successful brand extension

Successful Brand Extension

March 2014

American Marketing Association


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Brand Extendibility Hall of Shame

Unfortunately, brand extendibility examples like the ones below are far more common than we realize

Burger King Boxers

Harley Davidson Perfume Hooters Air

Dr. Pepper Marinade Chicken Soup for Dog Lovers

Arizona Tea Nachos ‘n Cheese Dip


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The Case for Brand Growth

Why So Many Brand Extensions Fail

Identifying Market Needs

Developing Inspiring Solutions

Determining Brand Relevance

Executing with Excellence


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Brand Extendibility Defined


Brand extendibility is one of three ways to drive organic growth, representing essentially the intersection of an established brand and new product or service development

Existing Brands

Brand Extendibility

Base Business

New Products

New Brands

Sources of Organic Growth


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The Need for Growth


Driving business growth through new products and services is a a top priority for CEOs

0

20

40

60

Product/Service Innovation

Increase Share in Existing Markets

Mergers & Acquisition

New Geographic Markets

New JV/Strategic Alliances

% of U.S. CEOs Citing Area as a Source for Growth

Source: PwC 17th Annual Global CEO Survey (2014)

36 37

14 10

3


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The Elusive Nature of Growth


…Yet over half of CEOs feel they need to change/improve their capabilities in this area

Source: PwC 17th Annual Global CEO Survey (2014)

0

20

40

60

No Need to Change Considering or Planning Change Change is Underway or Complete

% of U.S. CEOs Citing Their Product Development & Innovation Capabilities as Follows

20

54

26


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Various Types of Growth


Growth can be divided into two broad categories—organic and inorganic. Both categories have well-defined sub-strategies and tactics for driving desired results


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The Benefits of Brand-driven Growth


Brand-driven growth (brand extendibility) tends to be more incremental than merely driving base business, and less expensive and risky than launching new brands

Prod

ucts

& S

ervi

ces

Brands

Exi

stin

g N

ew

Existing New

Market Penetration

Brand Extendibility

Portfolio Extendibility

New Product Development

Higher Risk

Typically Less Impactful


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Just the Facts…


Although a desirable means for driving business growth, successfully extending existing brands (even very strong ones) is not easy

0

20

40

60

80

100

Brand Extension Failure Rate* Brand Extension 3-year Survival Rate**

Brand Extendibility Track Record

*Ernst & Young, 2003; **David Talyor, Brand Stretch (2004)

84

54


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Top Barriers to Successful Brand Extendibility


When brand extendibility fails it can often be attributed to one or more of the following…

No Meaningful Market Need

Demand

There is a Need, but the Solution is

Uninspiring

Supply

There is a Need and an Inspiring Solution, but the Brand is Wrong

Brand Relevance

Everything Makes Sense Strategically, but the Execution

is Poor

Execution


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1) No Meaningful Market Need (Demand)


When there is no customer need for a new product or service, and little ability to create the need, a brand extension has very little chance for success

Demand Supply Brand

Relevance Execution

Track plant growth and watch an entire growing

cycle in seconds!

PlantCamTM

Example

!  Addressing the need is not profitable

Underlying Components:

!  No need; difficult to create need

!  Satisfactory solutions already exist

!  The unmet need is too niche


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2) Uninspiring Product or Service Solution (Supply)


Even with an identified customer need, if the proposed solution is uninspiring or otherwise sub-optimal, the brand extension will struggle to succeed

Smokeless Cigarettes…

“produced a flavor and a smell so offensive that it

left users retching…”

Example

Demand Supply Brand

Relevance Execution

!   “Flavor of the Day” offering


!  Solution not aligned with need

!  Lack of imagination/creativity

!   “Side effects” or other drawbacks


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3) Lack of Brand Relevance


When there is an identified need—and an attractive solution to address it—there still needs to be a solid fit with brand under which the product or service is launched

EBay selling goods at fixed prices made no sense for the brand or to consumers… EBay Express was a confusing and contradictory concept

Example

Demand Supply Brand

Relevance Execution

!  Base brand “baggage”


!  Lack of credibility

!   Inconsistent persona

!  Contradictory price/value relationship


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4) Poor Execution


Even when everything makes sense strategically, poor execution will almost always doom a brand extension to failure

Example

Demand Supply Brand

Relevance Execution

Community-specific news, information and

engagement platform…

•  Flawed business model

•  Overly-ambitious launch

•  Poor content quality

!  Lack of clarity on goals/path forward


!  Lack of senior-level commitment

!  Culture gets in the way

!  Capabilities are not up to par


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Developing an Outside-In Perspective


The outside-in perspective is important as always. Business objectives for brand extendibility should guide exactly who’s perspectives “outside” matter most

Primary Objective: More Deeply Penetrate Existing

Base

Solicit Input and Participation from

Current Customers

Primary Objective: Acquire New Customers for

the Brand


Current & Prospective Customers

Primary Objective: Fail Miserably in Brand

Extendibility


Only Senior Management


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Start Specific… Go Broad


A common mistake during needs identification is to focus too narrowly on the category in question, without enough consideration to the broader context

Personal Values

Relaxation/Recharging

Role of Friends & Family in Life

Movies on DVD/Blu-ray

Role of Entertainment in Life

Home Entertainment

Dimensions for Understanding Consumers

Attitudes Toward Free Time

Broad

Specific


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The Latency Effect


Although “talking to the customer” is important, it’s not as simple as merely asking them what they want/need

“If I had asked customers what they wanted, they would have told me a faster horse.” −Henry Ford

!   Customers are often unaware they even have a particular need (latent)

!   Customers may be aware of a need, but have trouble articulating it (tacit)

!   Some of the most successful new products and brand extensions in history were not inspired by an articulated customer need

None of these products addressed a widely recognized

problem that any of us had


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The Importance of Precision


Especially when attempting to identify problems, it is important to be very specific about the nature of the problem, and what in particular needs to be addressed

“If you don’t know where you’re going, any road will take you there.” −Lewis Carroll

!   When attempting to understand customer needs, it is important to be as specific and granular as possible

!   Big problems and challenges are often comprised of smaller component challenges—each of which has different ideal solutions

!   Performance—Is it about productivity? Accuracy? Throughput? Speed?

!   Convenience—Is it about speed? Ease? Simplicity? Portability?

How can a 9-hour solution solve the problem of dinner preparation taking too long?


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Beyond Problems… Opportunities


Focusing only on solving problems is limiting. Many successful new products do not solve a problem…they create an opportunity or deliver a better experience

“Effective innovators don’t wait for problems to arise. They fix what isn’t broken and improve things that have no apparent deficit.” −Dennis Stauffer, Thinking Clockwise

While the world is full of problems, it’s also full of opportunities…many of which do not solve a particular problem

!   Uncovering opportunities that are not inherently problem-solving in nature requires a different approach

!   It’s less about asking customers what they think/want…

!   It’s more about observing what customers actually do— “and connecting the dots”

Consumers weren’t exactly sitting around thinking to themselves, “Gee, if

only I had a tablet…”


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A Reality Check


When seeking to identify unmet needs it is important to consider your core competencies. Identifying needs that you have little chance for successfully addressing is futile

Brand Extendibility Playing Field

Market Opportunity

Company Capabilities


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Cost-effective, DIY Techniques


There are a number of techniques that are designed specifically to uncover customers’ unmet needs, and ultimately, business growth opportunity

Bulletin Boards/ Threaded Discussions Community-building threaded discussions in which we can observe consumer-to-consumer (or B2B customer-to-customer) dialogue

Be Your Own Ethnographer/ Day-in-the-Life Observation Spend a day in the customer’s shoes. Shadow and observe them closely. Selectively ask “why” questions to understand underlying motivations


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Sources of Inspiration


Inspiration to fuel potential solutions can come from numerous, diverse sources

Core Competencies

Cross-BU Collaboration

R&D and Contracted

Partnerships

Supplier Collaboration

Company

R&D

Vendors

Universities

JVs/Alliances

Analogies & Metaphors Product / Technology

Business Model Levers

Best Practices

Case Studies

Delivery Channels

Service Models

Business Model

Functional Attributes

Emotional Benefits

Core Values

Personality

Brand Levers

Brand Customer Insights

Global Trends

Need Platforms

Digital Ideation

Customer Participation Customer


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Defining Your Frame of Reference


When thinking about potential solutions, it is important to consider and define your brand’s frame of reference (What business is it in? What business should it be in?)

Workout T-shirts

Sporting Goods

Athletic Apparel

Lifestyle & Fitness

Health & Wellness

Pedometers

Running Shoes

Jerseys

Shorts

Socks Sweatshirts

Footballs

Golf Clubs

Hockey Skates

Basketballs

Tennis Balls

Soccer Nets

Knee Bands

Trail Maps

Hiking Gear

Mountain Climbing

Camping Gear Prepared

Meals

Physician Network

Wellness Website

Nutrition Plans

Fitness Bands

Heart Monitors


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Identify Ways to Cluster


Look for ways to logically bundle products, categories, industries and sectors…

Original

Accessories •  Mobile •  merchandise

Gaming Hardware •  Consoles, devices, PCs

• Gaming gear

Home Appliances •  Sci Fi inspired

smart appliances

Ready to Assemble •  Changeable Living Spaces HH of tomorrow

Architectural Lighting •  Illuminated wallpaper

Technology enabled apparel & jewelry •  Multi-function

wearable device

Multiple IPTV channels

Service Provider

Content Extensions •  ringtones &

Ring backs •  Wallpaper •  Text Alerts

Hotels & Resorts •  Fantasy Destinations

Amusement Parks / •  Fantasy Destinations

•  Arcades / FECs •  Conventions

Gaming Software •  Video Games, Online Games,

Mobile Games, Computer games •  Interactive Role Play Game • Creativity Game

Home Storage, Org. Products, & accessories

Audio Video Equipment •  Media Wall •  Immersion pods

Internet / Digital Music Distribution & Downloads

UGC • Online story-building

Aggregation

Cable TV Broadcast

TV Production & Distribution

Motion Picture Production & Distribution (long format)

Travel Services • Staged events

Leisure

Music Media Consumer Products (non-retailing)

Commemorative Products

Television Film & Video

Book Publishing

Periodicals • Online story- building

Trading Cards & Comic Books

Digital Content Distribution

Publishing

Consumer Electronics

Toys & Games

House wares

Home Furniture

Lighting

Appliances

Apparel & Jewelry

Lodging

Entertainment

Restaurant & Cafes

Training Services (support)

Mobile


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The Power of Convergence


An effective way of inspiring new thinking is to consider how one new solution can address multiple needs (i.e., that are currently being addressed through multiple solutions


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Cross-Pollinating the Unlikely


To simulate lateral, out-of-the-box thinking, it is also useful to combine things that are typically thought to be completely unrelated to see where the combination leads you

Mash-ups

+ Using the same design as a weed whacker with a motor on one end and an impeller at the other, a miniature computer-controlled heart pump has

been designed to help patients waiting on the transplant list.

How Would X Approach Y?

+ If Google were in the business of manufacturing nuts and bolts, how would they go about it? In

what ways would their nuts and bolts be different from others on the market today? Why would

they be different and better?


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Brand Extendibility Footprint


A Brand Extendibility Footprint defines what your brand stands for today across multiple dimensions, and helps you determine where it can potentially go (and not go) in the future

Brand Footprint

Dimension 1

Dimension 3

Dimension 2

Dimension 4

Dimension 5

Dimension 6

Dimension 7

Dimension 8


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Illustrative Dimensions/Axes


Categories Spices Seasonings Appetizers Main Entrees Side Dishes

Segments Toddlers Young Kids Tweens Young Adults Teens

Price Points Entry Value Mid-Price Luxury High-End

Occasions Breakfast Snack Mini-Meal Dinner Lunch

Emotions Meditative Calming Relaxing Stimulating Energizing


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Example—Extending Along Categories


Categories

Desktop Software

Cloud Solutions

Subscriptions/ Licenses

Value-added Reseller

Consultative Services

TODAY

Not doing today, but there is high customer

permission…seen primarily as new platforms

Credible “stretch;” but would likely

require some convincing

Off-brand; Not able to span from a

‘mass’ to ‘custom’

Company: Financial Planning

Software Developer


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Example—Extending Along Occasions


Everyday/ Routine

Crunched for Time

Portable/ On-the-Go

Seek Different Experience

Special Occasion

TODAY

Lack of drive-thru window makes these occasions a bit more challenging, but

still have ‘permission’

Basic food fare makes this a big

stretch; would need to

significantly alter cuisine/menu offering

Off-brand; Highly

functional nature of brand is a disconnect

Occasions

Company: ‘Fast Casual’

Restaurant Chain


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The Power of the Intangibles


In general, extending across intangible dimensions such as emotional benefits, persona, etc. gives the brand more permission and leeway to extend in a meaningful way

“At Caterpillar, we build the machines that help our customers build a better world. The boots and shoes we build are made with the same commitment.”

“Excellence is a continual quest at the Tata group and Tata companies are supported in their efforts to achieve world-class standards in all aspects of operations...”


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What About Execution?


“I’m all in favor of it!”

—John McKay Head Coach of the 0-14 Tampa Bay Buccaneers (1976) …when asked how he felt about his team’s execution


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The Four C’s of Execution



CULTURE

CLARITY CAPABILITY

COMMITMENT

Every aspect of the brand extension/launch needs to be

clearly articulated, leaving nothing no ambiguity or room for

misinterpretation

Internal Brand, Marketing, Insights, Sales, and Product Development functions need to be staffed by capable talent with relevant experience

Senior management has to believe in brand extensions, and financially and publically back their marketplace launch and ongoing support

The organization’s values, visions, norms, systems, beliefs, and habits

all tend to influence the extent to which it executes successfully


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Commitment


The top two reasons brand extendibility—and growth in general—do not succeed relate to senior management commitment and level of support

1 Success has not been defined and agreed upon upfront and at the top – failing to set up adequate expectations and measures for evaluation

2 Incorrect level of support – insufficient funds are allocated at critical moments of the development process

3 Financial performance is inconsistent with general financially accepted results in the company – resulting in misguided financial assessment

4 Use of incorrect testing methodology – either through erroneous results or testing wrong measure results in early failure determination

5 Organizational misalignment – structure or lack of staff capabilities and seniority hinder the process


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•  Bureaucratic •  Short-term focused •  Fear •  Hierarchical •  Slow-moving •  Lacking shared purpose •  Rule-oriented •  Cautious •  Reactive •  Inefficient •  Stressful

•  Trust • Open to new ideas

• Willingness to experiment •  Disciplined execution

•  Risk-taking •  Diversity of thinking

•  Passion •  Collaboration

•  Flexible •  Team-oriented

•  Achievement-oriented

Culture


Closely related to senior management commitment, cultural dynamics also impact the extent to which brand extendibility is successful

Inhibit Growth/Expansion Facilitate Growth/Expansion


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Clarity


It is important to have complete clarity on the process to be followed, the roles of each team member, and the ways key decisions will be made

Process Maps

Role Descriptions

Decision Rights


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Capability


It is important to ensure your company has the right capability in place, by critical function

Level 1 Basic

Level 2 Competent

Level 3 Proficient

Level 4 Advanced

Level 5 World Class

Company

Benchmark

—Illustrative—

Strategic Planning

R&D

Sales/ Channels

Manufacturing

Marketing

Innovation


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