Like any new venture, brand extensions are risky but the the rewards of success are substantial
According to prevailing business wisdom, it’s a lot easier and cheaper to build on the success of an established brand name, such as Dove, than to build a new one ground up. Brand extensions are more than twice as likely to be successful than products that start their lives as completely new brands. Understandably, many companies are turning to extensions to boost sluggish sales of established products. A new study by Nielsen corroborates the view: the study shows brand stretches contributed almost 30 per cent to new launches in 2011 and their incremental sales’ contribution stood at 38 per cent in the same year.
Arun Chogle, client business partner, Nielsen, says, “Growth comes disproportionately today for many leading brands from their extensions as compared to the parent brand.” He highlights another finding of their study: stretches have five times higher success rate than new launches. So, if one of the ten new launches is successful, one of two extensions will be successful in comparison.
Traditionally, the reasons for stretching a brand included the ability to drive growth by leveraging equity of the parent brand, efficiencies of scale and most importantly the general belief that extensions attract faster consumer adoption. However, many attempts at brand stretch fail in the marketplace. In an earlier column on brand extensions for Business Standard, Anand Halve, co-founder, chlorophyll brand and communications consultancy, said, “Consider some of the brands that according to Brandz were the world’s most valuable brands in 2011: Apple, IBM, McDonald’s, Vodafone, Coca-Cola. If brand extensions was the magic solution, you’d have seen dozens of extensions of these brands across marketing landscapes far and wide. Coca-Cola potato chips, McDonald’s T-shirts, Vodafone TV sets, Apple refrigerators...”
His point being that a strong parent brand cannot naturally translate into a successful extension. There are traps and many of them. Brands can stretch themselves, but how thin and how far without snapping are critical questions.
So how can firms and their brands avoid pitfalls and best manage brand extensions globally? In her column, “How far can a brand stretch?”, Rohini Ahluwalia, associate professor of marketing in the Carlson School of Management at the University of Minnesota, said, “Stretching a brand makes it important to target an audience that will be able to process and understand the relationship of the brand to the new product.” She added, “Getting it right the first time is crucial, because early success with a target audience can help with future extensions. And the broader a brand gets, the easier it is to stretch next time.”
There may be no formula to making this choice but there certainly are rules that one can follow to ensure a favourable fate.
Healthy parents beget healthy children. In the brand kingdom, a strong parent brand can ensure — at least to a certain extent — a successful extension. There is the track record to fall back on and, on a more practical side, an existing distribution network to scale up operations. But that is not always enough.
Consider Anglo-Dutch company HUL’s soap brand Dove, for instance. The brand may have started out with soaps, but today its portfolio spans the breadth of personal care, with body washes, lotions, shampoos and deodorants. Some of the extensions like shampoos are more successful than others. But all these extensions have benefitted from the equity of the parent brand and its original promise — that it has ‘one quarter moisturising cream’.
Then, even Dove has made some costly mistakes. In 1965, Unilever introduced Dove dishwashing liquid. When the product failed to woo consumers, the company cut its price to make it more attractive. What the company had obviously not bargained for was that such a move would muddle Dove’s image in the consumer’s minds, as being associated with an inexpensive as well as a premium product — a harsh, grime-cleaning dish washing soap as well as a gentle moisturising soap. The extension did not go down well with the consumers and was duly withdrawn.
Perhaps closer to our times is the example of Reckitt Benckiser’s antiseptic liquid brand Dettol.
After a series of extensions like mouthwashes and shaving creams that failed to take off, the brand hit it off with liquid soaps and hand sanitisers. The brand then went on to launch a variant, Dettol Skincare, which was positioned as a milder, more caring variant of the brand. Despite heavy marketing and advertising support, the variant has not been able to replicate the success of the original product. Professor Anand Kumar Jaiswal, faculty, marketing, IIM Ahmedabad, explains the reason: “Dettol is identified with germ killing by consumers. And germ killing as an action is possible only when the formulation is strong and that translates into harsh products. The consumer is then obviously confused with this duality of the product image.”
You can draw a simple lesson from the experience of Dove and Dettol—that there must be a fit between the parent and the extension, either physical or conceptual. “An example of the physical fit is where the parent and the extension are in close proximity in terms of usage — say, bread and butter,” explains Jaiswal. “However, this ‘physical fit’ can limit your ability to stretch. Conceptual fits can widen the playing field considerably. That said, the ‘fit’ cannot be cosmetic in nature. Neither should it try to challenge the logic of a category.”
Take the example of Marico’s cooking oil brand Saffola. Saffola has been positioned on the health platform, and it has worked hard to symbolise a healthy lifestyle. When the brand launched a baked snack called Saffola Zest sometime back, it failed to make to take off. “The company missed out on a simple truth: people who are conscious about health don’t gorge on snack foods,” explains a brand consultant.
“In other words, the company misinterpreted the category of snacking.” But Marico has come back with a bang with Saffola ready-to-eat oats in flavours suited for the Indian palette. “Oats are seen as a healthy breakfast option. That takes care of the conceptual fit. And the flavours take care of the general resistance to the product from the Indian palette due to its relative bland taste,” says Harish Bijoor of Harish Bijoor Consults.
Another example of text-book extension — again from the Marico stable — is the extension of Parachute to the skin care category. “Parachute is known for bringing to consumers the goodness of coconut. With Parachute body lotion we decided to extend this benefit to the skincare category since the benefits of coconut for good skin are fairly known. The coconut oil proposition helps us distinguish ourselves in the market, as there are no coconut-based skin care products currently available,” explains Sameer Satpathy, EVP and head, marketing, consumer products business, Marico.
While there was a ‘fit’, he says, there were limitations in terms of consumers’ sensory expectations from the product. “Body lotions are expected to be fragrant, a quality not often associated with coconut,” he adds. “The brand had to therefore devise a new sensual persona for the product, right from the packaging design to the product communication. But since it was ‘Parachute’, sticking to the ‘goodness of coconut’ philosophy of the parent brand was inevitable.”
Studies show brand stretches tend to be more successful in an evolving or highly fragmented category. Where the category is new, the presence of a known name will draw consumer attention. And in case of the latter, where there isn’t strong loyalty towards any one brand, a known brand can help break the clutter.
Experts also say if you are looking to extend your brand to an unrelated category, the move should be backed by considerable marketing muscle. And if the brand can justify the connect — however tenuous it is — through compelling advertising, the consumer will eventually relent. Here consider Amul’s foray into frozen pizzas. This dairy co-operative is the first brand that comes to mind when you think of milk and related products. But frozen pizzas? While cheese is a key ingredient of the pizza and Amul enjoys considerable trust in the category, the association doesn’t seem very strong. “Pizza just isn’t a category consumers identify Amul with,” says a brand consultant. “But things can change if Amul decides to really go for it and puts some muscle behind its pizza. After all, it has tremendous distribution clout.”
A lot has been written about how the parent brand’s equity can help the extensions. The success of an extension can also have a positive rub-off on the parent brand, say experts. David Aaker, vice-chairman of Prophet and the author of Brand Relevance: Making Competitors Irrelevant, says in his HBR blog, “An extension can enhance the brand associations rather than detract from it. Consider Disney, a maker of cartoons, which expanded into the Disneyland theme park and TV series and later into retail stores, more theme parks, resort hotels, a retail store chain, a TV channel, cruise ships, and Broadway theatre. All these extensions enhanced the Disney brand by reinforcing the fun, family, wholesome Disney image, enriched the brand with symbols, characters, songs, and experiences, and provided huge amounts of brand exposure.”
What is true for Disney may not be true for another brand in another category. Jaiswal says academic research has shown that products that have become generic to the category (examples: Xerox for photocopying, Bisleri for bottled water, Pampers for diapers) have lower or limited stretchability. Reason: consumers find it difficult to associate these brands with any other category, except the original one.
The last word then is: brand extensions may not always work. They may even fail horribly or backfire. But staying aloof when competition is relentless is not such a great idea either. As they say, the best way to learn is from studying mistakes — other people’s mistakes.
Over the last decade or so, there has been a deluge of information that the consumer has been inundated with.