Do's & Don'ts of Stretching a Brand in a Down Market

Hooters Airlines. Harley cakes. And who can forget Maxim Haircolor?

Even in the best of times, the relationship between branding and innovation can be tricky. Generally speaking, they work together, with the brand strategy providing the ‘face’ of the business’s growth strategy. Brand strategy helps companies bring innovation to the market. Innovation returns the favor by enhancing brand reputation.

It sounds simple in theory, but in practice the partnership can be an uneasy one. The difficult choices imposed by hard times forces managers to confront the challenge of ‘brand stretch’ even more acutely. Balancing the need for brand focus with the need for innovation is the essence of the dilemma. Staying inside the confines of existing brand boundaries risks missing opportunities to meet emerging market needs. At the other extreme, stepping too far outside the brand’s comfort zone risks dilution of brand meaning -- the dreaded “everything-to-everyone syndrome”.

Every company aspires to a brand extension success, but at the same time they also fear the warning provided by brands that expanded too aggressively.

Among the many reasons for conflict between innovation and branding, two stand out:

• The goals of innovation and branding can be contradictory. Branding is about establishing trust through consistency; a brand is built by giving customers what they expect. Brands that change their messages too frequently, or extend too far into unrelated businesses risk confusing their customers and diluting their meaning. Innovation is about giving customers what they don’t expect. Innovation builds excitement and interest by delivering something new.

• Both innovation and branding demand resources. Unlike Apple and Virgin, most brands find it difficult to sustain a reputation for continuous innovation. Instead they build a brand by doing one or two things really well. For these brands a tension often exists between the desire to extend the brand beyond its expected horizons and maintaining brand focus. Innovation puts pressure on both branding budgets and brand architecture. Should the new brand be given a separate name, or sub-brand name? In our current economic climate, the answer to this question is likely to be “no”.

Finding and maintaining the right balance can be tough. It requires constant vigilance. As Lucas Conley pointed out in his book, “Obsessive Branding Disorder”, the branding path can be seductive. Innovation is difficult and doesn’t always line-up neatly with branding’s first commandment of ‘consistency’.

Our experience with firms that understand the need for balance, during good times as well as bad, is that they adhere to several best practices:

1. Don’t Take What Customers Say Too Literally. While carefully listening to the voice of the customer is key, it is even more important to reach into the mind of the customer, by looking for the motivations that underlie their behaviors and expressions. Good innovation decisions are unlikely to come from what consumers can articulate about their immediate rational needs. They are more likely to originate from their emotional desires or future needs. ‘Rear window syndrome’ can lead to preoccupation with solving today’s or even yesterday’s obvious problems and limits innovation to the incremental variety. When Apple introduced the iPod, Virgin launched Virgin Atlantic Airways and Amazon introduced the Kindle, these companies reached outside their existing brand competencies to address new markets and unfulfilled customer needs.

2. Don’t Be Overly Protective of the Brand: Fear of tarnishing brand reputation with customers, or employees and suppliers can suppress the desire to pursue ideas that promise to ‘stretch’ the brand. Most brands can stretch; the real question is whether it makes business sense, not whether stakeholders will accept it. ‘Brand stretch’ research can be misleading since customers are only able to answer questions based on what they already know. When marketers rely on customers to tell them whether a new offering can fit within their understanding of the brand, we again fail to see what is possible and limit ourselves to what is probable.

There are many examples of unlikely brand stretches that succeeded (at least from a market acceptance standpoint). BIC moved from pens to lighters to razors and Jeep from cars to strollers. We don’t know if Starbucks and Tide did ‘stretch’ research before moving their brands into new categories, or if they did what consumers thought of the ideas. If we had been working with them, we may have argued against the research, or at least against listening too closely to what consumers had to say about the ideas. Both companies no doubt already had ample evidence that the moves made business sense (licensing in the case of Starbucks, and superior product performance in the case of Tide-to-Go). Whether consumers would embrace the idea was probably a matter more of spending and awareness than brand ‘fit’.

3. Don’t Think of Brand Stretch as an All-or-Nothing Gamble: Sometimes we are reluctant to stretch the brand too far because we imagine a calamitous reaction from brand loyalists that permanently dilutes brand meaning, destroys our brand equity and erodes hard-earned market share. In fact, this risk can be managed through in-market experiments.

Best Buy’s expansion into musical instruments and music training provides a useful example. Recently, Best Buy announced it is opening six 2,500 square foot store-within-a-stores in South Florida. It is a stretch for Best Buy to deliver an artsy, high-touch service like music training, and they no doubt have research that suggests the market is unlikely to already believe that Best Buy can deliver high quality music instruction. Some of this is reality -- there is an internal capability gap that will need to be addressed. To Best Buy’s credit, though, they have decided to move forward. Whether or not this ‘innovation’ is ultimately successful will depend more on how much investment they make than any predetermined level of ‘brand fit’ or misfit. The key for Best Buy is that it is a relatively low risk experiment that will not broadly impact their national brand equity.

We have developed a simple grid for helping companies weigh the trade offs of stretching the brand or sticking to what the brand does best. To learn more, read our whitepaper, "Innovation and Branding in a Down Market". Note: This post was co-written with Brian Christian, Daso Innovation Consulting.