Dumb question, right? When you think “Harley Davidson,” chances are you think “authentic biker,” or “classic road cycles” or even “loud,” “tattoos and leather” or “badass.” Not exactly the same images that come to mind when you think of a cute pink and white scooter.
The Cadillac Cimarron. Seemed like a good idea at the time.
While there may be universal agreement that a Harley scooter wouldn’t do much to solidify the Harley brand, brands are making just that kind of mistake everyday. A few examples? Dial soap launching a deodorant. A-1 Steak Sauce coming out with a chicken glaze. PanAm putting its name on hotels. And does anybody remember the Cadillac Cimmaron?
All these decisions were greenlighted by really smart people, backed by impeccable research and sound marketing principles. In a nutshell, these brand extensions were viewed as a way to borrow the equity of a well established brand to “buy” a significant portion of a “related” market, and to inexpensively build incremental sales. Make the most of your brand, and give people more reason to think of it.
In practice, you trade in your reputation (another word for brand) in exchange for a short-term boost of awareness or profit. Unfortunately, many times the price to be paid for that short-term gain is a diluted brand than quickly loses its cache. The poster child example of this is Yahoo!, which went from being the dominant search engine of the 1990s with a market cap of $114 billion, to a I-have-no-idea-what-they-are-now company who’s had six top executives in six years and is now worth less than 1/6th of its high value (with less than 10% of the market share of Google).
So how do you go about determining whether your proposed brand extension will be the next Diet Coke or the next Xerox Computer?
We’ve found that brand equity is a two-way street. More often than not, a successful line extension doesn’t just “borrow” equity from the brand, it also “adds to it.”
The key that often determines a successful extension vs. an exercise in futility is this: does the proposed line extension jibe with “the real business we’re in.” This goes beyond the functional aspects of a product to more of the “problem” the brand solves well in the minds of your most ardent supporters. For Coke, for example, if you’re “real business” (Brand Vision) is “refreshing the masses,” then yeah, a new product that serves that purpose stands a good chance of success, and of not only “borrowing” equity from the brand, but also adding to it. Likewise, if you’re McDonald’s and your “real business” is ‘providing a variety of fast, taste-pleasing meals in a clean and friendly environment, then Chicken McNuggets or McRib sandwiches make sense. If, on the other hand, you are Dial soap, your real “business” in the minds of consumers is most likely “clean,'”not “defeats perspiration.” And if you’re A-1, your real business is “adding flavor to cheap cuts of beef.”
Looking at brand extensions through the “what business we’re really in” lens even helps explain outliers such as Apple or Virgin. Apple’s “real business” was not building and selling computers, it was in creating elegant, user-friendly cutting edge technology. Which perfectly describes the iPhone, iPod and iPad, as well as the Mac. And for Virgin? Their “real business” could be described as “turning mundane, low-interest unimaginative markets on their ears.” Rings true for Virgin Airlines, Virgin Mobile, and even the original Virgin Music Centres.
The key to all this is to understand what your brand means to your customers, how they see it, and what “problem” your brand elegantly solves for them.
Lose sight of that, and you could end up with another Levi’s shoes.
