Creating a new brand\u2014and carving out a place in people’s minds by standing apart\u2014has become an increasingly difficult job. That is why extending an existing, strong brand looks like a very good option to marketing professionals who want to grow. So why do some brand extensions succeed while other brands come out of the process worse off? To put it more sharply: why do more than half of brand-extension cases fail?<\/p>\n<\/p>\n
The marketing world has spent decades learning that many variables determine the answer. It is still hard to say brand-extension principles have become a scientific discipline. But the scientific approaches used within the process and its steps bring brands a little closer to a successful outcome.<\/p>\n<\/p>\n
Drawing on the experience and case studies it has gathered, Goodjob has identified four steps that can be the key to success in brand extension. Applying these steps effectively and correctly reveals both how necessary extending the brand really is and, if it is a good choice, how it should be done. To that end: (1) the state and capacity of the brand’s intangible assets must be understood, (2) opportunities in the competition and in consumers must be uncovered, (3) the extension model must be decided, and (4) it must be adapted to the business strategy.<\/p>\n<\/p>\n
To understand a brand’s capacity to extend, you have to have analyzed its strength in every dimension.<\/p>\n<\/p>\n
At the most basic level, this research must establish where the brand’s real strength comes from. A brand’s current strength may come from one of four elements it possesses:<\/p>\n<\/p>\n
Of course, a brand has to answer to all of them\u2014but a brand positioned in people’s minds through product expertise and a brand positioned through a higher purpose differ in both their ability to extend and their areas of extension. Volvo, which owns the “safety” attribute, could\u2014far from its business strategy though it may be\u2014carry that value into construction or home security if it wished. But the same isn’t true for BMW, which owns performance, or for an identity\/personality brand like Alfa Romeo.<\/p>\n<\/p>\n
Some brands own a foundation so strong that, when it comes to extending, the human mind accepts it instantly\u2014it even feels as though that product or service has existed for years. Close your eyes and imagine an “Apple car” or an “Apple washing machine,” and a minimal, functional product appears in your mind at once. That is priceless extension power.<\/p>\n<\/p>\n
On the other hand, in some cases a brand becomes so identified with one product group that it gets stuck there. Global history is full of examples: Colgate\u2014synonymous with toothpaste\u2014once tried to sell frozen dinners; Bic, famous for pens and lighters, stumbled badly when it moved into underwear and perfume; and the American gunmaker Smith & Wesson extended into bicycles without success. Such failures can have many causes, of course\u2014but at their root lies a failure to correctly gauge the brand’s capacity to extend.<\/p>\n<\/p>\n
What matters here is this: the master brand must meet the likely consumer expectations in the new category, and the existing brand heritage must not run counter to the extension. If the new category is important enough to become the brand’s new world, the brand strategy and all other necessary brand elements must be renewed. The best example is carmakers doing rebranding work\u2014rather than creating a new brand\u2014to prepare for electric vehicles, the future of the sector.<\/p>\n<\/p>\n
The new category needs to be a large, growing area that represents the category’s future. Beyond stealing share from (new) competitors, the brand should be able to create its own market, too. Today, no carmaker has the luxury of not making electric vehicles. Today, no food brand can ignore the demand for natural-ingredient products.<\/p>\n<\/p>\n
The criterion to weigh most when assessing a brand extension is category size. The reason: when a brand extends into a large, mature category and can’t differentiate, it can only take a small slice of the market. But when a brand creates an innovation, it manages to hold the dominant share even after many imitators appear over time. Meanwhile, brands extending into a growing area have an easier time.<\/p>\n<\/p>\n
Another important parameter is the competition in the category. Very strong rivals in the area you’re extending into mean that even the innovative developments you make on entry are rapidly copied by these big players, and the strength that would set you apart is quickly taken from your hands.<\/p>\n<\/p>\n
Finally, profitability and profit potential in the category must be examined. In some markets, by their very nature, profitability is low\u2014usually commodity markets. The value consumers assign to the product or service, and the pricing power that reflects it, may be limited. Profitability is higher in shampoo, for instance, but very low in conditioner. The biggest barrier to a sugar brand extending into the salt category isn’t brand perception but the very low profitability of that market.<\/p>\n<\/p>\n
Once you decide to extend, there are many models in terms of brand naming. But it wouldn’t be wrong to say the general trend is toward “monobrand.” Apple, one of the first names that comes to mind for brand extension, extended into every category using a standard code. Recently, though, it optimized its portfolio: the phone in your hand no longer says “iPhone” on the back, and there is no watch sub-brand called “iWatch.”<\/p>\n<\/p>\n
Here, different options come into play. The endorsed-brand model varies according to the dose of endorsement and the way it is expressed. The existing brand can extend into new categories with no change at all, or by carrying only some of its elements into the new category, or by creating new brand elements.<\/p>\n<\/p>\n
Far Eastern brands, for example, generally prefer to carry almost all of their brand elements into new categories with virtually no change. The reason they can do this is that these brands (Samsung, Mitsubishi, Hyundai) invested not in a specific product expertise but in technology expertise\u2014that is, in how they make their products. For brands like BOSCH, the basis of extension becomes the brand’s reason for being: “Technology for life.” That is how it has extended into so many areas\u2014spark plugs, power tools, refrigerators.<\/p>\n<\/p>\n
But not every brand is this “lucky” (being able to extend without changing any element is a great stroke of luck). The endorsed-brand model may require a categorical descriptor. There is Johns Hopkins Hospital, and there is Johns Hopkins University. Here, the brand can extend through categorical definition alone\u2014keeping the two brands’ identity and personality elements fixed while changing their value propositions. A house like Ladur\u00e9e has a patisserie, a chocolate boutique, and a tea salon; all three can carry different menus and experiences.<\/p>\n<\/p>\n
When categorical definition isn’t enough, brand extension is done with sub-brands. A sub-brand can have an identity and value of its own, or it can carry the master brand’s identity. A supermarket’s small-format stores\u2014think Tesco Express\u2014are an example. Or a telecom’s internet sub-brand, kept alive mainly for brand heritage even when it no longer serves much functional purpose (because the other players in the category are single-brand). To steal share from coffee shops and add day-parts, McDonald’s does this with the McCaf\u00e9 sub-brand and Burger King with BK Caf\u00e9. Whether such naming is even necessary is up for debate. Coca-Cola Zero, created to meet a different consumer expectation, grew so strong over time that the company retired another line. Marketplace brands like Amazon, Uber Eats, and Deliveroo, meanwhile, optimized their models under the pressure of market dynamics.<\/p>\n<\/p>\n
Depending on the situation, extension may need to weaken the link to the master brand even further. Sometimes you have to create a completely independent new brand. This is usually chosen because the brand doesn’t\u2014or can’t\u2014extend. When a full-service airline builds a low-cost arm, the tie to the premium parent can be a liability: if it is bound too tightly, it struggles to behave like a true low-cost carrier\u2014to sell onboard extras, strip out frills, and so on. That is precisely why many legacy carriers give their low-cost brands (think of how Qantas built Jetstar) real independence. Such a move can be a success in business-strategy terms while being a poor example of a brand model.<\/p>\n<\/div><\/div><\/div><\/div><\/div>