“STRETCHING YOUR BRAND MUSCLES”

brandgym research results

September 2003

10 April 2023 2

About the researchThe research was carried out by the brandgym in April/May 2003. For the first time, a combination of research with both consumers and companies was used to better understand the issue of brand stretch:

- Consumer research: with a representative sample of 1000 UK consumers

- Company research: with over 60 marketing directors from leading companies including Unilever, P&G, SAB Miller, Vodafone, 6 Continents, Yahoo! and Cadbury Schweppes.

The results from the study give an insight into the brand extension strategies of leading companies. They also highlight areas where marketers are perhaps out of touch with the real attitudes of consumers regarding brand stretch.

Headlines1. Extension is a hot topic: over 80% of companies launching new products and services in the next 2-3 years plan to do

this by extending brands rather than creating new ones.

2. Extensions of existing brands are cheaper to launch, thanks to the trust these brands have built up with consumers.

3. Brands are stretching further than before, with companies planning to increase the use of market stretch and jump.

4. The failure rate of extensions is high at over 50%, with the main causes being lack of relevance and differentiation, plus poor product delivery versus the promises made.

5. The obsession with the image building potential of extensions is dangerous: focus should be on profitable growth through adding value for consumers.

CONSUMER PANEL

MARKETING DIRECTORS

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Likelihood of buying a new product or service (% UK consumers)

58%

3%

39%

More likely from abrand I know

More likely from a newbrand

Just as likely from abrand I know or newbrand

Source: the brandgym

1. The extension advantageA huge 83% of marketing directors see brand extension as the key way of launching new products and services in the next 2-3 years, compared with only 3% for new brand creation.

This focus on extending existing brands reflects a desire to leverage the positive equity built up through heavy and sustained brand investment. A strong brand cuts the cost of generating trial, as shown by almost 2/3 of UK consumers being more likely to buy a new product from a brand they know.

2. Elastic brandsNot only are more brands extending, the planned stretch is getting bigger. Range extension (flavours/formats) is still the main type of extension planned but companies are increasingly using market stretch into adjacent categories and market jumps into more distant categories, attracted by the success of brands such as Dove.

Type of extensions being launched

63%47%

26%37%

11% 16%

0%10%20%30%40%50%60%70%80%90%

100%

Past 3 years Next 3 years

Market jump

Market stretch

Range extension

It stretched from bars into adjacent categories such as shower and bath products, with a clear link to the core product. It subsequently jumped to more distant markets such as deodorant and shampoo. These extensions, coupled with international expansion, have trebled the brand’s sales to well over $1 billion in the last 10 years.

Source: the brandgym

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3. The sceptical consumerChange in consumer attitudes to brand stretch

0%

20%

40%

60%

80%

100%

Company view Consumer view

Lot more negative

Bit more negative

No change

Bit more positive

Lot more positive

Consumers are less convinced about the benefits of brand stretch than marketers think they are. When asked about changes in consumer attitudes to brand stretch over the last 5-10 years, marketing directors thought the overwhelming majority had become more positive.

However, in reality consumers are much more ambivalent. Although almost 1/3 were more positive, the majority were neutral. This may be explained by the many under-performing brand extensions that companies have launched in recent years.

4. The image building mirage Impact of positive product usage on rest of range

0% 20% 40% 60% 80%

No effect

More positive,but no morelikely to buy

More likely tobuy

Definitley wantto buy

Company viewConsumer view

Source: the brandgym

Source: the brandgym

The only extensions that do help build brand image are big, breakthrough ideas with real sales impact, such as Gillette’s Mach 3 and Apple’s iMac. In other words, the best way to build image is to build the business.

The success rate of extensions sucks, with up to 70% failing (Source: Ernst & Young). An obsession with brand image building is a key reason, leading to extensions that “fit” with the desired brand image, but fail to add value for consumers. In fact, the image effects of extensions are over-estimated by marketing directors, with consumers saying that many of them have no effect.

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5. Brand and deliverKey reasons for extension failure (Marketing Directors)

0% 10% 20% 30% 40% 50% 60% 70% 80%

Too expensive

Low distribution

Poor fit with brand image

Didn't deliver promise

Low newness

Low relevance

Veryimportant

There are clear learning for marketing teams from past failures. First and foremost, extension concepts needs to be more relevant and better differentiated. This sounds a no-brainer but is not always applied, as costly flops such as Bic Perfume, Cosmopolitan yoghurts and Crystal Pepsi show.

Source: the brandgym

In addition, brand extensions must be better at delivering what they promise, or pay the price. This is shown by the disappointing results of Nescafe’s Hot When You Want self-heating cans. Lukewarm coffee led to lacklustre sales and an early death.

6. Do fewer things, betterConsumer experience of a poorly performing extension has a negative impact on use of other products, an effect under-estimated by marketing directors.

Poor extensions also undermine the credibility of future brand stretch. easyJet’s low-frills business model has been less successful in credit cards, on-line price comparison and internet cafes. This may partly explain why consumers see the latest move into cinemas as a big stretch. In contrast, Dove’s successful shower, bath and deodorant launches means the new shampoo is now seen as a small step.

Consumer view of brand stretch (1=small, 3 = big)

1.35 2.44

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Consumer view Company view

Stop buying

Less likely to buy

Feel more negative, butcarry on buying

No effect

Source: the brandgym

Impact of using poor extension on rest of range

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7. Show me the money

Conclusion: Beyond brand fit to brand added valueTeams extending their brands need to go beyond brand fit and apply the concept of “brand added value”, with 4 key challenges:

- Focus on those areas where the brand is genuinely compelling and credible to maximise the chances of trial.

- Delivery of the promise through excellence of execution that drives re-purchase and brand loyalty.

Source: the brandgym

Techniques used (always or sometimes)

1. Qualitative research (100%)

2. Prototyping (93%)

3. Quantitative concept testing (83%)

4. Full scale quantitative potential test (70%)

5. Good results in another market (78%)

6. Country market test (54%)

7. Regional test market (28%)

Brandadded value

Vision

Ideas

Focus

Deliver

- Developing a clear vision of how the brand adds value to consumers’ lives. For example, Pampers helps keep babies healthy and happy so they can play, learn and develop. This inspired the brand to stretch from nappies into baby wipes and Kandoo training toilet tissue.

The past failure of many extensions may explain the problems marketing directors have in getting approval for their brand extension plans. 63% of those surveyed said this task was fairly or very difficult.

A combination of prototyping and qualitative research are the preferred techniques to help make the case for brand stretch plans, closely followed by quantitative concept testing. The increasingly international nature of branding is shown by high usage of good results in another market. For example, Mc Donald’s rolled out globally Deluxe Potatoes after initial success in Holland. In contrast, the classic regional test market seems a thing of the past.

- Insight from suppliers and other companies, not just consumers, as the catalyst for developing extension ideas, For example, the idea for Listerine Actives breath freshening strips, now a $100 million business, came from a team member seeing the product on sale by another company in Japan.

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About the brandgym The brandgym helps teams develop a compelling, clear brand vision and the action plan to turn this into growth. brandgym clients include Lever Faberge, Danone, Cadbury’s, Unilever Bestfoods and SAB Miller.

The company was founded in 2001 by David Taylor. He had previously worked in brand management with P&G and Sarah Lee, in addition to starting and growing to 45 people the Paris office of WPP consultancy Added Value.

The full results from this research are featured in David’s book, “Brand Stretch: Why 1 in 2 extensions fail and how to beat the odds”.

His other books, “The brandgym”, Brand Vision" and "Where's the Sausage?" have all Amazon’s best-selling branding book chart. He has also been published in Marketing, Market Leader, Brand Strategy and Marketing Business and was recently named by the CIM as one of the 50 leading marketing thinkers of today.

Contact:

e: david@thebrandgym.com

t: + 44 (0) 77 89 20 25 64

W: www.thebrandgym.com

Blog: www.brandgymblog.com