The Risks and Rewards of Brand Extension

Ralph Tathagata-

The main advantage of a brand extension is that brand owners take the equity/goodwill from an existing brand and use it in another context. If successful, this can save a lot of money because they do not have to spend a chunk of money developing a new brand.

But what really are the risks in brand owners extending their brands? In trying to save money and build additional brand stature, brand owners sometimes risk losing focus on existing brands in the course of extension. It could even lead to damaging the brands’ perceptions. The risks increase when they shift their brands from existing markets to unrelated markets.

For example, Bic is known for its reliable writing instruments. Then Bic got into disposable shaving sticks, razor and even lighter in different markets around the world and consumers still bought their products. But when Bic absurdly dabbled into disposable underwear, consumers had to draw the line. Reason? The idea of disposable underwear didn’t just collocate and therefore was uninteresting to customers.

In general, corporate brand extensions are conscious attempts to grow a brand beyond its initial range of products. Sometimes the tactic works, and at other times it leads to some huge joke.

Brands with compelling propositions and sufficient competence can break new grounds in product/service or market category.

From the consumer point of view, brand extensions are simply confusing, but brand custodians have trained consumers to expect “new and improved” things. More often than not, they are very aware of these games and only play along.

In spite of the above, companies need to be better at presenting consumers/customers with more authentic product and service choices that address new (customers’) needs when extending their brands.

Al Ries in his book, The 22 Immutable Laws of Branding states that a brand must always be one thing. Yamaha must always be pianos or the brand will lose value. Apply it to some other things, say; guitar and you are busting all the value in the brand.

However, looking at one of the oldest consumer brands, Ivory; a product that was created in 1879 by the genius of James Gamble and Harley Proctor, a brand can be extended into various categories and still retain its equity.

Through the talent of Proctor, Ivory was the first product subjected to brand building, maintenance and leverage through promotion and identity.

Procter & Gamble successfully and profitably extended the Ivory brand into different categories such as Ivory Flakes, Ivory Snow and Ivory Dishwashing Liquid. All these line extensions went up against extremely strong brand competitors without ceding the core brand’s overwhelming market domination. After that, Ivory’s line extension into shampoos and conditioners, though did not gain dominant market share, produced successful and profitable brand lines without diluting the brand’s value in its other lines.

Today, Harley Proctor is justly celebrated as the man who figured out how to strategically leverage a brand into multiple line extensions.

A brand itself, through long, patient, extensive promotions and careful line extensions, can become a word in the consumer’s mind in and of itself. Sometimes a brand can transcend its association and, by doing this, create opportunity. A term brand experts refer to as the Principle of Transcendence. In order words, the purpose of a brand is to create opportunity.

The ultimate goal of a brand should be to transcend its association with a word and become a word in its own right.

Finally, in all attempts to stretch and leverage on a brand’s equity, owners should have one word in mind; innovation. Consumers/customers are not interested in technological breakthroughs. They are interested in innovations that address new needs