Sub-branding: getting to know the concept

Owners of a business planning its expansion often think about such issues as creating a sub-brand, brand extension, multi-branding. Despite their similarity, all these terms have a number of differences, which you should definitely navigate in order to ultimately choose exactly the solution that will be most effective for your business.

Now let’s look in more detail at what the term sub-branding hides and highlight its key differences from brand extension and multi-brand. We’ll tell you in what case it makes sense to create a sub-brand, highlight its main advantages and disadvantages, and get acquainted with possible structures. Let us give a number of examples of sub-branding that are used in world practice today. We will give recommendations that will be useful at the stage of its creation. But, first things first.

Sub-branding: getting to know the concept

The term sub-branding means the creation of a secondary or, as it is also called, an umbrella brand. This is done in order to attract a new audience and expand the range of products. Moreover, such a solution will help improve recognition of the main brand and increase loyalty from the user audience. If customers are accustomed to trusting the main company, then they will also transfer their opinion to umbrella brands. As a result, this will lead to an increase in income levels and the development of both the main and subsidiary brands.

Despite a number of significant differences, sub-brands will still have a connection with the main company. But at the same time, they may have their own standards, corporate identity, unique logo and slogan. In some cases, the focus is on the identity of the parent brand. Both strategies have a right to exist and give good results in practice. An example is Apple Corporation. This name alone is enough for consumers to associate it with reliability, stability, efficiency, and premium quality. All this is also automatically transferred to the sub-brands of the corporation, in particular iPhone products , iPad, iPod.

In any case, the name of the sub-brand echoes the name of the parent company. There are several options here. For example, it may consist of two words, the first of which will be the name of the brand, and the second is the name of the sub-brand itself. An example is the sub-brand Sony Pictures and the main brand Sony. Another option — a brand name consisting of one word, the first part of which is taken from the main brand. An example of this is the parent brand Nestle and its sub-brand Nescafe.

At the beginning of the review, we already said that today in the market, along with such a term as a sub-brand, there are also additional concepts. In particular, brand extension refers to the transition of a company from one production category to another. This happens when good progress is made in one of the niches, everything works stably, but there are no more prospects for development. And then an advisable solution would be to develop other areas of the market in which until recently the company had not yet worked.

Another term — multi-brand. In this case, it is also assumed that subsidiary brands will be created, but their name will be absolutely unique. One that in no way refers to the main brand and does not evoke any associations with it. For example, Procter & Gamble can safely be called a multi-brand. It supplies the market with Fairy detergents, Braun small household appliances, Pampers diapers, a huge variety of shampoos and other products.

That is, in order to understand that this is a sub-brand, you first need to pay attention to its name. It will necessarily be consonant with the main brand, that is, it will contain one word of the main brand or several of its letters in the name. But for the most part, in modern practice, the term subbrand hides all 3 concepts. Therefore, we will not separate them too much. We will also not delve into the legal side of the issue.

In what situations is it recommended to create a sub-brand

The creation of a sub-brand is mainly resorted to by already well-promoted and reputable companies. There are 3 key reasons for making such decisions:

1. The desire to launch a fundamentally new product on the market. This is the case that we have already briefly mentioned above. The point is that the company had an idea, in addition to the main product, to release some other fundamental new product. One that will belong to a different product niche or price category, will be positioned in a completely different way on the market, and will target a different segment of the consumer audience. An example here is the Mercedes-Benz brand. Thus, the price of a Mercedes-Benz S class averages about $100,000, while a model of the same class from the Mercedes-Maybach sub-brand will cost buyers at least 2 times more. There are fundamental differences in cars, which became the reason for quite significant differences in price. You have to pay extra for premium quality, expressed in a higher level of comfort and extraordinary bright design.
2. Building a more developed brand architecture. As we have already said, such a solution as creating a sub-brand is mainly resorted to by companies that have been successfully operating in the market for a long time. Those who are looking for new ways of development differentiate their products, distribute them into different categories depending on the product group, cost, and a number of other criteria. Thanks to such structuring, the efficiency of the company itself improves and interaction with the target audience is simplified. Moreover, structuring makes the search for certain products simpler and faster for customers, since it will be easier for them to navigate the huge assortment. An example here is the Armani brand. Today it has a huge number of sub-brands, divided by product categories. In particular, companies such as Giorgio Armani, Emporio Armani, Armani Exchange specialize in the production of clothing, shoes and accessories. But products for children can be found in Armani Junior. If buyers are interested in perfumes, they turn to the Armani Prive brand. If you need interior items, designer furniture, the Armani Casa company can satisfy such a request. The main brand even has a sub-brand specializing in the production of confectionery products. This is Armani Dolce.
3. Increasing your presence in the market. By launching a sub-brand, a large company can increase its competitiveness and reach a large number of user audiences and business niches. The logic here is quite simple: the company’s position in the market relative to competitors will be higher if they have a higher percentage of total sales in a given segment, that is, the market share will be higher. Since we provide examples in each category, we will highlight them here. As an option, we suggest paying attention to the Yandex corporation. Today its market share is about 40%. And this is ensured mainly due to the presence of a huge number of products in different market segments. This is the taxi service "Yandex Go", premium subscription "Yandex Plus", search engine "Yandex Browser", online booking service for tickets and hotels "Yandex Travel". By the way, Yandex’s closest competitors — This is the mobile operator MTS, which occupies 21% of the Russian market, as well as Sberbank. with 18% of the market.

Regardless of the reason why you decided to create your own sub-brand, you need to approach this issue as comprehensively and professionally as possible. Like any other solution, this has its advantages and disadvantages. Therefore, it is very important to weigh the pros and cons before making any drastic decisions. To make it easier to decide, we suggest getting acquainted with the strengths and weaknesses of launching a sub-brand.

Advantages of launching a sub-brand

The main advantages of such a solution as launching a sub-brand of your company include:

1. Increasing the efficiency of promotion and simplifying related work. To launch advertising campaigns and organize the work of the marketing department as a whole, you will need significantly less money. This is due to the fact that the consumer market is already well-known about the products of the main company; they are confident in their quality and reliability, therefore they will be more loyal and positive towards new products from the sub-brand.
2. Formation of the most positive image about the new company. This is also due to the fact that the consumer market is already quite familiar with the core brand. The audience will automatically transfer all the characteristics of the parent company, including its image and reputation, to the new brand. This will have a positive impact on income levels and will also contribute to more rapid development in the market.
3. Easier search for sales markets. Distributors operating in the market will be more interested and willing to buy products from sub-brands than from any little-known manufacturers. That is, such a young company does not have to worry that it will have problems selling its products.
4. Expanding the target audience. As a company operates in the market, buyers begin to associate it with a specific category of products or a particular product. If the company decides to expand, it will be very difficult to convey to the audience the information that the brand also has other products, which will complicate its introduction to the market. Therefore, a more rational solution would still be to launch a sub-brand for a new market niche and target audience segment. For example, the PlayStation console and related games made a real splash on the market and opened up a new category of buyers for Sony Corporation — gamers
5. Strengthening the position of the parent company in the market. Subsidiary companies not only work on the reputation of the parent brands, but also share with them their own successes and developments. Moreover, their appearance will indicate to the user audience that the company is developing, expanding, and working for the future.

Now let's move on to the other side of the coin.

Main disadvantages of launching a sub-brand

Be that as it may, the launch of a sub-brand — This is a rather risky and extraordinary decision, which not every company will decide to take. And this is due to a number of significant shortcomings:

1. Additional material investments. Like the creation of absolutely any company, a sub-brand will require significant financial expenses. It will be necessary not only to set up production, in some cases from scratch, but also to develop a unique corporate identity, launch a new website, fill it with content, promote it and social networks, launch advertising campaigns, and hire additional staff. Not every company can afford this. This is why we initially said that the launch of the sub-brand — This is a solution that fairly large companies resort to when expanding. For smaller organizations, the very process of launching and subsequently maintaining a sub-brand can entail unaffordable costs and make the company unprofitable. You need to understand that along with the launch itself, you will also subsequently need funds to maintain the sub-brand. In addition, it will not start making profits from the first day it appears on the market. That is, this is the case when it would be nice to live to see the future. To minimize such negative consequences for your business, initially calculate how much it will cost to launch a sub-brand, and only then evaluate your own financial capabilities. You should only decide to take drastic actions if you are completely confident that you will financially support such an initiative. It is also important to understand what human resources will be at your disposal. It is optimal to transfer all work with the sub-brand to a new team. If you involve people who work in the parent brand in such work, this will lead to a decrease in their productivity, which will also negatively affect the work of the parent company as a whole.
2. Risk of brand dilution. A similar problem is relevant for companies that launch a large number of sub-brands. In this case, it will be difficult for the user audience to keep track of all these changes and navigate all the products produced by subsidiaries. The whole idea of a business can be lost if sub-brands produce products that have nothing to do with those products that are presented in the assortment of the main company. So, if, for example, the parent brand launches cars on the market, and subsidiaries begin to produce children's toys, dishes, furniture, then the entire concept of the business is lost, the main idea disappears. The target audience does not perceive new products and does not associate them with the main brand. This can only be avoided if, when developing sub-brands, you adhere to the main idea and fit them into the intuitive ecosystem of the original business.
3. Reputational risks. We have already said more than once that the consumer audience associates products manufactured by sub-brands with the main company. Initially, you need to be prepared for the fact that the level of customer loyalty and satisfaction will be the same in each brand. And if it happens that the idea of your sub-brand does not work, if it does not receive a positive response from consumers, then all this negativity will automatically be extended to the main company. That means she will suffer too. Likewise, the challenges faced by the parent company will also affect the sub-brand. But this problem has a fairly effective solution. In particular, produce high-quality products, and a bad reputation will not threaten either the main or the subsidiary company.

Now that you are familiar with the concept of a sub-brand, you know when it is worth launching, what advantages and disadvantages this solution has, you can delve into this topic more deeply. In particular, now we will get acquainted with the architecture of the brand and, accordingly, sub-brands.

What could a brand architecture be

Brand architecture — this is the structure of the entire system, which includes sub-brands, as well as the relationship between them, the tasks that each of them solves. Today in practice there are 3 possible options:

1. Brand house. Already from the name it can be judged that the central element of such an architecture will be a directly known trade name. And subsidiaries will be located around it. At the same time, all sub-brands will be quite closely related to the parent company. All these structures will have a very similar style and will have the same approach to positioning the products they produce or the services they provide. The logo, brand name, packaging, style of communication with the user audience will be quite similar here . The consumer market will easily identify all sub-brands and associate them with the parent company, transferring their own opinion about the main company to them. In this case, the mutual influence of the brand and the sub-brand will be very high. Examples of such a solution include products from Google Corporation, in particular Google Docs, Google Drive, Google Translate, Google Play. Another example here is Yandex and all its divisions, which we talked about above, as well as Apple with products such as Apple Watch, Apple TV, Apple Music.
2. House of brands. If we analyze this name, we can conclude that there are a large number of disparate brands, united among themselves into one network, owned by the same person or group of persons. That is, here we are talking about the presence of subsidiaries that are not particularly related to each other. In this case, buyers may not even realize that they are looking at products from the same corporation. There may be fundamentally different names, development strategies, packaging, etc. That is, despite the fact that all companies belong to the same main brand, they will practically not overlap with each other. Their interaction will be minimal. Examples of such brand architecture include the Procter & Gamble, as well as its sub-brands Pampers, Old Spice, Fairy, Ariel, Braun, Tampax, as well as the Unilever company, which owns Rexona, Dove, Domestos, Lipton. A prominent representative of the house of brands in the category of automakers will be General Motors, which unites under its name such manufacturers as Chevrolet, Buick, Pontiac, Cadillac, Holden.
3. Hybrid structure. This option is used rather as an intermediate one and involves combining the first two solutions. It turns out that in this case, sub-brands use the reputation of the parent company, but at the same time have a clearly defined identity and different development strategies. Examples of such solutions include the Sony Corporation and its acclaimed product Sony PlayStation, or the same Nestle and Nescafe coffee or Nesquik cocoa.

You need to decide what structure your company will have even before launching sub-brands. You must understand how the parent and subsidiary companies will interact in the future, how closely they will be intertwined with each other. And based on this, build a future strategy.

How to create a sub-brand correctly

Now we will give a number of recommendations that will help launch a sub-brand, while minimizing potential risks and dangers. In particular, it is worth paying attention to the following points:

• Assess the need to launch your own sub-brand. We have already said that the launch of an additional company — This process is not always straightforward. This means that even before the actual work begins, it is important to determine how appropriate it would be to launch a sub-brand specifically for your brand. In some cases, such a decision will be unwise and will not bring development to your company and will not live up to expectations. You should think about creating subsidiaries if you are planning to launch a fundamentally new product on the market or want to attract the attention of a completely different target audience. But at the same time, you would like to preserve the values and ideas that have become the basis of your today's brand. In all other cases, most likely a more rational solution would be to continue producing products under the existing brand or launch multi-branding.
• Take into account the financial condition of your company, in particular whether you can handle the entire launch process, as well as the subsequent support of another full-fledged company. A sub-brand cannot be allowed to become an unbearable burden on an operating company. Yes, sub-brands are often brought to market faster than the main company, requiring a minimum of time until they begin to make a profit. But you should still have enough resources at your disposal to launch and subsequently promote a new brand. And try to make sure that maintaining its functionality is not included in the range of tasks of employees working in your main company. You should launch a sub-brand only when you are sure that your actions will not lead to losses.
• Pay attention to the current reputation of your core brand. You must understand that the image that you have developed for yourself at a given moment in time will automatically extend to the newly launched sub-brand. If at a given time your main brand has reputational problems, then the launch of a new company should be suspended for a while. That is, it is important to initially remove existing problems, and only then think about expansion. Otherwise, you definitely shouldn’t count on your subsidiary brand getting a head start on successful development. That is, you must be completely confident that the user audience will enthusiastically accept the entry of your sub-brand into the market. If there is no such feeling, if you assume that the target audience will not react particularly positively to your new brand, you should not even spend money on the launch. There is a high probability that the effectiveness of such an idea will be minimal.

To summarize

Summarizing everything we talked about in this review, we note a number of key aspects. In particular, well-structured sub-branding – this is something that will have an overall positive impact on the development of your main company, will allow you to introduce a new product to the market with minimal time and effort, occupy another niche, and increase the level of loyalty from the user audience. And what exactly will be the structure of your sub-brand — This is a rather individual question. In particular, you can completely link it to the work of your main company or, conversely, go beyond it and use your own strategy.

Before launching such large-scale work, it is important to assess your own capabilities, primarily material ones. You must have enough funds not only to create the company itself, but also to maintain its operation in the future. In principle, when developing a strategy, you can evaluate the experience of other companies that have already created their own sub-brands. This will help you understand which decisions can be called correct and correct, and which ones would still be better to avoid.

We bring to the conclusion that the process of creating a sub-brand requires a very painstaking and comprehensive approach and in any case it should begin with an analysis of your prospects and capabilities. This is what will allow you to evaluate the feasibility of an idea and select the most effective ways to implement it. Here it will be useful to perform a comprehensive audit of your own company and monitoring of competitors. You have to invest a lot of money in the opening and development of a sub-brand. And this is a risk. Therefore, from the very beginning you need to understand whether all this will be justified or not.

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