Increasing competition, escalating advertising costs and rapidly growing product categories are confronting marketing managers in major growth markets with the challenge to design the best brand architecture. Depending on the choice, it can help a company grow in the fastest and most profitable way. First, it is important to analyze the circumstances in the target market and the brand status of your own company in this market. A company must then select the strategy that suits it best. If the company brand, usually the company name, already has a high degree of recognition and a high reputation or a larger country of origin bonus, it makes sense to take full advantage of this value. There are usually two ways to do this: either a strict branded-house strategy or the house-of-brand strategy with strong support from the corporate brand. This is described in detail in our new Springer publication “Successful brand development in the major emerging markets” (written in German) by Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).
Branded house strategy particularly widespread in the B2B sector
A branded house strategy combines numerous, often very different products under the umbrella of a single, strong brand. All business units or brands share the same vision and values. While this requires closer cooperation between the company headquarters and the various business units, it also opens up the opportunity to strengthen customer loyalty, as it is likely that consumers will be attracted by the umbrella brand. This strategy is particularly common in the B2B sector or in industries such as consumer electronics, where companies such as Apple, Samsung and Sony give an individual product (such as the iPhone or the Galaxy series) their own name but associate them closely with the company’s umbrella brand. In the B2B sector, the logistics provider FedEx is a good example of this approach. It identifies the various business units as variations of the corporate brand such as FedEx Ground, FedEx Freight or FedEx Service.
House-of-brands strategy: the corporate brand only has a supporting function
In contrast, the different product lines or business areas represent their own brand identity and positioning within the framework of a house-of-brands strategy, with the corporate brand appearing with little or no support. Here, customer loyalty lies more with the individual brands (below the company brand), which are carefully tailored to the specific emotional and functional needs of the target group. Procter & Gamble is a good example of this approach, as the numerous brands like Pampers, Duracell, Gillette and Tide only display their own brand identity. But especially in emerging markets, these separate brands will be supported by P&G at least indirectly, as the “umbrella brand” gives them additional prestige in terms of quality and trust.
Local constraints such as joint venture obligations increase organizational complexity
In many cases, however, it is not easy to apply a strict branded-house strategy, as many global companies operate as joint ventures in some markets. This increases the organizational complexity and limits the brand strategy. In China, for example, the complex structure of the local automotive industry significantly reduces the visibility of the brand and the feasibility of brand strategies. Consumers themselves are hardly concerned about the different joint venture brands; they are concerned about “their” BMW or Volkswagen. And it is a big difference for them whether a vehicle was imported or manufactured locally. For this reason, many competing brands have externally managed to integrate their respective joint venture partners relatively seamlessly into the general umbrella brand. Like other foreign car manufacturers, Volkswagen still faces obstacles. But the company recently made greater progress with its joint internet brand portal, where consumers can find all Volkswagen products in China in one place for the first time, regardless of whether they were imported, whether they were Shanghai-Volkswagen, or whether the vehicles were produced by FAW-Volkswagen, the joint venture between Volkswagen and First Automotive Works.
The trend towards greater use of corporate brands is supported by increasing competition and the unabated rise of advertising costs in growth markets. This forces companies to increase their profile, visibility and brand strength in a faster and more cost-efficient way. A single (corporate) brand can achieve this strength faster than a portfolio of differentiated brands. Since there are still many products with poor quality around in the emerging markets – and the average consumer is addressed more by reputation and “brand origin” than by a specific positioning – it is obvious why corporate brands play a much greater role in the environment of a growth market.