Brand extensions are are certainly less expensive than building a new brand from the scratch. If a brand has strong equity and an established customer franchise, the extensions may even have a ready-made market. The problem arises when companies stretch brands in ways and directions that don’t make sense.
When Nike went from shoes to apparel and sporting goods, consumers had no problem accepting these extensions. Nike went from “athletic shoes for winners” to a brand that represents high performance, excellence and success – all relevant attributes in the new categories that Nike entered.
When Unilever turned Dove into a master brand and launched shampoo, deodorant and facial cleansers, some of these extensions made sense. But others like the Dove dishwashing liquid turned the “personal cleanser” brand into a household cleanser. It failed miserably. Dove’s extensions were complicated by the fact that the brand was at the same time being repositioned from a “functional” brand (remember the “one quarter moisturizing lotion” ads?) to one that focused on “real beauty”, turning Dove into a social activist brand aimed at improving women’s self-esteem. All Dove products contain the moisturizer. Was the “moisturizing” attribute relevant for something like a deodorant? I can’t see a strong relevance. But if you go by the sales figures reported, Dove’s repositioning combined with the brand extensions have produced great results for Unilever.
For every successful extension, there are dozens that have failed. Some well-known failures include Levi’s formal clothing and McDonald’s “Golden Arch” hotels. Golden Arch, a four star rated hotel aimed at the business traveler, seemed at odds with the McDonald’s brand image. Nike’s acquisition of Cole Haan a few years ago gave Nike a play in the upscale fashion and footwear category. The Nike brand (with a stronger tie to “performance”) would not have translated well in that category.
It is not just the strong brands like Nike that have pursued brand extensions, but often brands that are in trouble or have weaknesses in brand equity seem adopt this strategy as well. When Hummer launched footwear, men’s fragrance (licensed to Elizabeth Arden), a tough notebook for the warrior on the road and so on, it seemed like an attempt to exploit the short-term popularity of Hummer. The brand, despite some initial excitement, was never firmly established. Some might even say the idea of a Hummer is fundamentally flawed. Peter Waxman, Dove’s brand manager, once said:
A cardinal mistake you can make is that things are going well and you jump into a new category when you haven’t given a brand a strong enough base.
One could say that Hummer was trying to leverage its perceived image of ruggedness, masculinity/high testosterone and military-strength. But the Hummer is also a brand with many liabilities – it is seen as a gas guzzler and a symbol of the 1990s excess. Look at where Hummer is today. GM is trying to sell it to a Chinese automotive company. If the deal does not go through, Hummer will be shut down. What will happen to its offspring? Building a strong brand equity through great customer experience (i.e., consistently delivering on and sometimes exceeding the brand promise) should really take precedence over creating brand extensions for brands that have yet to establish themselves.
When you think about extensions that succeed, it has often been said that the “fit” between the brand’s image and the extension category is important. The benefits promised by the brand must be relevant in the new category where the brand is being extended. The dozens of cases that I have examined suggest that the brand strength or brand equity is a critical determinant. Stronger and more dominant brands seem to do better with extensions. Brands with a narrow brand identity and positioning do well when the extension is closer to the original category. Whereas, brands with a broader positioning have a greater chance of succeeding even in unrelated categories.
Brands whose identity and positioning is tied to a category or specific functional attributes will often have trouble going outside the category. Examples of brands that have narrowly defined identity and positioning include Bose (better sound through research), CNN (the most trusted name in news), British Airways (the world’s favorite airline) and many others. Mr. Clean, for instance, seems to have the license to extend into virtually any type of cleaning product. But its name and brand persona clearly define the boundaries for extension.
Nike, in contrast, did not define itself narrowly by the product category or specific functional attribute, but on more abstract attributes such as performance, excellence, active and success. Such a brand positioning strategy makes it easier to enter new categories, especially when the parent brand has strong brand equity.
The increased cost of brand building, the need to break-through clutter and the desire to reign in proliferation of brands are reasons for resorting to brand extensions. Conventional wisdom suggests that a failed extension can damage the parent brand. When you stretch a brand too far, its core values and message may get lost. But it seems like companies are willing to try different extensions, hoping some will click. The risk of a few failures along the way does not seem to be deterrent.