There is a large literature in the academic arena that focuses on brand extensions. In almost every article (including the original article I wrote coining the term “brand extension”), the authors point out the risks of extending a brand. This risk largely centers on the reality that the associations and meanings attached to a brand change when a brand extension succeeds. The academic argument is that this change is potentially negative diluting the brand. However, changing perceptions by consumers is often a positive or the dilution is worth the effort.
It is my opinion that expanding the relevance of a brand is one of the major benefits of brand extension. Most brands start off as a thing – Cuisinart Food Processor, KitchenAid Dishwasher, Snickers Bar, Clorox Bleach, Armor All Protectant and Sunkist Oranges. Brand extension changes the consumers connection to just one item and makes the brand represent a variety of items sometimes closely related and sometimes not.
Cuisinart Brand Extensions
Cuisinart had great success with selling their food processor in the United States and throughout the world. The brand became synonymous with food processors. People would say “I used the Cuisinart to make that dessert." One could argue that this use as a replacement for a generic name should not be brand extended. This point exists for Kleenex, Coke and other brands used as a generic substitute. However, there are examples like Cuisinart where the dilution is worth it to create a line of products that generate significantly more revenue than the parent product alone.
The consumer thought of Cuisinart as a food processor company. Management decided to redefine the business of the brand to include kitchen appliances, cookware, bakeware, dinnerware, flatware, tools and gadgets. Clearly the association of the brand name was changed and maybe diluted but the much larger business was worth the change. As discussed earlier, the opportunities available to a company depend on how they define their business and Cuisinart made a conscious decision to extend the brand. The downside risk is that Cuisinart share of the food processor market might decline, but the vast increase in sales and profits from the brand extensions meant the trade-off was worth it.
Honda Powered Brand Extensions
In some instances, a brand extension which takes a company into a new category opens the door to other categories which would otherwise be unavailable with the parent brand. A number of examples reveal how one brand extension changes the consumer perceptions enough to open the door to other category entries that consumers will now accept. Sometimes the thread which provides leverage in multiple categories is perceived “experience” or “expertise."
Honda began as a manufacturer of small motorcycles. In an era where motorcycle riders were bad boys who rode Harley Davidsons, Honda advertised “You meet the nicest people on a Honda.” So Honda was perceived of as a motorcycle company. Over time, Honda began making a small car with a motorcycle type engine. The rest is history. Today, Honda is known for cars and motorcycles, but their brand extensions have also been successful. The reason is that Honda developed a reputation for making reliable gasoline engines – their leverage. Where else do people want small reliable engines? – Lawnmowers, generators, snow blowers, pumps, tillers and trimmers.
Sunkist Brand Extensions
It is sometimes difficult to understand why a company would go on a brand extension licensing spree but the revenue potential is a major consideration versus just keeping a brand pure. When I visited Sunkist about a brand extension project, the company had a huge display of the licensed items sold around the world with the Sunkist brand. Sunkist, a cooperative of orange growers in Southern California, was started in 1893. The growers adopted the Sunkist name in about 1926 to brand their fruit to differentiate what is obviously a commodity category.
The licensing effort really took off when General Cinema, a movie theater chain, licensed the brand to launch Sunkist Orange Soda. This product had no juice and was obviously going to impact the wholesome natural perceptions about the brand. But so what! It made the growers a lot of money. Since then, the Sunkist brand has been licensed around the world for items that are close-in such as orange flavors vitamin C tablets to candy, nuts and trail mix.
Some brands have such limited value that extending them is desirable and runs little risk. Here are some of the reasons:
Risks of Extending a Brand
Failure – Most new products fail so there is the financial risk of this occurring
Diversion – Management must now split its attention focusing on marketing in the parent category and the new one
Confusion – Brand extensions can result in increased consumer confusion
Dilution – The strong association of a brand with one product or category can be disrupted when the same brand is used in other categories
From the earliest writings about brand extension, the greatest concern was that brand extensions would dilute the parent brand. This can happen in a variety of ways:
Breaking the link - As mentioned, many brand names started off as one product. An Oreo was a cookie but now it is a cereal too. Toll House was a chocolate chip but now it is also a cookie mix. The close link that a brand name had to the parent product is broken. With products where the brand is used to represent the category such as Kleenex or Coke, it is a generally (but not always) a mistake to break this link. The Oreo trademark is particularly valuable because people use it as shorthand for a type of product. “Please buy me some Oreos." When extended, now there is confusion: Do you mean Oreo cookies or Oreo cereal?
Non-sequitur products – Launching brand extensions that make no sense to the consumer can damage the parent. Zippo, the well-known lighter manufacturer, launched perfume in a lighter shaped bottle.
Poor quality – Brand image is critical in most categories but especially so in mechanical or electronic categories where breakdowns or repairs can be a major problem. New products that have poor quality can damage the parent brand by reversing the positive image people have of them. The Chevrolet Vega was a very poor-quality vehicle which negatively impacted the public’s perception of the Chevrolet brand.
Going down market - Launching down market extensions especially in luxury categories can also dilute a brand. The Cadillac Cimarron, an inexpensive car damaged the Cadillac brand.
Licensing – Many companies license their brand name to various manufacturers for a fee. Since the owner of the trademark has limited control, the probability is increased that brand extensions from these licensees may create problematic products generating negative publicity and therefore dilution.
While dilution is a real concern and many academic studies have focused on that topic, in reality, it occurs relatively infrequently. That is because products that are not a logical fit with the parent or are inferior in some way usually fail. Their failure often prevents widespread damage since they are withdrawn or gain awareness among only a small fraction of the targeted customer base.