Brand Extensions for growth

Summary

This podcast episode featured two separate interviews. The first conversation was with Charles Nixon, who discussed the acceleration of automation in business, driven by the COVID-19 pandemic. He explored the benefits for productivity and resilience, as well as the negative impact of job displacement. The second interview was with Thomas McAlinden, who explained the marketing strategy of brand extensions. He defined key concepts like brand equity, detailed the different types of extensions, and used numerous real-world examples of both successful and failed attempts to illustrate his points.

Key Points

Charles Nixon on Automation:

The pandemic significantly accelerated existing automation trends, transforming the "marketplace" into a "market space" where consumers gained more control and convenience.
Businesses were increasingly adopting automation to boost productivity, become more economically viable, and reduce human input to build resilience against future disruptions like pandemics.
While automation led to job displacement, Nixon argued that this was a historical pattern and that new, potentially more meaningful, jobs would likely be created.
Automation was presented as a desirable tool for businesses to ensure 24/7 service and reduce interruptions caused by human factors.

Thomas McAlinden on Brand Extensions:

A brand extension was defined as the process of leveraging an established brand's equity to launch products in new categories, with the goal of capturing new market segments.
Brand equity, described as the value of a brand, was built through high brand awareness and strong, positive brand associations.
Brand extensions could be "vertical" (a new product in the same category, like Diet Coke) or "horizontal" (a new product in a different category, like Coca-Cola water), with vertical extensions being less risky.
The success of an extension often relied on the "fit hypothesis," which concerned the perceived similarity between the parent brand and the new product. However, a lack of fit could sometimes be overcome by an effective marketing mix.
Failed brand extensions, such as Colgate's beef lasagna, did not always cause long-term damage to the parent brand.
Thorough market research was identified as being of paramount importance to reduce risk and avoid failure when launching a brand extension.

Transcript

Transcripts are auto-generated.

Announcer (00:01):
The Cambridge Marketing Podcast with Kiran Kapur, brought to you by Cambridge Marketing College. See their range of courses and apprenticeships at marketingcollege.com.

Kiran Kapur, Host (00:13):
Hello, I'm Kiran Kapu and on this podcast I have two guests. First regular contributor, Charles Nixon on the increases in automation we're going to see next year. We'll discuss the positives and the negatives.

Charles Nixon (00:26):
Automation has a lot of benefits. It has a lot of downsides as well in terms of the people who are obviously displaced in terms of jobs.

Kiran Kapur, Host (00:34):
Then we're looking at brand extensions with tutor Thomas McAllinden, how they work, where they've worked, and one or two failures.

Thomas McAlinden, tutor (00:42):
Colgate, when I say that to you, you will think of toothpaste, but actually, they surprisingly launched a-

Kiran Kapur, Host (00:49):
Yep, that was a brand extension too far and you won't believe what it was. Find out in about five minutes.

Announcer (00:55):
The Cambridge Marketing Podcast from Cambridge Marketing College.

Kiran Kapur, Host (00:59):
We welcome back Charles Nixon, founder of the Cambridge Marketing College this week to talk about automation. Charles, this is quite a practical subject this week.

Charles Nixon (01:08):
Yes, it is. And I think it's one where a lot of our listeners will be able to view for themselves what they think the future may hold in their own industry, which they will know more than either you or I. But the issue is I think that because of the nature of the pandemic, we have become much more used to those accelerating trends that we've talked about in the past. Much of that has been through the use of either apps or putting more emphasis on the consumer to make decisions which were previously housed within the corporation or the sales side of the business. So a practical example we've mentioned before has been things like restaurants. They're now much more automated in the process of actually booking, getting your food delivered from a menu and indeed paying. They haven't gotten the whole hog. So the next stage, of course, will be for you to book your own table, the table that you want rather than the table they give you.

(02:17):
And this leads to a very interesting discussion because essentially speaking, what we're doing is we're changing what was a marketplace into a market space. We are as organisations displacing cost but as consumers gaining control and convenience. And it's a win-win for both organisation and consumer. And I suspect that what will happen as we go forward will be as more companies seek to become economically viable again, they will look to the ability to increase productivity through automation. And the other aspect I think is to reduce human input where possible because of fear of infection of any resurgence in viruses or a further pandemic. So automation has a lot of benefits, has a lot of downsides as well in terms of the people who are obviously displaced in terms of jobs, but that has always been the case with all automation and the likelihood is that new jobs will be found some of which will be much more productive and perhaps more meaningful.

Kiran Kapur, Host (03:37):
Because I mean, I actually bought my car in for a service last week. My small, very local garage suddenly has an online booking system, which was wonderful. Yeah. So which meant the only time I actually interacted with the garage where one was to drop my keys and the other was when they were telling me why it had been quite so expensive to put it right. And that you could see was a good use of their time as opposed to answering the phone, booking somebody in

Announcer (03:57):
And

Kiran Kapur, Host (03:57):
All of that side of it. On the other hand, guess you do lose that personal interaction. And haven't you ever got to the stage in an evening when you're booking a meal or actually in my case, when we could go, cinema tickets and they would say, "Yes, you can go and see the show at this time. Now which seats do you want? " You think, "Oh, for heaven's sake, just tell me. " Sometimes I think you need a buck button that just says, "Take the decision for me. "

Charles Nixon (04:21):
There is an element I suppose here where you could actually automate it and some of the cinema chains, historically speaking, would suggest that seats

(04:31):
That you might want. And this is where competitive advantage comes for companies versus their competitors. They need to understand the degree to which the customer wants to make the decision. And as you just said, the customer wants to say, "Oh for goodness say just this is a no brainer, just get it done approach." The automation is something that we've been used to creeping along. We've done it in terms of bookkeeping. Now you now have things like Quick or Intuit where people can create an invoice on their mobile phone and send it as soon as they've completed the work with all the bank details and the ability to pay there and then rather than having to wait a month for the bookkeeper to process the paperwork, which they may otherwise have been up several hours of the night trying to just keep up top of their finances.

(05:30):
We want more productivity because historically speaking, we know for the last decade that it's been a decline in rate of growth of productivity and this again may be something that the pandemic actually spurs in business as businesses reappraise what it is that customers actually value.

Kiran Kapur, Host (05:50):
Okay. So that was increasing productivity. I think you said there was another thing as well about automation.

Charles Nixon (05:55):
The other aspect is slightly downside in one respect is reducing human interaction because humans are one, prone to infection and two, obviously prone to getting tired. So automation does allow for the twenty four seven 365 world to maintain a level of ability to provide the same service all the way through. But the other aspect I think is that we will be wary for quite a few years, I think, of recurrence of the virus in its existing form. We've already heard yesterday of potential new variants, but something else coming along, which we will be hypersensitive to the problems that are likely to happen should we get another virus or any other illness that affects human beings. So from a corporation point of view, you actually do want to reduce to the points where you get the greatest value and you can protect your human assets and resources.

(07:04):
I think there is an element that automation becomes not required but is something that is desirable because you can reduce the potential interruption and resilience is going to be one of the fundamental aspects of the world going forward. There's a lot of stories about people who want to go to their local shops these days because those shops have continued to manage, whereas large corporations have been knocked sideways by the pandemic. So resilience becomes an important factor.

Kiran Kapur, Host (07:39):
Charles, thank you. That was a really interesting insight into automation and how we should think about automation as we move into the next phase of this strange world.

Charles Nixon (07:48):
A pleasure as always. Thank you, Kieran.

Announcer (07:50):
The Cambridge Marketing Podcast from Cambridge Marketing College, training marketing and PR professionals across the globe.

Kiran Kapur, Host (07:58):
My guest today is Thomas MacAlindon. Thomas describes himself as a pracademic, which I think is a wonderful word to describe. He actually practises what he preaches. So he teaches marketing, but also does marketing. Thomas, welcome to the show. I know one of the things you're very passionate about is brands and brand extensions. So, can we start with what a brand extension actually means?

Thomas McAlinden, tutor (08:25):
Yeah, of course. And thanks for having me on. A brand extension is quite simply where you take your own brand that you've got, and you try to capitalise and leverage it and to apply it onto different products so you can enter new product categories or classes, really. And it's really about making sure that you capitalise upon the equity of the original brand name. So in order to capture new market segments, that's really what brand extension ultimately is.

Kiran Kapur, Host (08:55):
So let's go back a stage because you talked about several things there. So you talked about brand equity. What's that?

Thomas McAlinden, tutor (09:01):
Brand equity is kind of the value of the brand. It's all brand managers and organisations that have respective brands are aiming to make sure that they improve brand equity. And what that ultimately means is equity is another word for value. The equity is derived from you as a brand manager or as a marketer, increasing brand awareness of your brand and thinking about what percentage of my target market know I exist. But secondly, with that, you need to also build strong positive brand associations so people think about your brand in a specific and also favourable light. By being able to do that and having that high brand awareness or increasing brand awareness and those positive, strong brand associations will help lead to your brand becoming known and obviously kind of sought after. And with it, we start talking about building this brand equity and as such, if we do are able to build such a strong brand, then what we can do is then leverage that equity because people are familiar with it, because people trust it, because it can also act as a risk reducer, that we can then take that brand name and put it on other products as it were for our organisation to then give that product a better chance of success in the marketplace.

Kiran Kapur, Host (10:27):
Can you give me an example of a company doing

Thomas McAlinden, tutor (10:30):
That? Yeah. Loads. You talk about Innocent has been one company that really has extended our brand massively, sometimes successfully, sometimes not. So when you think of Innocent, you think of smoothies. So yes, they do that, but they've also got a range of other smoothies that they've entered that they've also launched it aimed for kids, but also they've got different things like fruit juices and everything else that kind of really fits with that brand. But they've also veered, some would argue that went away two away from the core association, and they launched VegPots, which was unfortunately a failure for them. But there's a whole host of examples. Another one, and a particular favourite of mine is Levi Roots. I don't know if you can remember Levi Roots when he was on Dragons Den.

Kiran Kapur, Host (11:22):
You'll

Thomas McAlinden, tutor (11:22):
Have to remind me. Yeah. The reggae reggae sauce ma who was able to go on to there to get funding for his cooking sauce. Now what he's been able to do is build his brand around the kind of heritage and really the Jamaican flavours and everything else to go with it. And rather than just simply cooking sauces, you can go and Google this when you listen to this and you can see about the pasties, the crisps, the brand partnerships that he's been able to have with Bud's eye, drinks, pizzas, ready to cook meals. And he's been able to do that because he's been able to build such a strong brand, but then leverage that equity. And again, with the awareness and obviously the positive, strong brand associations.

Kiran Kapur, Host (12:08):
Okay. So brand extension is something that brands can consider doing. You associate Caterpillar with big yellow diggers, but they also do safety equipment because you need that on big yellow diggers and that sort of area. Is this something that enables a brand to grow? Is that the idea for it?

Thomas McAlinden, tutor (12:27):
Yeah. Brand extension is actually the dominant form of growth by organisations, and you can think about that or know that when you go away and start looking at organisations and how they have grown. The reason being, again, the research is kind of clear in this with regards to the rate of success of even new brands versus brand extensions. And again, there's a higher likelihood or higher failure rate as it were for new brands rather than a brand extension. So first and foremost, that's the kind of first reason why organisations use it. But also because again, remember we're leveraging the brand equity, it helps us quickly expand market share relatively quickly, but also and perhaps more crucially because consumers are aware of that brand, they're more willing to trust it. And with that by leveraging that brand on the obviously new product that we've launched, it can also assist in increasing consumer acceptance to enhance them actually taking buying this new product, but also enhancing its chances of success.

(13:39):
So it is used by organisations and is the dominant form of new product introduction.

Kiran Kapur, Host (13:47):
So this is something like Kellogg's a little while back moving from the fact that you always had Kellogg's cereal at home, but moving into breakfast on the go and their breakfast bars.

Thomas McAlinden, tutor (13:55):
Exactly. So when you think about brand extension, brand extension is not only just leveraging the brand equity to then end up on new kind of product categories or classes, but there's different types of brand extension and with that we can talk about it being vertical or horizontal. Now vertical brand extension is where we're using the same brand but extending that within the same category. So let me kind of sum that up what that is. So that's like Coca-Cola still remaining within carbonate soft drinks and extending the brand from Coca-Cola to Diet Coke That's still the same brand as it were in the same kind of product category. Horizontal brand extension is where we're taking the same brand, whether it would be Coca-Cola, which is in soft drinks just now, but get into something completely new. So let's say they decided to develop a Coca-Cola water, that would then be a horizontal brand extension and it's important to understand that there are the two different types vertical or line versus horizontal or category, but vertical brand extension is deemed to be the less risky, hence why it's chosen more often than not.

(15:09):
And again, just to remind you what that is, that's taking the same brand and launching a new product within the same category. There's less risk. It's more closely aligned with what you're known for, hence why it's being chosen. But the choice of method between those two are normally dependent upon how risk-averse the organisation is, but also how strong or the strength of brand equity and existing levels of brand awareness.

Kiran Kapur, Host (15:36):
Yes. I was in the supermarket yesterday, and I noticed that Tiptree, who do my favourite jams, have jumped from ... I mean, they do jams and they do marmalades and all sorts of other spreads. So that would be a vertical line, but they've also now jumped into fruit cocktails, which you can say a logic to, but that's presumably that's horizontal because they've gone into a totally different type of marketplace.

Thomas McAlinden, tutor (15:59):
And you start thinking about how they're able to do that and some would argue it relates to fit because there have been some brands that have really not done well like Colgate now surprisingly, many, many years ago when I first started this journey in marketing and especially focusing on brand Cate, when I say that to you, you will think of toothpaste, but actually they surprisingly launched a beef lasagna and that's not made up-

Kiran Kapur, Host (16:28):
Seriously?

Thomas McAlinden, tutor (16:29):
Yeah. You can go away and you can Google that and you can see how they try to move into food with Colgate. And again, this is something that we might pick up in today, but it's really about going no-go zones or some would argue about categorical fit. They're not alone. Cools is another one, a really interesting one, a beer brand that then launched a range of sparkle and water, which was a monumental failure. And again, there's arguments over what is known as the fit hypothesis really coming into play here.

Kiran Kapur, Host (17:03):
What's the fit hypothesis?

Thomas McAlinden, tutor (17:05):
The fit hypothesis is quite simply thinking about the perceived similarity as it were between that parent brand and obviously the category in which it's being applied with. So for instance, when we talk about Colgate, the immediate thing that comes to mind is toothpaste and toothpaste is so far removed from food as it were, that it makes it a bit difficult to make that kind of connection, which from a consumer's point of view, really starts thinking about has this reached or exceeded the perimeters of its brand extension. And Davidson in 1987, I think it was came up with something called the perimeters of brand extension talking about the further you move away from the core. Obviously the more risk it is, but the more difficult it is to make this a success and this really fits in nicely with the fit hypothesis. And this has been discussed and debated within the literature by numerous authors.

(18:08):
One that kind of comes to mind is Lahiri and Gupta in 2005 that study talking about that consumers are perhaps more likely to embrace a new product if there's deemed to be some degree of compatibility between the brand and the new category and that's been looked at and studied extensively. And again, a really interesting author by Cellar in 2003 or 2008, I think it was, had to look at the central role of fit as well and showcase that it can be, but what they also discovered is that it can be bypassed. Fit isn't the be all and end all. It's actually what we can do as marketers, i.e. Our use of the marketing mix can actually still make a success of some of these things, but there are occasions where these brands and what these brands are associated with, which we're trying to do and build brand equity can possibly make life difficult to try and extend into categories that are really unrelated to it.

(19:11):
And the Colgate and Beef Lasagna is a classic example of that.

Kiran Kapur, Host (19:15):
Yeah. I'm still struggling with the idea of Colgate lost to base by Sania. You'd expect it to be minty flavoured. You

Thomas McAlinden, tutor (19:20):
Just can't get

Kiran Kapur, Host (19:20):
That again.

Thomas McAlinden, tutor (19:21):
Exactly. Exactly.

Kiran Kapur, Host (19:23):
So are there any problems with extending? Could that actually ... If you're moving to Colgate and you do the Lasagna, can that actually affect the core original brand? Can it work?

Thomas McAlinden, tutor (19:34):
Well, those arguments fall against this. As I say, there's various authors in academics as well as even practitioners that espouse the difficulty of what happens if this brand extension fails, does it impact upon the parent brand? And some have said, actually it can indeed have a detrimental effect on it and inappropriate brand extensions can create damaging associations. Remember, that's what we're trying to build for our brand anyway, which may be difficult for a company to overcome. But I suppose I would then draw your attention back to Colgate with the toothpaste, but then moving into beef lasagna, that's not really impacted them. I think they're still the number one brand worldwide or thereabouts. Bick is another example where the guys that make the razor blades, and I think they've also make lighters, they actually created big pants in the past as well. And again, it's not really had that much of a negative impact upon them.

(20:38):
So the argument of whether a failure can impact upon the brand, there is some merit to it, but it doesn't always hold true with evidence. And again, last but by no means least, another favourite brand of mine is Virgin. Virgin and closely aligned to Richard Branson, they're very pro- risk and he has launched lots of stuff over the years like Virgin Cola, Virgin Brides or Virgin Weddings. I think Virgin Brides, I think it was selling wedding dresses and things. And even though he's had a good number of failures, it's not really impacted upon the core brand version as it were. And I suppose that then just brings up this argument that actually we can still extend. We just need to obviously do research and this is what's paramount importance, that we don't just do this because we think it might be a good idea. Everything needs to be based on data evidence and insight and finding out consumers' reactions and whatnot, which I would've loved to be in the research of focus groups when Colgate were doing their research on their Colgate beef lasagna, if they did do research.

Kiran Kapur, Host (21:52):
You do wonder how those conversations went. It's like the big boardroom. Yes, what we really need to do is we're going to a line of lingerie. How does that work? Exactly. I'm not sure there were some very good reasons. They've got some very bright minds working there, but it's very hard from the outside to look at it. So if you were thinking about brand extension, how can you avoid the failure? Would it be to go out and do the research?

Thomas McAlinden, tutor (22:12):
Well, research is of paramount importance, not only if you're just simply a marketer. I always bring back to something that Mark Ritson who writes for Marketing Week says, and if you truly are market oriented, you've got this focus on the customer and your goal is to obviously satisfy them, then you don't just do research, you depend upon it. And it's also the same case with regards to your brand, which obviously forms part of marketing. You are needing to make sure your brand becomes a success and because businesses are very risk averse in the most part, research is undertaken to try and reduce that risk and again, helps provide information which then aids good decision making. Therefore, in order to try and do that is to not only do research, but then also think about the perimeters of the brand extension. Is this too far away from the core association like Colgate and Beeflazania, which in a consumer and when they think about your brand, can they make that association between it?

(23:25):
But as Chen and Louis highlight to us that Brandfit does have a role as it were, but we as marketers and brand managers have got the marketing mix at the disposal and again, we are able to influence consumers from our effective utilisation of the marketing mix.

Kiran Kapur, Host (23:44):
Thomas, that was great. Thank you. That was a really interesting overview of using brand extension for growth. We talked beforehand, I did warn you I was going to ask you for an acronym. We have a sort of growing list of them. Can I ask you for something to add to our list?

Thomas McAlinden, tutor (24:00):
GTB, very simple. Growth through brand extension. It is the dominant form of growth for new product introduction. It's less risky than when creating new brands, but also you talk about less expensive and time consuming because creating a new brand is time consuming and we can leverage that brand equity. So GTB.

Kiran Kapur, Host (24:23):
Thomas, that was absolutely great. Thank you very much indeed for your time.

Thomas McAlinden, tutor (24:26):
No problem. Thank you very much for having me.

Announcer (24:29):
The Cambridge Marketing Podcast from Cambridge Marketing College, training marketing and PR professionals across the globe.

Kiran Kapur, Host (24:37):
That's it for this week's show. Next time we'll be looking at changes in the data protection laws post-Brexit.