The era of the stand-alone brand is coming to a close, as more and more companies understand the value of linking brands together. While there’s valuable synergy to be found in brand portfolios, however, they face four dangers that single brands don’t—contagion, confusion, contradiction, and complexity.
CONTAGION, the first of the four, is the dark side of synergy. Just as customer loyalty can spread quickly through brand linkages, so can bad news. If one brand has a problem, depending on the strength of the ties between the brands, the rest of the portfolio can become infected. For example, a number of years ago 60 MINUTES aired a story on the Audi 5000’s tendency toward “sudden acceleration,” an untrue claim that spread like a forest fire through the media, the culture, and the courts. It ruined the reputation not only of the 5000, but of ALL the Audi models. It took years for Audi to restore luster to its brand.
By contrast, if the same fate were to befall Mini Cooper next year, its parent company BMW would suffer less damage. By building a separate brand for Mini, the company in effect has built a firewall between the two brands.
Thus, the choice between building a brand portfolio or stand-alone brand involves the trade-off between synergy and safety.
While CONFUSION isn’t as dramatic as contagion, it’s much more common. It happens when companies extend their brands past the boundaries their customers draw for them. I may love Crest toothpaste, but now that there are 17 varieties of Crest, I’m not sure what Crest means anymore. Rather than deal with my confusion, I may switch to Tom’s Natural. At least I know what Tom stands for. Customers want choice, but they really want it AMONG brands, not WITHIN brands.
Brand confusion can be avoided by understanding the trade-off between stickiness and stretchiness. Stickiness is a brand’s ability to own a distinct meaning in people’s minds. Stretchiness is its ability to extend its meaning without breaking.
For example, Dyson is closely identified with expensive, brightly colored, high-design vacuum cleaners. The brand has a high degree of stickiness in its subcategory. If Dyson were to add a line of expensive, brightly colored, high-design wristwatches, however, the brand could eventually forfeit its position in vacuum cleaners. Equally dangerous, if Dyson decided to stay with vacuum cleaners but market an inexpensive version alongside its original expensive version, the company would eventually find that its brand was defined by the low end, not the high end. The high end would then be vulnerable to a more focused competitor. Not only does stickiness limit stretchiness, but a downward stretch pulls perceived value down with it.
Of course, the temptation to stretch is nearly irresistible. Companies need to grow, and in the short term most brand extensions make money. In the long term, however, extensions can cripple a brand by confusing customers. Viewed through the lens of systems thinking, it would look like this: 1) the company needs revenue growth, 2) so it adds brand extensions, 3) which increase revenues in the short term, 4) but in the long term unfocus the brand, 5) which leads to decreased revenues, 6) which leads to a need for revenue growth, and around and down it goes. This is the brand-extension doom loop. The way to avoid it is through focus and long-term thinking.
CONTRADICTION can occur when a company tries to extend a brand globally. Since brands are defined by customers, not companies, customers in one culture may have a different view of a product or company than customers in another culture. The Disney brand, for example, may signify “wholesome entertainment” in one culture, “American entertainment” in another culture, and “cultural imperialism” in another. By extending its brand portfolio geographically, Disney risks cultural backlash from contradictory meanings.
One way to avoid contradiction is to build a separate brand for each culture, with a different name and a different set of associations for each. Another way is to focus a global brand on a common denominator. Hewlett-Packard’s “Invent” position allowed it to travel easily around the world without contradiction or cultural backlash.
The last danger is COMPLEXITY. As a brand portfolio grows, what began as a way to simplify the brand-building process often ends up complicating it. Multiple segments, multiple products, multiple extensions, different competitive sets, and complex distribution channels can easily create an overgrown, hard-to-manage, inefficient brand portfolio. While the human mind is better at addition than subtraction, subtraction is the key to building strong portfolios—pruning back brands and subbrands that don’t support your zag.
Managing a portfolio requires establishing clear roles, relationships, and boundaries for brands. It requires the sacrifice of lucrative revenue streams that unfocus the portfolio. And it requires a strong sense of what customers will allow the brand to be. “As provocative as it sounds,” said CEO Helmut Panke of BMW, “the biggest task in brand-building is being able to say ‘no.’”
Finally, the wine bar is ready to launch. The founders are confident about the clarity, direction, and market potential of their zag. While they still have many decisions to make, they now have a powerful decision-making tool to keep their brand aligned and their business profitable for many years to come.
Salud!
