Number 23: Summer 2003
How to Conduct Successful Brand Extensions
By Daniel Edelman
Editor's comment: Brand extension can be a very dangerous strategy. Get it wrong and the core brand is damaged. If it is undertaken correctly, the extension adds to the equity of the core brand. Daniel Edelman provides a number of lessons for companies that are looking at extending their brands.
Why extend your brand?
Brand extensions are a familiar way of capitalising on a brand’s equity to sell new products or services, for example; Nike golfing clothing, Oakley shoes, Sony digital cameras and Evian clothing etc. However, although there are obvious benefits of pursuing a brand extension strategy such as; utilising brand equity, business growth and cementing core brand attributes etc., there are also significant downsides of a brand extension strategy in that if a brand extension does not fit with the core brand; the core brand may not add any value to the brand extension product or service resulting in the failure of the brand extension, core brand attributes may well be diluted and negative attributes may be associated with the core brand.
The key to successful brand extensions is to determine if the brand extension fits or is consistent / congruent with the core brand. However, more often than not, managers utilise their own perceptions of the core brand as the benchmark to determine if a brand extension has the potential to fit with the brand. These perceptions of the brand are frequently in contrast with those of consumers. To further complicate matters managers do not fully appreciate or understand consumer’s brand extension fit judgements and therefore it is difficult for them to consider all the aspects consumers use to determine if a brand extension fits with a brand.
What's important to consumers
When considering brand extension fit there are four underlying constructs which consumer’s evaluate individually, to formulate an overall judgement as to whether or not the brand extension fits with the core brand.
Relevance: is the extent to which the core brand attributes are relevant or important to the brand extension category. For example; (1) the core brand attributes of Starbucks are clearly relevant to the sale of coffee grinders, but not relevant to the sale of other kitchen equipment such as microwaves or fridges, (2) the core brand attributes of Coca-Cola are relevant to the sale of other soft drinks and sodas but not the sale of fruit juice such as orange juice.
Recognition: is the extent to which consumers understand the reasoning behind why the brand is conducting the brand extension as well as the logic of the brand extension. For example; (1) the core brand attributes of McDonalds make it easy to understand / logical in the eyes of consumers for McDonald’s to extend its brand into another restaurant concept, however not easy to understand / logical the eyes of consumers for McDonalds to open a chain of grocery stores, (2) the core brand attributes of Nike make it easy to understand / logical in the eyes of consumers for Nike to extend its brand to sell golfing clothing, but not easy to understand / logical in the eyes of consumers for Nike to sell highly fashionable clothing.
Credibility: is the extent to which the core brand has attributes which are credible and acceptable to conduct and sell the brand extension. For example; (1) the core brand attributes of Sony make it credible and acceptable for Sony to extend the Sony brand into laptops and digital cameras however they are not credible and acceptable to extend the Sony brand into sports clothing, (2) the core attributes of Budweiser make it credible and acceptable for Budweiser to extend the Budweiser into new beers however they are not credible or acceptable to extend the Budweiser brand into wine or spirits.
Transfer: is the perceived ability of a brand to transfer their skills and experience to the brand extension. For example, (1) the skills and experience of British Airways are transferable into other areas of air transportation such as domestic flights and low cost flights, however British Airways’ skills and experience are not transferable into coach transportation, (2) the skills and experience of American Express are transferable into travel insurance and foreign exchange services, but not transferable into car rental.
The most crucial component of consumers' brand extension fit judgements is the relevance construct. However all the constructs are important and consumers must perceive all constructs to some degree to perceive a brand extension to fit.
How to conduct a brand extension
In conclusion the following five stage process model is suggested for brand extensions:
Initial research: Research and map the core brand attributes by talking to the core target customers of the brand utilising unstructured research techniques to elicit an understanding of the constructs and attributes of the core brand.
Utilise initial research: Use this initial brand research to assist in brainstorming and the development of brand extension ideas which managers think may or may not fit with the core brand based on the constructs of brand extension fit suggested above.
Investigate fit: Research core target customers' evaluations of the extent to which the potential brand extensions fit with the core brand. Ensure samples are representative of the consumers who are likely to purchase the brand extensions.
Select brand extension: Select the brand extension which the research indicates has the highest level of fit with the core brand and as such is most likely to be successful. If you want to conduct a brand extension which has a lesser degree of fit with the core brand, identify which fit construct is lacking and then seek to alter (prime) consumer’s evaluations of the brand via advertising or marketing to increase the degree to which the brand extension fits.
Conduct brand extension: Ensure that the brand is carefully mapped after the brand extension to identify is there is any change in the core brand values as a result of the brand extension.
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