Individual branding and umbrella branding: differences, advantages and disadvantages

Meaning of branding

A brand is what lets a buyer pick one seller's product out from the rest: a name, a logo or symbol, or a mix of them. It is the reason a customer can ask for a product rather than for a general type of good. Branding is the process of creating and managing such identities. A firm with several products must decide on its branding strategy: whether each product gets its own name, or all share one name. The two extremes are individual branding and umbrella (family) branding.

Individual and umbrella branding distinguished

Individual branding gives each product a separate brand name of its own, often without stressing the company name. Example: a large consumer-goods company selling different soaps, shampoos and detergents under distinct brand names, each with its own image and target group.

Umbrella (family) branding markets all or many of a firm's products under one common name, usually the company name. Example: a group whose name appears on salt, tea, cars, steel and hotels; an electronics company whose single brand covers televisions, phones, refrigerators and washing machines.

Individual branding: advantages and disadvantages

Advantages

1. Risk insulation. If one product fails or faces a quality scandal, the reputation of the company and its other brands is protected.
2. Precise positioning. Each brand can be positioned for a distinct segment, premium, value, herbal, kids, without confusing customers.
3. Competing for more shelf space. A firm can offer several brands in the same category, occupying more shelf space and capturing brand switchers.
4. Freedom to enter new categories and price levels. A firm known for premium goods can launch a cheap brand without damaging its premium image, and the reverse.
5. Easier sale or acquisition. Individual brands can be sold or bought as separate assets.

Disadvantages

1. High cost. Each brand needs its own advertising, research and packaging design.
2. Slower acceptance. A new name starts without the goodwill of the company.
3. Cannibalisation. The firm's own brands may take sales from one another.
4. Management complexity. Many brands require more brand managers and coordination.
5. Weak corporate identity. Customers may not know which company stands behind the products.

Umbrella branding: advantages and disadvantages

Advantages

1. Lower promotion costs. Advertising one name supports every product under it.
2. Faster acceptance of new products. Buyers who trust the name readily try new products, so launches are cheaper and quicker.
3. Strong, unified image. Consistent use builds a powerful corporate brand.
4. Economies in packaging and distribution. Shared design and channels lower costs.
5. Dealer support. Retailers willingly stock new products from a known family name.

Disadvantages

1. Shared risk. A failure or scandal involving one product can damage the whole range.
2. Limits on positioning. It is difficult to use one name for both premium and budget products or for unrelated categories without diluting the image.
3. Brand dilution. Stretching the name over too many unrelated products may weaken its meaning.
4. Unequal quality. Products of uneven quality under one name confuse buyers.
5. Fewer shelf facings. With one name in a category, the firm usually cannot take as much display space as a rival that offers several competing brands there (the reverse of individual branding's advantage 3).

Conclusion

Individual branding gives flexibility and protection at a high cost; umbrella branding gives economy and speed at the cost of shared risk. Many firms combine the two, for example, a company name endorsing distinct product brands, to gain the advantages of both.