Brands Without Borders: Understanding Brand Extension

One of the most difficult challenges a brand can face is continued growth. Of course, the easiest growth path is through the introduction of close in-line extensions, such as new flavors, scents, or varieties in the same category as the original parent brand. Once these obvious opportunities are exhausted, the marketer must search further afield to identify new opportunities. Often the brand must extend its franchise outside its home market and into new territory to continue growing.

For the brand manager, this strategy is fraught with challenges. Which brand name should he or she choose for the new idea? Which new market represents the best opportunity for the brand? Perhaps most importantly, what strategy should he or she pursue for the extension item in the new market to ensure its success? And finally, how will the existence of the new extension affect the equity and sales of the parent?

Ipsos-Novaction has developed unique tools to address the special issues of brand extension, and we have helped our clients to develop and introduce hundreds of successful brand extensions. Based on the findings of this work, we have developed several guidelines to help brand managers navigate the extension process.

Which brand to extend? Large consumer goods companies often own several brand names, each with its own strengths and equities. If a company wants to enter an unfamiliar market, which of its brand names should be used for the new entrant?

Our experience shows that choosing the right brand can have a tremendous impact on the success of the stretch initiative. It goes without saying that the best candidate should have a large user base and strong image in its home market; obviously a brand with a higher penetration has more users to bring to the stretch opportunity, and a brand with strong performance and perceptions will be a better platform for stretch than a weak brand. But a more subtle issue is also involved: we believe there also needs to be a fit between the specific imagery of the home market and the destination market.

Suppose a client has two strong household product brands -- one a bathroom cleaner, and the other a furniture polish. If that company wanted to introduce a glass cleaner, which brand name should it use? To address this issue, we conducted an analysis to identify the existing equities currently associated with each brand name. By equities we mean the perceptual dimensions or benefits where the current brand outperforms its competitors in its home market. In our hypothetical example, the bathroom cleaner brand would probably fit better with glass cleaning (since both involve sparkling, shiny surfaces) than the furniture polish brand name (since polishes are thick and creamy and coat the surface they are applied to).

Which destination to target? A comparable issue arises when a manufacturer has a strong brand name that it wants to extend. Often several categories are logical stretch destinations. Which one offers the biggest opportunity? Again, we believe the answer can be revealed by understanding how similarly consumers think about the categories.

Once a brand manager has identified several possible stretch opportunities, we use our equity analysis and volume forecasting model to identify which destination category offers the best potential for extension.

In general, the best destination categories are fairly large (high incidence and reasonably frequent purchase) and also somewhat permeable. Permeable categories are those that are easier for a new entrant because of their market structure. If a category is dominated by a small number of brands, it will be more permeable. Similarly, if consumers' loyalty to the brands currently offered is low, the category will be more open to new entrants.

A second criterion is that the equities (or benefits associated with the brand) in the brand's home category should be important drivers of brand choice in the destination category. For example, an air freshener is likely to be easily extended to other categories in which scent plays a key role. Categories in which the brand's equities are key drivers of choice and in which the equities transfer well to the extension item will ultimately represent the best destination opportunities.

Sometimes a client comes to us with no firm ideas about how to extend their brand. In this case, we conduct a simple analysis to identify a stretch path for the brand. We first ask respondents to tell us which existing products and usage occasions an existing brand fits best with (i.e., is most similar to). Of course, most respondents place it with the other products and occasions in its own category. Then we ask respondents to tell us which other products and usage occasions it fits next best with. This information is very revealing. It tells us what new products or situations seem, to respondents, to be a logical fit with what they already know about a brand. For example, they might tell us that a dish cleaner could logically be extended to bathroom cleaning, or that a laundry detergent could be stretched into all purpose cleaners. It's key to develop a stretch path that makes sense to consumers, but it is hard to get consumers to give us the answer directly. We find that this simple exercise is one of the best ways to get respondents to tell us really new ideas about how to grow a brand.

How to succeed in the destination market? Once the brand extension idea has been identified, the brand manager must work to execute it flawlessly. It is key that the new idea transfers the equities properly from the home category to the destination category. While this seems straightforward, sometimes it is not. For example, "moisturizing" may not be the same in two different categories. This is perhaps why Dove beauty bars are described as containing "1/4 moisturizing lotion" while Dove shampoos are advertised as containing "weightless moisturizers." While this powerhouse brand's strong association with the moisturizing benefit makes it a logical fit with both categories, the idea of moisturizing must be expressed differently to be successful in each. No one would want a shampoo with so much creamy moisturizer that it flattened hair!

Transforming a brand's heritage from one category to the next can be tricky. To be successful, you need to understand how consumers make choices in both the home and destination category, as well as have a detailed picture of the perceived positioning of the stretch brand and its competitors. Consumers can make unexpected associations with brand extensions, as they did in a recent project. A client that markets a laundry detergent wanted to launch an automatic dishwashing detergent. While the new brand was perceived to be terrific at cleaning, consumers expected that it would not leave dishes sparkling and shiny. The residue sometimes left on clothes washed with the laundry detergent provoked this perceived problem.

An additional goal of brand extension is to broaden the equity of the parent brand. That is, by extending to new categories the brand wants to add new benefits its image. To accomplish this goal, the extension item must promise strong performance on additional benefit(s) that were not relevant in the home category. For example, a diet drink brand might extend into diet snacks (reinforcing its strong low calorie heritage) by adding health bars to its line (developing a new strength in convenience). This is a powerful long-term strategy, since it increases the brand's future stretch options!

How to assess halo effects? The final question to be considered is how the presence of the new extension item will affect the image of the parent brand. Ideally, stretching the parent brand will broaden and enhance its image, adding new and exiting benefits to its heritage. Of course, there can be negative effects if brand stretch is not done right.

Our experience shows that it is smarter to extend a brand into new areas rather than extending within the same category with items that only offer more of the core benefits the brand already offers. Offering plus- performance items can, at the worst, erode the image of the existing items and be highly cannibalistic. (It is possible that plus-performance items are introduced to replace existing items and, where they offer the marketer more attractive margins, this is sound business practice. But in other cases, let the marketer beware!)

Even when adding new benefits, there can be surprising halo effects on the parent brand. For example, a dish cleaner manufacturer that introduced a dish cleaning brush might find that after this introduction consumers had more favorable impressions of the cleaning power of the dish liquid. This illustrates the opportunity for a positive halo effect. But the reverse is also true. We have seen a cases where brand extension ideas caused consumer impressions of the parent brand to decline, such as when a dish liquid marketer planned to introduce a new oven cleaner and found that this introduction made consumers think all its products were too strong and harsh. Launching this extension would have eroded the equity and sales of the brand in the home category -- a very costly mistake!

When brand extension supports the overall image of the parent brand, and expands its heritage, there can be financial rewards as well as perceptual halos. This is the key to producing advertising for a new brand that will not only drive its sales, but also drive its parent's sales.

Brand extension offers the marketer tremendous opportunities to grow their brand's image and sales. But it is complex and difficult to do well. It is far easier to extend a brand unsuccessfully.