Brand Extensions: Three Takeaways for Success
There are multiple ways to create competitive advantage. One is through brand extensions, when companies leverage an existing brand’s equity to launch a product in a different category. With additional ad placements, shelf space, and conversations, an extension gives the brand more visibility and more reasons to buy. But before you walk down that road, here are three things you should know.
Impact on the parent brand
One of the biggest risks when implementing brand extensions is causing brand dilution – that is when the new product category fails and presents a negative impact on the parent brand. Precisely what happened with the Cadillac Cimarron back in 1981. Selling at an entry-level price point, this model gained popularity in a market segment that could not afford the luxury-sized cars Cadillacs were known to be. This caused the Cadillac parent brand to lose some of its exclusiveness – if anyone could afford a Cimarron, a full-sized Cadillac seemed to be worth less. The lesson here is that it is important to know how the parent brand is positioned and how an extension will affect it.
Logical fit with the brand
Not every category is right for every brand. Make sure the extension is a logical fit to your brand – one that is compatible, expected, and that follows the brand story. The connection between the new product and the parent brand should be easily understood. This is what was missing when Colgate decided to branch out into ready-to-eat meals in the early ‘80s. People associate Colgate with toothpaste – something minty to brush your teeth with and spit out when you’re done. Food on the other hand is meant to be swallowed and have a pleasant taste. The two mental constructs just didn’t mix on a related trajectory.
It’s not the marketing manager, the engineer or the sales team who make an extension successful – it’s the consumer. Make sure to understand who your target is and what their needs are. McDonald’s has something to say about this. While their McPizza flopped because of a value proposition too close to established competitors like Pizza Hut and Domino’s, their McCafé concept is proving pretty successful on all continents. Especially with young people who see it as a relevant alternative to the 6-franc Starbucks cappuccino.
Get in touch today to find out how we can help you prepare for that brand extension.