8.56 PM Thursday, 28 March 2024
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 04:57 06:11 12:27 15:53 18:37 19:51
28 March 2024

Extension of a brand opens new vistas

Virgin as a brand has extended itself to many categories from aviation to retail. (GETTYN IMAGES getty images

Published
By Reena Amos Dyes

Companies are always looking to maximise return on investment by extending their brands into new categories and markets. Brand extension is also considered an opportunity to reach new markets and attain more sales without investing in the development of a new brand.

However, given the poor state of the world economy extension of the brand right now is an extremely tough decision for many companies to make.

Emirates Business spoke to branding experts to find out if brand extension during these critical times is a good idea or not.

Michael Hughes, Executive Director of Strategy & Engagement, The Brand Union, said: "A brand is essentially the reputation of a company. Strong brands are more resilient to market downturns and recession, so companies need to continue to focus on their brands. Especially in times like these, people choose brands they trust to spend their hard earned cash on.

"The current downturn in the economy is pushing brands to think more carefully about their product lines. They have the option to either launch more lines in an effort to maintain their market share or to consolidate their brand offerings to cut down on extensions that don't work."

Aneesh Sharma, Brand Strategist, Landor Associates added: "For starters, don't extend your brand now if you weren't prepared to do so in good times. A recession does not make your brand magically extend farther. The rules of extension that hold true in good times also apply now.

"And the answer to whether or not you should extend is this decision depends on your brand, your capabilities, the market opportunities, and on your audience.

"In hard economic times, brand value becomes much more important. A brand means foundation, credibility and longevity – precisely what consumers want to hold on to in times of uncertainty. In such a context, companies can use their already established brand equities to support a foray into new markets/ product categories. Doing so will obviously save on the marketing spend associated with the establishment of a new brand from scratch.

"On the potential downside, in an economic recession, brands are most likely to be tempted to extend downwards to a more affordable proposition," said Sharma.

"Remember that the 'stigma' rising from this will extend far beyond the recession. So unless there is a sound business case for moving down-market, beware."

Talking about what companies need to consider while extending their brand, Hughes said: "Transferring the equity of the brand from one category to another can certainly save money on the development of a new brand and it can also achieve faster results.

"In order to do this, you need consider the following; relevance, recognition, credibility and equity transfer.

"Before looking to expand, you need to ensure you fully understand your primary audience, the competition and that you have something to offer that will be compelling and differentiating. The next step is to strategically analyse whether your brand promise and personality can transfer the reputation and equity to the new range. You also need to consider the impact on the current brand and ensure this will not damage your existing products and image."

Talking about the risks of brand extension even at the best of economic times Aneesh Sharma said: "Thinking beyond the confines of the boom and bust cycle, without a doubt, there are risks and benefits associated with brand extension.

"Looking at the risks first, if the new proposition does not agree with the core essence of the brand, then there is significant risk of diluting existing brand value, and confusing the market about what the brand stands for. Take a strong brand like Jumeirah Hotels and Resorts, for example. The brand stands for luxury, indulgence, and excellence in hospitality. If Jumeirah was to slap its name on an hourly rentable airport hotel [like Yotel], the market would have a serious problem digesting the news. The disagreement between old and new is what will pose serious risk to the brand.

"This reinforces the need to actively manage what our brand stands for. Are we luxe or are we budget? Or are we both? If we're both, then we're probably neither. Just ask your customers," said Sharma.

Hughes added: "There are risks in extending brands too far into products and services without a coherent link between the product/service and the brand.

"Brands must find where the opportunity is and what role it can play in extending a company's business and portfolio. Strong brands can effectively stretch into a wide range of products and services, if the core brand promise is still relevant and differentiating. More importantly, companies need to ask; can the brand equity be transferred into a new industry or market and will this be as compelling and differentiating against a potential new set of competitors."

Aubrey Ghose, Founder and Managing Director, AIS-Brand Lab, said: "A major risk in developing brand extensions now, lies in assuming your consumer thinks the same way they did six months ago. They don't, they have changed and you have to start by understanding why they've changed, how they've changed and what that change means for your brand positioning, your products and your services."

Sharma added: "However, where there is risk of brand dilution and dysmorphia through brand extensions, there is also opportunity for rewards if the strategy is implemented in the right context. Here are a few ways. For instance, capitalising on opportunity, repositioning your brand, innovating for the future and protecting your turf is the right way to go about it."

So when is it ok to extend the brand?

Aubrey said: "This moment is far bigger then most of us are ready for, its bigger than most if us can imagine. We at AIS-Brand Lab think its no longer just about about brands extending or decreasing offerings, its about repositioning your business to be relevant in what we call 'the new world order'."

Giving an example of a successful brand extension, Ghose said: "A few examples come to mind, the first is Emirates airlines who are offering a totally new level of comfort on board their new A380s with their shower and spa facilities in First Class, the second is du doubling its talk time, click on their web site and you will see they are saying 'the rules of international calling have changed forever'."

On whether or not now is the right time for brand extension, the experts had this to say: "Don't extend your brand now if it didn't make sense to do so in good times. Whether or not a brand extension strategy is feasible depends on the market context. Brand extension must remain a long-term strategic proposition," Sharma said.

Hughes concluded: "Brand managers need to ensure that unless their extensions remain true to the original core idea, far from extending the brand's long term growth; they may well find it having the opposite effect."

Ghose added: "All brands will emerge from this period with one of two things, more market share or less market share. That's a constant, whatever the economic status of a company a country or the global economy. All brands will want to emerge from these market conditions with a greater market share, for some that will mean brand extensions, meaning new product development, for some it will mean 'Brand Stretch', meaning diversification, for most it will mean going back to basics and delivering better, faster, smarter. For the weakest brands, it will mean their time is up. In this climate of change, no one can stand still because this is not the end, it simply the beginning of something new and different."


Look before you leap

- Brand driver alignment: Knowing brand strategy before anything you do is critical. Is the new area of business in agreement with the brand driver?

For example, if your brand is Virgin, which stands for anti-establishment, fun and good value, then the category in which you choose to exercise your brand equity is almost irrelevant.

However, if your brand is Blackberry, standing for seamless communication, launching Blackberry Airlines might be a bit of an overextension.

- Organisation capabilities: Does your organisation have capabilities to enter new areas of business? Are your employees packing skills that can be unlocked to realise greater value? Are your assets under-utilised, that can easily be put to use in a new category? 

- Customer congruency: Is the customer base of the the company is similar (from a socioeconomic, lifestyle or cultural perspective)?

Will the customer base understand the link between the original brand and the new brand extension?

Is your organisation alienating a sizeable loyal brand following by entering into a new arena?

Correct way to extend

- Capitalise on opportunity: By going after new target markets or entering new product categories, the overall share of the pie can be expanded. A bigger market share, greater revenue and visible brand clout are all good things as long as the new proposition is linked to the original brand driver. 

- Reposition your brand: Strategic extensions can help move a brand reposition itself towards a desired platform, either radically or progressively. For example, with Masafi now playing in the "gourmet packaged foods" category, the overall perception of the Masafi brand has invariably moved upwards. This was not a chance occurrence.

- Innovate for the future: Brand extensions are an opportunity to move your brand into areas that may be the future bread and butter of your category. For example, if Kodak had extended into the digital photography arena in a timely manner, things would be different for the brand today.

- Protect your turf: Many of the world's large national air carriers have extended their brands into the no-frills category because they know that if they do not have a competitive offer in this category, the Air Arabias and the EasyJets of the aviation world will shred them to bits, especially in the short-haul segment.