The Umbrella Brand

I had just finished last week’s post about brand focus, when I read an article on Inc.com about Wayfair, which started as CSN Stores in 2002.  CSN specialized in micro-niche e-commerce sites (think strollers.com, hotplates.com, everygrandfatherclock.com, etc.) and by 2010, the company had about 200 sites, 4.8 million customers, and $380 million in sales.

Then, in the fall of 2011, it did something interesting: It abandoned the strategy that made it so successful by creating an “umbrella brand” called Wayfair.  Why?  The company’s research showed it was missing opportunities.  Customers were very happy with the selection and service at a specific CSN site but never made the connection that the company offered so many other products.

Also the microsite model is very transaction oriented and not much effort was put into branding.  It is all about using web analytics to drive people who have a very specific need to the microsite.  You want a hotplate, hotplates.com has 30 or 40 hotplates to choose from.

All those microsites are gone now, replaced by a single site—Wayfair.com.   If you type hotplates.com in your web browser, you will be redirected to Wayfair.com.  The Wayfair brand is based on the fact that all the products have something to do with the home and they are starting to build content and a community related to “home”.

As the founders of the company acknowledge in the article, building a consumer brand is not easy or cheap.  For the first time in the company’s history it has taken funding from venture capitalists, which will be used to build the Wayfair brand.

I applaud the founders of CSN on this daring move.  It would have been very easy to keep on doing what they had been doing.  But they saw the strategic value of a unified brand that would help the company cross sell and add products.   From the early financial results it looks like the strategy is working.  The company reported its best Cyber Monday sales ever ($4 million).  It will be interesting to follow this story as the Wayfair brand gains traction.

Other Umbrella Brands

Earlier in my career I worked in advertising and sales promotion at American International Group (AIG).   Although most people think of AIG as an insurance company, AIG is technically a holding company for an amalgamation of companies that provide insurance and financial services.  Many of the member companies were long established and often traded under their separate names when I joined the company in the early1980s.

Our job was to make AIG the umbrella brand for all these companies.  The benefit of this approach was leverage: The sum is greater than the parts.  Instead of one insurance company providing a very specific type of insurance, AIG corporately could cover a large variety of personal and commercial risks through its member companies.

This approach also reduced marketing costs.  Instead of 10 corporate advertising programs aimed at brokers, agents, risk managers and CFOs, we needed only one.  This allowed us to advertise the benefits of working with the group at a much lower cost and with more impact than if each company advertised separately.   Since AIG was publicly traded, there was a side benefit of reaching the investor community.

An umbrella brand works well if there is enough commonality among the parts.  CSN/Wayfair saw that commonality in that everything it offered through its microsites was related to the home.  In AIG’s case, all the member companies offered insurance and financial services.

Other companies tie together disparate businesses by branding them with the parent company name, such as GE has done with many of its businesses.  This allows the member companies to be easily identified as part of the parent company, while demonstrating GE’s corporate breadth of products and services.

 

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