August 20, 2021

Brand Extension 101

A recent article in Car and Driver Magazine[1] got me thinking about the concept of brand extension. Aston Martin has leveraged its brand into high priced condominiums in Miami, Los Angeles and Manhattan. The Manhattan apartments are fully furnished with Aston Martin Home Collection pieces, and come with an Aston Martin DBX (which has been “designed” by the building’s architect) but, oddly, no car park. According to the article, the apartments will be offered to an ‘exclusive VIP list” of extensive buyers. Whoever they are they will need pockets as deep as their affection for the Aston Martin brand – the Miami apartments top out at an eye watering $USD50 million.

A $50 million dollar apartment styled after your favorite sports car is perhaps the pinnacle of a concept known as brand extension. Brand extension involves a company using its existing (usually famous and often prestige) brand name or image on a new product or service which is marketed to largely the same customer base.

Aston Martin’s foray into property represents a gradual broadening of the product offering to its actual or prospective customers. A quick visit to shows that you can already buy Aston Martin branded clothing, hats, scarves, cuff links, luggage, wallets, notebooks, pens, and key rings. Your kids can buy a Lego Creator James Bond Aston Martin DB-5[2] or even the most adorable mini race overalls.[3] The need for most[4] of us to wear something whilst driving off for a long weekend, and to have some more clothes to wear when we get there, make clothing and luggage more obvious brand extensions – and it is a strategy followed by most high-end automotive manufacturers. Aston Martin is also in the enviable position of being associated with the ultimate gentleman – James Bond[5] – making its segue into gentleman’s accessories both logical and lucrative.

There are a number of ways in which brand extension can be carried out, which are described in the four quadrants of the Ansoff Matrix[6] as follows:

• Market penetration: the focus is on expanding exiting sales in existing markets. This is the safest option but involves minimal brand extension;

• Product development: (or line extension) is where a company offers a new product line in an existing category. This is slightly more risky because you are offering a new product to your existing market;

• Market development: (or complementary product extension) occurs when a company extends its product or service offering to something which complements its existing product or service line. A good example is Nike’s extension from footwear into clothing and other running and exercise related accessories as well as golf apparel and equipment.

• Diversification: (or lifestyle brand extension) is the riskiest of the four options since it involves introducing a new product into a new market. A recent example is Tesla’s USD$250 tequila which started as an April Fool’s joke but turned into a product which sold out within hours.

Sounds easy? It has been reported that 75% of diversification efforts fail. However, for the 25% that do succeed they succeed materially, growing revenue three times faster than their peers on average.[7] So how can you ensure that your strategy is successful?

#1: Never put your core brand at risk

While opportunities for growth can be exciting it’s important not to lose sight of what placed you in a position to pursue brand extension in the first place – your brand. Confusing the market as to your brand identity by expanding into illogical areas can negatively impact your brand and actually reduce market share.

That’s not to say diversification should not be pursued. However, you need to be clear on your brand promise: of which brand relevancy (the extent to which a new product or service “fit” your brand’s positioning) and consistency of price positioning are likely to be paramount.

Consider the following examples:

• Richard Branson’s Virgin Group offers everything from airlines, gyms, hotels, records, wines and books, to space travel. However all product and service offerings are positioned at the premium end of the market.
• Conversely easyGroup has leveraged the “easy” brand into gyms, airlines, ground transportation, electricity, pizza restaurants and even dog-walking all as a low-cost option.

#2: Never put your core business at risk

New growth opportunities can consume significant time and resources. Diversification which makes you slower to react to your existing customer base will likely erode market share not grow it. An important question to ask is whether you can afford to diversify, given the current needs of the business.

#3: Don’t spread yourself too thin

Companies which have successfully diversified keep it simple by pursuing one opportunity at a time. This means one new territory or distribution channel or product category at a time. Dyson has successfully diversified from vacuum cleaners, to hand dryers, heaters, air purifiers, and hair dryers. These products were not released all at once. Dyson did so sequentially over a ten year period and each product is consistent in its brand relevancy: they all involve moving air.

#4: Diversify where there is demand

Identify products or services for which there is a demand. Many new products and services are launched in a market for which there is no problem to be solved – and hence no demand. They are destined to fail regardless of the brand equity associated with them.

In 2006, Microsoft challenged Apple’s stranglehold on personal music players by releasing Zune. Despite spending tens of millions of dollars marketing it, Microsoft discontinued Zune after just six years. It was not a successful product because there were no distinct user needs that the iPod was failing to meet or any innovation in Zune that would shake things up. Zune was a “me too” product which just wasn’t different enough from the iPod. Microsoft executive Robbie Bach, who headed Zune, later admitted that Microsoft was “chasing” Apple without a compelling reason for consumers to switch to Zune[8].

Following these rules won’t guarantee success – but they might help you to avoid failures like
“Zippo The Woman Perfume” which was released in 2012. According to its manufacturer it “is dedicated to women between 18 and 36, which are strong, independent, curious and full of character. Her fragrance follows the roles of mother, working women and adventuress and offers a wide range of flavors that represent her” including, presumably, lighter fluid.

[1] Car and Driver
[2] A further example of brand extension – this time by Lego.
[3] Shop Aston Martin
[4] Maybe not the guy who took a sponge bath between his car and trailer in 2014
[5] As a proud owner of two Sunbeams (a S2 Alpine and a S1A Tiger) it would be remiss of me not to mention that James Bond didn’t actually drive an Aston Martin DB5 until the third movie in the series, Goldfinger. In the first movie in the series, Dr No, he rents a Sunbeam Alpine. One can only imagine he abandoned it somewhere in the Blue Mountains (along with Miss Taro) when the producers dangled the keys of a heavily modified DB5 in front of him.
[6] Ansoff Matrix
[7] “Growth Outside the Core,” Harvard Business Review, Chris Zook and James Allen
[8] Zune hardware mistake

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