What is new about brand extensions?

Why has brand extension become such an important topic? In fact, most companies have discovered the virtues of brand extensions only recently. Certainly most luxury brands have thrived through extensions, and so have Japanese brands, and indeed Nestlé, but in North America and Europe most marketers have been trained in a ‘Procterian’ vision of marketing.

At Procter & Gamble, since its foundation, a brand has been a single product with a benefit. As a consequence, the rule has been that new products should form a new brand. P&G’s Ariel (known as Tide in the United States) is a specific low-suds detergent. Other detergents have other brand names such as Dash and Vizir. This practice is thoroughly product-based.

Relating extensions to strategy

The brand extension perspective introduces two radical modifications. First, it maintains that a brand is a single and long-lasting promise, but this promise can or should be expressed and embodied in different products, and eventually in different categories. ‘Palmolive’ represents softness, and from this perspective it makes sense to have Palmolive hand soap, dishwashing liquid, shaving cream, shampoo and so on.

Second, it asks us eventually to redefine the historical brand benefit by nesting it in a higher order value. Brand extension exemplifies the move from tangible to intangible values, from a single product-based promise to a larger brand benefit, thus making the brand able to cover a wider range of products.

Is Gillette simply the best shaving product, or ‘The best a man can get’? as it says in its advertising baseline? This latter brand definition easily backs up the Gillette Sensor, or Mach 3, aimed at continually increasing the quality of a man’s shave. It allows also the brand to grow by leveraging its reputation and trust to introduce a line of male toiletries, a profitable, growing market.

Brand extensions are an emotional topic because they are the first occasion on which the identity of a brand is redefined, when all the unwritten assumptions that may have been held for decades about the brand within the company are questioned. In addition, unlike mere line extensions, brand extensions are associated with diversification, so there is a sizeable impact on the company as a whole.

Research on brand extension has been so obsessed by the brand itself that this has tended to foster a tunnel vision in marketing circles. The only focus of that research was to determine consumers’ attitudes to various possible extensions for a specific brand (Aaker and Keller, 1990).

This is why so many companies have gone through a phase where they extended their brands in all directions, just because the consumers said they could do it. This phase has ended; this early research neglected the company. It is a form of tunnel vision to focus on the brand only and exclusively.

Diversification is a strategic concept, which has implications for the whole company. Will it be able to learn all the new competences required to meet competition in the new market? At what price? With what delays? At what cost? Is it worth it? Is it sustainable? The brand and business perspective promoted by this book calls for a reinsertion of brand extension issues into the context of corporate strategy.

Finally, it is an involving topic because it is generally tied to a new product launch, which as for all new products commands time, energy, allocation of resources, and creates a situation of risk. This risk is increased by the fact that unlike line extensions, brand extensions lead the brand into new and unknown markets, which may be dominated by entrenched competitors.

There is not only a straightforward financial risk should the extension fail, there is also potential damage to the image of the brand, in the distribution channels, among the trade, and among end users. A good example is the problems encountered by Mercedes when it launched its new Class A, a radical downward extension, after it decided to go where the market was and compete against Volkswagen.

The car could not pass the ‘elan test’, thus destroying the sacrosanct image of Mercedes as one of the most secure cars in the world. The whole conception of a Mercedes car had to be redefined. One does not move easily from a high historical competence in manufacturing large sedan cars with rear wheel drive to making small compact cars with front wheel drive. Also for the first time, one could buy a new Mercedes for around s20,000.

This example illustrates the fact that brand extension decisions should not be looked at only through consumer research. As a rule, when expensive brands stretch downward, their existing clients are frustrated. They feel less exclusive, therefore their attitude to the extension is negative (Kirmani, Sood and Bridges, 1999). However consumers are in that respect quite conservative. They do not have a full picture of the Mercedes situation, and finally they do not have a long-term view.

Very few people knew, for instance, that the average age of purchasers of the Class C, at that time the entry-level Mercedes, was 51. Also, very few people knew that unless the company was able to produce more than a million cars rapidly, its production costs would be too high to sustain modern competition even in the premium segments. Higher production costs provide no value to consumers.

Managing brand extensions is about identifying the growth opportunities. It aims also at maximising the chances of success of the new product launch, while increasing the value of the parent brand. This entails managing the whole product range: to maintain its equity. Mercedes reinvested to innovate in the highend segment of its market through the new Class S and now a spectacular top-end model. On this occasion a naming problem arose: it was not called ‘Class Y’ but received a name, a brand: Maytag.

Companies have all gained experience in extending their brand. Some have made timid but successful extensions (Mars ice cream), others have experimented with at least 10 extensions, which may have all failed, as did Becel extensions, Unilever’s anti-cholesterol margarine (Kapferer, 2001: p 222). All acknowledge the necessity to reintroduce more focus, and more corporate parameters into the process.

The decision to extend the brand is a strategic one, and relying on consumer’s attitudes to possible extensions is now held to be seriously insufficient. Decision grids have to encompass other dimensions. In brief, because a brand could create an extension, it does not follow that it should do it. To a far greater extent than it has been said or written, it is necessary to assess the competitive status of the extension and of the company behind it. The question of what the extension really brings to the business and to the brand itself has also become more acute.

On an academic level, recent research is now revealing the limits of early studies on brand extension. Some of the models and rules presented in these pioneer studies should be questioned if not forgotten.

Strategic Brand Management Related Practice Tests

Strategic Management Practice Tests
Brand Equity In Question What Is A Brand? Differentiating Between Brandassets, Strength And Value Tracking Brand Equity Goodwill: The Convergence Of Finance And Marketing How Brands Create Value For The Customer How Brands Create Value For The Company Corporate Reputation And The Corporate Brand Strategic Implications Of Branding What Does Branding Really Mean? Permanently Nurturing The Difference Brands Act As A Genetic Programme Respect The Brand ‘contract’ The Product And The Brand Each Brand Needs A Flagship Product Advertising Products Through The Brand Prism Brands And Other Signs Of Quality Obstacles To The Implications Of Branding Brand And Business Building Are Brands For All Companies? Building A Market Leader Without Advertising Brand Building: From Product To Values, And Vice Versa Are Leading Brands The Best Products Or The Best Value? Understanding The Value Curve Of The Target Breaking The Rule And Acting Fast Comparing Brand And Business Models: Cola Drinks From Private Labels To Store Brands Evolution Of The Distributor’s Brand Are They Brands Like The Others? Why Have Distributor's Brands? The Financial Equation Of The Distributor’s Brand The Three Stages Of The Distributor’s Brand The Case Of Decathlon Factors In The Success Of Distributor's Brands Optimising The Dob Marketing Mix The Real Brand Issue For Distributors Competing Against Distributor's Brands Facing The Low-cost Revolution Should Manufacturers Produce Goods For Dob's? Brand Diversity: The Types Of Brands Luxury, Brand And Griffe Service Brands Brand And Nature: Fresh Produce Pharmaceutical Brands The Business-to-business Brand The Internet Brand Country Brands Thinking Of Towns As Brands Universities And Business Schools Are Brands Thinking Of Celebrities As Brands The New Rules Of Brand Management The Limits Of A Certain Type Of Marketing About Brand Equity The New Brand Realities We Have Entered The B To B To C Phase Brand Or Business Model Power? Building The Brand In Reverse? The Power Of Passions Beginning With The Strong 360° Experience Beginning With The Shop The Company Must Be More Human, More Open Experimenting For More Efficiency The Enlarged Scope Of Brand Management Licensing: A Strategic Lever How Co-branding Grows The Business Brand Identity And Positioning Brand Identity: A Necessary Concept Identity And Positioning Why Brands Need Identity And Positioning The Six Facets Of Brand Identity Sources Of Identity: Brand Dna Brand Essence Launching The Brand Launching A Brand And Launching A Product Are Not The Same Defining The Brand’s Platform The Process Of Brand Positioning Determining The Flagship Product Brand Campaign Or Product Campaign? Brand Language And Territory Of Communication Choosing A Name For A Strong Brand Making Creative 360° Communications Work For The Brand Building Brand Foundations Through Opinion Leaders And Communities The Challenge Of Growth In Mature Markets Growth Through Existing Customers Line Extensions: Necessity And Limits Growth Through Innovation Disrupting Markets Through Value Innovation Managing Fragmented Markets Growth Through Cross-selling Between Brands Growth Through Internationalisation Sustaining A Brand Long Term Is There A Brand Life Cycle? Nurturing A Perceived Difference Investing In Communication No One Is Free From Price Comparisons Branding Is An Art At Retail Creating Entry Barriers Defending Against Brand Counterfeiting Brand Equity Versus Customer Equity: One Needs The Other Sustaining Proximity With Influencers Should All Brands Follow Their Customers? Reinventing The Brand: Salomon Adapting To The Market: Identity And Change Bigger Or Better Brands? From Reassurance To Stimulation Consistency Is Not Mere Repetition Brand And Products: Integration And Differentiation Specialist Brands And Generalist Brands Building The Brand Through Coherence Defining The Core Identity Of The Brand Confirming The Presence Of Brand Core Facets In Each Product Identifying The Role Of Each Product Line In The Construction Of The Brand Graphically Representing The Overall System Of The Brand Checking The Coherence Worldwide The Three Layers Of A Brand: Kernel, Codes And Promises Respecting The Brand Dna Managing Two Levels Of Branding Growth Through Brand Extensions What is new about brand extensions? Brand Or Line Extensions? The Limits Of The Classical Conception Of A Brand Why Are Brand Extensions Necessary? Building The Brand Through Systematic Extensions: Nivea Extending The Brand To Internationalize It Identifying Potential Extensions The Economics Of Brand Extension What Research Tells Us About Brand Extensions Avoiding The Risk Of Dilution Balancing Identity And Adaptation To The Extension Market Segments Assessing What Should Not Change: The Brand Kernel Preparing The Brand For Remote Extensions Keys To Successful Brand Extensions Is The Market Really Attractive? An Extension-based Business Model: Virgin How Execution Kills A Good Idea: Easycar Brand Architecture The Key Questions Of Brand Architecture Type And Role Of Brands The Main Types Of Brand Architecture The Flexible Umbrella Brand The Aligning Umbrella Brand (masterbrand) Choosing The Appropriate Branding Strategy New Trends In Branding Strategies Internationalising The Architecture Of The Brand Some Classic Dysfunctions What Name For New Products? Group And Corporate Brands Corporate Brands And Product Brands Multi-brand Portfolios Inherited Complex Portfolios From Single To Multiple Brands: Michelin The Benefits Of Multiple Entries Linking The Portfolio To Segmentation Global Portfolio Strategy The Case Of Industrial Brand Portfolios Linking The Brand Portfolio To The Corporate Strategy Key Rules To Manage A Multibrand Portfolio The Growing Role Of Design In Portfolio Management Does The Corporate Organization Match The Brand Portfolio? Auditing The Portfolio Strategically A Local And Global Portfolio – Nestlé Handling Name Changes And Brand Transfers Brand Transfers Are More Than A Name Change Reasons For Brand Transfers The Challenge Of Brand Transfers When One Should Not Switch Analysing Best Practices Transferring A Service Brand How Soon After An Acquisition Should Transfer Take Place? Managing Resistance To Change Factors Of Successful Brand Transfers Brand Turnaround And Rejuvenation The Decay Of Brand Equity The Factors Of Decline Distribution Factors When The Brand Becomes Generic Preventing The Brand From Ageing Rejuvenating A Brand Growing Older But Not Ageing Managing Global Brands The Latest On Globalisation Patterns Of Brand Globalisation Why Globalise? The Benefits Of A Global Image Conditions Favouring Global Brands The Excess Of Globalisation Barriers To Globalisation Coping With Local Diversity Building The Brand In Emerging Countries Naming Problems Achieving The Delicate Local–global Balance Being Perceived As Local: The New Ideal Of Global Brands? Local Brands Can Strike Back The Process Of Brand Globalisation Globalising Communications: Processes And Problems Making Local Brands Converge Financial Valuation And Accounting For Brands Accounting For Brands: The Debate What Is Financial Brand Equity? Evaluating Brand Valuation Methods Brand Valuation In Practice The Evaluation Of Complex Cases What About The Brand Values Published Annually In The Press? Strategic Brand Management Interview Questions