“A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, co-operate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.” said Robert Heinlein. But that … is only true for human beings.
To extend wisely without going on an ego trip is a challenge many a marketer faces. Especially, today when the single most agenda for any business is growth, not just organic growth but leapfrog growth.
Globally Brand extensions and expansions are the most used strategy for growth. Extensions are when a brand or business extends its equity within the same category and expansion means when a brand ventures outside its core category by extending its core values. 58 per cent of UK consumers would be more likely to try a new product from a brand they knew, versus only 3 per cent for a new brand.
Closer to home… Brand proliferation and stretching is evident in the numbers quoted in some ACN data that I was reading:
- More than 1500 New Brands launched in the FMCG space in the last 3 years
- More than 1400 Line Extensions off existing brands in the last 3 years
Significant growth in the FMCG space has been driven by new line extensions and new brands.
Why is it so tempting to stretch??
Enablers of Brand stretch
- Extremely expensive to build Brands coupled with high failing rate of new Brand launches
- Research says consumers are more open to the familiar, so versus launching a new unfamiliar brand and spend huge money on familiarizing…a better option to extend the current Brand
- Self construal theory* states that markets where consumers are more interdependent accept extensions better. This is said to be true of east cultures which are high context cultures. Japan, India more ‘open’ to brand extensions
- Convey broader Brand meaning to consumers
- Research tools available to plan and test acceptance of extensions
Extensions are an attractive option but also a double edged sword. A closer look at the dynamics of stretching. Outlined are the moments of temptation when you as a marketer are likely to give into the temptation and the caution that one needs to take before giving in.
Tempt appeal # 1 You have created a high brand equity and its Pay back time
- The Brand'ss equity is strong and you want to start using it to make money. You want return on the investment that you have made on building the brand. You are super confident about elasticity of the Brand equity and want to achieve the stretch rapidly.
- The Brand is between its growth and maturity stage in its Life cycle, the brand product relationship has reversed. The Brand’s equity has become more ‘values’ based and that is when most businesses want to make the emotional stretch through a wide variety of extensions!!!
- Just because you can, doesn’t mean you should. A strong Brand doesn’t guarantee success, there has to be a significant value addition along with brand fit … extensions offer value cannot substituted by equity value
- Even with a high equity, dormant Brands need to roll out extensions in a planned manner.
- Stretch selectively, ensure you have a well defined product dna and brand dna. Stay true to what made you famous in the first place- the Brand’s core. CASE in point is Dove, the Brand waited 40 years before it started to stretch. It started to stretch with more soap bar options, moved into adjacent personal wash categories and then got into deos and hair wash but kept the moisturizing story through its stretch.
#2 Getting an elephant to dance. Your brand growth is stagnant
- You have a large Brand. The economy is showing growth, competition is growing, newer categories are also taking market share from your brand…the growth curve is flat.
- Everyone says the fastest turnaround is possible if you launch an extension.
- Don’t assume an extension will solve the problem which stems from a lack of growth of the core product
- The inherent weak links of the core product need to be strengthened before attempting stretch
#3 Reloaded- you feel the need to revitalize your long standing Brand
- A large share in the market, in most cases the Brand is a market leader, with consistent communication BUT losing sheen. Brand does not have a updated contemporary look and is in danger of fast losing share to new entrants.
- Before stretching strengthen your Brand, update it and look only at extensions which fill the equity not borrow from it.
- Create a halo effect that gives your Brand width and strength
#4 To be relevant to changing consumer needs
- You are a market leader and drive the market. You set the rules of the category. You can see consumer needs are changing with times, and challenger Brands hovering around with newer offerings. You strongly feel stretching is the answer.
- Don’t be reactive …be proactive. Ideally you should have new product development team who thinks ahead.
- And when you do give new offerings, relevance of the Brand’s core to the new extension critical
Examples of Brands who were proactive, Dettol- liquid hand wash- Dettol skincare
Lifebuoy-liquid wash- gold vs Baygon, who lost relevance with consumers due to lack of proactive innovation.
# 5 The new opportunities are compelling
- A growing middle class, a young country, rising income levels, changing lifestyles…giving way to new opportunities in products and services… rapidly growing markets.
- Most organizations set ambitious growth targets on Brands which are large but haven’t experimented with extensions. There is usually pressure from top management / holding companies have been very successful at what they do
- True especially for Corporate Brands…answer honestly if the stretch is within your grasp?
- Do you have the core competency or even if you decide to acquire it, does your Brand equity lend itself to the new business?
- Will the corporate house be able to break the business model? A lot of times, the proposition and fit is good but the company is culturally not geared for the business
- Will you be trying something so different that it will take away your focus from the core business
- Never expect success in one area to guarantee success in another
One such example is Virgin, who went on a Brand ego trip when it stretched into too many offerings, some which were not lending themselves to its philosophy of being an irreverent fighter for value and in some cases like apparel, the company had Poor understanding of the ‘new’ consumer and ‘new’ market and did not play by the rules of engagement relevant to that category.
# 6 Feel need to leverage your competency, both backward and forward
- You manufacture the bulk raw materials and have complete handle on the back end supply chain and know value addition will dramatically increase profitability
- You have channel presence with a widely distributed consumer product, you want to juice your distribution muscle. It is one of the most difficult parts of a business to build and you have made years of effort to do so.
- Expanding your mindset and company culture will determine your success.
- Different categories that sit on the same shelf have different rules of engagement, you have to respect the category codes
- Manufacture led thinking to consumer led thinking
An example would be ITC, which has extended into various new businesses that leverage its strengths and has been successful because of a cultural shift in its mindset.
# Tempt appeal 7 - Your business definition allows you to
- How does a Brand define the business it is in? determines how much and how easily It can adapt and stretch
- If you have defined wisely, it is very inviting to launch everything that within the business definition
- Is the Business definition an ego trip?
- Even when the business technically falls in your definition, does your brand
Satisfy a key driver in that category?
Example-One Brand that has done it well is Saffola who is attempting to move from a heart care oil to heart care foods
Of course, extending and expanding can be hugely profitable if done right. Generally when the Rule of affinity is followed, that is when the consumer reacts “Well I thought that they already made it” Consumer’s mental shelf was already set up even before the shelf at the super market displayed the product” then that stretch is likely to be the most successful.
So the next time the management says lets have a new baby, Do give in to the temptation, as long as the approach is like a marathon not a race, you have Preset the goals and path forward clearly, you keep reminding yourself that the stakes are high, and you use Brand relevance as an important filter.