Brand architecture strategy and firm value: how leveraging, separating, and distancing the corporate brand affects risk and returns

Liwu Hsu (), Susan Fournier () and Shuba Srinivasan ()
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Liwu Hsu: University of Alabama in Huntsville
Susan Fournier: Boston University
Shuba Srinivasan: Boston University

Journal of the Academy of Marketing Science, 2016, vol. 44, issue 2, No 8, 280 pages

Abstract: Abstract Despite evidence suggesting a growing incidence of brand architecture strategies beyond the branded house (e.g., Boeing and IBM) and house-of-brands (e.g., P&G with Tide and Cheer), and recognition that in practice these strategies are very different, there is still a need for research on how financial markets value the full range of brand architecture strategies pursued by firms. We replicate and extend Rao et al.’s (Journal of Marketing, 68(4), 126-141, 2004) investigation of brand portfolio strategy and firm performance by (1) adding sub-branding and endorsed branding architectures, (2) clarifying the “mixed” architecture to constitute a BH-HOB hybrid and remove sub- and endorsed branding variants, and (3) quantifying the impact of a company’s brand architecture strategy on stock risk in addition to returns. To explore the risk profiles of these five different strategies, we offer a brand-relevant conceptualization of the sources of idiosyncratic risk that may be exacerbated or controlled through brand architecture strategy: brand reputation risk, brand dilution risk, brand cannibalization risk, and brand stretch risk. We demonstrate superior results in terms of model performance using the expanded five-part architecture categorization and conclude with implications for practice. Our results show that risk/return tradeoffs for sub-branding, endorsed branding, and the BH-HOB hybrid differ significantly from what common wisdom suggests.

Keywords: Branding; Brand architecture; Brand portfolio strategy; Firm performance; Shareholder value; Abnormal returns; Risk; Time-series econometrics (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (29)

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DOI: 10.1007/s11747-014-0422-5

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