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Brand extension is a commonly deployed strategy for growth by expanding brand potential. It is about extending the same brand name into an adjacent or new category. Having invested in creating a brand, it is a logical step for a company to leverage the brand equity by expanding its portfolio.
A brand is like a rubber band. If you don’t stretch it, you are not maximising its potential. If you over stretch it, it will snap. So, how much should you stretch it?
Colgate’s mad extension into Frozen Meals in the early 1980’s is a prime example of over stretch. The women’s fashion magazine Cosmopolitan went bonkers and launched low calorie yoghurts under the same name.
Pepsi Crystal failed because people expected a cola taste and colour from the Pepsi name and not a colourless, citrus drink. On the other hand, Pepsi Max is a big hit because it offers the same Pepsi taste, with zero sugar.
Brand extension is a tricky business. Data shows that an estimated 70 percent of brand extensions fail.
In the world of brand extensions, success or failure of the extension is based on answering three fundamental questions. These questions provide the answer to extend or not to extend. While they may not guarantee success, they will reduce the chances of failure.
Does the extension present a lucrative market opportunity?
Is there an attractive enough market in the category that you are planning to extend into? Do you have a value proposition that is compelling? Do you have the resources and competency to compete in that category? Obviously, the answer to this must be ‘Yes’.
Does the extension fit with the parent brand equity?
Just a lucrative market opportunity is not sufficient. Is there a natural fit of the extension with the equity of the parent brand? Will it snugly align with the values of the parent brand? Again, the answer should be ‘Yes’.
Will the extension dilute or diffuse the equity of the parent brand?
While there may be a fit with the parent brand, the extension may end up harming it. Is it going to devalue the parent brand? Would it create a diffused image of the parent brand? The answer to this needs to be a ‘No’.
Only if the answer to these questions is ‘Yes, Yes, and No’ should you go ahead with the extension.
Applying the three questions
Let us look at a few examples of applying these questions. Maybe, the companies did not ask these exact questions, but the thought process would have been along the same lines.
When Toyota decided to enter the luxury car segment to compete with Mercedes, BMW, and Audi, they did not extend the Toyota brand, but went with a new brand instead-Lexus. The reason was clear. Toyota is a mid-market brand built around quality, reliability, and price value. It would have been too much of a stretch to move the brand into the luxury and high-performance territory. In fact, Toyota and Lexus are completely delinked and operate as separate businesses.
The Titan Company is a great example to study in this context. When they wanted to enter the women’s dress watch segment, they extended the Titan brand into a sub-brand Titan Raga. It not only presented a lucrative market opportunity, but perfectly aligned with the equity of Titan- premium, sophisticated and elegant. And of course, it wouldn’t dilute or diffuse the equity of the Titan Brand but add to it. However, when Titan decided to target the Youth segment and the Economy segment, they went for new brands- Fastrack and Sonata. Reason being, a funky, cool, and irreverent youth brand would not fit with the equity of Titan, on the contrary it would diffuse it. An economy brand under the Titan name would dilute its premium image and devalue the brand.
Here are a few extensions to ponder over: Was the decision of Dove to extend the brand into Dove Men, right? How about Patanjali launching jeans? Kingfisher extending the brand to an Airline? And Uber launching UberEats?
When taking a brand extension decision, think it through by asking these three fundamental questions. In the end, don’t stretch the rubber band so much that it comes back and smacks you in the face.
Anand Narasimha is a corporate turned academician with over three decades of experience spanning Brand Marketing, Advertising, Consulting, and Teaching. He writes the column Marketing Mocktail for Storyboard18. Views expressed are personal.