Balancing identity and adaptation to the extension market segments - Strategic Brand Management

Brand extension capitalises on the brand’s ‘assets’. It hopes that there will be a transfer of these ‘assets’ between the parent category and the extension category, given the perceived subjective proximity between the two categories. It is therefore a question of capitalizing on identity: the intended result is an identity based brand.

However, the success of an extension depends on its ability to deliver value to the client. In what way are these assets relevant? What makes them superior to the competition? This presents the problem of the extension’s ability to exploit a genuine opportunity or real consumer insight in its market.

There is therefore always a balance to be struck between these two (equally legitimate) requirements. Since a name is a promise, the brand cannot make different promises with different products; but at the same time, unsuitability for the target market is the number one reason that new products fail: each market has its own ‘drivers’ and customer preference levers.

An extension category may be chosen for its contribution towards building the future brand. Nivea, for example, owns a raft of daughter brands, each positioned on extensions that have a highly specific role in building the Nivea brand over time. The hygiene and beauty market – as the name suggests – consists of hygiene and care on one side, and make-up on the other. Why would a brand such as Nivea, positioned on skincare and having successfully offered all possible skincare permutations worldwide, use Nivea Beauty to enter the world of seduction, play and appearance against such well-established giants as Maybelline, Max Factor and Bourjois?

As always, the answer has to be growth, image and profitability. After all, the make-up market is a rich seam of double-figure growth. Furthermore, it attracts new young customers. This fashion aspect lends the brand image a very modern appearance. And lastly, it is a profitable category.

However, Nivea still had to acquire legitimacy in this unexpected area. The first advertising campaign of Nivea Beauty was a failure; during extension, brands are often (naturally enough, perhaps) more preoccupied with their brand identity than with the customers in the target market. Nivea relied on bad insights. The sub-brand’s positioning was ‘All the colours of care’ – but to a young target audience in the mass retail channel, this is not a relevant promise.

At a chemist’s it would have been a different story, hence the existence of La Roche Posay and Roc cosmetics. The brand repositioned its beauty line on the market expectations and the long-term weaknesses of the competition. The new promise was, ‘The most beautiful me’.

As we can see, this promise is no longer a straightforward translation of the essence of the brand (loving care for the skin), but neither is it inconsistent with the brand’s equities. Nivea Beauty’s promise is that it preserves a woman’s natural beauty. This capitalizes on Nivea’s fundamental intangible values: respect, humanity, love, naturalness, simplicity.

The promise derives from a consumer insight as a reaction against the totalitarian line taken by many make-up, cosmetics and beauty products brands, urging women to look like top models and stars. This time around, the relaunch was a success. In terms of extension, the challenge lies in the balance between market appropriateness and faithfulness to the brand’s identity: it is created through successive adjustments.

The McCain example provides another illustration of the difficulty inherent in brand extension. McCain is a Canadian company, operating worldwide, with three branches: frozen fries (it supplies McDonald’s throughout the world), frozen pizzas, and soft drinks. In 1998, noting the rising popularity of tea-based drinks in the soft drinks market, it decided to launch an ice tea, Colorado by McCain.

The firm justified its choice of an endorsing brand architecture by the overprominence of the ‘raw’ product’s image (in light of the previous launch of McCain fries and pizzas in the relevant countries). Consumers were therefore intended to ask for the Colorado tea drink, with its intangible youthful Tex-Mex connotations, thus fitting it into the overall American brand identity.

The marketing team was not limiting itself to image. Mindful of the competitive nature of the market, it also created a highly differentiated product embodying an essential McCain identity trait: generosity. As a result, the can of tea contained 33 cl instead of the competitors’ usual 25 cl.

This decision was based on sound logic: it differentiated the extension in terms of the brand’s equities, both intangible and tangible. Sadly, this was also one of the causes of the extension’s failure. In reality, this differentiation, embodying the brand’s spirit of generosity (and thus larger portions, as befits the stereotypical American), proved to be a problem. The can, being taller than other standard cans in the category:

  • was unsatisfactory to retailers, who like to keep storage issues as simple as possible;
  • was rarely drunk in full by customers, who thought it contained too much;
  • appeared more expensive in terms of its retail price, even though the per litre price was the same.

Paradoxically, then, this differentiation generated long-term dissatisfaction – a fundamental error in the cut-throat environment of this double-figure growth market.

The most serious problem faced by this extension was probably the fact that it was up against Lipton, the world’s number one in tea products, aggressively pushing its two megabrands (Lipton Ice Tea and Liptonic), with their associated promotional expenditure, to capture this market. Not even Nestea could compete, despite a strategic alliance with the Coca-Cola Company which ensured the distribution of its drink in all Coca-Cola vending machines. In the hypermarket – and thus the home consumption market – Nestea was powerless against Lipton.

At this point we should take another look at why strategic analysis is a higher priority than marketing analysis for the extension.

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