U.S. manufacturers introduce more than 150,000 new products in 2010 alone. Of these, more than 90 percent were extensions of existing brand-name products. The extreme failure rate (80% or more) often cited for new products is apparently closer to 30-49% for launched products. So investing your company’s budget and effort in new product development, especially products that leverage your current brand equity, makes sense.
Brand extension that wasn’t
My first marketing job was for a cute catalog with a cartoon family as spokespeople in the then-emerging category of software that served a dual purpose: to educate and entertain children. At that time, technology-leading teachers and doting, upscale parents were in need of basics. They wanted help in choosing and using all the best titles, and a return policy for these expensive teaching (and babysitting) computer tools.
A few years into it, prices were declining, big-box stores were starting to carry the titles, and our efficient little start-up had excess capacity. What about those gaming titles, the entrepreneurs at the top asked, the software that had such dominance at the Consumer Electronics Show and the Electronic Entertainment Expo? Could we extend our brand and launch the happy-kid catalog’s angry little brother version, catering to a much harder-core audience?
The short answer, we found after sinking some time, money and energy into it, was…no. Why wasn’t our new brand extension accepted? It bothered our employees. Our parents were upset. Our advertisers were confused. Sure, the catalog copywriter could channel her inner anger, but it just didn’t…fit.
Consumer perceptions of fit key
Fit, it turns out in searching the literature, is the key component of a good brand extension. Successfully transferring brand associations from the parent brand relies on consumers’ perceptions of fit (Yorkston et al).
Capacity + money to be made doesn’t always signal go ahead
Prophet Brand Strategy contributes a key idea – one ignored by the example of my old bosses – that companies should add ‘brand relevance’ to the ‘organizational capability’ and ‘market opportunities’ list that often gets companies revved up to take the plunge in a new direction. In other words, knowing that your company can do something and that no one else is doing it doesn’t necessarily mean that your brand should be the one to do it. Again, the sweet spot should be where those three – capabilities, opportunities, and brand fit – come together.
In considering whether a new product fits, or is relevant to your brand, keep in mind that it really doesn’t matter whether company insiders think something is relevant. What matters is whether your buyers, or potential buyers, do.
Marketing research tests the fit
What should you be researching? Two questions stand out:
- Just knowing the brand name, customers of the new category should be able to identify a reason why they might prefer the new brand extension to existing competition.
- Ask consumers whether their opinion of the parent would be lowered if the new brand extension were available.
Brand extensions should be based on a combination of knowledge and creativity, sound business strategy combined with a bit of risk taking. Will research insure success? No, but as with most major marketing decisions, creatively approached, expertly conducted marketing research will improve the odds.
So how do you know which direction to take your brand? I would add a few steps to these six golden rules and turn them into ten:
- Understand brand strengths: What key attributes can your brand build upon?
- Consider brand flex points: What parts of your brand aren’t that important?
- Understand your market: Who are your buyers, how else might you meet their needs?
- Understand your competition: It might change as you extend your product line.
- Research opportunities: Look for gaps in the space your brand might address, or poorly branded product spaces.
- Brainstorm for ideas: Use outsiders and insiders and edit afterwards.
- Test concepts: Before you invest in the winning ideas, test them as ideas to see which resonate. Since consumers may not see the connection, if you still feel strongly about an idea, at least you know what you’re up against.
- R&D to develop the prototypes: Be clear on major pricing constraints before giving product development an assignment.
- Iteratively test prototypes: Do small, qualitative tests with the design and product team involved so they can re-invest the findings in real time iterations. Test market or soft launch before the final step.
- Market like crazy: Once you’ve developed the product, put resources behind it to give it a chance to succeed.
Focus on those buyers open to change
Further, how consumers view their own personality also affects how loyal they are to a brand and how open they are to a brand extension.
This is quite interesting. An “entity theorist” is a person who thinks of their own personality as something fixed, whereas an “incremental theorist” views personality traits as “situational, dynamic and able to change with time and effort”. Kind of the old nature vs. nurture idea. Brand personalities are therefore relied upon by entity theorists to signal their own, inherent, good qualities, since they can’t do anything about those personally; whereas incremental theorists have less need for bolstering themselves through brands but are more open to brand extensions.
So it’s important to understand that the people most loyal to your current brand might be the most resistant to transferring that brand goodness to your new product. And those most open to seeing your brand take on a new direction might not be your current loyalists. Which is why it’s so important to get the balance right between innovative thinking and building on traits seen as immutable parts of the existing brand.
Learn from the past
Successful, and failed, brand extensions from the past now seem so obvious: Clorox bathroom cleaner (bleach meets Comet), iPhone (mobile meets Mac), or Crystal Pepsi (Pepsi meets…transparent?). Studying what worked and what didn’t can yield some insights, but consumer tastes and brand perceptions change. So ask questions, be brave and forge ahead.
Jennifer Cooper, President of BuyerSynthesis, helps established and emerging brands grow revenues through better understanding their buyers. She can be reached at email@example.com.