One popular way to grow a brand is through extensions—using an established brand name or trademark on new products. Extensions can be relatively easy for management to endorse because they always leverage some already-existing customer base, technology, capability, distribution channel, etc., and often appear to be a relatively low-cost way to increase sales.
Despite the appearance of great promise, however, the failure rate of brand extensions from consumer goods companies is approximately 80%.1 The risk goes beyond a failed product launch. A poorly thought-out brand extension can dilute the meaning of a brand and literally erode hard-earned brand equity. Here’s a quick look at the positives and potential pitfalls of some common brand extension strategies.
Product Line Extensions
A product line extension adds a new product within a brand’s current category, such as when Ben & Jerry’s introduces a new flavor of ice cream. The line extension offers the customer another choice and hopefully another reason to purchase more frequently.
But line extensions can be dangerous when new, lower-priced products are added to a brand line-up to attract a new customer segment. General Motors’ decision to introduce the lower-cost Cimarron under the Cadillac brand backfired and tarnished the Cadillac brand image. A recent article described it this way: “Cimarron eventually made its way to Worst Car Ever lists…. It’s largely considered the worst example of badge engineering in modern history, as it represented a cynical take on a Cavalier at nearly double the price.”
Channel & Category Extensions
A brand extension is when a brand is used to introduce a product into a new category, geography or distribution channel. These extensions offer the brand greater market penetration potential and/or increase product access to current customers. Starbucks coffee and Wendy’s chili being sold in supermarkets, or the Nike brand moving beyond athletic shoes into clothing, equipment and sports accessories are examples of successful brand and channel extensions.
On the other hand…ever heard of Colgate’s frozen lasagna? Or Zippo perfume? Or Pillsbury frozen microwave popcorn? These are examples of famous brand extension failures—products that were very quickly rejected by consumers and consequently pulled from retailers’ shelves because they represented too much of a disconnect with the familiar category of the established brand consumers had come to trust and love.
Consumer Permissions
Brand extensions should be part of every manager’s strategy playbook, but understanding the core meaning of the brand to customers is critical to avoid mistakes. The only reason the failure rate of brand extensions isn’t even higher is because many companies (wisely) rule out extension ideas that do not pass the “permissions” test of the brand’s core customer. That is, when a brand is so strongly positioned within a category it’s the first name mentioned by consumers, it may be difficult for those consumers to accept that brand as being able to legitimately offer the same quality and value in another category. The Kleenex brand, for example, is so solidly associated with tissue and with caring, soft and absorbent paper products that Kimberly-Clark has limited freedom to use the brand outside those categories. Similarly, Bausch & Lomb has limited permission to expand beyond eye care-related categories—in fact, all attempts by B&L to go outside of eye care that I am aware of have failed.
Sub-brands
One option for circumventing the permissions restrictions of a brand is to introduce a new product as a sub-brand. Unlike brand extensions, where the new product is launched as part of the main brand, a sub-brand is positioned as a subsidiary, with its own name, identity and messaging. Under the umbrella of a parent brand, sub-brands can offer a new concept or product line credibility and permission that might not be possible as a stand-alone. And a carefully considered sub-brand strategy might also reduce the perceived risk to the main brand of being overextended. A classic case here is Black & Decker’s DustBuster. Management skillfully attached the quality reputation of Black & Decker to the new DustBuster sub-brand, which was positioned as a powerful handheld cordless vacuum cleaner. At the same time, DustBuster’s messaging introduced new vacuuming capabilities to the handheld “drilling and cutting” benefits normally associated with the Black & Decker parent brand.
How To Get Extensions Right
Exploratory consumer and channel partner research is the essential first step toward ensuring your brand has permission to enter a category, channel or market. Research can often reveal the potential for rejection or backlash from retailers as well as consumers for specific strategic moves.
The deep experience of Radii Latin America brand strategists and research team can help you address all the issues and opportunities noted above and more. We conduct carefully designed insight research with core customers and channel stakeholders to help you determine the relative permissions of your brand and the potential for success for extensions you may be contemplating. Give us a call to discuss how our approach can help deliver a positive outcome for your brand extension strategy.
Credit to Jim Cobb (The Bloodhound Group)
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