on the products and markets. We will see that behind these basic alternatives can be found architectures that in practice are very different.

Table : ‘House of brands’ or ‘branded house’

House of brands                    Branded house Product-brand                          Source brand Line brand Range brand Maker’s mark Endorsing brand Flexible umbrella brand            Masterbrand

The first option (house of brands) relates to a situation of extreme freedom of management for the brands, subsidiaries, activities and divisions. This is typical of Japanese groups. For example, there is no coordination between the Mitsubishi Motors division and the Mitsubishi Electric division. It may be the same name, and the same company in legal terms, but each division, like a silo, acts as it sees fit. It carries out its own advertising, with its own arguments, its brand values and so on. The important things are commercial success, and the growth in recognition of the Mitsubishi name.

As we can see, ‘house of brands’ does not relate solely to the product-brand architecture, as my American colleagues David Aaker (1995) and Kevin Lane Keller (2007) write, but also applies to umbrella-type strategies (a single brand for the whole company) where in fact the decisions made downstream, in contact with the market, are very free, and seek only to reach the objectives linked to that specific market, without coherence as a whole at the image level.

Michelin has acted in this way for decades. Michelin’s Truck Division did not coordinate with Michelin Private Vehicles or with Michelin Aviation. There was no desire to create variations on a common, specific and normative brand platform in each of these markets.

The ‘branded house’ expresses the desire to give coherence to the whole under the auspices of a brand with central values that find embodiment at the market and product level. This path brings together the masterbrand and also dominant (source) brand strategies, giving a strongly normative structure to the daughter brands on the second level. This strategy is pursued by Nivea for example, l’Oréal Paris and Kinder. This second level must express the values of the parent brand. The ‘branded house’ is a family with a high degree of internal unity.

The six main brand architectures

This is why we can structure the strategies according to a matrix that classifies them. They are classified by the number of brand levels (one or two) and according to the degree of freedom allowed downstream, at market level, for decisions on product and service positioning. These will be examined here in turn.

Branding strategy and brand valuation

Branding strategy should not be seen as a formal design problem but rather a matter of deciding on the value flows to be created between the different parts and products of a company. The central issue is therefore the valuation of the offering, through the agency of the company itself.

The business angels and investment funds have got it right. For example, in the cosmetics sector, there is more to be gained from the resale of a ‘branded house’ than a basket of mixed brands, however well known, grouped together within a ‘house of brands’.

For example, Garnier has become a ‘branded house’, a house with a house spirit and house values that in return influence the positioning of the brands under Garnier. In fact, Garnier is itself a brand with a specific identity. SCAD, on the other hand, is a ‘house of brands’ that groups together brands as diverse as Dop, Vivelle, Dessange and J L David. SCAD is merely a commercial and marketing organizational structure.

In the cosmetics sector, a ‘house of brands’ is valued at six times the profits, while a ‘branded house’ enjoys an overvaluation that  brings the P/E (Price-Earnings) ratio to 7 or 8. Similarly, as soon as a company is quoted on a stock exchange, all internal separatist tendencies – such as sub-brand logos protected jealously from the corporate brand – must cease. What had previously been of little consequence becomes unacceptable.

All value flows must converge on the stock brand, since the market valuation of the company presupposes that the company capitalises on all sources of value created by its subsidiaries and sub-brands. Everyone and everything in the company contributes to this, including branding strategy.

Industrial companies are only just beginning to appreciate the importance of brands in terms of their profitability.

Brand architecture and corporate internal organisation

The brand architecture also has a strong influence on the functioning of the company. There is no masterbrand or source brand without a brand master, a guardian of the temple, someone who will ensure the necessary coherence, not only at the level of the logo or of the formal identity, across all countries and divisions. That would be to view this person as more than a guardian of policies – on character, on typographics, or on respect for graphic charts – (what is often referred to as a logo cop).

In reality, the more a company moves towards the ‘branded house’ type of architecture, the more it becomes necessary to install coordination and power structures. Hence at Schneider Electric, and also at the core of the Seb group, there exists a brand committee, made up not of communicators but of the managers of the business units and the divisions themselves. The profile of the participants in this brand committee is moreover symptomatic of how seriously or otherwise the company takes the notion of branding.

Japanese companies have recently become aware that their typical silo organisation, although it certainly had advantages, was damaging to the emotional quality of the brand and its coherence. Each division pushes a functional characteristic of its product, and nobody takes responsibility for the brand values themselves.

This is why, in 1999, Toshiba decided to name a ‘Mr Brand’ in the person of the previous worldwide director of research and development for the Toshiba group. It should also be noted that Korean groups such as Samsung, and in particular LG, did not take so long: they were quick to name brand guardians, with transverse and global authority.

If we examine the architectures in detail, the apparently banal fact of moving from two brand levels to one is in reality a message on the company’s methods of organization and the distribution of power. In its beginnings, Veolia followed a house of brands strategy. Veolia was born from the splitting up of Vivendi Universal’s public utilities division, but the value was located at the level of its business activities.

In this way Connex brought together all the private trains, buses and subways throughout the world, Onyx was the global brand for waste management and Dalkia the brand for the energy branch. This marked a group where power coordinates, but the markets dominate. Veolia was more a group name than a brand carried by unique and differentiating values.

This is somewhat like Suez nowadays. Moving to Veolia Transport, Veolia Water and Veolia Waste Management was a revolution in the methods of governance. This therefore gives us a single, central Veolia, which varies according to the market it is operating in.

Removing the division brands sends a strong message of integration, externally to clients and prospective clients, but also internally. The client may legitimately expect to see the organisational and IT silos disappear, and genuinely networked managers appear.

When this is not the case, there is a gulf between the brand and the organisation.