Where to start?
There is no single approach to brand extension, but what are the factors that drive success? Let’s start with a short story.
The Rowntree story
In 1881, Rowntree launched Fruit Pastilles, and then in 1893, Fruit Gums. Their success allowed them to launch new chocolate products, including chocolate beans. However, through the early 1900s, Rowntree struggled to make milk chocolate to match the quality of market leader, Cadbury’s Dairy Milk. Then in 1931, George Harris became marketing manager for chocolate products. So mining his knowledge of marketing and consumer research gained in America, he launched Rowntree’s Chocolate Crisp, later renamed KitKat (Figure 1). As a result there are over 200 KitKat brand extensions today.
He also transformed Rowntree’s Chocolate Beans into Smarties. As a result, brand extensions now available include large Smarties, Fruity Smarties, and ice cream Smarties.
While launched as ‘fruit confectionery’ brand extensions, KitKat and Smarties, grew into discrete, and successful new ‘chocolate’ brands. As a result, Harris became Rowntree’s company Chairman in 1941. He is also now recognised as a father of modern marketing (Figure 2).
Benefits of brand extension?
Let’s look at the benefits of brand extensions to better define ‘success’. In summary brand extensions are a source of growth, or reputation, or both.
Growth by increasing market penetration or share, for example by increasing usage, attracting new customers, or entering new customer segments or markets.
Also reputation, by boosting awareness, rational or emotional perceptions.
These fit nicely with the brand managers’ role to maximise profits and brand equity. Of course, none of these aims are mutually exclusive. What seems apparent however, is that the further a brand extends, the greater the dissonance from the core. While this implies greater opportunity, and potential for a ‘new’ brand, it also implies greater risk. (Figure 3). Of course, it is not always the brand manager that drives innovation, but often the R&D department. The question then, as George Harris understood, is whether a brand extension or new brand strategy, will inspire greater success.
Brand extension vs. launching a new brand?
So is it better to extend a brand, or launch a new brand? Here’s a summary of the pros and cons of each option (Figure 4). In summary, extending a brand allows it to benefit from its existing brand awareness and equity, thus potentially reducing launch promotion costs. Conversely, launching a new brand, builds new equity, though at higher cost.
How to extend a brand?
There are two principal ways; either brand extension by evolving from the brand core or to realise a vision.
Brand extension by evolving from a core
Boots No7, launched in 1935 as a retailer own brand. Originally it was a skin care line, though cosmetics followed and then took off after the war (3). Over the years the brand had many make-overs: both changes in livery (blue, terracotta, brown, grey, black etc). Also many brand extensions, though growth was impeded through a close association with Boots. Thus in 1971, the decision was made to build an independent fashion brand, though exclusive to Boots. Product innovations also added to the ‘skin care’ equity, with (Special Collection) Positive Action Cream (1980) (designed to compete with upscale skin care brands). In 2007, No7 went a step further by launching Protect & Perfect Serum. A BBC Horizon documentary declared it the only product on the market to have proven anti-ageing effects. As a result it caused a storm in Boots’ aisles with stock selling out in just two weeks. Today ‘Protect and Perfect’ is a sub-brand extension in its own right. It sells well beyond Boots’ stores (Figure 5).
Brand extension from the core requires understanding on the nature of the brand equity, its strengths and weaknesses, and then building on those strengths, or eliminating weaknesses.
Brand extension to realise a vision
Olay, a pink beauty lotion, (or Oil of Ulay, Olaz, or Ulan), as it was originally known, launched in South Africa in 1952 (4). Promoted as ‘the secret of younger looking skin’, it eventually became global category leader. While largely a single product brand, it was clearly perceived as ‘for younger looking skin’. In 1985, Procter & Gamble therefore acquired the brand, and invested significantly in R&D, to create a raft of brand extensions to better deliver the said promise. As a result, brand extensions now include Complete, Total Effects, ProX, Regenerist, Regenerist Luminous, Classics, Fresh Effects, Body (North America) and White Radiance (Asia). They also include lots of ingredients to deliver the younger looking promise: including a broad spectrum sunscreen, retinyl propionate (a vitamin A derivative), glycerin, niacinamide (vitamin B3), and amino peptides.
Lessons learned from other brand innovations
Gucci brand extensions
Gucci started out making saddles for wealthy horsemen in Tuscany in 1921 (5). Impressed by some of the luggage he saw guests with at luxury hotels, he then employed fine leather craftsmen, and the latest machinery, to make luggage. He also set up stores to reach elite customers. Clothing then followed in 1964, as did the iconic double GG logo on belt buckles. Then through the 1970s, as the company established a reputation for classic Italian style and luxury, it prospered. While ups and downs followed, eventually in 1990, the hiring of a strong creative, Tom Ford, to design a ready-to-wear collection, took the company to new heights. Most recently the brand extended into homeware and decoration (Figure 6) and social sharing via digital media has inspired even more growth.
Caterpillar Inc. (sometimes shortened to Cat) is the world’s biggest manufacturer of construction equipment. The name results from the merger of two companies in 1925; one of whom Holt, whose tractors hauled guns in World War 1. During World War 2 their trucks also found fame with the US Navy who used them to build military bases. Then through the 1950s, the company made a series of acquisitions, bringing new products to market under the Caterpillar name.
Caterpillar brand extensions
By the late 20th century, Caterpillar was synonymous with reliability, durability and technology, and a distinctive yellow livery. In 1994, therefore, via a carefully controlled licensing programme, Caterpillar extended the brand to a other merchandise. Firstly, and most famously, boots. The footwear sector has since boomed, and it remains the most successful consumer product licensing segment to date. In the late 90s Caterpillar then issued its first watch license, to Catwatches.com (Cat calls them rugged timepieces), and in 2016, to mobile phones. According to Kenny Beaupre, Caterpillar Brand Licensing Manager, “This builds positive brand awareness which helps in many ways. It also connects new and existing audiences to Caterpillar’s products and services. We’re fortunate people like being associated with our brand, and Cat licensed products are a great way to show this connection.“
The Walt Disney Company brand extension
Walt Disney, a shy yet visionary man, famously created his first sound cartoon, Steamboat Willie in 1928 (4). It featured what was to become the world’s best known mouse. Later in 1935, he went on to create the first full length, animation, Snow White and the Seven Dwarfs. Then in 1955, he opened the world’s first amusement park, Disneyland (in Anaheim, Los Angeles). To fund this he also diversified into TV programmes, including the Mickey Mouse Club, and live action movies. As a result, by the mid 1960s, when Walt Disney died, he’d set high standards, instilled strong beliefs in, and established a clear vision for the company, “to make the world happy”.
This vision has since guided Disney’s “imagineering”.
1. Brands grow through evolution (from a brand promise), or revolution through innovation to realise a brand vision. So build clear brand values. And also answer the question – “what does the brand stand for”? (Figure 8)
2. Great brands, and thus brand extensions, tend to have high awareness (at least in their niche). And also distinctive rational and emotional benefits. So pay particular attention to boosting the latter, as people pay more.
3. Successful brand development springs from clear insight, a strong creative leader, visionaries, a great R&D department, or a strong brand belief system.
4. Don’t think narrowly i.e. within a market segment, to extend a brand. However, do understand customers, and their views on your brand. Also think creatively: to uncover an insight or thread to connect the brand parts, and inspire a clear direction. Further even if a finding is untrue, it could still inspire growth.
5. You are more likely to reveal extraordinary brand extension ideas, through a culture of innovation. So hire folk who are bold and not blinkered.
6. Don’t cannibalise your own sales unless you are making more money i.e. higher margins.
7. Slapping your brand name on any product risks eroding rather than enhancing your brand. So avoid stretching too far, and only use a new brand when dissonance, and upside potential is great.
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2. Sébastien Jaulent, Katia Luxin, and Yna Sacko, Dissertation on ‘Advantages and Disadvantages of Brand Extension Strategy for Companies’
3. No7 Beauty
7. Capodagli Bill, Jackson Lynn, The Disney Way – Harnessing the Management Secrets of Disney in Your Company (1988)