Published by World Advertising Research Center

Farm Road, Henley-on-Thames, Oxon RG9 1EJ, UK

Tel: +44 (0)1491 411000 Web: www.warc.com October 2003, Issue 443

Umbrella Brands And Sub–brands

Microsoft got it right, WordPerfect got it wrong. So how does
umbrella branding and sub–branding work, and what are the
pitfalls?
Rod Hirsch
Fox Parrack Hirsch

Imagine for a moment that you make baked beans. It is what you have always wanted to do. Baked
beans are your passion. So much so, that when you are deciding what to call your company, you
quickly dismiss all alternatives in favour of 'The Baked Bean Company'. It says what you do, who
you are and the position you want to achieve within the market.

Business is good. You grow the beans and tomatoes, you control every aspect of the cooking
process, and you market your beans to bean enthusiasts, to those who need beans as part of their diet
and to those who occasionally fancy beans on toast at home.

For some bean aficionados, you even add special ingredients – but you are happy to do this, because
you are 'The Baked Bean Company'. About the only thing you don't do is make the cans the beans go
into. But then, you are not in the can business, right?

From time to time, other people look enviously at the baked bean niche, but they don't have your
experience or reputation in the market. More importantly, they don't have the marketing muscle to
build a presence. They go away, chastened by their inability to penetrate the bean sector with any
degree of success. You are reassured of your strategy. You make baked beans, it is all you make and
that is why people choose you and your beans.

But then a shadow falls over your operation. In the next valley, the company from which you buy the
cans decides to branch out.

They have long made cans for all sorts of comestibles, but carefully avoided calling themselves 'The
Can Company'. Instead – and here is the clever bit – they planned for the future. They named their
operation 'The Food Company', because a) food goes in cans and b) they preferred to leave their
options open. Oh, and by controlling the can business, they have made a huge amount of money.

Worryingly, your supplier is about to become your rival.

The smartest of their marketing brains goes to her CEO and she says, 'Bill, we already have a virtual
monopoly on food packaging. Nearly everybody has to buy their cans from us. That is not going to
change, and you are to be congratulated on your genius in striking such an advantageous deal with
The Mammoth Tin Organisation. But some of these people we sell cans to are making a lot of
money. We should get into the food business.' And the CEO agrees.

So The Food Company launches a whole range of canned goods – including pineapple chunks,
cocktail sausages, spaghetti hoops and, yes, baked beans – spending aggressively to dominate the
market. On every can, it says The Food Company Baked Beans or The Food Company Pineapple
Chunks, or whatever.

And over time, whenever there is a new product launch, the buying public recognises the parent
brand, even if the product – say, tuna fillets in brine – is unfamiliar. They know and trust The Food
Company for pineapple chunks, so they will give them a whirl with tuna fillets.

This is not good news. For a while, you ignore the growing threat, soldiering on with your one–
product policy. Then, in the face of falling sales, you panic. You launch a new line – lychees – but to
your surprise, the public stays away in droves. You do some research and, to your horror, you find
out why your new product is a flop. People assume that the lychees come with baked beans! In
tomato sauce! In the same can! Yuk!

And why would they assume that? Because you are 'The Baked Bean Company', that's why. Because
you have spent a lot of time, effort and money telling people that all you make is baked beans. As a
consequence, your company, your brand and your products are indistinguishable.

You are in trouble. Despite making very good baked beans that are much appreciated by quite a lot
of people, you eventually go bust. And what remains of your operation is sold at a knockdown price
to a bunch of people who don't know anything about the bean business, but just want to hit back at
The Food Company in any way they can.

MICROSOFT WINS

And that is more or less what happened to WordPerfect when Microsoft decided to get into word
processing. I exaggerate to make a point, but the point is an important one. Microsoft got it right,
first by having a vision of where the industry was heading (and by bringing its clout and influence to
bear on that direction); and then by implementing a clear umbrella brand/sub–brand strategy, which
has allowed for almost limitless extensions in both software and hardware.

WordPerfect, on the other hand, failed to realise that its inability to differentiate product from brand
would condemn it in the long run. Oh, it is still around, but its current parent is experiencing fiscal
woes and WordPerfect is unlikely ever again to challenge the might of Redmond.

Of course, it is not just in the tech sector that successful companies get it wrong. Volkswagen with
the Beetle was a one–product company (if you exclude commercial vehicles) for more than 40 years.
It was only the introduction of the Golf, with its radical departure from conventional VW
engineering practice, that saved the firm, and even then it was a close–run thing. The Golf's
immediate predecessor – the short–lived and unloved K70 – had risen without trace, and VW's
senior management was in agonies of indecision about the wisdom of abandoning air–cooled rear–
wheel drive and joining the rest of the world. Nowadays VW has a plethora of sub–brands, including
whole car companies such as Skoda, which despite being brands and having sub–brands of their
own, still borrow values from the parent organisation when it suits them.

GET BIG, GET NICHE, GET OUT … OR MUDDY THE WATERS

Sometimes it does no harm to have a little confusion between the role of the parent brand and the
sub–brand. Symantec, today a key player in the PC/internet security sector, is a case in point. In the
early

1990s, Symantec was relatively faceless – a home for a loosely associated collection of PC utilities
and other programs.

For example, plenty of Apple users protected their machines with an anti–virus product called SAM;
most of them were unaware that SAM was the acronym for Symantec Anti–virus for Macintosh.

But the company had a strong trump card in the person of Peter Norton and his popular PC repair
and protection software, The Norton Utilities. For many users, the product brand was the dominant
element – but Symantec, clearly determined to avoid the WordPerfect trap, had other ideas.

Over the next few years, the company put a lot of effort into promoting its own name and was
largely successful in establishing its yellow and black branding. However, the Norton name wouldn't
go away. People liked and trusted it. So today, the Norton sub–brand is an integral part of the parent
brand, with a considerable halo effect on the company's other offerings.

IT'S NOT ME. EVERYONE ELSE IN THE ARMY IS OUT OF STEP

There is one high–technology company that by all rights should have been dead and buried years
ago, and yet appears to be thriving as never before. I refer, of course, to Apple Computer. Now, I
don't want to get bogged down in a long, involved argument about the merits of the Apple operating
system versus Microsoft Windows. There are other magazines, websites, news groups and nerdy
individuals in saloon bars devoted to that particular subject.

What I want to examine is Apple's brand strengths – particularly how and why it has developed its
sub–brand strategy. The key point to remember is that, from its garage beginnings, Apple has been a
proprietary system. And by that, I mean Apple has always controlled the design and development of
both the hardware and the operating system software. This absolute control is at once a strength and
a weakness.

For the sake of clarity, let us skip over the very early days of the personal computer and fast–forward
to the arrival of the IBM PC. At that point, Apple's product – and sub–brand – was the Macintosh.
Designed by Apple, running an operating system developed by Apple and boasting software written
to strict Apple/Motorola chip specifications, the Mac was light years ahead of the IBM PC in looks
and performance.

But, thanks to the Microsoft/IBM relationship – whereby Microsoft licensed its operating system to
IBM, and consequently opened up PC manufacture to anyone with a soldering iron and a sense of
purpose – the Mac was under serious threat.

This was not immediately apparent, largely because of the burgeoning market and Apple's
dominance of the education and design industries.

However, once IBM–compatible PCs flooded onto the market in the late 80s/early 90s, Apple's
proprietary stranglehold began to choke the company itself. As the business community and home
users embraced the choice (and low prices) offered by vendors of IBM–compatible machines,
software developers deserted Apple and flocked to the opportunity offered by Microsoft Windows.

The following years were a period of turmoil for Apple. Steve Jobs and Steve Wozniak left the
company they had founded, and despite some extraordinary advances in some product areas
(multimedia and handwriting recognition, for example), by the mid–1990s Apple was a mess. Too
many palace revolutions, too many poorly differentiated product lines, too many abortive ventures
into untested technologies, not enough leadership, not enough vision, not enough buyers. Even the
much–vaunted (and at times fanatical) loyalty of Macintosh users was stretched thin. Apple's global
market share of the PC business had fallen from nearly 10% at the start of the decade to just 2% by
1998.

Then came the iMac, the machine that saved Apple and, arguably, transformed the whole PC
industry.
The iMac was cuddly, colourful, easy to use and the perfect way to move the PC from the study to
the living room. Using standard PC internal components kept down the cost, greater compatibility
with Microsoft Windows meant fewer barriers to purchase, the unique design meant instant product
placement in TV programmes and commercials – it was a brilliant package.

The iMac turned Apple around, but it was only the first step in the brand strategy devised by Steve
Jobs, recently returned to his brainchild. The 'i' brand family – including iMac, iTunes, iDisk, iMovie
and iPhoto – has already been touted by Apple as the 'centre of your digital world', where everything
works together to make your life easier and more enjoyable. Behind the marketing speak, this sounds
like vintage Apple proprietary strategy.

But there is a crucial difference. The 'i' family has recently been joined by the iPod. This stylish MP3
player is much more important than its diminutive size would suggest. It is the first hardware product
from Apple that is genuinely operating–system–independent, coming as it does in Mac OS and
Windows versions.

With the iPod, in order to reach Windows users, Apple has played down the differences between the
two camps, to the extent of minimising the presence of the Apple brand.

For some audiences, notably existing Apple users, the sub–brand is an extension of the umbrella
brand – for others, the sub–brand is the brand.

Those who ordinarily might steer clear of the Apple name, either through unfamiliarity or distrust,
now have no reason to shop elsewhere. In other words, Apple has succeeded in rallying the faithful,
capitalising on the neutral and persuading the potentially hostile.

Apple understands that the personal computer is no longer a clunky, geeky device. It is an appliance,
bought for reasons of fashion and taste as much – if not more – than for its out–and–out technical
performance. It is logical to assume that the 'i' brand will be joined by others which, while sharing
the overall Apple ethos of good design and ease of use, will increasingly move further away from the
Apple parent brand.

IF AT FIRST YOU DON'T SUCCEED, DENY ALL KNOWLEDGE

Toyota, with Lexus, has taken this strategy one step further. Toyota makes fine automobiles, but will
never be accepted as a worthy contender at the Mercedes/BMW level, especially in the USA. In the
late 1980s, Toyota decided to stop banging its head against the glass ceiling and started to look at
how it might go round the problem.

The result was a car company that benefited from economies of scale in research and development,
purchasing and manufacture, but which paid no tribute – indeed, avoided any reference – to its
parent organisation. Separate dealerships, autonomous marketing capability and well–managed
media relations ensured that the brand started from a blank sheet.

Lexus sprang fully formed onto the market, with the express intention of being the luxury car of
choice. Rapid and astonishing results in influential customer satisfaction surveys fuelled burgeoning
sales, and the Lexus reputation was born.

This kind of 'stealth brand' is not unknown, but Lexus is rare not simply because of the sheer
magnitude of the operation, but because Toyota has been so self–effacing in its pursuit of a particular
breed of car buyer.

BRAND = LONG TERM SALES. UNLESS IT DOESN'T

The technology sector is young compared to many other areas, but already we are seeing the
shakeout not just of products, but of brands, as the market matures and commoditises. How long
Compaq will remain a sub–brand of HP is anyone's guess, but Digital, OS/2, Warp and countless
others are already only memories. The incestuous, intertwined nature of umbrella brands and sub–
brands makes it difficult to reach any kind of conclusion, except to say that it's frighteningly easy to
get it wrong, à la WordPerfect, and seemingly effortless to get it right if, like Microsoft, you take the
long view.

© World Advertising Research Center

http://www.warc.com

NOTES & EXHIBITS

Rod Hirsch
Rod Hirsch is creative director at Fox Parrack Hirsch. With a wealth of adver
extensive industry knowledge, Rod has a profound understanding of the prob
facing marketers in the rapidly changing world of technology.

rhirsch@fphcom.com