Where to start?
What are brand extension strategies for success? And when is it better to extend your brand, launch a new brand or finesse your brand strategy? Let’s start with a short story to illustrate some of the factors to consider.
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 the USA, he launched Rowntree’s Chocolate Crisp, later renamed KitKat (Figure 1). Fast-forward to today and there are over 200 KitKat brand extensions.
He also transformed Rowntree’s Chocolate Beans into Smarties. So today you can now find large Smarties, Fruity Smarties, and ice cream Smarties, amongst many other brand extensions.
While launched as ‘fruit confectionery’ brand extensions, this gave KitKat and Smarties the focus to grow into discrete, and successful new ‘chocolate’ brands. Harris was lauded for this success, and as a result, he became Rowntree’s company Chairman in 1941. Today he is also viewed as a father of modern marketing (Figure 2).
Brand extension aims
So what you wish to achieve with your brand? There are two principal brand extension strategic aims. Either or both to:
- Grow your brand i.e. increase market penetration or share, for example by attracting new customers, entering new segments or markets, increasing use, and thus sales and profits and / or to
- Boost your reputation or equity by increasing awareness, or rational or emotional perceptions.
However, the further a brand extends, the greater the potential dissonance from the core. While this may imply greater opportunity, and potential for a ‘new’ brand, it also implies greater risk. (Figure 3). The second question then, as George Harris understood, is whether a brand extension or launching a new brand will inspire greatest success?
Brand extension vs launching a new brand?
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, requires building new equity. Thus at higher cost (See Figure 4). This form of brand extension strategy is likely to be most suited to launching a ‘new to world’ product or variant which requires a more differentiated positioning.
Principal brand extension strategies
There are two principal brand extension strategies; either by evolving from the brand core or to realise a brand vision.
1. Brand extension by evolving from the core
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.
Boots No7 brand extension
In 1935 Boots launched a retail own brand called Boots No7. Originally, it was just a skin care line, though cosmetics followed and subsequently 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. So in 1971 the decision was made to build an independent fashion brand, exclusive to Boots.
New product innovations also added to the ‘skin care’ equity, with (No7 Special Collection) Positive Action Cream (1980) (designed to compete with upscale skin care brands). Then in 2007 No7 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 two weeks. Today ‘Protect and Perfect’ is a sub-brand extension in its own right. It also sells outside of Boots’ stores (Figure 5).
2. Brand extension to realise a vision
Olay is 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.
Three example brand extension strategies and lessons learned
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. Through the 1970s, the company established a reputation for classic Italian style and luxury, and prospered. While ups and downs followed, the hiring of the highly creative Tom Ford to design a ready-to-wear collection in 1990 took the company to new heights. Most recently the brand stretched into homeware and decoration (Figure 6). It also encouraged social sharing via digital media. This has inspired further 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.
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
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 tend to have high awareness (at least in their niche). And also distinctive rational and emotional benefits. So pay attention to boosting the both via your brand extension strategies 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 too linearly i.e. just within a market segment, to stretch your brand. Try and think laterally. So understand customers, and their views on your brand. Also seek a new 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 bold and creative thinkers.
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 boosting your brand. So avoid a stretch too far – only launch a new brand when clearly different and the 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)