That gurus You never tire of repeating it, the main value of a company is its brand. It contains all the values of a company and its most important asset is intangible: it implies ownership of a place in the mind of the consumer. This power, combined with the application of proper marketing techniques, allows some companies to use their brand as security when deciding to launch new products.
the two extensions
In this diversifying adventure, according to the marketers surveyed, there are two main strategies typically used to grow under the brand’s umbrella Extension of the product line (line extension) and the brand extension (Brand extension).
The technique of Extension of the product line (line extension) is the common way to extend a brand and launch products similar to the original ones, e.g. For example, a soap brand that starts producing shampoo.
But sometimes the new products don’t have an obvious kinship with the originals. This is known as brand extension (Brand extension), a more complex technique that consists of extending it even to new and surprising product categories. From the shoe manufacturer who opens hotels to the backhoe builder who sells boots, almost anything is possible as long as the combination is right and carried out with the necessary feasibility guarantees.
not everything is worth it
Enjoying the umbrella of a recognized brand is a crucial guarantee to embark on the adventure of diversification, but there are certain limits that must not be crossed.
First, the experts recommend checking whether it really makes economic sense to launch the new product by creating a sub-brand or by expanding the existing brand.
When deciding to diversify, fundamental factors such as brand strength, character and synergies must be considered.
The concept. It’s very important that there is a conceptual continuity between the new products and the previous ones, something that makes the consumer think further about your brand, the philosophy, in a way. The consumer does not buy objects, but rather concepts, the ideas that the brands represent.
It is therefore appropriate that the category or new market to which the brand is extended has some relationship to it. For successful diversification, it is first necessary to identify the emotional values and personality attributed to the brand itself and these characteristics are also appropriate for the new category.
the power Another essential aspect is the analysis of the strength and awareness of the brand. A brand that combines recognition value and versatility in equal parts would be ideal.
If the brand is not known in the market, no diversification advantages can be used. At the same time, however, this recognition can also become a liability, since it is more difficult for the consumer to accept expansion into another category or niche if he identifies strongly with his category.
The synergies. The new product may have emotional continuity with the brand, enjoy widespread recognition, and be welcomed by consumers in its category, and yet launching it may not be a good idea. First of all, we should ask you: In the current market situation, are there any synergies in production or in sales with the brand? If the answer is no, it’s possible that adoption will cost more than the benefits it can bring to the organization.
The transfer of the mark. Difficulty finding production and distribution synergies by going into a different than usual category is the most common obstacle to expansion. However, these most valued brands have the ability to sell licenses to third parties to take over that production in exchange for it royalties for trademark rights.
The possibility of exploiting the brand itself, through diversification and entering other market niches with new products, remains an option rarely used by most Spanish companies, which generally have a conservative attitude towards this type of initiative.
The brand culture in the Spanish market is not yet fully developed. They are still not recognized as assets and are therefore not managed and measured as such, although various business initiatives have been implemented that will transform this culture in the medium term.
This conservatism prevents brands from being exploited through creativity, but it’s also a way to take care of them without risking their positioning. Even if it becomes commercially successful, poorly planned or managed diversification can be counterproductive for the company.
Devaluation. The main risk of renewal is the loss of brand equity. If some control criteria are not followed, it is possible to lose the brand’s positioning, especially in the high-reach area.
To avoid discrediting, experts recommend following a number of general rules, regardless of the brand in question and the category to which it applies. The two essential rules would be a homogeneous level of quality in the different categories and restraint in expanding the brand.
Become overly extensive marks Wasa mere logo, and that way the brand equity devalued, credibility is lost.
commercial control. In addition to quality control and expansion disputes, brand image must be taken care of when searching for new categories. Depending on the attributes that correspond to the brand, categories arise that might make commercial sense but would distort the perception of the brand.
On the other hand, experts recommend keeping control of the distribution channels. Mishandling the brand in its new category at the point of sale by placing it next to products with different positioning can mislead the consumer.
10 rules to conquer new territories
Having a recognized and valued brand is an essential requirement to conquer new territories. But it alone does not guarantee success. In product diversification, you also have to consider other factors: image loyalty, organization, market niche, customer knowledge…
1. Preserve identity. The hook of the new product or service is the brand. Regardless of how distant it is from the main activity, it is important that it reflects the brand’s philosophy, style and personality.
2. Surprise. The most attractive – albeit risky – diversifications are usually those that involve entering an unexpected sector for the client, sparking curiosity and leading to an ingenious offer that they want to be a part of.
3. Increase uniqueness. As soon as you enter a new sector, hand in hand with an unrelated brand, it is convenient to maintain the uniqueness that presents a special offer and differs from the rest of traditional competitors.
4. Good relationships. The new product’s customer base comes from the brand’s most loyal customers. Loyalty systems can be developed to give preferential treatment to the customer-friend, such as B. additional and exclusive services, membership cards, special offers…
5. Don’t look like an intruder. If on the one hand it is useful to surprise, on the other hand it is advisable to maintain a certain balance in order not to be an intruder in the new market that is being entered. Look for areas where the brand doesn’t shock and inspire suspicion.
6. Maintain proportion. The extension of the brand is usually a reduced division in relation to the main activity. Oversize in the new activity can affect the company’s financial and human resources.
7. Live by it. Any new product or service bearing a brand must ensure the same quality standards as the first products the company launches and compete in the same range. In no case should they cloud the original image of the brand.
8. Autonomy. To effectively manage the extension, those responsible for the release must be able to make decisions without having to rely on the main company for everything. A parallel venture can be created as manufacturers do with their networks of franchised stores.
9. Go to the top. It is not an uncontroversial law, but experience shows that it is usually the brands of high-end products that are most active in distribution and most successful. It is a consequence of the value your brand has achieved and earned.
10. Business Plan. No matter how strong a brand is, it alone will never ensure the success of an extension. It’s unlikely to do well without a rigorous market study and a business plan that supports the new product.