{"id":2024,"date":"2013-07-06T12:00:50","date_gmt":"2013-07-06T06:30:50","guid":{"rendered":"http:\/\/teekhapan.wordpress.com\/?p=2024"},"modified":"2013-07-06T12:00:50","modified_gmt":"2013-07-06T06:30:50","slug":"extending-your-brand-may-dilute-its-identity","status":"publish","type":"post","link":"https:\/\/vivekkaul.com\/2013\/07\/06\/extending-your-brand-may-dilute-its-identity\/","title":{"rendered":"Extending Your Brand May Dilute its Identity"},"content":{"rendered":"

\"laura<\/a><\/span><\/span><\/span>
\nVivek Kaul<\/span><\/span><\/span>
\n 
\nVijay Mallya, the liquor king, who wanted to run an airline, recently told the staff at Kingfisher Airlines that he had no money to clear their salary dues. Mallya, like many businessmen before him, also became a victim of the line extension trap. \u201cThe line-extension trap is using the same brand name on two different categories of products. Kingfisher beer and Kingfisher Airlines. We have studied hundreds of categories and thousands of companies and we find that line extension generally doesn\u2019t work, although there are some exceptions,\u201d says marketing guru Laura Ries, who has most recently authored\u00a0<\/span><\/span><\/span>Visual Hammer.
\n<\/i><\/span><\/span><\/span>Along with her father, the legendary marketing guru Al Ries, she has also authored, several other bestsellers like\u00a0<\/span><\/span><\/span>The Origin of Brands<\/i><\/span><\/span><\/span>,\u00a0<\/span><\/span><\/span>The Fall of Advertising & the Rise of PR\u00a0<\/i><\/span><\/span><\/span>and the\u00a0<\/span><\/span><\/span>War in the Boardroom<\/i><\/span><\/span><\/span>.
\nBut does such a rigid line against line extensions make sense in this day and age, when it is very expensive to build a brand. \u201cWe have never said that a company should not line extend a brand. What we have said is that line extension \u201cweakens\u201d a brand,\u201d says Ries. And there are always exceptions to the rule she concedes. \u201cSometimes, a brand is so strong it can easily withstand some weakening. Early on, for example, the Microsoft brand was exceptionally strong so the company could use it on other software products and services.\u201d
\nThere is also the recent case of Tide, the leading detergent in America, opening a line of dry-cleaning establishments using the Tide brand name. And it might just work, feels Ries. As she explains \u201cBecause there are no strong brands or national chains in the category, this can possibly work, although we believe Procter & Gamble, the owners of Tide, would be better off with a new brand name.\u201d
\nThese exceptions notwithstanding there are way too many examples of companies which haven’t fallen for the line extension mistake and are doing very well in the process. Toyota is one such example. And one of the reasons for its success is the\u00a0launch of three new brands in addition to Toyota. Scion, a brand for younger drivers. Prius, a hybrid brand. And Lexus, a luxury brand.
\n\u201cInitially, Prius was a sub-brand of Toyota, but the company recently decided to create a totally separate brand. Prius has some 50 percent of the hybrid market in America and is a phenomenal success. The separate brand name will assure its success for decades to come,\u201d says Ries.
\nWhat about Apple we ask her? How does she view the brand, everyone loves to love? Hasn’t it also made the line extension mistake by launching the Apple iPod, the Apple iPhone and the Apple iPad? \u201cApple is not a product brand. Apple is a company brand. Nobody says, I bought an Apple unless they have just visited a grocery store. They say I bought an iPod or an iPhone or an iPad, three brands that made Apple one of the most-profitable companies in the world,\u201d explains Ries.
\nSo in that sense Apple did not really make a line extension mistake. For every new product it created a new brand. And the success of this strategy reflects in the numbers. Apple\u2019s competitors, Hewlett-Packard and Dell, line extended their brands into many of the same products. Both are in trouble. Last year, Apple made $41.7 billion in net profits. Dell made $2.4 billion. And Hewlett-Packard lost $12.7 billion.
\nBut what about Samsung, which has been giving Apple a really tough time in almost all product categories that they compete in. \u201cCurrently, Samsung is an exception to the principle that line extension can weaken a brand. But that\u2019s only in the short term. We predict that sometime in the future Samsung will suffer for its marketing mistake,\u201d states Ries. \u201cWhat keeps Samsung profitable is the principle that in every category there\u2019s always room for a No.2 brand. Coca-Cola and Pepsi-Cola, for example,\u201d she adds.
\nAnd Samsung is clearly not as profitable as Apple.\u00a0Last year, Apple made almost twice as much in net profits as Samsung even though Apple\u2019s revenues were smaller. Apple\u2019s net profit margin was 26.7 percent compared to Samsung\u2019s 11.5 percent.
\nThe other two big companies in the mobile phone market have been Nokia and Blackberry. Nokia recently launched a smartphone under the new ‘Lumia’ brand name. On the face of it this is exactly what Ries would have recommended. The company launched a Lumia smartphone, and did not fall for the line extension trap. Given this, why is Nokia losing out in the smartphone business, we ask Ries.
\n\u201cWhat\u2019s a brand name? What\u2019s a model name? What\u2019s a sub-brand name?\u201d she asks. \u201cMany companies like Nokia think they can decide what is a brand name and what is a model or a sub-brand name. So Nokia considers \u201cLumia\u201d to be its smartphone brand name. Not so. It\u2019s consumers that make that decision. Consumers use iPhone as a brand name and not Apple. Consumers also use Nokia as the brand name and not Lumia. To consumers, Lumia is a model or sub-brand name.\u201d
\nAnd there several reasons behind consumers not considering Lumia to be a brandname. \u201cLook at a Lumia smartphone and you\u2019ll see the word \u201cNokia\u201d in big type. Look at an iPhone and you won\u2019t see the word \u201cApple.\u201d You\u2019ll see the word \u201ciPhone\u201d in big type and just an Apple trademark,\u201d says Ries.
\nAnd on top of that Lumia doesn’t even have a website of its own (<\/span><\/span><\/span>www.lumia.com<\/span><\/span><\/span><\/span><\/a>\u00a0is a website of a British IT company). \u201cLumia\u201d doesn\u2019t sound like a brand name and it doesn\u2019t even have a website. That makes it very difficult to create the impression that Lumia is a brand.\u00a0This isn\u2019t the first line-extension mistake Nokia has made. Nokia was its brand name for a line of inexpensive cellphones. And today, Nokia is also using the Nokia name for its expensive smartphone products,\u201d says Ries.
\nThe Blackberry story goes along similar line. On the face of it, the company doesn’t seem to have made a line extension mistake. But Ries clearly does not buy that. \u201cWhat\u2019s a BlackBerry? Is it a smartphone with a physical keyboard? Or a smartphone with a touchscreen? It\u2019s both, of course, and that\u2019s exactly why BlackBerry has fallen into the line extension trap. To compete with the touchscreen iPhone, the BlackBerry company (formerly called Research In Motion) needed to introduce a new brand of touchscreen smartphone. It\u2019s very difficult to build a brand that it has lost its identity.\u201d
\nAnd given the lost focus its very difficult for these companies to go back to the days when they were immensely successful. As Ries puts it \u201cIt depends upon whether either company (i.e. Nokia and Blackberry) can do two things: (1) Develop an innovative new idea for smartphones, and (2) Introduce that innovative new idea with a new brand name. It\u2019s hard for us to tell whether it\u2019s possible to come up with a new idea for a smartphone. It could be too late.\u201d
\nAnd this could work in favour of Samsung, feels Ries. \u201cEvery category ultimately has a leader brand and a strong No.2 brand. Since all three smartphone brands (Samsung, Nokia and BlackBerry) are line extensions, one line extension has to win the battle to become the No.2 brand to the iPhone. Samsung made massive investments in product design and development plus massive marketing investments,\u201d says Ries.
\nSo it\u2019s logical that Samsung would become a strong No.2 brand. Furthermore, they priced their smartphones as less expensive than iPhones, another strategy that increased its market share although not its profitability. This has worked particularly well in Asia, feels Ries.
\nThis success of Apple over Samsung comes with a caveat. As Ries explains it \u201cLong-term, every category has two major brands. But they are normally quite different. Long-term, we see Apple as the leader in the high-end smartphone category and Samsung the leader in the \u201cbasic\u201d smartphone category.\u00a0Apple would make a mistake in introducing less-expensive smartphones. That would undermine its position at the high end.\u201d And that is mistake that Apple needs to avoid.
\nAnother massively successful company that has fallen prey to the line extension trap has been Google. The company has introduced a number of products under the Google brand name, but none of them have been massive money spinners like the Google search engine.
\nAs Ries puts it \u201cCurrently, I can\u2019t think of any Google product that is very successful. Google +, the company\u2019s social media competitor, is nowhere near as big or as profitable as Facebook.\u00a0Google\u2019s most successful introduction has been Android, which now is being use by 75 percent of all smartphones.\u201d Google bought the Android company, one of the reasons it probably didn\u2019t use the Google name on the software.
\nWhat all the examples given above tell us is that line extensions have had a sketchy track record. So why do companies fall for it, over and over again? Ries has an answer for it. \u201cAs one CEO told us, We have a great company and great products. Why can\u2019t we use our great company name on our great products?,\u201d she points out. \u201cMost chief executives believe that the only thing that really matters is the quality of their products and services their prices. Deep down inside, they don\u2019t believe that the name or the marketing makes much of a difference.\u201d
\nThen there is the pressure to keep increasing earnings. Chief executives are under pressure to increase sales and profits and they see product expansion (including line extensions) as the best way to achieve these goals. \u201cThe more important strategic decision is the question of \u201cfocus.\u201d It\u2019s our opinion that the best way into the mind is with a narrow focus. That\u2019s not, however, the majority opinion, at least among top management people. Most companies are moving in exactly the opposite direction. They are line extending their brands,\u201d says Ries.
\nGiven this, CEOs don\u2019t believe a new brand is worth the cost and effort required. It\u2019s true, too, that many management people equate new brands with expensive advertising programs, feels Ries.
\nBut that again is a perception that they have. Most big brands in the last ten years were not built because they advertised left, right and centre. Ries questions\u00a0the assertion that it\u2019s expensive to create a new brand. \u201cIt\u2019s only expensive if a company uses advertising to launch the new brand. In our book,\u00a0<\/span><\/span><\/span>The Fall of Advertising & the Rise of PR<\/i><\/span><\/span><\/span>, we recommend launching new brands with no advertising at all. Just PR or public relations. Advertising doesn\u2019t have the credibility you need to launch a new brand.\u201d
\nThis is because when a consumer sees an advertisement for a new brand, his or her first reaction is, this can\u2019t be very important because I\u2019ve never heard of the brand. And that’s why some of the biggest brands in recent years like Amazon, Twitter and Google, used almost no advertising. They did, however, benefit from extensive media coverage, feels Ries.
\nIn order to succeed in the years to come, companies will have to create multiple brands. \u201cThe future belongs to multiple-brand companies. But with one reservation. A company needs to be successful with its first brand before launching a second brand. You can\u2019t build a successful company with two losing brands,\u201d concludes Ries.<\/span><\/span><\/span>
\n 
\nThe article originally appeared in Forbes India<\/a> edition dated July 12, 2013<\/span><\/span><\/span>
\n 
\n(Vivek Kaul is a writer. He tweets @kaul_vivek)<\/b><\/i><\/span><\/span><\/span>
\n 
\n\u00a0<\/span>
\n 
\n\u00a0<\/span><\/span><\/span>
\n\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Vivek Kaul   Vijay Mallya, the liquor king, who wanted to run an airline, recently told the staff at Kingfisher Airlines that he had no money to clear their salary dues. Mallya, like many businessmen before him, also became a victim of the line extension trap. \u201cThe line-extension trap is using the same brand name … <\/p>\n

Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"qubely_global_settings":"","qubely_interactions":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[14,34,43],"tags":[210,303,942,1623,2069,2536,3216,3390,3922,3960],"qubely_featured_image_url":null,"qubely_author":{"display_name":"Vivek Kaul","author_link":"https:\/\/vivekkaul.com\/author\/vivekkaul\/"},"qubely_comment":2,"qubely_category":"Business<\/a> Forbes India<\/a> Interview<\/a>","qubely_excerpt":"Vivek Kaul   Vijay Mallya, the liquor king, who wanted to run an airline, recently told the staff at Kingfisher Airlines that he had no money to clear their salary dues. Mallya, like many businessmen before him, also became a victim of the line extension trap. \u201cThe line-extension trap is using the same brand name…","jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts\/2024"}],"collection":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/comments?post=2024"}],"version-history":[{"count":0,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts\/2024\/revisions"}],"wp:attachment":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/media?parent=2024"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/categories?post=2024"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/tags?post=2024"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}