The No. 1 Reason Why Brand Extensions Fail

Is your company interested in extending its brand?

I bet many of you will answer “yes.” Marketers everywhere are under increasing pressure to boost short-term results and show return on investment. Stretching your existing brand may look like a cheaper, quicker and less risky way to do this than investing in a new one.

However, extending your brand into a new category is the easy part. The harder part is taking consumers with you into unknown territories!

Many big-name companies have had both successes and failures with brand extensions. And the No. 1 reason why some brand extensions fail is simple: they don’t bring enough meaningful value to the consumer.

Just ask McDonald’s. Its McPizza product flopped because consumers thought its value proposition was too similar to established competitors such as Domino’s and Pizza Hut. By contrast, its McCafé concept is doing well because it’s seen as different, especially by teenagers for whom Starbucks might be too expensive.

Other big companies have also had mixed results in brand stretching. Richard Branson has built a terrific Virgin brand across lots of categories, but few Virgin brand extensions have been big winners. Montblanc is great in pens but has had a harder time moving into other lifestyle categories such as watches, jewelry and fragrances. And easyJet failed when it tried to move from its low-cost airline brand to internet cafes, cinemas, car rental, cruises or finance.

In general, far too many marketers assume that strong brand equity and a “good idea” are enough for a successful brand extension. Sure, a good brand name might reassure consumers that the new offering comes from a serious company. But they will only buy the new product or service if it makes their lives easier, better, cheaper, faster and so on.

Brand stretching is not easy, and I strongly believe it’s more art than science. In my interviews with top marketers and senior executives, I find that many simply don’t know under what conditions brands can be successfully stretched.

What we do know is that great value propositions can lead to brand extensions that strengthen your long-term brand equity rather than diluting or weakening it. For example, Yamaha moved from pianos to motorcycles and marine engines with amazing success. Davidoff successfully moved from cigars to cognacs and perfumes. Sony went from rice cookers to TVs and the Walkman and is now a key player in digital cameras. Similarly, Apple moved from computers to phones, to music.

When brand extensions fail, it’s usually because companies try to borrow or milk their brands, and/or they simply do not pay enough attention to creating sufficient new consumer benefits. Think of flops such as Bic moving from disposable pens and shavers to disposable perfumes and underwear, Heinz trying to move from ketchup to mustards, and Xerox moving from photocopiers to computers. Even Apple has had its share of failures: think of the Newton tablet, the Lisa computer, the iMac USB mouse, the iPod Photo and the iPod Hi Fi. Fortunately, consumers often forget the flops if the failed products are quickly taken out of the market!

McPizza might have sounded logical to top executives at McDonald’s — “OK, we’re not in hamburgers, we’re in fast food!” But it wasn’t logical to consumers, who preferred to stick with established pizza chains.

As I’ve often repeated, your brand is not what YOU think it is, it’s what your customers think it is. You must always provide them with tangible or intangible benefits. And let’s remember, it’s NOT the engineers or the marketers who finally decide what consumers should value. At the end of the day, it’s the customer!