Lessons in Brand Extension

Brands exist for the long term and are successful because people prefer them to ordinary products. Brands are not just names, logos, designs, etc.; they establish trust in consumers’ minds and enable them make choices and judgements. It is therefore important that consumers’ perception of the company or product is deliberately influenced through information at their disposal, which they can analyze.

Because brands are a company’s most valuable assets, it is important that they are handled carefully. Companies usually grow internally in one of three ways: either through market expansion, developing new products, or extending old ones (Steve Hannaford 2006). The major thrust of product development in the last few decades has been directed at extending the equity of existing brands by companies.

Brand extension may be referred to as a product line extension that is marketed under the same general brand as a previous item or items. For example a Motorola V 50 mobile phone is an extension of Motorola that used the secondary brand of V50 for the overall brand. Brand extension could either be a pseudo-variety, or cross branding between two product segments. Brand stretching refers to the use of an established brand name for products in markets that are not related, e.g. the Dangote Group is into spaghetti, cement, textile, sugar, etc.

Brand extension makes it possible for a marketer to take a reputable brand and put it on a brand in a new category, e.g. Diet Coke. Marketers often take advantage of brand awareness and leverage on the associations consumers know about the parent brand. More so, consumers who favourably evaluate a parent brand are more likely to identify with the extension than an unfamiliar brand in the same category; this is because they trust a known brand name. Generally, brand extension makes new product introduction less expensive.

Maggi Chicken, Maggi Crayfish, Maltina Pineapple, Maltina Strawberry, Guinness Extra Smooth, Nescafe Gold Blend, and UK Nescafe: all are examples of extending a brand. A successful brand helps a company to enter new product categories more easily. For example, Omo (owned by Unilever) was extended from a washing powder to a bar soap. The Lucozade brand was successfully extended from children’s health drink to an energy drink and sports drink.

Marketers have long realized that strong brand names that deliver higher sales and profits have the potential of creating some magic on other products. Nescafe is an example of a strong parent brand that has successfully exploited brand extension to develop a series of variants that specifically target different coffee occasions, consumer types and price sectors (Martin Payne 2001). Of course these are able to strengthen the Nescafe parent brand.

Sometime ago Korean consumer electronics manufacturer Samsung Electronics Co. used to produce lower-end consumer electronics under a handful of unknown brands. But starting from 2001, Samsung, which had repositioned to focus on building a more upscale image through better quality, design, and innovation, came out with a line of top-notch mobile phones and digital Televisions. Through these products, the company’s technological prowess is showcased. (Matt Haig 2004).

Brand extension should be able to feed off the parent brand and take its equity rather than having a significantly different positioning. Bank PHB product offers such as PayTime (Salary Advance), Phuture Account and Partners Account feed off the core brand and add to it. The Guardian has The Adviser and Life, while This Day offers Style; these brands allow the extensions to feed off their media strength.

However, brand extension can run out of energy and result in dilution. If the consumers’ perception of the brand is misunderstood, it could be transferred to a sector that consumers see as ‘inappropriate.’ If the positioning is irrelevant, it can undermine the parent’s credentials and also take needed marketing funds from the parent.

Diet Coke’s marketing pitch- “The taste of Coke without calories” definitely targets regular Coke rather than a competitor’s product (Al Ries 2006). Should the best target for a second brand not be the competition? After all, Lexus never took business away from Toyota. Instead, it took business away from Mercedes-Benz, BMW, Cadillac and Lincoln. When a product category deviates by creating two separate categories, the regular leader usually loses out in spite of the longtime leader using its existing name on the new category.

The problem with the Mercedes-Benz E-Class, the cheaper A-Class and M-Class extensions is that Mercedes-Benz has spent most of its history establishing itself as a prestige brand even though it focuses on engineering. But prestige is ultimately about price, not engineering. So the cheaper Mercedes-Benz cars are popular because they are one way of buying into a prestige brand. Meanwhile there is a law of diminishing returns here- the more cheap cars that are sold, the less prestigious the brand becomes. Could the case of Mercedes-Benz extensions be that of product success and brand failure? (M. Haig).

Volkswagen tried to move up-market with the luxury Touareg Sport Utility vehicle and Phaeton Sedan models, but that has only succeeded in confusing car buyers who have always associated Volkswagen with zippy, affordable cars. According to Al Ries, author of The Origin of Brands and CEO of Atlanta-based marketing strategy firm Ries & Ries, one of the most difficult problems in marketing is balancing the needs of today with the needs of tomorrow.

While we extend big brands, should we not try to develop new products? Are we so good at building brands that we forget to create new ones? Experts have cautioned that brand extension has the potential to dilute the brand equity and cannibalize sales of the parent brand (M. Payne). Brand extension therefore must be approached with a degree of caution. The brand’s long-term health should be of paramount importance and must not be sacrificed for short-term advantage when managers face pressure to deliver.

A successful brand extension will address genuine consumer needs and is developed from the consumer demand side not the supply side. We need to constantly consider the long-term effects of a brand extension. Brand extension should be relevant to the consumer and to the parent brand, e.g. what does the extension add to the parent brand?

Despite brilliant marketing, distribution, and manufacturing expertise, companies that do not innovate will stagnate. We can still be a very profitable company, but that is not enough for investors who are actually more interested in growth (S. Hannaford).

The day other day, I was asking my lovely wife about the Maltina extensions- strawberry, pineapple, exotic fruits, etc. (she is a maltina person) because I was not getting to hear about them anymore. I was really sad when she said that they were no longer being produced. Can this be true?