EXTENSION Brand as Inspiration for Business Growth

The following report is an abridged version from Chapter 7 of The Indispensable Brand by Mitch Duckler. The book provides a roadmap for crafting a brand strategy that rises above the noise and monotony in the marketplace… and for catapulting from indistinguishable to indispensable. Brand Growth and Transformation

Brands need to continually grow to maintain relevance. Achieving and maintaining profitable growth, however, is a constant challenge. Not surprisingly, launching new products and services is a very popular way of obtaining profitable growth. According to PwC, American CEOs consider product and service innovation to be a key driver of growth. Still, they also believe that they need to make substantial changes to their innovation capabilities and product development.1

FiguFigurere 7.1 1 SourcSourceses for G forrowth Growth (PwC)

% of U.S. CEOs Citing Area as a Source for Growth

60

40 36 37

20 14 10 3 0 Product/Service Increase Share in Mergers & New Geographic New JV/Strategic Innovation Existing Markets Acquisition Markets Alliances

Source: PwC 17th Annual Global CEO Survey (2014) Source: PwC 17th Annual Global CEO Survey (2014)

2 Brand as Inspiration for Business Growth www.fullsurge.com Business Growth: vs. Line Extension

Before diving into further detail on the topic of brand growth, it is important to distinguish between line extensions and brand extensions. Line extensions are typically categorized as launches where the company introduces additional items under the same brand name. This category includes new flavors, forms, colors, and other minor additions. Brand extensions, however, are when a new product is launched that represents an entirely new category for that brand. An example of this would be when an apparel company launches a new line of perfumes under the same brand name.

Relatively speaking, brand extension represents a stronger opportunity for revenue growth and brand transformation (vs. line extension). As such, the remainder of this report will focus solely on the topic of brand extension.

3 Brand as Inspiration for Business Growth www.fullsurge.com The Business Growth Matrix

Figure 2 Business Growth Matrix New

Brand New Product Extendibility Development s vice

Higher Risk ts & Ser

Produc Market Portfolio Penetration Extendibility Existing

Existing New Brands Typically Less Impactful

As the figure above demonstrates, brand growth can be achieved in two ways: incremental extensions and transformational new products and services. This framework also shows how brand extendibility can offer a lucrative path to achieving growth, having the potential to drive dramatic business results. Brand extension also carries less risk and expense than launching new brands for new products and services.

However, when it comes to extension, many brand leaders struggle with how far they can and should stretch their brands’ boundaries. Playing it too safe will underwhelm customers while straying too far from the brand’s core will risk damaging the brand’s valuable equity.

4 Brand as Inspiration for Business Growth www.fullsurge.com Three Factors Contributing to Successful Brand Extensions

FFigureigure 7.3 3 BrandBrand Extendibility Extendibility — SuccessSuccess F aFactorsctors

the solution and the brand intended to represent it

There is an inspiring solution to address the market need

There is a meaningful market need, or one can be created

AND AND Brand Demand Solution Relevance

As will be further detailed in the following sections, there are three important preconditions for successful brand extension. First, there needs to be demand for the extension in question. If it doesn’t improve an existing process or solve a problem, then the extension will most likely fail. The second factor pertains to the solution itself. Namely, the new product or service extension needs to be compelling and inspiring, in addition to satisfying the demand or need in question. Finally, the solution needs to represent a strong fit with the brand it’s housed within. If all three factors—demand, solution, and brand relevance—are met, the potential for success is very high.

5 Brand as Inspiration for Business Growth www.fullsurge.com THE FIRST FACTOR: DEMAND

It stands to reason there first must be a need or desire for a new product or service; no brand extension can be successful if this condition is not met. If the need doesn’t exist, then the company must find a way to create the need or desire—a more challenging, though still viable, path.

Unfortunately, many new products and services are often launched in the marketplace with no apparent problem to solve or need to address, resulting in inevitable failure. Google Glass, a pair of glasses that could take pictures and record videos, flopped for this very reason. It hit the market at a high price of $1,500 and answered a question that no one was asking. There was no demand, so Google axed the project in 2015.2

In some cases, an unmet need may exist because there are no solutions whatsoever in the market. In other cases, there may be solutions to address the need, but they are unsatisfactory or insufficient. For example, we probably don’t need yet another type of toothpaste, yet toothpaste manufacturers believe (rightly or wrongly) that current offers are insufficient—so they launch new products. This means that it isn’t enough for marketers to know there is a problem or need. The extent to which current solutions sufficiently meet that need is equally important.

Even when the above conditions are met—a need exists, and there are insufficient solutions to address it—the market opportunity must be substantial enough to warrant the investment. The rise and fall of 3-D TVs is a perfect example of this.

Back in 2009, TV manufacturers poured money into research and development in order to flood the market with new models of 3-D television sets. The manufacturing companies were disappointed, however, for their new innovations weren’t successful. This was because 3-D TV required special glasses that often gave people headaches. Options for 3-D entertainment also dwindled quickly (James Cameron only makes so many movies). Such limited content was the final factor that made this technology fade from history.3 The concept—perhaps a bit ahead of its time—was too niche in terms of its appeal.

When it comes to demand—both need and opportunity identification—another dynamic must be eptk in mind. Customers are often unaware of their unmet needs. As Henry Ford once famously declared, “If I had asked consumers what they wanted, they would have told me a faster horse.” Items like Post-it Notes, laptops, ATMs, and automobiles all represent highly successful innovations and new product launches, despite consumers’ inability to articulate their need beforehand. Therefore, directly

6 Brand as Inspiration for Business Growth www.fullsurge.com asking consumers what they want and what they need is a necessary, but not sufficient, approach to opportunity identification.

Finally, it is important to keep in mind that problem resolution represents only one form of demand. Some of the most successful new products of all time do not solve a discernible problem—but instead, represent a better way of doing something. For example, Steve Jobs proudly announced that he had no idea how an iPad would or should be used, but he saw the incredible potential of the device. By trusting customers to make it useful, Apple created a need that didn’t exist prior to launching that new product.

THE SECOND FACTOR: SOLUTION

An appealing solution to address the need or want is the second requirement of successful brand extension. Several mistakes can be made during this process, and each factor has the potential to singlehandedly derail a brand extension.

The first mistake, which is relatively straightforward and obvious, is when the solution does not successfully address the want or need in question. The concept of Nokia’s N-Gage, a hybrid mobile phone and handheld gaming device, was in high demand back in 2003. Despite addressing a need, however, the solution was a mess. Users had to disassemble the device to change games and hold it sideways to use as a phone. It simply wasn’t intuitive and engaging enough to succeed.

Even if the solution is creative and inspiring, the side effects of an offer can sometimes be the proposition’s downfall. An example of this was R.J. Reynolds Tobacco Company’s smokeless cigarette. By heating and aerosolizing tobacco flavor, it was designed to reduce the unhealthy side effects of smoking, but the taste and smell were extremely foul. The product was consequently taken off shelves less than a year after its debut.

Brand extension efforts can also fail from a commercial perspective due to excessive cannibalization. In other words, even if the solution is robust, its revenue and market share could come at the expense of another product or service from the same company or brand. Crest used to own 50 percent of the market with a single product. It now owns just a quarter of the market with fifty products.4 According to Catalina, existing brand buyers typically account for 42 percent of new product .5 Brands must avoid merely moving revenue from one internal column into another to prevent cannibalization.

7 Brand as Inspiration for Business Growth www.fullsurge.com THE THIRD FACTOR: BRAND RELEVANCE

The third and final factor for successful brand extension is relevance. Brand relevance is the extent to which a new product or service concept fits the brand’s positioning. If the fit between the concept and the brand isn’t strong, the new offering can dilute the brand’s valuable equity, or even destroy the equity altogether.

When determining brand relevance, two important concepts must be considered. The first covers the multiple dimensions that make up a brand. The second covers the extent to which different ideas along each of those dimensions fit the brand’s positioning.

FFigureigure 7.4 4 BrandBrand EExtendibilityxtendibility FFootprintootprint

Dimension 1 Dimension 8

Dimension 2

Brand Footprint Dimension 7

Dimension 3 (Occasions)

Dimension 6

Dimension 4 Dimension 5

Occasions

Everyday/ Crunched Portable/ Special Routine for Time On-the-Go Experience Occasion Company “Fast Casual” Highly Restaurant Chain functional nature of Basic food brand is a fare makes disconnect this a big stretch; would need to

alter cuisine/menu Lack of drive-thru window makes these occasions a bit more challenging, but still have ‘permission’

TODAY

Notes: Bottom diagram intended to represent an “inset” for Dimension #3 • BotNote:tom diagram intended to represent an “inset” for Dimension #3

8 Brand as Inspiration for Business Growth www.fullsurge.com As demonstrated in the Brand Extendibility Footprint exhibit, the closer any potential idea is to the center of the diagram, the closer it fits with the brand positioning. Ideas that are farther from the center can still work for the brand, but their adoption is more questionable. Marketers might need to take more overt steps to help customers understand the connection between the new offering and the brand.

To determine the Brand Extendibility Footprint, marketers need to evaluate their brands across different dimensions: functional and emotional, tangible and intangible. Intangible dimensions give the brand more permission to stretch into territories that may seem to be a disconnect to customers. In other words, brands can successfully extend into seemingly unrelated product categories by leveraging the intrinsic aspects of their positioning.

For example, The Clorox Company was traditionally known for bleach but was able to successfully extend its brand into other categories like sprays, wipes, and toilet cleaners. This brand accomplished this by moving beyond product features and attributes, tapping into the more intrinsic aspects of its brand (help consumers maintain cleanliness).

Like all aspects of brand strategy, the “outside-in” voice of the customer is essential during brand extendibility efforts. Consumer research helps brand leaders determine both the optimal dimensions in the Brand Extendibility Footprint and the extent to which new ideas fit the brand.

It is important to keep in mind, however, that customers tend to be fairly literal in their interpretation of brands. This means they may be less willing to “endorse” a potential brand extension in theory (i.e., as a concept in ) than they would be to purchase the actual new product once it hits the market. Whether or not the brand should wait for consumer permission or proactively establish it depends on whether the brand extension has the power to inspire consumer interest independently.

AVOIDING STAGNATION THROUGH EXTENSION

As discussed above, some of the most meaningful brand extensions come from companies tapping into the intangible, yet salient aspects of their brand positioning. Marketers can rely on numerous sources when it comes to generating inspiration for brand extendibility.

9 Brand as Inspiration for Business Growth www.fullsurge.com FigureFigure 7.5 5 Brand Extendibility — Sources of Inspiration Brand Extendibility — Sources of Inspiration

Functional Attributes

Core Values Personality R&D Brand Levers Customer Insights Vendors Global Trends Universities Need Platforms JVs/Alliances Digital Ideation Analogies & Brand Customer Metaphors Participation

Product / Technology Customer

Business Company Model

Business Model Levers Core Competencies Best Practices Cross-BU Collaboration Case Studies R&D and Contracted Delivery Channels Partnerships Service Models Supplier Collaboration

Most brand managers think of positioning as a guardrail that protects the brand from veering off the path. This is a valid mindset, but by being overly cautious when defining their brands’ bounds of extendibility, marketers may be closing the door on numerous, high-potential sources of profitable growth. Once again, it’s often the intangible and more emotional aspects of brand positioning that represent the best sources of inspiration for extendibility and new product development—even though the ideas resulting from them may seem less intuitive and perceived as riskier.

Consider the fashion brand Giorgio Armani, a premier name in luxury. Consumers hear “Armani” and think of concepts that include style, expertise, and sophistication. This brand’s personality is a reflection of its founder’s personality, guiding consumers’ perceptions of the brand and all products that bear its name.

10 Brand as Inspiration for Business Growth www.fullsurge.com The Giorgio Armani brand extends beyond the world of fashion, though, with a product portfolio consisting of everything from haute couture to fragrances. The brand has also diversified into several product categories that are unrelated to fashion.6 Specifically, the Armani brand is attached to restaurants, hotels, nightclubs, flowers, and chocolates—and not all catering to the elite. It extends into seven sub-brand categories that range from high-end to medium-priced men’s and women’s fashion, children’s fashion, and home products.7

The Armani brand extension strategy has successfully transcended fashion by maintaining its high- quality standards across every offering. By using a uniform mix strategy for its sub-brands, Armani also ensures that every representation of its brand provides the same impression of expertise and skill.

Armani’s understanding of the role the luxury customer plays in its success has been the key to its effective brand extension strategy. Armani concentrates first on its consumers and crafts its brand based on the needs of the audience. Armani has evolved into a brand reflective of an entire customer segment.8

Armani designed products that would appeal to different luxury consumer segments, adopting the brand extension strategy of sub-brands and the brand diversification strategy into non-fashion categories. It successfully created a brand that has revolutionized the branding strategy of the luxury goods sector.

Progressive Evolution versus “Swing for the Fences”

For a long-term brand extension strategy, the ideal approach is to begin with ideas and offerings closer-in to the brand’s positioning before gradually moving outward from the core offering. This helps to build brand credibility and momentum over time, priming the market for more peripheral (and less intuitive) departures.

Procter & Gamble’s Mr. Clean brand is an excellent example of this. The brand aspires to be the hardest working cleaner, and its charming mascot furthers that mission.

Mr. Clean first made its mark in the kitchen by offering consumers a solution for cleaning floors and walls. In the 1990s, the company set out to target other rooms in the house. In 1992, it debuted a toilet cleaner and liquid bathroom cleaner. Then, in 1993, it expanded further with its glass and surface cleaner.

11 Brand as Inspiration for Business Growth www.fullsurge.com The next decade contained progressively bolder moves as the brand moved beyond the interior of the home. In 2003, P&G introduced the Magic Eraser surface cleaning pad, extending the brand’s application to include exterior surfaces. Mr. Clean even reached outside the home to clean everything from car wheel rims to sports equipment.9

Its boldest move came in 2007 when it ventured beyond household products to open a line of car washes. Customers at a Mr. Clean Car Wash enjoy gourmet coffee and shop while they wait. The car wash also offers a smartphone app, membership program, and VIP club for loyal customers. All of this extension was possible because Mr. Clean evolved gradually and progressively while remaining true to the brand’s essence. If the brand attempted to open a car wash before “priming the market” with numerous, more logical, and closer-in offerings outside of the kitchen, it likely would be nowhere as successful as it is today.

Brand Positioning: More than a Safety Net

Brand positioning plays a vital role in extendibility. It should continue to protect valuable brand equity from harmful dilution and destruction, but it can also serve as inspiration for new ideas. Marketers must consider the intangible qualities their brands represent and use those as inspiration for extendibility. The power of brand positioning ultimately allows marketers to achieve meaningful, transformational brand growth.

12 Brand as Inspiration for Business Growth www.fullsurge.com Notes

1 Volker Staack and Branton Cole, Reinventing Innovation: Five Findings to Guide Strategy through Execution (PwC, 2017), https://www.pwc.com/us/en/ advisory-services/business-innovation/assets/2017-innovation-benchmark-findings.pdf 2 Jake Swearingen, “How the Camera Doomed Google Glass,” The Atlantic, January 15, 2015, https://www.theatlantic.com/technology/archive/2015/01/how- the-camera-doomed-google-glass/384570/. 3 “The 10 Biggest Market Research Fails of All Time,” TrendSource, June 2, 2017, https://trustedinsight.trendsource.com/trusted-insight-trends/the-10-biggest- market-research-fails-of-all-time. 4 David Taylor, Brand Stretch: Why 1 in 2 Brand Extensions Fail, and How to Beat the Odds (Chichester, UK: Wiley, 2004), 35. 5 Dave Ansett, “Brand Extension and the Cannibal Effect,” truly Deep (blog), accessed September 10, 2018, http://www.trulydeeply.com.au/2015/01/brand- extension-and-the-canibal-effect-brand-strategy-melbourne/. 6 “Brand Extension Success—New Profit Growth,” china Business Philippines, January 2010, https://chinabusinessphilippines.com.index.php?option=com_con tent&view=article&id=1453:brand-extension-success-new-profit-growth&catid=31:asian-brand-strategy&Itemid=73. 7 “Case Illustration 1: The Armani Brand Extension Success Story,” Martel Fashion, November 10, 2016, http://www.martelnyc.com/luxury-fashion/case- illustration-1-the-armani-brand-extension-success-story.html. 8 “Giorgio Armani—The Iconic Global Fashion Brand,” MartinRoll, November 2016, https://martinroll.com/resources/articles/branding/girogio-armani-the- iconic-fashion-brand/. 9 Pete Canalichio, “Brand Licensing and Brand Equity,” Branding Strategy Insider, November 29, 2013, https://www.brandingstrategyinsider.com/2013/11/ brand-licensing-and-brand-equity.html#.WuzLG9PwajQ.

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