Brand extensions

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Question - What are the main opportunities and risks in extending your brand?

Answer 1 - the main opportunities of brand extensions are:

1. saving money
2. building additional brand stature

Answer 2 - the main risks are:

1. failure in the new product/service or market category
2. losing the tight focus of your existing brand
3. damaging the perceptions of your existing brand

The risks increase as you extend your brand from your existing market into unrelated markets.

Your biggest chance of success is if your brand is well developed in terms of its higher emotional profile (personality, values, taste/appearance).

The key success factors are whether you have:

1. a compelling brand proposition in the new product/service or market category
2. sufficient competence in the new product/service or market category

In more detail.....

The main advantage of a brand extension is that you take the equity/goodwill from an existing brand and use it in another context. If successful, this can save a lot of money because you do not have to invest the standard $50 million - $1 billion in developing a new brand on a global basis. All you have to do is to make people aware that the brand has entered a new product/service or market category.

Another advantage is that, if you are successful, you increase the respect/stature of your brand overall, and may well rejuvenate it.

The downside to a brand extension is that you can:

1. fail in the new product/service or market because the brand is not compelling in that area
2. lose the tight focus of your existing brand, and therefore its intimacy (differentiation and relevance)
3. damage your existing brand by introducing new conflicting/confusing attributes

Brand extension options, in order of increasing risk, are:

1. related product/service extension - same market
2. unrelated product/service extension - same market
3. related product/service extension - related market
4. unrelated product/service extension - related market
5. related product/service extension - unrelated market
6. unrelated product/service extension - unrelated market

Whether a brand extension is successful will largely depend on:

1. your existing brand definition, and whether it is compelling in the new product/service or market category
2. your distinctive capabilities - your brand definition may allow you to stretch, but your execution of the extension lets you down

Broadly, the more your customers' perception of your brand definition is geared to the higher emotional needs (personality, values, tastes/appearance etc.), the more your brand can stretch into unrelated product/service or market areas. The obvious example is Virgin which probably stands for something like the ability to rejuvenate a business sector - and so potentially works in transport (plane, train, cars and courier services), finance, mobile communications etc.. However, lack of executional competence may let the brand down - e.g. Virgin Trains, Virgin Express.

To take another example, Anita Roddick may think that the Body Shop brand (or, perhaps, competence) is rooted in retail cosmetics. However, in fact, Body Shop probably stands for ethical trading, and therefore would easily stretch into green issues - organic products, ethical investments etc..

So the questions are:

1. what does your brand stand for in the mind of existing/potential customers?
2. what could you, with significant investment, make it stand for?
3. in what markets could your brand profile match needs, and in which segments?
4. are those segments attractive enough to you?
5. do you, or could you, have leading edge competence in those markets?

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