Take a look around your organization and count up the total number of brands that you're financing. Include your corporate brand (eg. Kellogg's, Sony), your product brands (eg. Corvette, Smarties), and we'll leave your internal, employee-focused brands for discussion on another day.

Whether your tally is one or 75, the total number of brands you're paying for needs to be a deliberate decision made by senior management on an annual basis. Brands are time and cash-intensive. So be brutally honest about how many you can afford to support and if you can afford to resource each brand well enough to compete against the leaders in their category. You also need to determine which brands are actually helping you reach your corporate goals.

Looking at your brands as a portfolio of assets and determining how they can best work together to maximize ROI, is the field of study referred to as brand architecture. This article is the first of two where we’ll share some of the practical lessons we’ve learned helping clients solve brand architecture problems. We hope they'll help you and your leadership team determine the optimum number of brands for your organization and also offer some insight on how to prioritize their financial resourcing.

Branded House or House of Brands?

Due to the extensive financial and strategic implications, it's a big corporate decision to determine how closely related or unrelated your organization's brands are going to be to one another. A helpful reference point is to determine if your organization's collection of brands should more resemble the Branded House approach or the House of Brands approach.

The Branded House approach is the way that GE (General Electric), HP (Hewlett-Packard), and Apple do it. These companies sell multiple products to multiple customer segments, under one giant masterbrand. For example, Apple conveys sleek design, clever graphics, and a youthful image alongside all of its successful products:  iPod, iTouch, Mac, iTunes, iPhone, and iPad. The look, feel, tone, personality, colours, style, and much of the messaging is highly consistent across all of Apple's brands.

One advantage of uniformity across all of your brands is that the goodwill and trust of the masterbrand can be transferred to the sub-brands. If a customer is familiar with and approves of the masterbrand, they're going to be more willing to try one of the sub-brands. It also offers marketing efficiencies because every time you promote the masterbrand, you're simultaneously promoting the sub-brands. This means less logos / visual identities to manage and you avoid having to resource a bunch of separate brands that each have a unique message.

A disadvantage of the Branded House approach is that if something goes wrong with the masterbrand (eg. Maple Leaf) then all of its sub-brands inherit the negative attributes. Another challenge is that it can be more difficult to reach or relate to a highly distinct customer group. If IBM wanted to reach the youth market with an online music store, their masterbrand presents some obstacles.

The House of Brands approach is used by organizations such as P&G (Proctor & Gamble - Tide, Duracell, Crest). Inside the P&G house of brands there are more than 100 unique brands, each of which has a separate logo, messaging, personality, promotional campaign, etc.

An advantage to this approach is that risk is isolated. So a catastrophe with Duracell batteries is unlikely to negatively affect P&G's sales of Crest toothpaste. Another advantage is that each of the brands can have more distinct personalities that directly relate to unique audiences. The brand positioning that P&G uses to promote Tampax can be totally different from their positioning of Gillette Mach3, Folgers, and Pampers. If these product brands were tied closely to an overall P&G masterbrand, it would be difficult to relate to unique audiences.

The disadvantage of the House of Brands approach is that there is no goodwill or positive equity transfer from the masterbrand to the sub-brands. And it's almost always more cost-intensive because totally separate brands are more expensive to resource than a group or family of uniform brands.

Reviewing these two approaches of brand portfolio management (Branded House vs. House of Brands) can help your corporate team determine which end of the spectrum would most benefit your organization. Lately, our clients' need for cost efficiency combined with the opportunity for a trusted masterbrand to transfer equity to sub-brands, has resulted in us recommending the Branded House approach (high uniformity) with greater frequency.

Once your team has decided which end of the Branded House / House of Brands spectrum you're on, you'll have more clarity as to how many unique brands you need to resource. Retiring brands can be a highly charged activity as they often have deep roots and emotional connections inside an organization. So watch out for emotional factors creeping into the decision making process and make sure that each brand you're resourcing is helping you move closer to achieving your overall corporate goals.