How do you extend a brand?

Published in LaZOOZ - Strategy, Marketing and Innovation Newsletter, Issue 79, By Ari Manor, CEO, ZOOZ

When you develop a brand, it's important to carefully define what business domain your brand is meant to represent, and the differentiation and added value that the brand offers. Coca Cola, for example, is a carbonated soft drink brand, and it offers "The Real / Original Coke". Similarly, Bituach Yashir [Direct Insurance] is an insurance brand, and it offers cheaper insurance (by circumventing agent commissions).

If Coca Cola would want to branch out to the snack food category, and if Bituach Yashir would want to offer savings plans, they would most probably develop new brands for this purpose. The reason is simple: The human brain is accustomed to categorizing and classifying things it encounters. Therefore, it also tends to associate brands to specific business domains and benefits. Once it becomes clear to customers what the brand represents (the business domain and benefit) - it's best not to tamper with the brand and blur our customers' perception of it.

For example - the Coca Cola brand already belongs to the soft drinks category, and it is very well known as the original cola beverage. Extending the Coca Cola brand to other domains (such as snack foods) will only be detrimental, and blur the brand's focus and differentiation. The Bituach Yashir brand already belongs to the insurance category, and it is very well known as cheaper insurance (no agents). However, the absence of an agent is less significant in the savings plan category since there are already numerous direct investment channels (online, for example).

Therefore, an attempt to encompass new business domains under the veteran brands is doomed to fail: the new business domain (such as snack foods or savings plans) may not succeed, and in addition, the actual brand (Coca Cola or Bituach Yashir) may be damaged and lose focus. So how can you stretch an existing brand, and leverage it to additional business domains?

One possibility is to stretch the brand to very similar categories that are a natural extension of the current domain. For example - Coca Cola can try to add carbonated cola beverages in other flavors (Cherry Coke, Diet Coke, etc.), and Bituach Yashir can add different types of insurance (house insurance, life insurance, etc.).

Another option is to stretch the benefit to additional business domains in which the benefit identified with the brand is highly relevant. For example - Bituach Yashir can operate in additional categories under the word Yashir [direct]: Direct Real Estate (without a real estate agent), Direct Investment (without a broker), Direct Holiday (without a travel agent), and so forth.

In order to be able to stretch the benefit that the brand represents to other business domains, the benefit needs to be very unique and compatible with a wide variety of business domains. The most successful, and virtually the only example of this, is the Virgin brand. This brand started out as a record store in London, which promised customers it would "break the rules for them". Richard Branson opened the first store in 1971 after previously selling records by mail order. In order to offer cut price records, he really tried to break the rules for his customers, and was even caught by British Customs in an attempt to smuggle records from France (where they were cheaper) to England... ".

The vision of Breaking the Rules for the Customers - offering them a better price and better service - characterized all the additional business domains that Richard Branson ventured into under the Virgin brand throughout the years. For example: 

• Virgin Records - a record label that was launched in 1973, which focused on the actual musicians instead of on the financial aspects of the record industry, offering them cool recording studios that really appealed to them
• Virgin Atlantic Airways - established in 1984. Richard Branson decided to enter the airline industry after he tried to reserve a flight to the United States over the phone and the British Airways call center was constantly busy. He concluded that there was a huge demand for these flights, and that he could provide better service than British Airways. The airline he founded, Virgin Atlantic Airways, offered transatlantic flights from England to the United States, with an improved Business Class and no First Class. This is how he competed with British Airway's monopoly with tremendous success.
• Virgin Direct - established in 1995, this was the first company in England to offer index-linked investment funds (ETFs), which later became Virgin Money (which provides a wide array of financial services and products).

   

  
  

  Sub-Brands in the Virgin Group

   

The Virgin Group strategy is to enter business domains in which the suppliers are complacent and do not offer their customers a good deal. This, coupled with "breaking the rules for the customer", enabled the Virgin brand to penetrate a wide variety of additional business domains, including book publishing (Virgin Books), gyms (Virgin Active), tourism (Virgin Holidays), cellular services (Virgin Mobile), and many more.

It should be noted that the Virgin brand was successfully extended to very different domains, yet it still failed in other domains. For example, Virgin Coke failed in penetrating the cola soft drink category since its competitors - Coca Cola and Pepsi - obstructed the distribution channels and doubled their marketing budgets to impede Virgin's penetration attempts. The suppliers in this category were not complacent at all, and therefore Virgin was unsuccessful in obtaining a significant market segment..

In summary: If your brand does not offer a benefit that spans various and diverse business domains, such as the Virgin brand's "breaking the rules for you", then you are probably better off developing new brands for new business domains, or extending your brand to encompass business domains that are very close to your current one. On the other hand, if you are developing a new brand and want it to be compatible with a wide variety of business domains, it's important that your brand offer a universal benefit that is not specific to the given business domain.