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Brand extension: the key to scaling up?

Here’s a question: what do a centre-left broadsheet, a frumpy clothing retailer and a slick-passing football team have to do with Baltic cruises, low APR rates and flexible travel insurance?

Meandering through the thrills of Marks and Spencer’s men’s socks aisle last week, the answer to this confounding conundrum partially revealed itself. There, on the cusp of the racy-of-racy (the male briefs section) stood a washed-out advertising board adorned with a bikini-clad model. ‘With our cover, you’re runway ready’ it tried to boldly declare.

So, it turns out, Marks and Sparks are in the travel insurance business. This got the cogs turning. What other brands, I pondered, offer non-conventional products that they wouldn’t typically be associated with? My mind, as it so often does, turned to my beloved Arsenal; I was sure they offer an official club credit card? Yes, they do – along with five other distinguished Premier League clubs, and Tottenham. Later that day, The Guardian’s website also directed me towards their ‘holiday offers’ page, offering me up to 70% off luxury hotels.

Beach holiday Marks and Spencers holiday insurance

‘Image courtesy of Spiros Vathis on Flickr’

I don’t know about you, but when my computer packs up, I don’t turn to my rabbi. I call the IT guy. So why would I trust Arsène Wenger with my finances, or Alan Rusbridger to organize that dream break to the South of France? What if he confuses his Nice with his not-so-nice, his Monaco with his Mogadishu? I think I’ll stick to my travel agent, thanks Alan.

Why therefore, do these brands enter these non-traditional markets and how do they succeed on less familiar territory?

Brand extension – whereby a company utilizes its brand equity to launch a new product, often in a different market to the one it usually operates in – is by no means a new or unfamiliar concept. Indeed, the 90’s saw an explosion of brand extension – 81% of new products used brand extension to introduce new brands during this period.

In essence, well-executed brand extension can be the key to expanding and growing your business – both financially in terms of revenue and market share, but also in terms of brand awareness and loyalty. Brand extension can also serve to help a business define a new direction for itself.

Most of us will interact with the most successful examples of extended brands on a daily basis (or in the case of Diet Coke, extended products or extended lines). The difference? An extended product is simply a different version of a parent product, to be launched in the same market. An extended brand however will launch products in completely separate markets.

Coke bottles, PHA Media

‘Image courtesy of Mike Mozart on Flickr’

Take Virgin for example, which famously started as a record store. Today Richard Branson’s gargantuan empire has extended to aviation, travel, mobile, banking, books – even space travel. Thought Google was primarily a search engine? Think again: they’re developing driverless cars and solar-powered internet-broadcasting drones. And perhaps one of the oldest successful examples of brand extension is Yamaha – originally just a piano production manufacturer, the Japanese corporation is now more renowned for their its bikes than its beats.

For ambitious companies considering extending their brand, it would be tempting to hastily bellow – in the words of Mr Branson himself – ‘screw it, let’s do it’. But for a brand to successfully extend, conditions must be optimum – and this can essentially boil down to The Aaker Model.

This academic model views brand equity as consisting of four key components: brand awareness, brand loyalty, brand associations and brand quality. Only with widespread brand awareness, strong brand loyalty, positive brand associations and renowned brand quality should a brand be looking to extend. Take Stelios’ ‘easy’ brand. Not exactly renowned for high-quality, many of its brand extension ventures – such as easyCinema and easyBus – have failed.

Therefore, if customers are more loyal to a competitor, don’t fully comprehend a brand’s original mission or purpose and have reservations over brand quality, brand extension can prove counter-productive. One of the other risks of brand extension is that the original parent brand will become diluted or inextricably changed, and indeed in some markets the failure rate amongst brand extensions is as high as 84%.

If, however, the conditions are right, the strength of a brand is there to be exploited and brand extension can be one of the most successful growth strategies. Where to, Mr Rusbridger?

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