Brand extensions
Team Interbrand
Warc Best Practice
July/August 2011
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Brand extensions
Team Interbrand
Warc Best Practice
July/August 2011
Brand extensions
Team Interbrand
London
Extending a brand requires an understanding of its core perception and how this, and demand drivers, chime with those of the
new segment.
Twenty or so years ago, where your brand sat on the spectrum from value to premium was largely fixed and predictable. In the
UK, Marks & Spencer was the middle-class favourite for clothes and Virgin was the plucky challenger, some way apart from
the premium territory owned by British Airways.
Today, the picture is far more blurred, as brands have extended upwards and downwards in an attempt to capture market
segments on the periphery of their traditional core.
Hence, M&S trying to upscale its clothing offer with designer-led sub-brand ranges and Virgin going for BA's base with its
clubhouses and limousine ‘Upper Class’ services. Upstretching is an established tactic to boost the value of a brand, but the
practice is not without risk. Often brands extend too far, into inappropriate areas, and dilute the core idea. In the long term, this
can lead to erosion of brand value and can even destroy some brands.
Can extending your brand have a positive effect other than short-term gain? Can we drive brand value for the long term by
extending our brands? Can we increase margins through brand extension? Looking at some high-profile examples from a
range of categories, our conclusion is that, although stretching into higher margin areas is difficult, it can be successfully
achieved.
But let's be clear: the task is not an easy one. A brand might be strong, but there is no guarantee it can stretch upwards. A
brand extension strategy first requires marketers to anticipate what their brand allows them to do.
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H&M has collaborated with high-end labels including Lanvin (above)
A case in point is Audi and Volkswagen's comparative strategies to shape brand perception. Throughout the 1980s and 1990s,
Audi's unwavering commitment to brand building helped it to catch up with its German counterparts by repositioning itself from
a mainstream to a luxury brand. By capitalising on its technological abilities of Vorsprung Durch Technik and using design as
the key emotional brand driver, its cars became stylish, contemporary and beautiful, underpinned by best-in-class cabins and
engineering prowess. Audi extended its portfolio to a larger number of touchpoints, selling desirable cars at a premium.
Released in 1998, the Audi TT was the embodiment of this strategy. Almost overnight it became iconic, featuring in museums
and design exhibitions.
By comparisons decade later, Volkswagen was anchored in the mass-market, though selling at a premium price due to quality
perception. Following on the vision of the then CEO Ferdinand Piech to position the brand across all major segments,
Volkswagen extended its range to include a luxury car, building on the quality perception image. By extending its range, not
only did it follow the literal definition of the ‘people's car’, but it intended to helpVW retain its price-premium in a market where
competition had grown tougher and there was a need to support the brand's equity to justify the cars’ price.
Phaeton, named after the god of the sun, was Volkswagen's answer – an engineering masterpiece in every way. Despite a
much-publicised launch to demonstrate the cars engineering credentials, Phaeton failed to appeal. Why wasn't Volkswagen
able to enter the luxury segment while Audi managed to reposition its whole brand? The difference between Audi and
Volkswagen is where the emotional drivers to the brand come into play. In other words, where the strength of feeling from
ownership comes from. For Audi, the master brand conveys the emotion (‘I drive an Audi’) and the products such as the A8
reinforce the engineering pedigree (with the TT being an exception). For Volkswagen, the product brands are where the
emotional drivers come into play (‘I drive a Golf’) with the master brand conveying the quality and durability of the vehicle. The
trouble was that the Phaeton had no perceived emotional drivers. The advanced class-leading technology of the product met
the quality and durability of the master brand. There simply was no emotion in the proposition.
As strong as the Volkswagen brand was, it lacked an immediate fit with the luxury sector. VW was strongly associated with the
mass market, depriving the Phaeton of the sense of exclusivity that defines the luxury sector. There, Audi succeeded, because
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it was already positioned higher up and had less far to stretch.
However, other brands do succeed in stretching upwards. A typical strategy is the one followed by H&M, which created a halo
effect by forming partnerships with famous designers. Since 2004, a core element of this strategy has been to capitalise
primarily on the image of well-known designers, such as Roberto Cavalli and Jimmy Choo, through limited-edition
collaborations.
The first was ‘Karl Lagerfeld for H&M’. At launch, H&M encouraged the formation of long queues by providing breakfast and a
limited edition Lagerfeld T-shirt to the first 200 people queuing before each store opened – a clever trick to signify desirability.
This created value for the brand by delivering on its philosophy: ‘To bring [customers] fashion and quality at the best price.’
Margins went up and the brand became an established player in the arcane world of fashion, not just low-end clothing.
The main reason for success was that H&M managed to recreate key characteristics of high fashion, but on a global scale. Its
partnerships were with very desirable designers, who brought in legions of followers. It also made sure that key influencers
within the industry trusted the brand's ability to create desirable fashion items. Also, the limited editions gave a sense of
exclusivity to the product lines – a key attribute of the fashion industry.
Burberry is another great example of a fashion brand that managed to stretch upwards. After a massive loss of confidence
from its target market, it managed to get its iconic Haymarket check back on the catwalk. Formerly a quintessentially English
luxury brand, known for its classic designs and visual elements, the brand expanded into producing mass-market items in the
1970s. Though a financial success in the short term, this business strategy did not align with the brand strategy of offering an
exclusive fashion experience to the ‘old-money’ and fashion-forward sets. Selling cheaper items also enabled copycats to
reproduce fake Burberry items for sale on market stalls, which propelled the brand downward.
However, in the 2000s, the company successfully made the shift back upwards. From 2001, senior management signalled a
return to the brand's original business of producing classic English clothes. With this came a careful tweak to the brand's
visual identity, with the almost total removal of the sullied check pattern from its product lines, present instead in more subtle,
reinvented forms. This also made the design harder to copy and helped the brand to regain a sense of exclusivity.
Burberry also launched Prorsum, a luxury sub-brand designed by Christopher Bailey with core elements of the Burberry visual
identity, but with a modern twist that appealed to a younger target audience. The label became high-profile when it started
dressing more modern icons, such as Kate Moss, Emma Watson and Alexa Chung. As H&M had also understood, being
associated with trendsetters that appeal both to high-end fashion and the masses was crucial to ensuring high levels of
desirability.
These two examples from the world of fashion are particularly telling, since upward extension in fashion remains relatively
rare, in an industry much better known for ‘diffusion’ – as in the famous case of Armani's ‘Emporio’ line.
CONCLUSION
To conclude, a few home truths can be pointed from these brief case studies:
l
You should always make sure that the core perception of your brand is not a barrier to upwards extension
l
Always anticipate what the key demand drivers in the target market are, and how your brand is likely to perform against
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these drivers. If needs be, a longer-term strategy would be to shape overall brand perception before stretching upwards.
Chances are, moving too fast will diminish your brand equity.
l
Understanding and playing by the rules of the new segment is crucial, whether it involves understanding the role
emotions play in the luxury car segment, or the importance of style leaders in the fashion industry.
l
The sense of exclusivity is a crucial element that needs to be carefully managed. If a mass-market and higher-up subbrand coexist, there needs to be a clear visual or verbal identity element that justifies the price premium and protects the
exclusivity from excessive ‘bleed’ or interference from lower-end propositions.
FURTHER READING ON WARC.COM
SWOCC's Brand Extension Success Factors, Charlotte Blom, Brand Management Models, 2006
Brand Extension Evaluation Model, Whan Park, Sandra Milberg and Robert Lawson, Brand Management Models, 2006
Cross-Cultural Segmenting and Brand Extension. The Case of the Mercedes-Benz A-Class Launch, Esomar, Automotive
Marketing, Lausanne, March 1998
Risk! How to Win in the Game of Brand Extension, Helen Wing, Admap, November 2005, issue 466
ABOUT THE AUTHOR
Manfred Abraham, Rupert Faircliff, Carla Caprile, Ben Shaw, Sasha Sabapathy, Robert Pyrah and Anne Bertreau are
strategists at Interbrand London.
anne.bertreau@interbrand.com
© Copyright Warc 2011
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