Three decades ago Al Ries and Jack Trout warned against the perils of brand extension in Positioning: The Battle For Your Mind. They argued every extension has to alter the core proposition of a brand. As marketers grapple with a slowdown and extensions once again appear more cost effective than launching new brands, the strategist decided to knock on the doors of Al Ries for some answers.
Often brand extensions fail due to a failure of business practices and economic circumstances rather than the failure of a brand. How closely are they linked and can you separate the two?
This, of course, is the critical issue when it comes to line extensions. If a line extension is a failure, everyone says the product or service was “not competitive.” Very, very seldom does any reporter or journalist believe that it was the “perception of the brand” that caused the failure. And not the product itself. Take Kodak, which is on the verge of bankruptcy. Headline in a recent issue of The Wall Street Journal: “Kodak teeters on the brink.” Ten years ago, Kodak stock was at $30 a share. Yesterday, it closed at 47 cents. The Wall Street Journal story said: “The company, for instance, invented the digital camera — in 1975 — but never managed to capitalize on the new technology.” That's a typical quote that has been repeated hundreds of times. Kodak tried very hard to market Kodak digital cameras. That’s a classic line extension mistake. Kodak means “film photography,” it doesn’t mean “digital photography.” No wonder Kodak “never managed to capitalise on the new technology.” They gave the new technology a line-extension name.
What are some of the common mistakes marketers make while going about brand extensions?
They don’t take into consideration the fundamental principle of marketing. Unless there is an absence of serious competition, line extensions never work. It’s that simple. Line extension never work… unless there is no serious competition. Where in the world do you see successful line extensions? In India, for example, and in many developing countries. Why is this so? Because in developing countries, there is usually a shortage of capital. As a result, a company that has the resources can often successfully line extend its brand because potential competitors cannot obtain the capital to compete. Tata is a good example. There are no Tatas in America. That would never work in a country that can fund startups to challenge any company that is foolish enough to launch line extensions. Take Apple, the most-valuable company in the world. Nobody says, I bought an Apple. Apple is a company name. The brand names are Macintosh, iPod, iPhone and the iPad.
What kind of brand extensions result in dilution of the mother brand?
Any line extension weakens the mother brand. Look at Microsoft, once one of the most valuable brands in the world. No longer. Microsoft has weakened its name by many line extensions, few of which have been successful.
Are sub-brands a better way forward than brand extensions?
Sub-brands are a half-way step. Not as bad as line extensions, but not as good as new brand names. A new category demands a new brand name. This is one of the immutable laws of marketing and one of the laws that get violated every day of the week.