Branding: Grounded in reality

Brand extensions that succeed begin in the same place: by asking what customers want, writes Robert Gray.

If you own a strong brand, there is the perpetual temptation to stretch it into new product areas or even across categories. Look at the runaway success of Apple's iPod, which married innovation with the design-conscious funkiness of the parent brand to immense commercial success, or Caterpillar's move beyond heavy machinery into popular chunky footwear.

Yet, while rewards are potentially immense, it can be a risky undertaking.

Research last year from Ernst & Young suggested that brand extensions are more likely to fail than new brands. And data from Millward Brown found that awareness of extensions' advertising is considerably lower than that of new brands, with many consumers confusing the extension with the parent.

This raises many intriguing questions. Do some brands or categories of brand stretch better than others? If so, why? How do you decide when to extend and in what direction? And what should you do to give yourself the greatest chance of success?

'The problem in my view is that while the best brand extensions profit from the reputation of the parent brand, this can breed complacency within the company - an attitude that the normal rules of marketing don't apply because the brand name will carry them through,' says MCBD planning director Andy Nairn. 'Thus the main mistakes are shockingly basic ones. Very often, there is no real consumer need for the brand extension; the product is developed on the basis of what the company can make, and how it can squeeze more value out of its existing assets, rather than what consumers actually want.'

If the basic product is not different enough or brings nothing new to the category, the chances of it failing are extremely high. Extensions are also likely to fail if the core values of the parent brand have been misunderstood or carelessly interpreted.

Pearlfisher creative partner Jonathan Ford says there are three basic steps to successful brand extension. First, the essence or truth of the original brand must be clearly defined. Second, the way this can be transferred into a new category or offer must be painstakingly researched. Finally, executing the extension must be done in a way that is highly desirable.

'Brand extension failures tend not to have followed these three steps,' says Ford. 'With McDonald's, the obesity debate led it to distance itself from its core focus. It introduced salads, but some of these were found not to be as healthy as they were originally thought to be. What McDonald's should really be focusing on is better-tasting burgers.'

Instant rivalries

JKR chief executive Andy Knowles says that in principle it is a mistake to launch a me-too brand extension against a long-established, stand-alone brand. He reels off a list of brands that have struggled against strong, well-entrenched competitors: Tia Lusso against Bailey's; Virgin Cola versus Coke; Kit Kat Balls taking on Maltesers; Tropicana Smoothies and Innocent. Despite the hype surrounding its launch, Branston Beans, he believes, faces a tough task in making inroads against Heinz.

Knowles believes that brand extensions that are designed to build on and add back to the core brand equity work best. In this category he places Robinsons Fruit Shoot and Audi TT. JKR has worked with brands such as Scholl Party Feet, helping create a product positioning that took the focus away from a curative proposition to a preventative one.

'The consistent theme in all of these is that they were not head-on attacks, but flanked existing products by bringing something new and special to the market, and that is the golden rule for extension,' says Knowles.

'Copy others and you will end up in a price war at best. Invent your own way and you give yourself a decent chance of success.

'At the beginning, the temptation is to do something different from the mother brand to attract new customers,' he adds. 'But in attempting to drive a wedge between mother and daughter brands, all the equity is undermined, dividing resources, weakening the mother brand and dissipating the opportunity.

Kit Kat declined progressively in inverse proportion to its brand extensions. That's the role model for bad brand extension.'

Erroneous research conclusions

Poorly formulated or imprecisely interpreted research is also occasionally a factor in brand extensions that go wrong. When questioned, consumers often give lukewarm 'permission' for a company to extend its brand. This is misinterpreted as active enthusiasm - clearly a very different thing.

Alternatively, consumers err toward the familiar, 'approving' brand extensions that they've seen before, while shying away from more radical ideas that may in fact have greater potential.

'In terms of which sectors or brands are better suited to brand extensions, I'd say that service or non-tangible companies have an advantage in that they are inherently defined by an attitude rather than a physical product, and the former is easier to transfer than the latter,' says MCBD's Nairn.

'Similarly, younger companies have an advantage, in that they are less associated with a particular product or format and so may find it easier to branch out.'

Tesco and Virgin have done well at brand extension because they operate in the service sector, define themselves in terms of intangible values, and always consider what the consumer is looking for in a category - and thus whether their values might be desired in that sector. Often they launch a product which not only lives up to the parent brand's promise but also enhances it.

EasyGroup owner Stelios Haji-Ioannou believes that entrepreneurs are well placed to carry out brand extensions because each one is like starting up a new business. The easy brand, which began with easyJet, has been extended into a wide array of sectors from hotels and car hire to cinemas, pizza delivery and personal finance. A number of brand experts feel that its extension into toiletries with easy4men (see panel below) is a stretch too far, but Haji-Ioannou vehemently denies that Boots is considering delisting the range and feels it has a part to play.

'I don't think easy4men will materially change my net worth but it's not cost me anything and I think it's worth having,' he says. 'It can't be spectacularly unsuccessful as we haven't lost anything on it. You might think that we've gone too far. I can argue that 15 (easy brand extensions) is a carefully selected list out of thousands of ideas that have come to us. It's not as if we're not conscious of our limitations.'

A mistake many marketers make is that they fail to define their brands in more emotional ways. By starting from the question of which new formats their company can make, rather than what the consumer wants, they end up bringing nothing new or truly desirable to the market.

For those brands moving out of their category, the associations of the new category has to match its own. 'In the UK, JCB tried to mirror Caterpillar's successful move into branded clothes and footwear,' says Dragon's director of consumer brands, Claire Nuttall. 'In the US, this is a buoyant, successful industry; the associations in the UK are predominantly images of wolf-whistling and overweight men - not the image that would give JCB the platform to launch from.'

Similarly, Harley-Davidson's contrived entry into the perfume market was doomed because the requisite values were diametrically opposed to its rugged, masculine persona. Mars ice cream and Kellogg's Nutri-Grain bars have worked because they are true to the brand's soul and, moreover, feed back positively onto the parent.

'Ultimately, brands thrive by having a clear and differentiating position in the consumer's mind,' says HPI Research managing director David Iddiols. 'It is vital not to dilute that position by stretching too far - the narrower the focus, the clearer the brand persona. So if contemplating brand extensions, the golden rule must be to ensure that the move magnifies, rather than diminishes, that persona.'

HIT - GREEN & BLACK'S

From chocolate bars to gift boxes and ice cream - a logical stretch, but one executed with aplomb. Its packaging in the frozen aisle smartly mirrors the high standards the brand set in confectionery. The organic-yet-indulgent positioning is just as valid in the new category, sending the same clear messages to the consumer as before. Simple, stylish yet striking packaging and a choice of flavours in keeping with the brand's sophisticated positioning make for a good extension.

MISS - KIT KAT

Fast becoming the definitive marketing textbook example of how excessive extension can damage the mother brand. Nestle Rowntree introduced variant after variant: Kubes, White, Chunky, Lemon & Yogurt, Seville Orange, Chunky Peanut, Low Carb and Balls. This contributed to an incoherent strategy that confused consumers and undermined a classic brand. Too much choice, not enough focus.

HIT - RANGE ROVER SPORT

Launched last year into the fast-growing premium SUV sector led by the Germans (BMW X5, Porsche Cayenne), this model takes what drivers know and respect about the Range Rover (luxury, distinctive styling, all-terrain ability) and adds one clear, simple ingredient, 'Sport', to take it into another market. Advertising and direct marketing support showed it was a Range Rover with extra oomph; for example, a mailing contained a bottle of Tabasco. It had a six-month waiting list at launch.

MISS - EASY4MEN

From the group that brought no-frills air travel to the market comes no-frills personal grooming. EasyJet has plenty of virtues, its low-cost basic service offer structure great for weekend breaks or budget business travel. But these qualities are an odd fit when applied to toiletries. It is not the first time Stelios has tried such extensions with varying success; easyPizza, easyCinema and easyCruise, to name but a few, have seemed out of place.

HIT - BACARDI BREEZER

The boom in alcopops, or flavoured alcoholic beverages, as the category is more wordily known, may have slowed since its arrival in the mid-90s, but the launch of Bacardi Breezer 12 years ago brought the brand to a new audience, and its ready-mixed format revolutionised consumption. Like Diageo's Smirnoff Ice, it has been an international smash. The market is more difficult now, as such drinks have become less fashionable, but Bacardi Breezer stands out as a brand that has survived recent culls in the market. In fact, Bacardi has been developing the range and last year launched a half-sugar version.

MISS - VIRGIN BRIDES

Virgin has proved itself one of the most elastic brands around, stretching from music and retail to mobile phones, financial services and air travel. After a shaky start, it has also convinced as a train operator, but has been less successful as a cola, vodka or cosmetics brand. Its move into wedding services with a mass-market brand seems another of those ill-conceived stretches. Operating out of a single store in Manchester, Virgin Brides launched amid a bizarre PR effort involving Sir Richard Branson in a wedding dress. Surprisingly, attention to the operation faded after that and there is little to suggest that it has won sceptics around.

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