In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit. The architecture of the so-called brand refers to the choice of brand subordinate and the relationships of all products. It specifically regulates function and position of each brand in brand strategy. On the strategic level, brand architecture has two kinds of big directional selection.
By Cancan Lu
In
economics, an externality is the cost or benefit that affects a party who did
not choose to incur that cost or benefit.
The architecture of the so-called brand refers to the choice of brand subordinate and the relationships of all products. It specifically regulates function and position of each brand in brand strategy. On the strategic level, brand architecture has two kinds of big directional selection.
The first one model is giving priority to corporate brand, which we called corporate brand model, that is corporate brand is consistent with all products brand, or more focusing on corporate brand. For example, virgin use the corporate brand on all products in all areas of its business, and as the Buick Company owns Buick Lacrosse, Buick Excelle, Buick Hideo Models;
Another one is the independent brand model, namely the corporate’s products (services) use different individual brand. For example P&G has Rejoice, Head and Shoulders, Crest, Chi Mei er, Tide, Pringles etc.
Different corporate choose the different architecture as per their conditions. It seems that every corporation has a good management of brand architecture and has achieved great success. However, there are also so many corporations which have failure brand because of the lack of scientific and rational management of brand architecture.
The study of brand architecture selection before mainly focused
on the corporate factor, that is the relationship of product brands and the
relationship between corporate brand and product brand only. But, it cannot be
denied that the success of a certain brand is determined by consumers, and this
paper is based on the brand concept from consumer’s point of view. Therefore, it
is necessary to take consumers factor into consideration on the process of
brand architecture selecting. At the same time, culture, as an important
variable, has a significant explanatory power on analyzing cross-regional
business practice. So, we also take into account the culture factor.
The External Factors
Affecting the Architecture of the Brand Strategy
Social
Culture
There are many
research shows that the people of Europe and the Americas are with more
personality, they advocate more personal independence, therefore, the European
and American countries tend to choose independent brand model so that consumers
can rely on a variety of innovative products to show their own personality.
On
the contrary, Oriental countries, such as China, South Korea and Japan etc, are
more emphasis on collectivism, unity and coordination. The crystallization of
this culture has penetrated into every stage of enterprise management. All of
the management, the marketing work must be unified in a collective culture so
that the corporate choose the corporate brand model. In addition, the
oriental culture is more exquisite “origin”, such as ancestry. This kind of
culture has been influencing the Oriental consumers for long time. For the same
product, consumers have different acceptance and purchase decision considering
it is from a well-known large companies or born in a small corporate. The
different phenomenon for this because consumers think big corporate has more
capacity to produce this kind of product. Corporate ability can cause
consumers’ association about product attribute. Capacity here refers to the
professional level of production and providing products or services, such as
technology innovation ability, production capacity.
Market Factor:
The market
factors that affecting brand architecture is the degree of homogeneity. The
higher degree of homogeneity of the market, the more priority to corporate
brand model. If degree of homogeneity is lower, corporate are more inclined to
independent brand model. For example, the degree of homogeneity of PC market is
relatively high, the enterprise is very difficult to find a new market segment,
if the company uses the independent brand model that is bound to increase
enterprise cost of new brand building and marketing. On the contrary, if the
degree of homogeneity of the market is low, then the enterprise can create a
new brand to occupy new market quickly, meanwhile building barriers to entry
and creating profits.
Technology:
If the technology updates faster, it’s better
to choose the corporate brand model. The creation of new brands, marketing,
consumer accepting and earning profit return are not instantaneous, the whole
process is a certain length of time. As frequent changes in technology markets,
if companies choose the independent brand model, perhaps the product has been
updated when its new brand has not been accepted by consumers. The product has
been eliminated by the market but does not create value. On the contrary, it
can avoid the adverse impact on the brand when technology updating if the
corporate chooses the corporate brand model. For example, in Personal Computing (PC) industry, each
introduced new products take the brand architecture of adopting the “Corporate
brand + Version” so that enterprises only need to publicize the function,
attribute of the new product. This can not only reduce the cost of marketing,
but also meet different needs of different people.
On the other
hand, with the rapid development of Internet, the brand architecture selecting
has changed dramatically. According to a new research report, by the end of
2014, the global Internet users will be close to 3 billion, this figure is
equivalent to 40% of the world’s population and two-thirds of the users will
come from developing countries. The scale of Chinese Internet users has
reach to 0.6 billion ended December 31, 2013 and the Internet penetration rate
is 45.8%. In recent days, consumers have more opportunities to get the
information of products and corporates. Now, consumers can easily gain related
information of a certain brand through Internet when they face a new unfamiliar
brand, for example, how the quality of the brand; which corporate the brand
belongs to; the brand ranking, and so on. This will greatly reduce the
information asymmetry than before and consumers are increasingly able to get
enough information he needed at lower cost. Therefore, the corporate is more
and more suitable for choosing the corporate brand model. Because even to
choose the independent brand model, the perception of the products will be
mainly from the corporate brand after the consumers search the ownership of the
brand on the Internet. The consumers will firstly judge the corporate brand,
then go for the evaluation of the product brand. There will be a big waste of
the funds when building an independent brand. It is getting harder to establish
unique brand image through independent brand model. At present, more and more
corporates begin to focus on the building of corporate brand image can
illustrate this opinion in a certain extent.
Consumer:
Consumer
maturity refers to the degree of price sensitivity and purchase experience of
consumer. The immature consumers will pay more attention to product’s
function and price. In this situation, it’s better to adopt the corporate brand
model because good corporate brand becomes the guarantee of quality and service
commitment. For example, Chinese consumers tend to attach more importance to
product specific attributes and price while ignoring the shopping process cost,
time cost, spirit cost, service value and other factors compared to European
consumers. Therefore, corporate brand model is a better choice in China.
If
consumers attach great importance to functional properties of products in
purchase progress, it’s better to choose the corporate brand model because it
can make consumers be aware of what he buys is not only the product itself, but
also the entire corporate and manufacturer. This model could strengthen the
image that product is from a big company, not a small and let consumers feel
better quality and more secure. In china, consumers always believe that big
corporate has more resources and greater abilities to provide good products and
services. Obviously, it is also consistent with the culture factor mentioned
above.
Corporate
Strategy:
The brand architecture strategy is one of the
corporate’s overall strategy, so it should reflect the goal structure and the
choice of corporate’s overall strategy. It means that the strategic brand
architecture is determined in a period of time once the overall goal of the
corporate is for certain. According to the competition strategy theory of
Potter, enterprises can choose between the low-cost strategy and the
differentiation strategy, if the enterprises choose the former, it’s better to
choose a corporate brand model. Under this kind of architecture, corporate only
needs to make corresponding marketing activities for one brand. It will play a
propaganda effect on all products, and of course that can greatly reduce the
cost for the corporate. If choosing the differentiation strategy, so it should
tend to the independent product brand because one brand is difficult to meet
the different needs of different consumers and more brands can adapt to
different consumer groups.
Brand Image:
The more consistent of corporate brand
association and product brand is, the more the corporate should adopt corporate
brand model because this model can make the product sharing corporate brand
association, it also can expand the corporate brand association. For example,
the Estee Lauder reminds people of high-end cosmetics, if the company launched
another high-end products, it can continue to use the corporate brand. On the
contrary, if the company launched another low-grade product, it’s better to
avoid the use of the corporate brand because it would be detrimental to the
corporate brand image. When the images of corporate brand and product brand are
widely inconsistent, the best choice is adopt the independent brand model so as
to avoid conflict of the two images.
Correlation between
each Product within the Enterprise:
If the correlation between each product within
the enterprise is relatively strong, the enterprise should choose the corporate
brand model. If the correlation is weak, it should adopt the independent brand
model. Just imagine that if a chocolate company produce toilet cleaning agent
and it adopt the corporate brand model, then this will make consumers don’t
know what course to take. In this case, it should take the independent brand
model to weaken the influence of the corporate brand and avoid the negative
impact on the company due to different nature of the products with the same
brand.
The Strength
of Corporate Brand Driven Role:
In Aaker’s
book “Create a Strong Brand”, he pointed out that brand has a driving role
which is the decisive actor of customers to buy products. If the driving role
of a corporate brand is strong, it should tend to the corporate brand as the
leading because the strong corporate brand can help to expand product boundary
and all products or services can share the corporate brand marketing efforts.
For example, the virgin company established a very strong brand image, namely
“challenges freedom and happiness” and the driven role of this image is very
strong, so that the company can reach not related areas, such as airline,
hotel, catering and other fields. On the contrary, if the corporate brand
driven role is weak, it might as well choose the independent brand model
because the weak corporate brand did not have driven effect on products.
About The Author:
Cancan Lu, Management School, Shanghai University of
International Business and Economics, Shanghai, China
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