Brand extensions have proved very successful and profitable for some
companies, yet disastrous and costly for others. Robert Dwek discovers
the secret of the more is more philosophy
Brand extensions have been flavour of the month for some years now. They
rose to prominence in the late 80s on the back of increasing
competition, dramatic technological advances and the overnight
superstardom of ‘The Brand’ - since brands were now considered pure
gold, went the thinking, why not sprinkle a little gold dust over a
whole new array of products by endorsing them with a name that had
already proved its worth?
Then came recession. But far from dampening the brand extension spirit,
it added fuel to the fire. With new product development costs spiralling
and uncertainty dogging every marketing move, the appeal of a proven
brand name became even greater. Now that we’re supposedly well out of
the economic doldrums, whither brand extension?
Well, to judge by a stream of almost- daily news stories - Tesco
launching a pet health insurance scheme, for instance - it is in very
fine fettle indeed. But there is a new twist. Brands now being extended
are not always the kind we would expect to see radically rearranged.
Take the Post Office, for example. Boring? Staid? Not any more. In the
past few years, its Post Office Counters division has gone on a brand
extension extravaganza, offering a host of sexy new services. Most
recently, it has announced its intention to move into financial services
in a big way, as well as the travel agency business - both, of course,
offered from the comfort of the familiar Post Office premises.
Another famous corporate name busy extending itself right, left and
centre is Virgin. It now includes PEPs, soft drinks, hard drinks and
will soon stretch to pensions and health insurance.
Will Whitehorn, corporate affairs director for the Virgin group,
believes there is nothing odd about a company entering completely new
markets at a rate of knots, as Virgin is doing. Far from it. ‘It’s only
in this country that Virgin’s recent strategy might seem strange. If you
look at the biggest Japanese companies, you realise that we are going
down a well-trodden path.’
Mitsubishi, for example, manufactures products ranging from cars to
stereos, and from medical equipment to textiles, as well as being in the
shipbuilding and banking industries. Sony makes Michael Jackson records
as well as pocket calculators. The same eclecticism applies to other Far
East titans like Samsung, Hyundai and Yamaha.
‘The brand transcends any one product,’ Whitehorn asserts. ‘The UK is
the home of the brand, but this country has lacked a corporate culture.’
By which he means that the UK’s definition of a brand has remained far
too narrow, too closely associated with a product rather than a set of
But change is now in the air because the corporate branding philosophy
is gaining global dominance. So companies like Virgin - to borrow an
investment analyst’s phrase, ‘top down’ companies - are in the
ascendant, and ‘bottom up’ companies - those that associate brands with
individual products - are very much out in the cold.
How far can the Virgin brand extension revolution go? ‘An awful lot
further than we’ve gone,’ Whitehorn replies. ‘What we’ve been doing in
the past few years is what’s been going on in the rest of the world for
the past 30 years. We’ve embarked on a long-term plan to build Virgin
into the first British global brand of the 21st century.’
He claims the UK hasn’t produced a truly worldwide brand in the past 30
years, dismissing Laura Ashley and the Body Shop as narrowly focused
retailers. The top-down approach to brand extension has other followers,
who may yet give Richard Branson a run for his money on the global
Marks and Spencer is a classic example of how a company’s attributes can
be leveraged. The M&S product range has expanded dramatically over the
years, but its move into financial services is perhaps the best
demonstration of the value of the M&S brand.
Consider also the AA, which may not have strayed so obviously from its
original product path, but has extended its brand into a raft of related
services, such as insurance and publishing.
Dorothy Mackenzie, a partner of the design and marketing consultancy,
Dragon International, sees the growing top-down trend as a direct result
of a more service-oriented society.
‘The most unlikely companies, such as the former state-owned utilities,
now see themselves as service providers,’ she notes. ‘This new
perspective is opening up the way they think about their business and
their brands. They’re realising that they can get into new product areas
which aren’t necessarily adjacent to their existing products, simply by
trading off a well-honed set of corporate values and a strong corporate
But when brand extension goes wrong, it’s often because the company has
not got a clear enough idea of what the brand image means. Levi’s, for
instance, is recognised as a very powerful brand. But when it launched a
range of men’s suits in the mid 80s, it didn’t stop to think that this
new product line wasn’t in keeping with it’s original proposition, which
was young, defiant, anti-establishment, individualist. Not surprisingly,
this brand extension flopped.
Another road to ruin is to approach brand extension as a way of making a
quick buck. The once high-fashion name, Pierre Cardin, did this when it
began plastering its moniker over all manner of chain-store clothing
products. As a result, its aura and mystique vanished almost overnight
and critics argue that the brand has never recovered.
Levi’s and Pierre Cardin are two examples of unenlightened brand
extension. The companies were deluded into thinking that they weren’t
straying too far from home, when in fact they couldn’t have been more
wrong. They forgot that brand extension means refocusing on your core
brand and redefining, each time, exactly what it stands for.
UK banks, once blind to the power of branding, have finally woken up to
its impact on their sleepy backwater of the marketing world.
Could Midland have called First Direct ‘Midland Direct’? Would consumers
have bought this brand extension? Marketing consultants disagree. Nicola
Fawssett of New Solutions says Midland was right to go for a completely
new name. ‘Sometimes it is better to accept that a new product needs a
new brand. Midland was too closely associated with the old school of
But Kristina Hunt of the research and product development company, What
If, refers to something called the ‘post-rationalisation factor’, which
loosely translates as the consumers’ ability to forgive a company for
producing an apparently anomalous brand extension, provided the new
product or service is original enough or important enough. ‘Midland had
no heritage of being a hi-tech, young people’s brand. But because First
Direct’s service is so fantastic, no-one actually cares who owns it -
and most people realise it’s owned by Midland.’
The message that comes across from people like Hunt and Fawssett is that
brand extensions have become a way of life and that, whatever the
difficulties, this aspect of marketing can no longer be ignored.
Marketing people are constantly being told to think ‘outside the box’
nowadays, a philosophy which necessitates a much more fluid perspective
of brands. In these fast-changing times, look at the fastest-moving
industry of them all, computing, to see how malleable modern brands must
be. Microsoft is busy extending its brand in a top-down fashion so that
it can make the quantum leap from software programmer to king of
tomorrow’s information superhighway.
Brand extension has been the saviour of many dead-on-their-feet brands.
Brylcreem was seen as yesterday’s news until it realised it could use
the retro-chic fashion of the late 80s to rejuvenate its core
attributes. Having done this, it has been extending with great success.
The key, though, is that it became a strong brand again before it tried
to extend. To do so from a position of weakness would have spelled
Lucozade also came back from the dead, leaping aboard the health
bandwagon of the 80s before extending into a glittering array of new
drinks. Think too of Tango, which five or six years ago would most
likely have bombed had it tried to extend into the variety of flavours
now available. But it redefined its core values, it won back its brand
soul, attracted a new audience and built a dialogue with it. You get the
feeling that Tango could now extend into, say, paints, and make a
success of it - particularly the Outrageous Orange shade.
Talking of which, there’s another top-down brand that has massive brand
extension potential. The mobile telecoms newcomer, Orange, has already
built up an enviable level of customer loyalty, based on its powerful
personality. ‘Orange is in a very strong position,’ Fawssett says.
‘There is an aura about the brand that conveys an almost tangible
feeling of self-confidence, and that rubs off on consumers.’
Brand extension, then, is not something to be viewed any more as a niche
activity. It’s not something you do once every ten years, then sit back
and relax. Everyone is brand extending today - yes, even media owners,
who have recognised that they are no different from other companies.
Consumers today have less time to make decisions and are more brand
literate. Those brands that send the clearest signals will increasingly
act as a short-hand set of values for consumers. For this reason, the
brand extension story is only just beginning and looks set to remain
flavour of the month for many more years to come.
Top five success stories
Tango Apple, Blackcurrant and Lemon
M&S financial services
Top five flops
PG, instant white tea; No consumer demand for instant tea, let alone
instant tea with a whitener
Timotei facial care; None of the Timotei hair-care values translated to
Levi’s suits; Didn’t fit with the rebellious, individualist image
portrayed by the jeans advertising
Delight; This Van den Bergh chilled foods brand extended too quickly and
without defining clearly enough its core attributes
Penguin ice-cream bar; Was priced and packaged as a luxury purchase,
which was out of sync with the core product’s attributes as a fun
product aimed at children