Welcome to the third post in our series on brand architecture models. This article will explore the house of brands brand architecture model (the second foundational brand model in our series), what it is, and why it matters.
Future brand development articles will delve into the endorser brand model and source and hybrid brand models. Did you miss the previous articles in this series? Check them out:
- “Brand Architecture Models: An Introduction, Thoughts, and Perspectives”
- “The Branded House: What It Is, How to Develop It, and Why It Matters”
What is the house of brands architecture model?
Unlike the branded house model (where all sub-brands are intrinsically connected to the parent or core brand’s positioning), the house of brands model is characterized by a core brand that is largely hidden in terms of consumer-facing.
Another key characteristic of the house of brands model is that each product aligns with a single positioning—each new product being, therefore, a new stand-alone brand.
“Delta (Delta Hotels by Marriott) allows us to put a hotel in a market where we cannot plant another Sheraton flag. Positioned appropriately, brands provide choices for guests.”*
Tina Edmundson, then Marriott’s global brand officer
*Marriott’s stewardship of 30 brands a juggling act (circa 2017)
Looking at the diagram above, you can see that, unlike the branded house architectural model, the house of brands model features discrete and separate boxes (e.g., no linear connectors), indicating no outward-facing connection between sub-brands or the core brand.
GM: Chevrolet, Cadillac, and Buick
When considering the model in the next diagram, look at the three lower boxes—Chevrolet, Cadillac, and Buick. Each brand is distinct and presents no consumer-facing connection to the others.
Chevrolet is focused on comfort and being a provider of automotive products and services that are perceived as a good value for the money to their customers. In fact, Chevrolet has been cited as one of the most valuable brands in the world. Chevrolet is also known for its strong position in the pickup truck market.
GM launched a fourth sibling brand to Chevrolet, GMC (not shown in the diagram), to capture luxury pickup trucks. In this way, GM protects Chevrolet’s core brand positioning from dilution in the ‘good value’ mass-market space while allowing GM to capture another more affluent market.
Cadillac, on the other hand, represents a brand aimed at attracting a new league of consumers, affluent millennials. This presents an opportunity for GM to secure its future by building brand affinity today with an entirely new generation of younger buyers.
In short, the house of brands model is great for companies with a diverse portfolio because:
- Each brand can succeed or fail without toppling the parent brand portfolio
- Each brand has flexibility, and the ability to target and address diverse market segment needs
- Each brand can flourish independently under one largely hidden, corporate brand
Depending on market and brand strategies, it is not out of the realm that one brand in a house of brands might compete with another. Typically you want to have enough differentiation to preclude this happening in a cannabalistic way.
For example, though Chevrolet has a high-end truck line, the defined overlap of buyer personas between Chevrolet and GMC is minimalized. Thus, GM is able to capture a larger gamut of market segments and market share by providing broader choices for truck buyers.
How to create a house of brands
As with the Branded House, developing a cohesive house of brands architecture model requires strategic thinking and a focused approach. Here are some tips to help you get started.
Begin with a POV based on a broad view of a market
In our example diagrams, GM takes an expansive view of a vertical consumer market. GM then develops a thesis they feel will bring the best return to shareholders by selecting aspects of that vertical to place discreet brands.
Brands that align with their strength as a manufacturer, distribution networks, vendor partners, market demands and trends, audience size, potential share of the market, profitability forecasts, and many other factors aimed at constructing a sound brand and business strategy.
Treat each distinct brand with the respect its audience demands and deserves
As with any brand build, resonating with that brand’s audience is key to product-market fit. The verbal and visual identity of each brand in your house of brands model must stand on its own.
Consider overlap, options, and differentiation
If GM has a Chevrolet dealership in a large market but also a GMC dealership in the same market, the question must be asked, “Why?”
- Are GMC buyers primarily large contractors in the market and Chevrolet buyers, homeowners, and small contractors?
- Are consumers not seeing something in Ford, Dodge, and Chevrolet offerings that GMC options can capitalize on?
- Can Chevrolet and GMC products and services combine to pull market share from competitors?
- Do Chevrolet car offerings help stir truck sales overall?
If the answers to questions like those above are yes, then the effort to establish a new brand may well be worth it. People may recall that Chevrolet and GMC are both GM brands, but they will assess them based on their market offerings independently, just like Ford and Dodge. If positioned correctly, that can present clear advantages.
FAQs about the house of brands
Here is a look at frequently asked questions about the house of brands brand architecture model.
How does the house of brands model affect a business overall?
Brand models must always follow or lead business strategies but must never be out of step with business strategies. GM wants to capture markets. Some broad-based, longstanding, and value-driven, some reinvigorated to build for the future.
Like long-term and short-term investments, GM is betting on its business strategies and the brands and brand strategies that will get them where they want to be fiscally.
Do house of brand models impact more than marketing?
Everything follows your brand model or vice versa—facility and resource allocation, new hires, product design, production, dealer and delivery mechanisms, and customer success services. These all should look to business and brand strategies for queues on how and what to budget for.
If Chevy were to promote vehicles with electric motors for eco-conscious consumers, but the factory is keen to design and build only gasoline-powered vehicles incongruent with audience wants and needs, then eventually profits and the entire brand and business will suffer.
What benefit is there in considering a house of brands model?
The house of brands allows for each brand to stand on its own profit and loss statement.
Each distinct brand can be assessed more clearly as to its value in the target markets carved out for it. More clearly than, say, many branded house models where many assets and strategies are intermingled. To this end, brands can be assessed, reinvented, expanded, or lopped off on their own merit and the acceptance or not of their audiences.
“The main target audience of Cadillac is affluent millennials, people in their late 20s and early 30s who have adequate memory of Cadillac’s fall, rise and near-rise again.”*
Taditya Shastri, Educator, IIDE – The Digital School
*Extensive Marketing Strategy of Cadillac – With Detailed Overview (circa 2022)
Is there a downside to this brand architecture model?
Ostensibly, once a brand is up and running, and a brand’s strategy and market fit are on point, it will stand on its own two feet and provide profit and stability to the parent company. However, getting several or more full-on brands off the ground typically requires separate strategists, separate executive suites, separate operations, separate marketing teams, and separate everything (e.g., deeper funding). It’s important to count the cost as resources are shared nominally across brands.
Often, a house of brands is best suited for established companies with resources that are looking to diversify and expand into new markets or capture more of a given segment.
The house of brands: Navigating diverse markets
A true house of brands brand architecture model can be powerful in the marketplace. As with any brand or business model, careful consideration should be taken upfront regarding the cost and relative return of seething up largely siloed ground-up brands. The house of brands is definitely not for every business.
In our next post on brand architecture models, we’ll explore the endorser brand model and witness firsthand the power of a name.
