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Growth Through Brand Extensions/What Is New About Brand Extensions?

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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.