Brand Extensions: Is it Time to Broaden Your Horizon?

By definition, a brand extension (product or service) should offer a different benefit and/or attract another market or market segment than its parent brand. Brand extensions seek to capitalize on the positive perceptions and associations of one brand, translating them to the new brand. For example, if customers associate safety with a certain company, they may infer that any product from that company is safe. Loyal customers of a parent brand may be more willing to try brand extensions. This, in turn, may decrease the cost of marketing the new product. The extension may strengthen the parent brand as well.

Notice I keep using the word "may." Here's why: many brand extensions end up disasters, draining the marketing budget and diluting their parent brand in the process. In their rush to grow, even large corporations overlook the simple fact that brands should only be extended when the new product or service addresses genuine consumer needs and is based on accurate knowledge of the parent brand's core strengths in the minds of its customers. Having more products doesn't always mean achieving more profit - especially in the long term.

Let me give you a true example of a poorly thought-through brand extension. Not long ago, a leading manufacturer of motorcycles introduced cake-decorating kits. One nationwide survey "awarded" the product "worst brand extension." After all, the baking world and the biker world don't seemingly intersect. The product doesn't seem to fit with the brand's core values.

What a Brand Extension Should Do:
A brand extension should:
    - strengthen the existing brand
    - address additional opportunities or find new uses
- bring new users to the brand only if existing costumers are not put off by the extension

A brand should move into a new industry only if it can do so without losing relevance (i.e., cake-decorating example above). The new market should be a natural fit with the original market, because most brands become linked to a specific industry in the consumer's mind. As a result, few brands can wander outside their flagship market. Virgin (as in Virgin Mobile, Virgin-Atlantic, etc.) is one example of a brand whose values transcend industry segment.

Another way a brand extension can be successful is by creating a new category versus moving into an existing one, where it may get lost among more established competitors. Before Starbuck's, who would dream of paying so much for a cup of Joe? Starbuck's revolutionized an industry with its introduction of a new category: the European-style coffeehouse.

Keeping your focus narrow doesn't mean you have to carry a limited product line. For example, Starbuck's has stuck (for the most part) with its original market, but offers many choices to that market, including extensions like coffee liqueur. Companies who stay focused on a particular market are perceived as specialists, and specialists are usually thought to know more or be better.

Ask Yourself 5 Key Questions:
If you are considering a brand extension, ask yourself:
1.    What is the long-term vs. short-term impact of the extension to my company and parent brand?
2.     Is my parent brand strongly associated with a certain product category or can it step into new markets?
3.    What value does the extension add to my parent brand?
4.    What unmet customer need does the extension serve?
5.    How does the extension leverage my brand's strengths while avoiding its limitations?

As you calculate revenues from sales of your brand extension, be sure to tally up its true costs in terms of brand erosion as well. Maintaining long-term brand health is usually more important than short-term dollars.