Brand leveraging

THE benefits of a strong, recognisable brand go beyond just the immediate sales bonuses it brings to a company.

One way to increase the brand’s value comes through extending its use into other product lines.

When done well, this can be immensely successful.

Entrepreneur Sir Richard Branson has proved surprisingly successful by taking his Virgin brand into both the music and airline industries.

Caterpillar made the unusual, yet successful, move into clothing and The Frontier Touring Company, a roadie service for visiting musical and theatrical acts, spun off a similar clothing venture.

However, moves to extend the brand can also be extremely dangerous.

UWA school of marketing head Dick Mizerski said there were numerous examples of companies that had failed to successfully extend their brand into other product lines.

Besides being extremely successful with Virgin Airlines and Virgin Records, Sir Richard also had disastrous flirtations with Virgin Cola and Virgin Vodka.

Colgate made the less-than-successful move into bath soaps. This not only failed to draw customer attention, but also reduced its sales of toothpaste.

JDA managing director Julian Donaldson said if the extension did not add value to the brand, then a company should not do it.

“The brand has to retain the consistency of what it stands for in the market. The more you dilute that, the less successful it will be,” he said.

“People don’t tolerate being surprised or tricked by a leveraging that is not consistent with the reason that they entered into a relationship with the brand.”

Mr Donaldson said brand extension was not an area a company should enter into unless it had a strong understanding of what its brand values were and what the customer relationship was with that brand.

Right Marketing managing director David Kent said companies needed to look at the diversity of the markets in question.

“If the market types are close then you can have a generic brand,” he said.

“There has to be some synergy with the brand message.”

Mr Kent said a company could gain a broader market simply by spinning off another brand.

“For example, look at Bunnings with WA Salvage,” he said. “Wesfarmers has been able to create a broader market coverage without having competing customers.”

Coca Cola has taken a similar approach with its huge stable of drink offerings. Besides Coke and Diet-Coke – a direct extension of the Coke brand – it has the brands Sprite and Fanta, along with bottled water varieties competing for consumers’ tastes.

Another way companies can leverage a strong recognisable brand is through franchising. It’s one of the most successful ways to increase a company’s value through its brand and has worked successfully for companies such as Dome, Ultratune and McDonald’s.

Indeed, in a recent study of the world’s most valuable brands, McDonald’s was ranked eighth with a value of $US26.4 billion.

Former Franchising Council of Australia president John Groppoli said most franchises relied on two things to work – a strong business system and a strong brand.

p Next week: Defending the brand.

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