Virgin, an ongoing fairytale?

Most companies fail when they cross their extension baundaries but Virgin doesn’t seem to have limited extension range. Richard Bransons companie has been able to interfere in a enormous variety of markets, using itss polyvalent brand name.

Virgin is a strong worldwide known brand but due to many extension activities, the company can’t spread any longer a single powerful message. Years ago, it had an attractive image as a rebel, a fresh companie which loved revolting monopolies and bureaucracy. Carried by it’s illustrious owner, Sir Richard Branson, Virgin started to participate in a wide range of activities. Personnally, I think it is quite dangerous of letting a company depend this heavily on its icon, especially when people can’t link the brand to a specific message anymore.  Furthermore, it’s worth pointing out that Virgin isn’t a market leader in any of its businesses and that it’s not an innovative company. Nowadays the company remains fresh in new markets, but over time, the new kid in town will become a worn out greybeard. Question is, will Virgin be able to remain a highflyer then?

Source: http://www.brandchannel.com/features_profile.asp?pr_id=215

Van Vooren Lennert

State of the economic system and brand extensions.

During the 1990’s, economy was growing strongly and global brands wanted to ride the coattails of that evolution. Companies saw great opportunities and wanted to make the most out of the positive economic climate. Therefore, brand extensions were a gift from heaven. Almost every single strong brand saw itself obliged to use their reputation/name to enter new departments of the market. This resulted in a situation in which extensions represented an astonishing 81% of all new products launched during the 1990’s. Furthermore, it’s worth mentioning that brand extensions aren’t always offensive moves. Sometimes, companies feel the need to take opportunities, just to outsmart the competition.

But times are changing and the economic downturn certainly doesn’t stimulate extensions. As a matter of fact, companies need to reduce costs in every possible way. Nowadays, it’s not uncommon that companies quit some of their extensions, despite of earlier made multi-million investments. In 2002 for example, Unilever decided to cease all extensions of Domestos, its household bleach product.

Source: http://goliath.ecnext.com/coms2/gi_0199-2688400/Fool-s-gold-for-marketers.html

Van Vooren Lennert


I fully agree on Alexandre’s opinion. I see a lot of brand extension failures as the result of incomplete information about the target audience. To me, investing in additional research to achieve a more realistic image of the aimed segment seems a necessity to succeed.

Why brand extensions fail

Numbers teach us that brand extensions often have the tendency to fail. A team of market researchers from Ernst & Young tried to find a decent explanation for this unfortunate phenomenon.

They managed to identify three key reasons: the new products lack a decent marketing support, they aren’t as distinctive as they should be and the most important reason of all: the products just aren’t good enough.

Companies and marketing directors rely too much on their brands. They assume that the product having a well-known name, makes up for a possible lack of quality. This lack of quality is usually the result of insufficient research and testing because they want to launch their new product on the market as fast as possible.

In these cases, the products show much higher purchase intention than new brands, but due to a possible disappointment caused by a quality difference compared to the mother brand, they will also have a higher risk to have ‘died’ before the end of their first year compared to launches with a new brand.

http://www.mrsa.com.au/print.cfm?i=1801&e=112

Bram Van Hijfte

Differences in acceptance of brand extensions

Obviously every person reacts on a different way to a brand extension, but scientists found some determining factors that characterize people that are open towards brand extensions.

The way people behave is influenced by our cultural back ground. Hispanics for example usually have a “connected-to-others self-view”. This means they are more sensible too what others feel and think. Experiments show that people with a connected-to-others self-view will be more open to accept brand extensions. They would be better at seeing the connection between the brand’s values and the extension. On the opposite, a person with an “independent self-view” will mostly be more critical towards an extension. Mostly men and Westerners are categorized as independent self-viewed. They often think more analytically, which makes it more difficult for them to accept a brand extension. So before a company launches its product, it should consider in what category their target audience is mainly situated in order to lower the chances that the connection will be overseen.

I think local research about the self-view is necessary. It would have saved BiC a lot of money and effort if they had known how people saw their perfume.

Source: http://www.brandingstrategyinsider.com/2008/06/how-far-can-a-b.html

Reaction to entry about Digibox: I totally agree. I think this market is too dominated by Telenet and Belgacom, which also makes it more expensive. 

Alexandre Van Laere

Digibox, because we have to

Both Telenet and Belgacom, Belgiums largest telecom providers make sure that every house in Belgium has one of their digiboxes. This wasn't always their core business, its is only because last several years technology has evolved and HD-televisions have become payable that they could extend their monopolies.
This extension was mostly possible due to their power on the Belgian market. They set datalimits and blocked several American tv-sites like hulu.com -where you can stream tv-shows. This way they block a lot of alternatives to make sure you buy all yout favorite programs via their digiboxes.

Personally, I can't stand the way both companies promote their products. I hate the fact they cut in my freedom while I pay more than enough compared to what is charged in other countries. And the most annoying thing of all, its either Belgacom or Telenet if you want tv or internet in belgium.

Source: http://cwafiles.org/speedmatters/state_reports_2009/CWA_Report_on_Internet_Speeds_2009.pdf?nocdn=1

Tom Van Raemdonck

Improving success in brand extensions.

First of all, it’s worth pointing out that there are is no such thing as a standard manual on how to achieve succes in brand extensions.

Nevertheless some characteristics should be considered. BIC, for example, applied it’s name a few years ago to women’s underwear. This action resulted in an epic fail, since customers were unable to link BIC pens and women’s underwear. BIC has been having some success in brand extensions, cfr. Cigarette lighters and safety razors, but with the women’s underwear, they certainly crossed their brand extension baundary line. Secondly, BIC had some additional difficulties since they were obliged to a completely new distribution network and production processes.  But brand extension isn’t an exact science, which is proved by Virgin. They were able to create success in completely different categories of products.

Crucial conditions for successful brand extension seem to be flexibility, exploiting existing resources, know your strenght and market.

Source: http://brandfailures.blogspot.com/2006/11/brand-extension-failures-bic-underwear.html


Van Vooren Lennert

Google on the path of extension

After introducing some great services, such as: Google Earth, Gmail, Google Chrome, it seems that the marketers at Google just can’t get enough of exploring new markets.

Recently, they announced a new, free, service for real-estate agents to publish their properties online. Managers at Rightmove, the leading online real-estate service in the UK, thought that Google wouldn’t be a real threat to them because they had the trust of the people. Nothing could be further from the truth, Rightmove’s stocks decreased in value by 10% in one day. This case shows the brand power Google has. I think Google has such a strong image because many people use Google on a daily basis and they are satisfied about the brand. I use Google Chrome because it is the fastest web browser and google.com is my homepage.

Google’s excellent quality gives them a head start with every new product they release. Nice marketing campaigns can affect much, but I think there is no better publicity than good quality.

Source: http://www.brandingstrategyinsider.com/2010/04/google-brand-continues-to-stretch.html

A reaction to Bram’s post about Budweiser: I think the sales of Budweiser beer will fall back if they withdraw the ‘regular’ Budweiser beer. People will buy alternative products because they will have forgotten that the Budweiser Select is actually a ‘higher class’ beer (and therefore more expensive). Maes also changed the recipe of their beer about a year ago, but I don’t think they made it more expensive. 


Alexandre Van Laere

When the most popular beer in the US becomes ordinary.

Brand extension can also be used to downgrade an established brand by upgrading line extensions.

Anheuser-Bush has applied this marketing strategy to it’s famous beer Budweiser. This is probably the most popular beer in the US, but was suddenly downgraded by it’s superior brother Budweiser Select. Budweiser Select claims having all the good things the normal Budweiser has, but with a lower calorie content. The more exclusive, and obviously more expensive, Budweiser Select is now sold next to the ordinary Budweiser, but methinks that this is only temporary.

I expect that sooner or later, maybe after Anheuser-Bush has launched another upgrade on the Budweiser Select, they will announce withdrawing the ordinary, high-calorie Budweiser from the market, as drinking the Budweiser select offers only advantages over drinking the ordinary version.

From that moment, the once so-called superior Budweiser Select, will be the ordinary Anheuser-Bush lager beer. But of course a more expensive one than it’s predecessor.

If this would be the case, brand extension would have been used to make the consumers pay more by obligating them to buy an, up to now, superior beer as if it was an ordinary one.

http://www.brandingstrategyinsider.com/2009/10/the-upgraded-brand-extension-threat.html#more

Bram Van Hijfte

When cars fly too high

Rolls-Royce is well know for their exclusive motor machines. If you're rich and you want to show it of, you buy a Rolls. But Rolls-Royce is also present in the air, since they deliver engines for the Airbus' great A380. But last week, one of their engines failed in mid-flight and the plane had to make an emergency-landing. No one was injured.

This is a good example that brand extensions do not always are that flawlessly. Rolls has been making cars for a while and has a good name. Unfortunately when their engines get airborne, they show some electrical flaws. They're allready replacing their engines for new ones, but due to this problem Airbus' built has been delayed.

I think this shows well that the good name of Rolls-Royce has benefited the brand extension. If another company, only specialized in aircraft engines, made this kind of mistake, it would be bankrupt.

Source: http://www.businessweek.com/news/2010-11-16/airbus-says-rolls-to-ship-engines-from-a380-factory.html

Tom Van Raemdonck

Cannibalizing or defending its market position?

As stated in previous entries, launching new products on totally different markets is not possible for every company. In addition, creating a new product for a similar market as your original products’ can also cause damage to the company.

This phenomenon is described with the term “cannibalization”. In case of cannibalization, the new product’s sales will rise, while the sales of the older ones will decrease. Hopefully the brand extension’s sales can compensate the losses in sales of the other products. I think Coca Cola could be used as an example of this. With the introduction of Coca Cola Zero, some Coca Cola consumers have switched to buying Coca Cola Zero instead, but I don’t think the total sales will have grown. The reason why Coca Cola may have carried through the extension was to limit the possibilities of competitors in its market. Brand extensions are often done because of sort like defensive grounds.

So extending your brand on a close market can be beneficiary, but only for defensive reasons.

Source: hh.diva-portal.org/smash/get/diva2:238026/FULLTEXT01

I agree with Bram on the blog entry about the range of brand extensions. I think the concept of BiC’s disposable phone is good, but the price should be lowered in order to distinct itself from other brands.

Alexandre Van Laere

The range of brand extension

There is a certain maximum range in product diversity which has to be respected to successfully extend your brand. The only difficulty is to determine this maximum range, since it will be different for every single brand.

The Virgin Group for example is a business conglomerate which offers over 200 different products or services, including: air travel, soft drinks, mobile phones and even financial services. By simply attaching  the name  “Virgin” to every product they market, they keep successfully expanding their product range. The main reason they can pull this off for every kind of new product, is because almost everybody knows that Virgin is a conglomerate, which means people won’t directly link Virgin to a specific product.

BiC on the other hand, is a company that is far-famed for it’s writing equipment. Even the BiC-logo pictures a man holding a huge pen. Nevertheless, BiC decided to expand their product range to lighters and shaving equipment. Consumers accepted this brand extension, since all products offered by BiC were qualitative disposables. Later, BiC launched a perfume, but this was a complete fiasco. People didn’t want to wear a perfume, which is considered a luxury good, that is linked directly to cheap disposables. BiC had crossed it’s maximum range in product diversity and paid the price. Nowadays, BiC is once more flirting with this maximum range, offering a cheap, basic mobile phone. I hope for BiC that this turns out to be a successful brand extension, but I personally wouldn’t even consider buying a BiC-phone, when brands like Nokia also offer basic phones in the same price range.

Recapitulatory, I wouldn't accept Alexandre's statement about wide product variety right away, but there certainly is a grain of truth in it.

http://www.bloomhead.com/KnowledgeBox_Jan07.pdf

Bram Van Hijfte

Brand extending: attractive, but not without risk.

Brand extension is probably one of the easiest ways for companies to successfully
launch a new product onto the market. Just give it the same name as an already existing
product, so consumers immediately associate both products.Thereby they will
ascribe the same qualities of the product they already know to the new one, before even having used it.

Essential for successfully pulling off this marketing strategy, is of course that the majority of the consumers feel positively towards the product which name will be used and preferably even choose this product over the competing brands’ alternatives.

If this is the case, brand extension is a cheap and easy way to give your new product a head start when launched onto the market. But, as always, there also is a catch: as the product range increases, so does the brand vulnerability. A flaw in one of the products, will affect public opinion towards the entire product range of the brand.

Brand extension has te potential to be a blessing but reckless extending of the brand, can turn it into a curse.

Bram Van Hijfte

Keeping the core business in mind

You wake up with your Sony alarm clock; at breakfast you have a bowl of Kellogg’s cereals, which you eat with delicious milk of Nestle (that you keep fresh in your Samsung refrigerator). Still being sleepy, you already got in touch with a lot of brands without realizing properly.

Most likely, the person in the example will buy Kellogg’s cornflakes again if he or she likes them. The brand gives the client a kind of certainty that the product they’re buying will fulfill their needs. That is why a company will try and expand its amount of product categories, which will all be sold under the same brand. Essentially to this is that companies should know how the clients see their products. To illustrate this: Harley Davidson, is it just a type of motorcycle or a way of living?

However, I think companies should try to hold their core business in mind. The differences between the products can’t be too big, otherwise the brand might lose some of its power.

Article: http://www.businessweek.com/magazine/content/06_32/b3996420.htm

Alexandre Van Laere