In my previous post, I had talked about the concepts of Branded House and House of Brands as the two prominent philosophies followed by conglomerates to manage their brand portfolios. I thought I could probably do a comparison of the two different schools of thought here.
House of Brands is when a conglomerate launches different brands in different segments, and the company name is not projected as a brand. So, P&G markets its detergents as Ariel and Tide and HUL markets detergents as Rin and Surf (conspicous in their absence are the company names P&G and HUL in the brand name)
Branded House is the concept of branding all products based with the name of a company. Earlier, all Bajaj products had the name Bajaj affixed to them – Bajaj Pulsar, Bajaj Discover etc. Cadbury too, markets products as Cadbury Dairy Milk and Cadbury Bournville (though they do have a strong umbrella brand in ‘Cadbury Dairy Milk’ under which Crackle, Wowie etc are launched)
Examples exist for both strategies, with companies like Cadbury sticking to Branded House way, while HUL, P&G, ITC etc are following House of Brands concept. Bajaj is about to shift from Branded House to House of Brands. Nestle, on the other hand is following a mix of both, branding both Nestle Polo or Nestle Pure as well as umbrella brands like Maggi
1. Brand Equity Transfer:
Using a branded house system allows for a brand equity transfer from the parent brand, lending credibility and quality assurance to a new product offering. It also reduces the marketing budget requirement a bit since less has to be spent to build the brand
2. Decoupling of Risk
House of Brands enables decoupling of risk when one of the brands fails, or is attacked. A case in point : when Cadbury Dairy Milk was attacked by the issue of worms being present in the chocolates, all the offerings across the spectrum suffered from a credibility loss and a subsequent sales dip, even when products like Crackle were unrelated and had no complaints from the customers either.
(you might note that the above two points are similar to the points used by companies to decide whether to launch a new brand or to launch an extension)
3. Expansion Possibilities
There is only so much that you can stretch a specific positioning to fit different products. Again, taking an example of Cadbury, it is going to be difficult for them to expand anywhere apart from confectioneries. Say, even if they plan to enter beverages segment, they would perhaps have to launch new brands because the current positioning can’t be spread to beverages.
Hence, both strategies have their own pros and cons and depend upon market scenario as well as long-term view. As a personal opinion though, I believe that a House of Brands strategy is better, since it allows products to function independently, with a lot of creative freedom in marketing (a sore need to help differentiation). They can still use same distribution channels and other backend services (including IT systems) to help create an edge.
Ref: A comprehensive detail on the same can also be found on the following blog:
(I strongly recommend the blog above to any marketing aspirants. Excellent content, and Exhaustive coverage over the years)