Many companies try to benefit from the equity of their established brands by launching brand extensions—new products introduced under an existing brand name. In our previous post, Why So Many Brand Extensions Fail, we discussed how extending brands has potential to both heighten acceptance of new products/services and generate positive spillover effects on the parent brand, increasing the brand's growth potential.
While it’s generally best when products and services are a strong fit with the parent brand, here we will examine how, contrary to popular belief, consumers give some brands a great deal of permission to extend into unlikely places.
Brand Extension Critical Success Factors
While there are no hard and fast rules for brand extension strategies, from our frame of reference as brand strategy consultants, critical ‘success factors' include:
- Perceived fit. An extended brand is more likely to succeed if the extension category is related to the product or service the brand is best known for (i.e., the perceived fit between the extension and the parent brand is high).
- Image/reputation of the parent brand. A positive brand image and a strong reputation make customers trust in the brand and act as a barrier against competitive threats. It is argued that brands with a high-quality perception can be extended much further and enjoy higher acceptance than brands with low perceived quality. When consumers do not have strong trust in brands (i.e., brand reputation is weak), they doubt that the brand can actually deliver innovative benefits.
- Innovative product/service benefits. Conversely, if consumers have already established trust in a strong reputation brand’s ability to deliver on promised benefits, they appreciate that new, innovative benefits could address their unmet needs. A study, reported in the Journal of Consumer Psychology, found that consumers are actually quite flexible and open-minded in accommodating “low fit” brand extensions, as long as the extension provides innovative benefits that are both novel and useful (e.g., bed sheets with a temperature-sensing technology that gives consumers enhanced comfort and control).
Although customers may reject an extension in a new category because the brand stretches too far (which weakens existing equity), recent research suggests lower fitting extensions don’t always fail. Many brand extensions may seem unlikely to us however, numerous brands have made a success of an unlikely diversion into an unlikely category, including:
- BMW's extension from automobiles to skateboards
- Jacuzzi kitchen sinks
- World-famous Guinness Book of Records initially started out as a marketing giveaway for the stout brand
- Michelin’s restaurant guide made the tire company a fine dining authority
If lower fitting extensions ‘always fail’—as suggested by prior research—there shouldn’t be any low fit extensions in the marketplace because they wouldn’t sell and companies would learn from their failures. But in fact, BMW skateboards and Jacuzzi sinks have not been failures.
Flying High with Brand Extensions
Founded in 1970 by Sir Richard Branson as a mail-order record business, the Virgin brand is one of the most recognizable brands in the world. Virgin has successfully extended from a record shop brand to a cola brand to an airline brand. Cultural icon, Richard Branson, is a big reason for the elasticity of his core brand and the versatility to shift into significantly different categories. Who could have imagined Richard Branson’s Virgin Group could both sell records and provide commercial air travel? The brand is about a self-image that customers have of themselves (free-spirited and anti-status-quo). Not all Virgin extensions have been successful, but all are inspired by the Virgin personality of being irreverent and fun.
When they win over consumers, extended brands offer big rewards: more distribution, increased revenue, and better name recognition. Traditionally, the objective has been not to stray too far from a brand’s persona yet still strive to find the next new thing. But while an extremely low fit concept like chicken wing ice cream is a definite no-go, strategic extensions into lower fitting categories by brands associated with quality can certainly succeed.
