Brand Extension: The When, Why, & How

Brand Extension: The When, Why, & How image virgin 300x232Virgin do well with brand extensionWhen business is booming, it’s easy to get starry-eyed about growth. And when it comes to growth, what better way is there to grow than by expanding your products and services? Right? Wrong. Brand extension, which is different from line extension, shouldn’t be your first go-to for achieving growth results.

Brand extension refers to expansion into a new market territory. For a marketing company, brand extension might mean breaking into the print-on-demand t-shirt business. Line extension, on the other hand, could refer to slightly modifying your current existing services. Perhaps you could extend your blog-writing “product line” by offering direct publishing services through WordPress. This kind of move would be a line extension – not a brand extension.

Is Brand Extension Right for You?

If you’re Richard Branson, then yes, brand extension probably is for you. As this entertaining and educational case study on Branson’s Virgin Group points out, Branson has built a $3.5 billion international conglomerate on everything from magazines to airplanes. When it comes to brand extension, Branson is a master.

However, brand extension isn’t always the smartest growth-oriented small business tactic. The reason is simple: extending your brand can be expensive and highly risky. (Just ask Branson about the massive Virgin Cola flop.)

Before considering brand extension, take some time to see if line extension might not be the smarter move. With a line extension, you can open up new sources of revenue based on the products and services that you already know and excel with. That being said, let’s turn our attention to brand extension…

When to Extend Your Brand

Following (the good parts of) the ‘Branson Model,’ brand extension occurs when sales are strong and you have established yourself as a leader. Obviously, this isn’t some magic formula or else products like “New Coke,” to refer to another fizzy flop, would still be on the shelves today. If seemingly rock-solid brands like Coca-Cola can fail, then there has to be more to the equation, right?

One of the biggest driving factors behind successful extensions is brand authority. Even if sales are at an all-time high and you possess the acumen and resources to extend your brand, don’t make a move until you have established brand authority, which isn’t quite the same as trust.

Authority refers to a brand’s good name in the industry in which they’re already established. Trust, on the other hand, refers to how customers perceive the brand’s ability to branch out into other industries.

Disney is a great example of a brand that has authority and trust. After extending the film production company to include amusement parks, merchandise, and resorts, Disney gained trust. It’s no wonder that Disney, “a film studio,” can create award-winning cruise lines. What does a Disney CEO have to know about cruise ships to get started? Not a whole lot. (Okay, I’m being a little facetious here.) But the point is, a brand like Disney has trust that allows them to leverage their strong sales with their recognized leadership qualities for brand extension success.

Why Brand Extension Can Be Lucrative

When your brand has strong sales figures, authority and, subsequently, trust, you’ve hit the jackpot. Deliver a quality product in a new industry and that new-kid-on-the-block-feeling isn’t nearly as bad as it is for other newcomers in the same industry.

Remember, there are two types of “lucrative” ventures: ones that have sustainability and ones that burn out. Branding expert John Parham discusses these two types of ventures in this article from AdAge.com:

Bed, Bath, & Beyond extends their brand to knock off Wal-Mart as the number one home textiles retailer. Sustainable.

Cheetos releases a lip balm. Burn out.

How to Extend Your Brand

In the same article, Parham outlines the “three pillars of a winning brand extension”:

  • Fit: Does it make sense for your brand to extend in this way?
  • Opportunity: Is there opportunity, or are there already too many cruise lines/soft drinks/whatever out there?
  • Leverage: What is it about your brand that would convince a customer to buy your product – not an established competitor’s?

These first two pillars can be accomplished by performing market research and waiting until you have the authority and trust you need before proceeding. Obviously, the tricky pillar here is number three.

A great way to overcome the third pillar, leverage, is to partner with a company that already has experience in the territory that you’re interested in expanding into. (By the way, this kind of partnership is a small business tactic that works on a two-way street!)

Remember, when it comes to brand extension, you have to have revenues, authority, and trust. Only then should you be asking yourself about fit, opportunity, and leverage.

To learn more about how major Fortune 500 companies are extending their brands and growing through content marketing, check out our guide, which shares information about how you can do it, too!

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