Brand Extension Principles - Part 2: Brand Extension Research and Strategy

Brand extensions have little chance of success if they're launched without adequate research and an effective strategy. Too often brands are extended to jump on the bandwagon of a trend without the proper research and strategy in place to ensure consumers will accept the brand extension on the market. As discussed in Part 1 of the Brand Extension Principles, Coors Sparkling Water is the perfect example of this mistake.

Brand Extension Research

Launching a brand extension begins with market, competitor, and consumer research. You can't just assume that consumers will accept every product launched with a parent brand on it. If that were the case, New Coke wouldn't have failed.

Brand extension research requires a comprehensive understanding of brand fit. If consumers don't perceive that a brand will fit in a new category, then the company either has to invest in re-educating consumers and repositioning the brand or the company needs to choose a different brand extension.

There are a few things that you need to ensure consumers believe about your brand before it can be successfully extended, and these are things that you can learn through research. Therefore, during your research process, you need to ask questions that will reveal consumers' answers to questions like the following:

       
• What position (or word) does the parent brand own and what makes it unique to you? Parent brands have to be distinctive and own a position in the markets where they exist.
       
• What does the parent brand's promise provide or deliver to you? Parent brands have to have a solid brand promise that consumers understand, recognize, and believe.
       
• Does the parent brand elicit any negative feelings for you? Parent brands must not pass on any negative perceptions to extensions.
       
• What do you need or want that existing brands and products are not providing? Extensions have to fill a need, void, or consumer want. There must be consumer demand for the extension.
       
• What unique feature or benefit would a new product or brand need to offer for you to consider buying it? Extensions should bring something new and different to the category.
       
• Does your existing perception of the parent brand fit the new category or market that the brand plans to enter? Extensions have to be introduced in categories and markets where consumers believe those brands will fit.

You can use a variety of qualitative and quantitative market research as well as open-ended and closed-ended questions to gather the specific data you need to make appropriate brand extension decisions that will shape your brand extension strategy and plan of execution.

Bottom-line, you can't assume that consumers will welcome your brand extensions with open arms. There is a reason why Colgate Kitchen Entrees were doomed to failure and even hurt sales of Colgate toothpaste. Make sure your brand extensions don't suffer the same fate by conducting comprehensive research first.

Brand Extension Strategy

As you develop your brand extension strategy, you need to look for the sweet spot in terms of which extension best enables you to leverage your existing brand equity in a manner that fits with consumer expectations and perceptions. However, there are opportunities to extend a brand into areas that aren't a natural fit for that brand. Therefore, you need to understand the difference between the two primary brand extension strategies -- centralized or decentralized.

A centralized brand extension strategy is one where extensions leverage the parent brand name, reputation, and position to drive new revenues for a business. These can be both line and category extensions where all new products are introduced under the same brand umbrella. This is a great strategy that gives companies the cost savings they want and can be very successful as long as those requirements mentioned above related to fit and perception are in balance. Amazon and Google are great examples of companies that use centralized brand extension strategies.

A decentralized brand extension strategy is one where extensions leverage manufacturing, distribution, and other economies of scale but they do not share the parent brand name. This is a good strategy for companies that want to protect their parent brands while pursuing significant expansion into multiple categories and markets. Automobile manufacturers use this strategy with extensions into different categories (e.g., Toyota has extended into the luxury vehicle market with Lexus and into the youth-oriented market with Scion). Johnson & Johnson and Procter & Gamble are excellent examples of consumer product companies that follow a decentralized brand extension strategy launching separate brands to appeal to specific markets.

It's up to each company to determine how far its brand extensions should be distanced from one another, and this decision affects whether the company pursues a centralized or decentralized strategy. However, even a decentralized brand extension strategy can vary in terms of brand distance. For example, it's not unusual to find multiple American car brands sold in the same dealership such as Dodge, Jeep, and Ram vehicles on the same Chrysler dealership lot. This is less likely for Toyota and Lexus.

In Part 3 of the Brand Extension Principles series, I'll discuss brand extension mistakes and some high-profile brand extension failures to learn from. In the meantime, you can read Part 1 to learn the answers to two important questions - what is a brand extension and why extend a brand?

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