Brand Architecture Optimizing the ‘Face’ of Your Business February 2009 BrandAmplitude, LLC All Rights Reserved

Background Why Brand Architecture? Brand architecture is the external ‘face’ of your business strategy; consumers and customers know you through your brands and your brands support your business strategy. “ Where much of an organisation’s brand-building efforts once focused on acquiring, launching or aggressively extending brands….today’s focus is on trying to get the most from existing brands through better organising and managing brands and brand inter-relationships within the existing portfolio. Rob Osler, “The type-role-purpose brand taxonomy”, Brand Management , July 2007 Brand Architecture Internal Organization Corporate/Center/Region Capabilities/Value Chain Management External Marketplace BU BU BU Offers Offers Offers Offers Offers Offers Offers Offers Channels Customer Segment 1 Customer Segment 2 Customer Segment 3 Customer Segment 4 Customer Segment 5 Competitors Competitors Competitors Competitors

Architecture is Strategic To be effective, each brand needs its own strategy. Brand architecture establishes the optimal interrelationships of brands within a single company. Corporate Business Unit Business Unit Products Products It also describes the role of each brand in the corporate portfolio and specifies the linkages between brands. Brand architecture may or may not line up with internal organization structures.

To be effective, each brand needs its own strategy. Brand architecture establishes the optimal interrelationships of brands within a single company.

A brand’s role is determined by its ability to confer equity to an offer. Understanding brand roles and linkages helps with brand naming decisions. Brand Roles Brand Role Description Example Driver (Master) Drives purchase decision and defines user experience. Most represents the differentiation inherent to the offer. Office Co-driver Contributes equally to brand equity in a multi-brand offer. None Endorser Provides approval, credibility or guarantee to a range of products, but is usually not the driver. Microsoft Ingredient Materials, components or parts that are contained within other branded products. Clipart Sub-brand Equity is driven by another brand, usually driver. Word PowerPoint

A brand’s role is determined by its ability to confer equity to an offer.

Understanding brand roles and linkages helps with brand naming decisions.

A brand’s strategic purpose reflects the intention of the company for maintaining the brand in the portfolio. Understanding strategic purpose helps prioritize marketing investments. Strategic Purpose Brand Purpose Description Example Flagship Company’s most visible and most valuable brand. Account for high proportion of revenue, and is foundational to company’s mission. High category awareness. Windows Office Strategic Of strategic importance to company’s future sales or market position. Has potential of positive impact on overall perception of the corporation. Vista XBox Distinguisher Enhances the differentiation of another brand. Also referred to as ‘branded energizer’, differentiators, or silver bullets. One Care Live Cash Cow Money making brand that does not represent future significant growth. MSN XP Corporate Low visibility to customers, but important to corporate constituents such as regulatory bodies, investors, employees, trade groups, partners. Microsoft Fighter Response to competitive threat. Protects share of other brands in the portfolio. Hotmail

A brand’s strategic purpose reflects the intention of the company for maintaining the brand in the portfolio.

Understanding strategic purpose helps prioritize marketing investments.

Background Where Architecture Fits Brand Architecture is part of corporate strategy. It should be established prior to creating a brand strategy Produces better long-term strategy that is customer-insight driven and encompasses brand platforms with long-term growth potential Minimizes waste and inefficiency by building fewer stronger brands with less overlap Actively manages the linkages between brands to leverage credibility in support of new opportunities Corporate Objectives & Brand Architecture II. Brand Strategy III. Marketing Strategy Communications Offer Design Relationship & Experience IV. Marketing Execution & Metrics Strategic Marketing Process

Produces better long-term strategy that is customer-insight driven and encompasses brand platforms with long-term growth potential

Minimizes waste and inefficiency by building fewer stronger brands with less overlap

Actively manages the linkages between brands to leverage credibility in support of new opportunities

Corporate Objectives & Brand Architecture

Architecture is Dynamic Architecture is more than the corporate or visual identity system of a company. It is grounded in market dynamics and changes over time. Growth Gap Strengths & Weaknesses Target Markets Desired Identity Needs & Wants Competitive Set Business Strategy Architecture

When To Revisit? Brand architecture is revisited when companies change strategic direction, or reach key turning points in the business Sizable business unit is acquired or sold Existing portfolio or structure hinders the effective pursuit of future growth opportunities. Brands are losing relevance in the marketplace Brands have been stretched beyond their credibility and effectiveness T oo many or too few brands in the portfolio to achieve business objectives Co-branding opportunity presents itself. Acquire Maytag Entry of foreign competition Time Growth Inflection Points

Sizable business unit is acquired or sold

Existing portfolio or structure hinders the effective pursuit of future growth opportunities.

Brands are losing relevance in the marketplace

Brands have been stretched beyond their credibility and effectiveness

T oo many or too few brands in the portfolio to achieve business objectives

Co-branding opportunity presents itself.

Background Key Principles Parsimony Profit Partitions Maximize profitability by fulfilling as many customer needs as possible at minimum brand development and management cost. Sufficiently cover the market and target customer segments, but do so with the fewest brands possible. Provide customers with the solution they seek by creating clear separation – “daylight” – between the company’s portfolio of offerings.

Maximize profitability by fulfilling as many customer needs as possible at minimum brand development and management cost.

Sufficiently cover the market and target customer segments, but do so with the fewest brands possible.

Provide customers with the solution they seek by creating clear separation – “daylight” – between the company’s portfolio of offerings.

Most companies build their businesses through multiple brands. Architecture solutions range on a spectrum from ‘branded house’ to ‘house of brands’. Spectrum of Solutions Build equity in multiple brands Build brand equity in master brand Maximize synergies among business units Target multiple customer segments Reinforce a global organization mindset Minimize risk of bad publicity Single parent brand spans a set of offerings. Independent brands, each maximizing its impact on the market. Linked Brands House of Brands Branded House

Most companies build their businesses through multiple brands. Architecture solutions range on a spectrum from ‘branded house’ to ‘house of brands’.

House of Brands Description : Each brand stands on its own with no linkages to any other brand Example : Ford Motor Company has chosen to maximize the value of its brand portfolio by maintaining a portfolio of brands that serves different customers and market segments Brand 1 Brand 2 Brand 3 House of Brands

Description : Each brand stands on its own with no linkages to any other brand

Example : Ford Motor Company has chosen to maximize the value of its brand portfolio by maintaining a portfolio of brands that serves different customers and market segments

Master Brand Description : One flagship/driver brand, applicable to all customer segments, serves as the umbrella and primary point of reference for all product and service offerings Example : Virgin Group successfully extended the brand into multiple, disparate markets and categories based on the lifestyle brand that Richard Branson has built Consumer Business Product 1 Product 2 Etc. Product 1 Product 2 Etc. Business and Finance Travel and Transportation Entertainment House and Home Use generic descriptors, rather than brand names at this level Branded House

Description : One flagship/driver brand, applicable to all customer segments, serves as the umbrella and primary point of reference for all product and service offerings

Example : Virgin Group successfully extended the brand into multiple, disparate markets and categories based on the lifestyle brand that Richard Branson has built

One Master Brand Linked to Company Brands Description : Strong co-driver brands are linked to a flagship/driver brand that unifies and provides additional credibility and substance Example : Sony has chosen to maintain multiple brands, which each have significant equity, while building a flagship brand that communicates global, financial strength. Driver Brand 3 Linked Brands Brand 2 Brand 1 Handheld/ PDA TVs Portable Music Player Computers Gaming

Description : Strong co-driver brands are linked to a flagship/driver brand that unifies and provides additional credibility and substance

Example : Sony has chosen to maintain multiple brands, which each have significant equity, while building a flagship brand that communicates global, financial strength.

Carhartt Architecture ‘ Carhartt’ serves both as driver and flagship. There are few other brand roles or strategic purposes in the portfolio. Assessment: Highly efficient, but can be risky…. especially if competitors are more specialized. Branded House Brand Role Strategic Purpose Carhartt® Driver Flagship, Strategic 1889 Jeans™ Subbrand Defender WorkDry® Subbrand Distinguisher WorkCamo® Subbrand Cash Cow WorkFlex® Subbrand Distinguisher Extremes® Subbrand Distinguisher Water Proof Ingredient Distinguisher Soft Shell Ingredient Distinguisher Flame Resistant Ingredient Strategic

Coca-Cola is a good example of a hybrid brand architecture. Some brands benefit from association with the Coca-cola brands, while others are driver brands on their own. Coca-Cola Architecture House of Brands Brand Role Strategic Purpose Coca-Cola® Driver Flagship, Strategic Diet Coke Sub-brand Strategic Coke Zero Sub-brand Strategic Coke Classic Co-drivers Strategic Sprite® Driver Flagship Fanta® Driver Flagship Dasani Driver Flagship My Coke Rewards Ingredient Distinguisher Powerade Driver Flagship Minute Maid Driver Flagship

Coca-Cola is a good example of a hybrid brand architecture.

Some brands benefit from association with the Coca-cola brands, while others are driver brands on their own.

David F. D’Allesandro, Brand Warfare: 10 Rules for Building the Killer Brand, 2001PrK Process Actionability Identify key drivers going forward. Step 2: Brand Architecture Mapping Compare current go-to-market architecture vs. consumer perceptions of architecture Identify gaps, overlaps, inefficiencies and synergies Step 3: Architecture Alternative Development Develop architecture options Understand corresponding business, consumer, brand and channel implications for each option Step 4: Alternatives Screening Develop screening filters based on learnings from Step 1 Filter options to determine most likely architecture alternatives Identify gaps, tradeoffs and key decision points Issue How aligned are external and internal perceptions of number of brands and their roles? Identify hidden “gems” that could be leveraged in the future. What are the various ways the portfolio could be configured going forward? Understand the opportunities and risks of each approach. Which architecture alternative best fits the short and long-term business and brand objectives? Maximize the internal capabilities of the organization. Step 1: Strategic Business Analysis Understand strategic business and brand goals Understand customer segments and brand perceptual boundaries/limits Outline relevant trends and competitive dynamics Process How closely aligned are the brand and business strategies?

Identify key drivers going forward.

Compare current go-to-market architecture vs. consumer perceptions of architecture

Identify gaps, overlaps, inefficiencies and synergies

Develop architecture options

Understand corresponding business, consumer, brand and channel implications for each option

Develop screening filters based on learnings from Step 1

Filter options to determine most likely architecture alternatives

Identify gaps, tradeoffs and key decision points

How aligned are external and internal perceptions of number of brands and their roles?

Identify hidden “gems” that could be leveraged in the future.

What are the various ways the portfolio could be configured going forward?

Understand the opportunities and risks of each approach.

Which architecture alternative best fits the short and long-term business and brand objectives?

Maximize the internal capabilities of the organization.

Understand strategic business and brand goals

Understand customer segments and brand perceptual boundaries/limits

Outline relevant trends and competitive dynamics

How closely aligned are the brand and business strategies?

Brand Architecture Evaluation Criteria Fit with Strategy Help achieve and support strategic priorities? Strengthen and leverage the core business? Business Management Support different business units and/or market segments? Flexibility Enable the organization to react to changing market conditions? Implementation Ability to execute with a high degree of success? Financial Do expected benefits outweigh the estimated costs? Brand Brand Equity Fit with and protect existing equities? Create desired new associations? Brand Positioning and Associations Fit with the positioning and associations we want our brands to have? Enhance uniqueness? Brand Synergies Create synergies across the portfolio? Brand Management Enable marketing and brand-building efficiencies? Customer Confusion Maximize clarity and minimize confusion to current and potential customers? Customer Expectations Meet category customer needs? Market Applicability Address the needs of a changing and dynamic marketplace? Multiple Stakeholders Meet the needs of multiple stakeholders, e.g., B2B as well as B2C markets and other constituents such as investors? Business Customer/ Stakeholder Brand, 2001PrK Evaluation Criteria

Fit with Strategy

Help achieve and support strategic priorities?

Strengthen and leverage the core business?

Business Management

Support different business units and/or market segments?

Flexibility

Enable the organization to react to changing market conditions?

Implementation

Ability to execute with a high degree of success?

Financial

Do expected benefits outweigh the estimated costs?

Brand Equity

Fit with and protect existing equities?

Create desired new associations?

Brand Positioning and Associations

Fit with the positioning and associations we want our brands to have?

Enhance uniqueness?

Brand Synergies

Create synergies across the portfolio?

Brand Management

Enable marketing and brand-building efficiencies?

Customer Confusion

Maximize clarity and minimize confusion to current and potential customers?

Customer Expectations

Meet category customer needs?

Market Applicability

Address the needs of a changing and dynamic marketplace?

Multiple Stakeholders

Meet the needs of multiple stakeholders, e.g., B2B as well as B2C markets and other constituents such as investors?

Architecture Benefits Provides competitive advantage via optimal market coverage Clarifies strategy by identifying gaps and overlaps Provides leverage through marketing efficiencies for existing brands and line extensions Eases planning by prioritizing investments and showing what to do with acquired brands Facilitates development of visual identity systems Growth Gap 2008 Revenues 2012 Revenues Brand’s contribution to Growth Gap and role in supporting strategic objectives Current Business New Products/ Services Acquisitions/ Partnerships Other Growth Contributors Current Business

Provides competitive advantage via optimal market coverage

Clarifies strategy by identifying gaps and overlaps

Provides leverage through marketing efficiencies for existing brands and line extensions

Eases planning by prioritizing investments and showing what to do with acquired brands

Facilitates development of visual identity systems

How much does this option allow for future growth? What equity exists the product brands? How extendable are these? What equity exists? How extendable is it? Leverage Synergy Clarity What are the relationships between the company’s brands? How much does this option leverage the equity and relationships between the brands? What benefits do the possible strategic brands offer the other company brands? How much clarity does each option provide for the end user? Which brands are most important to consumers/ customers? Which combination of brands provides the most clarity? The optimal brand architecture affords Leverage, Synergy and Clarity. Key Questions Addressed

How much does this option allow for future growth?

What equity exists the product brands? How extendable are these?

What equity exists? How extendable is it?

What are the relationships between the company’s brands?

How much does this option leverage the equity and relationships between the brands?

What benefits do the possible strategic brands offer the other company brands?

How much clarity does each option provide for the end user?

Which brands are most important to consumers/ customers?

Which combination of brands provides the most clarity?

The optimal brand architecture affords Leverage, Synergy and Clarity.

For more information about brand architecture, brand strategy or brand research, contact: Carol Phillips Brand Amplitude®, LLC [email_address] 269-429-6526 Judy Hopelain Brand Amplitude®, LLC [email_address] 415-810-8268 With thanks to Rob Osler Director of Brand Strategy, WONGDOODY, Seattle, WA

For more information about brand architecture, brand strategy or brand research, contact:

Carol Phillips

Brand Amplitude®, LLC

[email_address]

269-429-6526

Judy Hopelain

Brand Amplitude®, LLC

[email_address]

415-810-8268