By Tom Dougherty
Branded House or House of Brands
If you want to win by growing your market share — there is a better way, a smarter way, than the traditional advertising and marketing strategy and tactics. However, it requires looking at your business and brand from a very different point of view. This different point of view is hard to grasp because old myths die-hard and old expensive myths seem to die hardest of all.
If you need to steal share, it does not require underhandedness (as the name might suggest) it requires smarts. If you think that “stealing,” as it relates to taking market share, is a short cut to success — a means to cheat your way to success — you are dead wrong. Winning requires great effort and hard work because it means you must outsmart your competition in order to achieve success. In our book, you must learn how to be different and smarter. You must stop seeing the “marketing game” as you learned it in college, even if college was just last year. Things are changing and the future belongs to those that recognize and use change to their advantage.
It is All About Scarcity
Start with the idea of scarcity. Encapsulated within scarcity is the entire concept of value. We only value scarcity. If we discovered a heretofore hidden mountain range made entirely of gold, the owner would not be rich because the abundance of gold in the market would make the metal a commodity, with all of the inherent value of tin. Everything has a value measured by its scarcity — the greater the scarcity, the greater the value. The pharmaceutical industry today is a case study in scarcity because the profits they glean are in direct proportion to the uniqueness of the patent. They protect scarcity by patenting their concoction and then defending that patent as if their very lives depended on it. And they are right; their livelihood does depend upon it.
Wall Street analysts will talk about these pharmaceutical companies in terms of product pipelines, FDA approvals, and waning patent rights. The mix of the three is the difference between a BUY, SELL or HOLD stock recommendation. In the absence of any other reason for the physician or patient to choose which pharmacological compound to prescribe and use besides drug efficacy, these companies had better keep the pipeline filled with new drugs and new patents.
Only when a product like VIOXX is pulled from the market because of troubling side effects, does the physician council the patient that the OTC available product, ibuprofen, has nearly the same efficacy. The REAL problem here is a fundamental idea that it is a smart strategy to build your “business home” as a house of brands rather than as a branded house. If you don’t mind chancing your fortune by putting all of your eggs in the “R&D” basket then being a house-of-brands is not a bad idea.
Things are Not as They Once Were
Often, in the beginning of a company’s life cycle, companies differentiated themselves with one or two break through products. It was simply easier to market product efficacy than it was to dig deeper and understand just what the customer is buying (who the customer is buying is closer to the truth) and why.
It was, and still is, the conventional marketing wisdom. In addition to requiring greater smarts and dispassionate intellectual vigor, being a successful branded house requires as a prerequisite the ability to see your customer, not as an asset to exploit, but as a partner to understand, and with whom one must empathize.
What is a Branded House?
A branded house, when done properly, has an overarching reassurance to the customer that those that choose this BRAND share an attribute. Not a product attribute but an identifiable personal attribute that not only sets them apart but is integral to their own personal identification. Choosing such a brand is not necessarily a matter of showing off or display. Rather it is absolutely a means of self-discovery and personal fulfillment instead of having to rely solely on product attributes like in the house of brands model. So, when a branded house launches a new product or sub-brand, the new addition to their stable automatically gains a level of acceptance and importance because of the previous identification with the parent brand.
Most branded houses make the mistake of believing (in this case a form of self-deception) that the parent brand equity is also about efficacy or category. We reiterate: this idea is corporate identity at best. More often, is it simply an acknowledgment of the commodity benefits — benefits of the category that comprises your business’s sandbox.
Parent brands differentiate themselves not by their category or offering but by identifying the type of customer who chooses it. We use the word type very loosely because we are not talking about segmentation based solely on race, religion, ethnicity, nationality, gender, age, or education. These may all play a part in identification of the target market but the real key is in understanding the belief systems that are shared as germinal, by your most coveted customers. The parent brand is how the customer knows that the brand is for them.
Efficiency is What Matters Most
Generally speaking, creating a branded house is a more efficient model than being a house-of-brands because it allows for a more cost effective means for new product launches and brand extensions. However, executing the house of brands strategy successfully, requires uncommon diligence and hard work.
Both of these are scarce — and therefore very valuable. It is just plain easier to launch individual brands or to try to differentiate your “branded house” by the table stakes of your category because all these require is an understanding of yourself — not an anthropological understanding of your most coveted prospects. You would think that REAL “branded houses” would be common.
They are not. Automobile companies like Ford, Chevy, Chrysler, Dodge, and the like are not Branded Houses in any real sense, rather, they are old vestiges of a business that has become more known for individual “brand models” and even more so by category descriptors of vehicle type like SUV, pick-up, and mini-van. These categories are identified as “integral” and then the shopper chooses from among the many offerings within that category. It is no wonder that the torch of automotive dominance is being passed from “the big three” to a multitude of others.
Want to Win
If you want to win in the market today, you must find the courage and wisdom to get out of your own way. The obstacle to success is often the company’s identification with what it believes is its importance and identification instead of what the target market believes is its importance and ID. Once we can bypass all the old ideas and beliefs, you can start your branded house on the road to steal share. Doing so is so rare, “scarce” if you will, and its value is almost immeasurable.