A business which has a brand that lives well in the mind of customers often has the intention to expand brand by launching a new brand or trying to join in a new field. Brand extension isn’t a new concept anymore to businesses; howerver considering this concept in practical business, there are still many interesting things that need to share.

Brand extension – indispensable trend?

After Zero Degree Green Tea launched to the market quite successfully, opening a huge market for natural soft drinks, Tan Hiep Phat Group continued to launch a new brand, Barley Tea Brand, etc. Similarly, after X-Men has got a big success in the market, ICP Corporation has launched a new product which is X-Men for Boss. Maybe Brand Expansion has become an indispensable trend of businesses?

The concept of Brand Extension is still thought mistakenly that is improving new products until now by many people. “Brand Extension” is understood simply as creating new brands or sub-brands based on the prestige basis of existing main brands. While new product development is just increasing product innovation on old product types and still using old brands. For example, when we make mention of Toyota, global consumers think that “this is a fuel-efficient car for people who have the average income. Thus, the luxury car market segment belongs to Mercedes-Benz or BMW. So, how does Toyota get the competition into this premium market, result in Lexus luxury cars appear without logo of Toyota. This is a typical example of a brand extension to attack another segment of the market.

As usual, a brand of a new business is launched and had success that means a new market is created. When this business evaluates the huge potential of this new market, it also means calculating a strong and long-term strategy to protect that market. At that time, many businesses thought of the strategy of “brand extension” to create one or more new brands to protect the market, in order to prevent the massive landing of potential opponents in the market.

Many brand owners have a misunderstanding that brand extension is an indispensable trend of development, so using in one or another way brought new brands to market. Brand extensions are not always true, sometimes we see that brand extensions are being applied by many businesses, like becoming a trend; however, this is not an indispensable trend, each business need to have a methodical brand strategy for business.

Failure to extend brands

In the years 2007 and 2008 when the real estate market was popular in Vietnam, we saw many corporations and companies (mining, electricity, petroleum, telecommunications, banking) expand the business of real estate, many new brands were born by adding the word “land” or “real” to the old brand. After over a year, these companies have bankruptcy procedures and give up the field to professional real estate companies.

In Vietnam, we also see the lack of long-term strategy expansion of brands of some consumption goods companies, and after initial success with shampoo brands, these companies decided to make fashion, soft drinks, fish sauce, etc. Thus, resources will be dispersed while the source of capital is not strong enough to support each of their children (new brands). Do not imitate Unilever, when we see that they have over 1700 products from detergents, toothpaste, soaps to cosmetics and teas with many different brands. Reconsider long-term brand strategy, consider investment resources (human, financial), consider the size and scale of the market to avoid unfortunate mistakes.

In the world, there are some stories of brand expansion failures. We can mention the big failure of the Harley Davidson Perfume, the famous motorcycle producer has tasted a bitter failure from the brand expansion campaign. Harley Davidson has offended loyal customers when their “masculine, strong” position has been influenced by the new fragrance type. Fortunately, Harley Davidson also realized the mistake and stopped producing perfume. Leading banana exporter Chiquita, used to suffer from excruciating pain when launching a frozen fruit juice product. This trial is a real disaster. According to Business Week, the failure cost Chiquita is over $ 30 million. In addition, the case of Ben-Gay, a brand familiar with massage oils, unplanned launching the cold medicine aspirin. Smith & Wesson, who is the number one expert in the US on pistols, unplanned lauching a mountain bike. Cosmopolitan which is giant magazines group launches yogurt for ladies. Pond is the famous skin cream producer, launched a toothpaste.

Many famous experts in the world such as Jack Trout and Al Ries believed that Brand strength is inversely proportional to Brand expansion and top brands should focus on one position in Customers’ mind. For example, when we mention to Pepsi, consumers think of “soft drinks”, KFC, consumers think “fast food”, BMW means “luxury car”. If Pepsi expands brand with the petroleum industry, KFC joins the telecommunications industry or BMW expands its brand to cosmetics, Jack Trout and Al Ries believe that they will definitely have make the end of this second market in a short time.

Brand extension is necessary; however, this problem should be considered because this is really a risky strategy. I it fails, it will not only lose a large investment, but also hurt the existing brand. When the brand extension is not suitable for the core brand, the business will also face many troubles, the new brand cannot utilize the existing potential of the core brand and thus will failure easily in business strategy.

Brand Extension – Necessary and Sufficient condition

It is true that in business there is no right or wrong, no specific process is suitable for all, the story of brand extension is the same. Sam Sung is a typical brand that is very successful in expanding the brand can be an example.

However, with the limited resources of most Vietnamese businesses, when deciding to expand the brand, it is necessary to pay attention to the following issues:

Considering the main brand location, launching a new brand must be considered to have a negative effect on an existing location or not. This is the first job. The key to a successful brand extension is to define the brand’s core values. In order to successfully implement this process, the brand owner needs to have specific, wise research, not impatient, hasty. The way of launching a perfume brand with the charming positioning of the fashion brand owner may be easy to accept to the market than the charming perfume of the motorcycle owner.

Defining a location strategy for a new brand, it is necessary to create a “new living area” in the minds of customers for a new brand, and of course this “new living area” does not coincide with the existing “old living area” which main brand brings. If these two brands are located in two different segments and support for each other which will become an advantage for new labels to come to the market. There are some cases which our business needs to launch a new brand to “fill” the great gaps created by our main brand, otherwise the good cake will fall into the opponents.

Preparing resources for the expansion strategy, sustaining a brand takes enough time and sufficient resources. This can be overwhelming for many small companies if they’re in hurry to expand. We have to choose the right time, until we can truly confidently feed a new brand. At present, there are many Vietnamese enterprises have too much on a plate and they many brands, but each brand lives weakly in the minds of customers. This image is like a large family but poor income, each child is not given thoughtful care.

Assessing the impact after expansion implementation, every business after deciding to expand the brand must always consider whether anything affects its core brand, how does the target customer evaluate to the core brand? The above information is collected to take timely action without losing the existing core brand image.

Finding out the target customer insight, this is a sufficient condition for brand expansion. All new products must be based on a real need of the customer. In the process of brand Expansion, if we are confident that we have enough financial and human resources, we should pay attention to the market problem. Many world-class companies sometimes make this mistake when launching new brands that seem to be easy, unexpectedly when discovering that there is actually no demand for this new product in the minds of customers.

In the world as well as in Vietnam, many businesses are very successful when expanding their brands, but there are also big failures to become memorable lesson of many brand owners. Business always includes risk or luck factors. The point is that every business has to be smart and have a clear understanding of ourselves to decide whether to expand the brand or not and when do we start this strategy. Huge market demand, brand expansion stories success or failure will continue to be interesting stories even if the concept is not new anymore.