by: Jennifer Rice
Friday's Wall Street Journal offers two examples of brands trying to stretch outside their traditional boundaries.
First, Wal-Mart plans to launch small-footprint stores in a response to Tesco's entrance into the US market. Two different concepts will be launched next year:
- Urban convenience stores stocked with groceries geared to more affluent tastes
- Stand-alone stores offering a variety of health services and products
Second, Samsonite is striving to play in the luxury-goods market by reinventing itself as a "sexy, high-end label." The brand has launched designer luggage and high-end men's shoes; sunglasses and stationary are in the works. They're looking to compete with the likes of Burberry and Coach.
So how far will a brand stretch? While there are no hard and fast rules, a basic guideline is to determine how closely aligned the extension is from current perceptions. Wal-Mart has built its brand on 'cheap.' The likelihood of successfully extending upwards towards "more affluent tastes" is dubious unless it disconnects the Wal-Mart name using a sub-brand. The Wal-Mart connection with healthcare has a much tighter association -- healthcare costs have spiraled out of control, and Wal-Mart is a very viable brand to bring affordable healthcare to lower-income segments. And by doing so, some (needed) positive brand equity can be generated for the master brand.
Samsonite is another story. By their own admission, "people still think of that hard, plastic suitcase when they think of Samsonite." It's associated with durable, not with style. Last year they acquired Lambertson Truex, a high-end leather-goods maker; IMO, it would have been an easier and less expensive proposition to position Truex as the high-end brand and keep Samsonite as the durable mass brand. That would give the company two distinct brands to appeal to two very distinct target audiences, and it would keep the aperture for revenue opportunities much wider. Repositioning Samsonite can be done if they create a cool enough product, but it will be challenging and I'm not sure it's the smartest move for the company. Time will tell.
Original post: http://brand.blogs.com/mantra/2007/08/how-far-will-a-.html
Jennifer: A nice post. Many of our clients have dealt with the problem of brand extension for years. We have studied the phenomenon and found the most curious to be Harley Davidson Wine Coolers, launched in the late eighties/early nineties. We find the key issues to be: 1. Will your target customer accept the extension (does it fit)? 2. Will a successful extension damage the mother brand's equity (What if the wine cooler had been a big success)? 3. Is the brand/company somehow truly advantaged (via lower costs or greater value)?
There's hope for 'brand-stretching' for Walmart and Samsonite. Remember, Nike started as a shoe company and became an entire fashion sector. Shoppers Drug Mart started as a small strip plaza pharmacy and is growing into the country's leading cosmetics retailer. General Motors started with coaches and buggies, and now makes its profits as a leading wholesale capital finance company. Rogers started with radios, then televison and now dominates the 'entertainment content' market. Virgin started with a record store and is now going into space. Coke was first a medicine, Aspirin for colds before saving heart attacks, IBM for the military before the general public, GE for lightbulbs before jet engines. The world is full of examples of successful brand stretching - but the extensions were not from greedily expanding market share in one category, but rather from carefully entering or inventing an entirely new category.