Where does brand extension end?

What does a brand's name mean? Obviously, it has rich connotations. If there is a motorcycle under one brand, are you willing to buy a piano of the same brand? Lemonade and potato chips belong to the same brand, what do you think? Can aspirin and pesticide be the same brand? Consumers have so far expressed approval for Yamaha's motorcycles and pianos, but negative attitudes toward Frito-Lay's lemonade and potato chips. And whether the public is nervous about Bayer mixing pesticides and painkillers under the same brand remains uncertain.

When a company decides to add a new product to an existing market, or even to venture into another entirely new market segment, there are many factors to consider: the environment of the The competitive landscape and the capital needed to expand. But the most important factor is often overlooked by many companies: the meaning of the business name in the public's mind, and whether the product and market expansion are consistent with the public's understanding of the business?

The Simplest Way to Expand Your Brand

The easiest way to expand a company is to work on its core products. This is the most obvious method and generally succeeds. Dole Foods is a good example. The company initially operated pineapple cultivation and canned pineapple food, and gradually expanded to produce bagged/boxed food. Ed Rice, senior executive of Dole's brand consultancy firm Landor Associates, explained: "Dole has done research on the company's brand, trying to understand how consumers feel about the company's brand as the product expands. Reflect." The results showed that several of the brand's core elements - pineapple, Hawaiian scenery, sunshine and health - remained. They realized that they could extend the brand to other fruits, dried fruits, nuts, and even fresh products. They also have more distant, but still relevant, products: frozen fruit juices and sorbets, for example. It all seems reasonable, rightfully so. At the beginning, many people worried that the brand extension would go to extinction, unable to provide enough value, and there would be nothing but pineapples.

Xerox had the same experience. The company took the reputation built on its core product, copiers, and applied it to a new product line -- small office and home office (SOHO) supplies. "Our own key market research in multiple countries has shown that the Xerox brand has many positive value factors," said Marc Young, the company's vice president of strategic marketing. But it also conjures factors such as technical engineering, industry leaders, and high quality. The only downside is that SOHO owners don't trust Xerox to make products specifically for them. So our challenge is to moderately adjust the brand image to make it better connect with SOHO users at the same time. "

Xerox has high hopes for the SOHO market, hoping to help the company out of the recent financial crisis. On a deeper level, Mark Young is confident in the success of this new product line. He said: "The brand The meaning of the product is different from the product that can appear at any time, you have to really understand it. A brand contains a set of expectations and promises. As soon as consumers see your brand, they have expectations, and if even your new products meet those expectations, those new products have a chance to succeed. Just imagine if Xerox were involved in the automotive market, people would think that this is not Xerox's strong suit. But many believed that Xerox could make not only copiers but other office supplies as well. This is not an abuse of consumer trust. ”

Trap 1: Extending the brand for short-term growth

Sometimes, the extension of a brand into a new area becomes a life-or-death point, not just a matter of growth. MathSoft used to focus on Develops and supplies technical computing and data analysis software for engineers and professional technicians. To stay profitable, the company is desperate to dabble in educational software. "Crisis is more of a push to break out of your existing product line," the company Education and Management said. "Our company went public in 1993, and the business went from bad to worse, and we realized that the reason for the loss of revenue was a single product," said Chris Randles, general manager of Engineered Products. Unless it finds new growth, the company will continue to burn cash and lose money until it eventually goes out of business. "

In such a situation, many companies take a risky move of ignoring the long-term growth of the company and doing whatever it takes to grow the short-term. But Randles and other top managers didn't fall into this trap. .They considered two questions: First, which field MathSoft has established for its technological advantages and prestige in its software products is suitable for extension; second, which market has "blowout" growth opportunities.

"Our research found that our company has not paid enough attention to the education market, where scientific computing is in high demand. "Also, more computers will be coming into homes and schools, when the Internet was still new, but it has a lot of potential in the education and learning market," Randles explained. So we were thinking, now that we have mastered such high-end technology, mature, safe, and rich content, we can fully utilize its advantages, can we regroup and succeed in this huge potential home and school education market? "

MathSoft's vision was that it would be able to use its brand reputation for data analysis software to promote educational software, even though the content and target audience for educational software were different than ever. The company's first The challenge came from within: Getting employees familiar with the new product. "We mixed marketing expertise with well-educated employees," Randles said, "and then we motivated the software development team. The users of the core product they have developed in the past are engineers and scientists, and now they are turning to teenagers, so it is necessary to stimulate their interest. In my opinion, it is the alignment of technology, content and branding that allows us to stand in the education market. "

The brand extension done by the above three companies is reasonable in the eyes of consumers. But some companies extend their core business a bit too far. Quintalinux Ltd, a construction services company in Hong Kong, has entered the Linux software consulting business. On the surface, this has nothing to do with the company's main business, but the company's CEO David Lee (David Lee) pointed out that investing in information technology is closely related to the company's construction industry. For many years, Quintalinux has been committed to the "smart" building business, that is, the general wiring according to the commercial requirements of the owner. Now extending to software consulting, companies can better understand their customers' needs at different levels. “It is impossible for a mere construction company to go into IT,” Mr. Li said, “but for us, it is an extension, not a completely new field. This way, our traditional business can keep us afloat. - We're one of the few profitable companies in the Linux business."

Trap #2: Ignoring management and competitive dynamics

But sometimes, companies expand their product lines, especially through mergers and acquisitions When the method is extended, it seems reasonable on the surface, but the result is a complete failure. What is the reason?

In theory the answer should be simple, but in practice it is not. Sometimes it's a matter of time, sometimes it's mismanagement, and it's just too strong a competitor. The Fender brand is almost wiped out, which is caused by the latter two factors.

Fender, one of the most famous guitar brands in the world, was bought by CBS in 1965 when the considerations seemed reasonable: CBS had already entered the music market, with a recording and broadcasting business, Extending to the musical instrument industry should be an easy transition. "The problem is, they know very little about the real manufacturing industry," said Morgan Ringwald, director of public relations at Fender Musical Instruments. R&D investment was not guaranteed. Manufacturers in Asia soon followed, producing better quality and lower prices for knockoffs. It wasn't until 1985 that CBS decided to spin off all non-broadcasting business and let the two companies go their separate ways Focus on your strengths, and Fender will have a chance to reinvent itself."

Like CBS's blind foray into the musical instrument industry, many companies looking to expand their product lines make the same mistakes. In fact, this error can be avoided. "A lot of companies don't do their job," says Howard Moskowitz, president of Moskowitz Jacobs Inc. "They don't really understand what their products are and how they relate to their existing businesses." . "Many times, companies fail because they make decisions that misunderstand, ignore, or even violate one principle: A product or brand must be differentiated from its competitors. In the case of CBS, it failed to understand that quality control and craftsmanship are the foundation of the Fender brand. The magic weapon of success.

Another common problem is that businesses fail to understand the value embedded in their brand and arbitrarily extend it to inappropriate products. This kind of far-fetchedness will inevitably lead to the failure of a single product and the entire brand Devaluation. Harley-Davidson, always the poster boy for superbikes, entered the fragrance business with problems. “Harley-Davidson’s brand values are strong and masculine, and if its products and these It's a deadly blow to a brand when its values diverge," said Charles E. Brymer, CEO of Interbrand Group, a brand management firm.

Fortunately, these products are tiny, It wasn't enough to negatively impact Harley-Davidson's overall brand image much, and the company ended up cutting those product lines. "Over the years, we've tried different products and unified them under the Harley-Davidson brand. In retrospect, these mistakes would not have been made if we had had a more professional opinion at the time. "Companies are now more careful about partner selection and brand extension strategies," admits Joe Hice, director of corporate communications for Harley-Davidson. "

The Tommy Hilfiger Company was a successful business with a brand name that had trouble expanding. The company designs and sells men's and women's sportswear, denim and children's clothing, and is known for its traditional styles. When it moved to trendy styles last spring, sales plummeted. Ed Rice of Landor Brand Consultants believes the shift has blurred the brand's image. "They're in too many channels, too many markets at once," he says. realm, their products quickly appeared on the barter market. In this way, the Tommy Hilfiger brand has become increasingly mediocre. "It's devastating for a brand built on uniqueness.

If Tommy Hilfiger were to learn from the famous Polo Ralph Lauren company, which maintains the mainstream brand At the same time, other apparel products and retail channels have also been successfully tried. What is the secret of success? It turned out that instead of putting all products under the same brand like Tommy Hilfiger, it designed a new sub-brand for each product, Such as Polo Sport Ralph Lauren, Ralph Lauren Purple Label, Lauren by Ralph Lauren and Chaps Ralph Lauren. When consumers buy lower-grade products, they feel that they have the quality and prestige implied by the Ralph Lauren label at a low price. And high-end consumers also feel that they are fully enjoying the value of the well-known brand Ralph Lauren. The company has since followed suit, successfully entered the home furnishing and paint industries, and is now known as the master of "selling lifestyle", so consumers can use the brand. , arming their wardrobes, walls, beds and floors.

Trap #3: Ignoring differences in global markets

Those who truly understand brand values and take them into account when expanding their brands Value companies tend to be successful, but this cannot be generalized for global companies because brand extension strategies are more successful in Europe and Asia than in the U.S. For example, Bayer's product is aspirin in the U.S. synonymous with . Brand consultants warn that Americans will be annoyed if they see the name of a headache medicine on a pesticide can. But in Germany, where Bayer is headquartered, its products include headache medicine, agricultural products, polymer There is no obvious conflict between them and chemical products.

In fact, the most successful cases of brand extension appear in Europe and Asia. British Gas PLC is an example. The deregulation of gas supply, new competitors can buy gas in bulk at low prices, while the fixed price between British Gas and suppliers, the cost is much higher. So the company is urgently transformed. The result? It entered a new the credit card business. Prior to this, it provided customers with financial services such as insurance for gas bills, and market research shows that the public is positive about its involvement in the financial services industry.

“British Gas Entering the credit card space is really creative, it captures the simplest complex of people in daily life. "John Diefenbach, a partner at the brand consulting firm Wolff Olins, said, "The best way to do this is to take advantage of the original gas company's huge customer base and high brand awareness. "The company's transformation has led to success on two levels: one is that it has developed a Goldfish card that is today the fastest growing credit card in the UK, and two is that the card has 84% brand recognition.

Of course The UK's most successful brand extension is Richard Branson's Virgin Group. The company reaches out to every corner of the market - aviation, music, soft drinks, cars, liqueurs , publishing, wedding dresses, and many, many more. It's been successful in that its brand is not limited to any particular product, but an attitude. "What I've found in my conversations and research with them, they seem to want to be in any A field that challenges itself and brings customers a leisure and entertainment. "You know that wherever they go, it's going to be a lot of fun and a buzz," said Alan Siegel, chief executive of professional services firm Siegelgale. They use innovative marketing strategies and invest heavily in them. "

Yamaha wins with a similar theory, albeit with a different attitude. "Yamaha makes both motorcycles and pianos," says Interbrand's Brimmer, "because of the differences between the two." The core values are precision and quality so they can be successful. Therefore, if you have established the core values of the brand, it is easy to extend the brand to other areas. Similar examples have emerged in Japan, other Asian countries and Europe. In these places, companies like to have brands cover multiple areas, and they do it successfully. U.S. companies, on the other hand, are more interested in product segmentation—perhaps because Asian and European brands are more focused on value than the product itself. "

Starbucks has always been associated with coffee, but, driven by Chairman and CEO Howard Schultz, the company has tried its best through promotion and advertising. Promote Starbucks as a way of life, not a product. Schultz explains in Future of Brands: “Obviously our brand is rooted in coffee, but it also means With more value, this is true for us internally, and I believe it is no exception to customers. I think Starbucks is somewhere between the home and the office, it has become the 'third place' in the business world, and we have become the meeting place. Romantic coffee and our service make Starbucks an extension of people's front porches. He believes that this shift has led to Starbucks' success in investing in ice cream, and that it will not fail when the company launches other new products in the future. The latecomers in the next few years are very instructive. There are increasing signs that a company's goods are more than steel, plastic or potato chips. The most valuable asset of a business is its own brand and how to operate effectively. Brand.

The original text is excerpted from the March/April 2001 issue of Across the Board magazine with permission from Conference Board Inc., copyrighted by Conference Board Inc. in 2001. Translated by Li Qingkang.