brand-hierarchy

What Is A Brand Hierarchy And Why It Matters In Business

Brand hierarchy, otherwise known as brand architecture, refers to the brand strategy behind the relationships between various parts of a business. Broadly speaking, this strategy is best summarized by grouping products and services according to their associated similarities and differences.

Understanding brand hierarchy

As companies grow, so too do their product ranges. Brand hierarchies help businesses and indeed consumers communicate vital brand elements and feature differences between individual products in a range.

Brand hierarchy is important for the simple fact that many businesses overlook the strategy entirely. These businesses tend to have a preoccupation with releasing products and services without first thinking about the relationship between them.

As a result, the association between offerings is vague and not reflective of the wider brand. Consumers then become confused and unable to make a purchasing decision, which negatively impacts on revenue and profits.

Establishing a robust brand architecture is not difficult and can be performed at any stage of business development. However, those who focus their efforts on product development at the expense of brand hierarchy may encounter a costly rebrand in the future.

The three types of brand hierarchy

Corporate, umbrella, and family brands

The highest level of the hierarchy is corporate, family, or umbrella brands. This level uses cohesive and consistent naming and identity structures, ensuring that individual products and services are homogenous throughout the range. The corporate strategy is particularly useful for large parent companies that have many divisions or subsidiaries.

For example, Heinz Cream of Tomato Soup and Heinz Tomato Ketchup both share similar visual branding on their labels. They also feature the corporate brand Heinz in their names, reducing confusion among consumers, and increasing brand equity in the process.

Endorsed brands

Endorsed brands are those that have been endorsed by a parent brand that is either a corporate, umbrella, or family brand itself. In theory, the endorsement from the parent brand adds credibility to the endorsed brand in the eyes of consumers. In this approach, products are linked or grouped according to brand identity itself. They do not rely on homogeneous naming or aesthetics.

For example, parent company Microsoft lend their brand identity and credibility to Office, Xbox, Windows, and Bing. But each endorsed brand in isolation is distinct in the sense that it is not immediately recognizable as being owned by Microsoft.

Individual

Individual brands are consumer-facing brands where no explicit link between the product and its parent brand is promoted. In many cases, there is also no link between individual brands themselves. 

This is a common occurrence when parent brands acquire smaller brands with high equity among consumers. Here, the parent brand is irrelevant and often detrimental to brand equity compared to the individual products it takes ownership of.

Coca-Cola uses this strategy to their advantage, having acquired brands such as Fanta, Sprite, and Dasani that were successful in their own right. Further investigation will reveal the connection to Coca-Cola, but these brands continue to exist in original, recognizable forms.

Benefits of incorporating brand hierarchy strategy

  • Reduces customer confusion. Businesses offering a line of unrelated products confuse consumers as to the brand they are trying to create and convey. Establishing proper brand hierarchy lessens this confusion, establishes consistency, and leads to increased brand equity.
  • Reduces competition. In some cases, sub-products achieve such popularity with consumers that the weaker core brand loses popularity. Brand hierarchy strategies focus on strengthening the primary brand so that products under its “umbrella” do not compete with or undermine each other.
  • Provides clarity. When brands are visually or otherwise segregated with a hierarchy, it allows businesses to develop a marketing strategy for each. Since each brand will have its own target audience and brand story, clarity reduces the chances of brand dilution or improper messaging.

Key takeaways:

  • Brand hierarchy is a means of organizing different brands and their associated products under a larger, parent brand.
  • Brand hierarchy can be divided into three main types: corporate, endorsed, or individual. Each has a different organizational structure based on real or perceived relationships between a parent company and its various brands.
  • A brand hierarchy strategy is most effective when implemented as a foundational element of business operations. It clarifies the future direction of a brand and avoids individual products within a brand potentially undermining each other.

Read also: Microsoft Business Model, Brand Pyramid, Brand Essence, Brand Building.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here