House of Brands vs. Branded House – Which is Right for Your Growing Business?

To help potential customers remember you along the customer journey, you need a brand strategy. Consistent branding anchors your business in the minds of your potential customers. As your business grows, especially through acquisitions, it can be tempting to consider a rebrand.

Before you make any changes, it’s necessary to decide on the brand architecture that’s right for your business. Having a clearly defined method for organizing and promoting your products makes your company more adaptable, establishes your target audience(s), and ensures you have the appropriate staff and resources for your brand and sub-brands.

There are many forms of brand architecture, but two of the most common are House of Brands and Branded House. In this blog, we’ll define both strategies, address their advantages and challenges, and provide guidance on how to choose the brand architecture that’s best for your growing business.

 

Branding Strategy: House of Brands

What is a House of Brands?

Are you familiar with these clothing stores: The Gap, Old Navy, Banana Republic, Athleta? Did you know they’re all owned by the same parent company, Gap, Inc.? Gap, Inc. is an example of a House of Brands. 

In the House of Brands architecture, the parent company – in this case, Gap, Inc. – has several diverse sub-brands that operate independently. Each sub-brand has its own brand identity, products, and target customers. The sub-brands are successful because they have clear, differentiated branding and messaging.

Advantages of Being a House of Brands

Companies with diverse products and/or services often employ the House of Brands strategy because it allows them to target different audiences and address different market needs. And because the sub-brands are distinct, you can prevent them from negatively impacting each other.

Challenges of a House of Brands Strategy

If you want the parent company to get the glory, the House of Brands strategy is not for you. Because the sub-brands get so much attention from their own marketing efforts, people may not be familiar with the parent company.

 

Branding Strategy: Branded House

What is a Branded House?

Now that you know what a House of Brands is, understanding the Branded House strategy will be simple: it’s the opposite!

The parent company is the brand and the different products or services it offers fall under it. A prominent example is Amazon. Many people do their online shopping through Amazon’s platform, but Amazon also offers a streaming service (Amazon Prime) and sells its own e-readers (Amazon Kindle) and smart devices (Amazon Alexa), among others.

The products and services Amazon offers are varied, but they share the same name and have a consistent look and feel so there’s no doubt about who the parent company is.

Advantages of Being a Branded House

Amazon was well-known before it began adding its sub-brands. The company leveraged its own reputation to make its additional products and services a success, and as a result, the company grew into a powerhouse.

Following a Branded House strategy streamlines marketing. The parent company and sub-brands share the same resources, and messaging is more consistent across sub-brands.

Challenges of a Branded House Strategy

As the parent company grows by entering new markets, there can be skepticism and confusion among consumers, making it difficult to meet the needs of new audiences. New target audiences might not have the same level of trust and brand loyalty as existing audiences, making them less receptive to new offerings. If a new sub-brand is in a different industry than the others, consumers might struggle to accept it because of the strong brand identity of the parent company. 

 

House of Brands or Branded House: How to Determine the Best Strategy

This side-by-side comparison of the House of Brands and Branded House strategies should help you determine the brand architecture that’s best for your growing business.

 

	House of Brands	Branded House
Brand Management & Consistency	Each sub-brand has distinct branding and messaging to attract their target audiences Brand management can be difficult, unequal, and more expensive There’s often confusion internally and among consumers about the role of the parent company	Brand messaging is consistent across sub-brands Brand management is centralized The parent company defines the sub-brands
Consumer Perception & Brand Loyalty	Consumers often don’t know about the parent company Unique branding for sub-branding shields the parent company’s reputation Consumers are more likely to be loyal to a sub-brand than the parent company	High brand loyalty to the parent company makes customers more likely to try new products or services Industry or audience mismatch between the parent company and a new sub-brand can cause confusion and skepticism
Flexibility & Adaptability to Market Changes	Differentiated sub-brands allow marketers to tailor the brand look and messaging to its target audience Distinct sub-brands allow the parent company to enter new markets or industries more easily	Association with the parent company allows new offerings to take off faster Branching into new markets or industries can be more challenging because of strong brand associations
Resource Allocation & Marketing Effectiveness	Multiple brand strategies Likely have several independent marketing departments with little interaction or collaboration Higher marketing costs overall	Unified brand strategy Typically has a single marketing department focused on the parent brand Being on the same team allows marketers to share resources and work collaboratively Centralized marketing budget allocation

But don’t base your decision just on those factors. You should reflect on the industry your business serves, the audience your business targets, and your vision for your future growth. Depending on your long-term objectives, one brand architecture is likely a better fit.

 

	House of Brands	Branded House
Industry / Target Market	Diverse offerings and target markets Defined individual sub-brands with tailored marketing strategies can more easily enter new markets with minimal risk to the parent company	Similar offerings and target markets Branching out could potentially hurt the parent company
Market Dynamics	Individual sub-brands can more easily adapt to market changes without impacting other sub-brands or the parent company	The unified brand strategy makes sub-brands and the parent company less adaptable to market changes
Business Structure /Capabilities	Distinct sub-brands and greater agility allow the parent company to offer a wider variety of products or services and to reach a broader target audience Opportunities for cross-branding Requires a wide marketing team to develop and execute marketing strategies for each sub-brand	Emphasis on the parent company brand can restrict the offerings and target audiences Requires a deep marketing team with sub-brand experts and/or marketers who specialize in specific channels or market segments
Long-Term Objectives & Growth Strategy	Maintaining and expanding portfolio of sub-brands  Introducing new sub-brands or acquiring existing ones Expanding a sub-brand into new markets Diversifying a sub-brand’s offerings Growing each sub-brand’s brand equity	Growing and strengthening the unified brand identity Leveraging the brand’s reputation, credibility, and customer loyalty across sub-brands Reinforcing brand associations by maintaining unified branding Expanding into new markets or product categories through new sub-brands under the parent company umbrella

Case Studies: House of Brands vs. Branded House

House of Brands: Gap, Inc.

Couple Don and Doris Fisher opened the first Gap store in San Francisco in 1969. Originally, the Gap sold men’s Levi jeans, records, and cassette tapes – quite a different product offering than what it is known for today.

The Fishers first began growing their business by introducing women’s Levi’s to the product offering and opening new stores. Five years after opening the first store, Gap-label products were introduced, strengthening the brand. After going public in 1976, Gap expanded by opening stores outside the United States, acquiring businesses, and creating sub-brands: Banana Republic, purchased in 1983; Old Navy, started in 1994; and Athleta, purchased in 2008. By 1991, the Gap no longer sold Levi’s, replacing them with Gap-label jeans.

Though the company has seen great growth in its nearly 55-year history thanks to the success of its sub-brands, it has also faced challenges. In 2019, Gap purchased children’s clothing brand Janie and Jack during its parent company Gymboree’s bankruptcy. The company’s plans to grow it as another stand-alone sub-brand were abandoned due to internal struggles and Gap sold Janie and Jack just three years after purchasing it. This was also part of the company’s “Power Plan” strategy to focus on growing its lifestyle brands, which also included launching the sale of Gap Home products on walmart.com. 

Because of its House of Brands architecture, each sub-brand has been able to develop its own identity and target market and evolve both over time. For example, Banana Republic introduced a new brand identity in 2021, and activewear company Athleta sponsored Olympic gymnast Simone Biles and partnered with award-winning musician Alicia Keys to co-create a line focused on women’s well-being. And when there’s been a mismatch or negative market influences with a sub-brand, Gap has been able to offload it and maintain its core identity and competitive advantage.

Read more about the Gap’s history here. Read this Retaildive article to learn more about Gap’s sale of Janie and Jack.

Branded House: Amazon

Amazon began as an online bookseller in 1995 at a time when online shopping was far from the norm. Though it grew revenue in its early years, it also faced losses; it wasn’t until 2001 that the company saw its first profitable quarter. Though Amazon had begun selling more than just books at this time, it didn’t truly take off until 2005 when Amazon Prime, its 2-day delivery subscription, was introduced.

Bundling Prime Video helped Amazon Prime subscriptions take off. Thanks to a large subscriber base and the growing popularity of online shopping, Amazon saw continued growth, amplified by its own consumer technology (e.g., Amazon Kindle e-reader and Amazon Fire tablet), private brands (like AmazonBasics household products and Amazon Essentials clothing line), cloud services, and acquisitions (including supermarket chain Whole Foods and entertainment company MGM).

With its Branded House architecture, Amazon can leverage its eCommerce platform to promote and sell its own products, which often are designed to work together. Take its e-reader the Kindle: readers can purchase reading material from their device through the Kindle store, which is part of its online marketplace. To grow its reach with readers, Amazon purchased the audiobook company Audible in 2008.

In less than 30 years, founder Jeff Bezos became one of the richest men in the world, and his company became ubiquitous – available internationally and in a variety of markets. However, it has faced challenges and controversy because of its Branded House structure. As a marketplace owner and retail seller, Amazon’s practices have come under consumer and governmental scrutiny for its monopolistic and anticompetitive practices.  

If you’d like a quick overview of Amazon’s history, read this article in the Michigan Journal of Economics. For a more exhaustive list of Amazon’s many products, services, subsidiaries, and acquisitions, see this definition from TechTarget.

 

Conclusion

In determining the optimal brand architecture for your expanding business, the choice between a House of Brands and a Branded House rests on several crucial factors. A House of Brands approach offers versatility and market adaptability through its distinct sub-brands, each with its own identity and target audience. Conversely, a Branded House strategy emphasizes a unified brand identity, leveraging the parent company’s reputation and streamlining marketing efforts across its offerings.

Aligning your branding strategy with your business objectives is of utmost importance. Whether you want to reach diverse markets or reinforce a singular brand identity, your choice should reflect your long-term vision and growth trajectory. Consider the industry dynamics, target market specifics, and internal capabilities required for effective execution. Striking the right balance between differentiation and coherence is key to maximizing brand equity and market impact.

Ultimately, the success of your branding strategy hinges on its resonance with your audience and alignment with your business goals. By carefully weighing the advantages and challenges of each approach and understanding their implications for your brand’s trajectory, you can make an informed decision that propels your business forward in the ever-evolving marketplace.

Still not sure which marketing architecture would be the best match for your future growth goals? Let us do the investigative work for you.