The 3 Factors That Contribute to Successful Brand Extensions

Posted by Carolyn Crafts on October 16, 2020

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Brands must continually grow to flourish and maintain relevance. One of the most established ways for an existing brand to achieve material growth is through brand extensions. However, many brand strategy owners struggle with how far they can (or should) stretch their brands’ boundaries.

Play it too safe and risk boring line extensions that underwhelm customers and fail to impact the marketplace. But straying too far from the brand’s core positioning risks diluting or causing irreversible damage to its valuable equity.

Brand extendibility offers a lucrative path to achieving growth. It can drive faster, more dramatic business results than simple efforts to increase market penetration. When done correctly and responsibly, brand extension carries less risk (and less expense) than new brand launches to accommodate new products and services. However, the failure rate of brand extensions is persistent and well-documented; research from EY reveals that brand extensions fail at an astounding rate of 84%.

Business Growth: Brand Extension vs. Line Extension

Before diving into further detail on brand growth, it is important to distinguish between line extensions and brand extensions.

Line extensions are typically categorized as launches where the company introduces additional items under the same brand name. This category includes new flavors, forms, colors, and other minor additions.

Brand extensions, however, are when a new product is launched that represents an entirely new category for that brand. An example of this would be when an apparel company launches a new line of perfumes under the same brand name.

Brand extension represents a stronger opportunity for revenue growth and brand transformation (vs. line extension). So why does something that appears so straightforward has such a dismal success rate? Explanations for this poor track record abound, but most trace back to one or more of three primary reasons:

  • No demand (i.e., need or want) for the extension — if it doesn’t solve a problem or improve an existing process, the extension will likely fail
  • There may be a demand; however, the solution is uninspiring or inadequate
  • The need exists, and the solution adequately addresses it; however, the brand itself is either irrelevant or a poor fit for the solution

Meeting all three factors — demand, solution, and brand relevance — increases the potential for success.

Demand

Unfortunately, many new products and services are often launched in the marketplace with no apparent problem to solve or need to address, resulting in inevitable failure.

In some cases, an unmet need may exist because there are no solutions whatsoever in the market. In other cases, there may be solutions to address the need, but they are unsatisfactory or insufficient. The extent to which current solutions sufficiently meet that need is equally important.

In 2006, Microsoft made a competitive move to challenge Apple and released Zune, its version of the futuristic, one-buttoned, every-song-in-your-pocket iPod. The onscreen colors were energetic, and the interface was a beautiful minimalist font. However, the Microsoft Zune was not a successful product because there were no distinct user needs that the iPod was failing to meet or any innovation that would shake things up. The Zune solved nothing.

Solution

An appealing solution to address the need or want is the second requirement of successful brand extension. Several mistakes can be made during this process, and each factor can singlehandedly derail a brand extension.

The first mistake, which is relatively straightforward and obvious, is when the solution does not successfully address the want or need in question. BlackBerry continually improved its physical QWERTY keyboards because it wanted to focus on business emails. The once-superpower in the smartphone market failed to anticipate that consumers — not business customers — would drive the smartphone revolution.

Even if the solution is creative and inspiring, an offer's side effects can sometimes be its downfall. In 1999, the avian flu pandemic fears created a demand for antiviral medications. The FDA approved two flu drugs — Tamiflu and Relenza. Tamiflu reported massive sales, while Relenza became one of the pharmaceutical industry's worst product flops. The powder form of the drug caused respiratory difficulties in some patients. GlaxoSmithKline sold only $13 million worth of the drug in the first quarter of 2006 compared to Roche's $770 million in Tamiflu sales in the first half of the year.

Brand Relevance

The third factor for a successful brand extension is relevance. Brand relevance is the extent to which a new product or service concept fits the brand's positioning. The closer the idea fits with the brand positioning, the greater its chances of success. If the fit between the concept and the brand isn't strong, the new offering can dilute the brand's valuable equity or even eradicate the equity.

Brands can successfully extend into seemingly unrelated product categories by leveraging the intrinsic aspects of their positioning. For example, The Clorox Company was traditionally known for bleach but successfully extended its brand into other categories like sprays, wipes, and toilet cleaners. The brand accomplished this by moving beyond product features and attributes, tapping into its more intrinsic aspects — helping consumers maintain cleanliness.

Brand Positioning’s Vital Role

Brand positioning plays an essential role in extendibility. It should continue to protect valuable brand equity from harmful dilution and destruction, but it can also serve as inspiration for new ideas.

Marketers must consider the intangible qualities their brands represent and use those as inspiration for extendibility. The power of brand positioning ultimately allows marketers to achieve meaningful, transformational brand growth.

From proper brand positioning, to effective brand extensions, to robust brand architecture, our brand consultants zero-in on the issues that matter most to your business. Contact us to learn how we help brands meet their unique needs with dedicated experts who are focused on your business.

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