A New Brand World: From Amazon to Tesla — do brand and product extensions always work?

Model extensions work effectively as it’s simpler for companies to concentrate on simply the brand new product reasonably than face the prospect of making consciousness each for the model and product, as per business specialists.

Jeff Bezos, the world’s richest particular person with a web price of $187 billion, will journey to house in July as a part of the primary crewed flight by his house firm Blue Origin. Bezos shall be flying on New Shepard, the rocket ship made by Blue Origin, which the billionaire based within the 12 months 2000.

It’s been a unprecedented journey thus far for Bezos. In 1994, he created the net bookstore Amazon adopted by cloud computing platform Amazon Internet Companies in 2006. In Could, Amazon acquired Hollywood studio MGM, which is dwelling to the enduring James Bond franchise. That’s not all. Amazon at this time holds a serious stake in electrical automobile firm Rivian and owns grocery chain Complete Meals Market. In January, Amazon.com additionally introduced the acquisition of podcast startup Wondery, aiming to beef up non-musical content material on its Amazon Music app. Then, in fact, there may be Bezos’s house enterprise.

Tesla proprietor Elon Musk isn’t far behind both in the case of diversification. Not like many, in truth, Musk had an thrilling 2020—Tesla shares surged, he had a child boy and even launched Tesla Tequila. The lightning bolt-shaped bottle, launched in November 2020 within the US, was bought out inside hours of lift-off at an eye-watering worth of $250 per piece. Curiously, it began as a joke. On April Idiot’s Day in 2018, Musk had shared a photograph on Twitter of himself, holding an indication saying “Bankwupt!”. In subsequent tweets, he stated he was “handed out in opposition to a Tesla Mannequin 3” surrounded by “Teslaquilla” bottles. It wasn’t lengthy earlier than netizens began asking him to promote ‘Teslaquilla’, which he lastly launched final 12 months as Tesla Tequila. As per the model web site, it’s “an unique, small-batch premium 100% de agave tequila añejo”. Añejo tequilas are sometimes aged for one-three years in oak—Musk’s was aged for 15 months.

Bezos’s funding technique and Musk’s branching out from rockets and vehicles to tequila aren’t the primary examples of name diversification. Many entrepreneurs earlier than them have gone the model innovation and extension route. It’s simple to see why, because it not solely helps set up a model’s place in new classes, but in addition advantages the dad or mum model by making a higher sense of loyalty, reaffirming the model promise and client notion. It additionally sustains the dad or mum model’s relevance in its current class, say specialists.

Progress technique

Model extensions work effectively as it’s simpler for companies to concentrate on simply the brand new product reasonably than face the prospect of making consciousness each for the model and product, as per business specialists. “It’s an efficient model and enterprise development technique. However what’s most necessary is to arrange a optimistic outlook with the patron concerning the efficiency of name/product extensions,” says Mumbai-based Krishna Iyer, government vice-president of promoting agency MullenLowe Lintas Group. “A powerful retail focus primarily based on anticipated client demand helps mitigate the danger of failure. Product extensions have seen a justifiable share of failures, too, and so it requires cautious considering to determine the precise classes, in addition to the method to enter these classes. Think about a model of condoms known as Virgin. It’s a positioning catastrophe!”

Iyer cites a couple of examples of name extensions that labored effectively up to now. Despite the fact that the airline is at this time grounded, Kingfisher is an effective instance, he says, as its beer flew off the cabinets. Know-how large Google, too, has prolonged its model identify to most of its services. FMCG majors Unilever and Nestle comply with a hybrid mannequin of a number of manufacturers with completely different product extensions. ITC, initially a cigarette firm, has prolonged into classes like hospitality, FMCG and stationery, all unrelated and unimaginable for a model that began its journey with tobacco. Clearly, extensions needn’t essentially be born out of a product. Fratelli, a wine producer, lately diversified into cheese, launching a variety of flavours.

Mumbai-based Anjali Malthankar, nationwide technique director, Tonic Worldwide, a digital-first inventive company, says, “Historically, model extensions had been thought-about to be extra profitable than new model launches as these entailed much less danger and had been additionally cheaper, however instances have modified. Folks have a platform to voice their opinions and we’re seeing manufacturers wrestle to maintain even their fairness intact within the trolling world. This reduces the model’s will to experiment and face scrutiny for brand spanking new improvements. Nonetheless, we’re noticing model extensions for native and regional manufacturers, that are low-risk and largely triggered by wants equivalent to hygiene and cleansing throughout pandemic.”

Success tales

Some of the progressive examples of name diversification is the Michelin Star, one of many biggest honours a restaurant can obtain. It’s a star score that’s awarded as an indication {that a} restaurant has succeeded on the highest degree. The Michelin Information, thought-about the Bible of eating guides, could make or break tremendous eating institutions all over the world. However it’s the identical Michelin that manufactures tyres.

As per the model web site, Michelin tyre firm was established in 1889 by brothers André and Édouard Michelin in France. It was a time when driving was perceived as a novelty, with lower than 3,000 vehicles in all of France. Nonetheless, the brothers had been fast to recognise driving and mobility as an enduring pattern. To encourage extra street journey—and increase tyre gross sales—they determined to create a complete information e-book for motorists, which might catalogue inns, eating places, mechanics and gasoline stations. In 1900, the very first version of Michelin Information was printed and 35,000 copies got out without spending a dime. Immediately, greater than 30 million copies have been bought throughout the globe. It presently charges over 40,000 institutions in additional than 25 international locations throughout 4 continents. “From a picture standpoint, it actually has helped as a halo for a tyre model. As a result of tyres, in fact, aren’t the sexiest product,” Tony Fouladpour, Michelin North America’s director of company public relations, reportedly stated.

Different success tales of innovation embrace Dyson. It revolutionised the class of vacuum cleaners for greater than three a long time, however in 2019, forayed into desk lamps and different grooming merchandise. Ferrari, whose vehicles usually dominate world racing competitions, efficiently ventured into the theme park enterprise with Ferrari World Abu Dhabi in 2010.

Nonetheless, some model extensions can dilute the model. Take, as an example, Callaway, an American world sports activities gear model. It began by making premium golf golf equipment and later launched footwear, attire, golf equipment, umbrellas, watches, towels, and so on. All merchandise are designed for golfers, however have completely completely different engineering and building strategies that may dilute the model. Nonetheless, the pluses of name extension are greater than the minuses, opine specialists. “For model and product extensions, the professionals far outweigh the cons. Within the case of the previous, a model is seen to a wider viewers, rising its fairness and loyalty. For the latter, the model’s new merchandise have a better probability of acceptance, higher trials and elevated gross sales. Extensions are a CFO’s delight, serving to corporations scale back the price of new model growth, and optimising distribution, advertising and marketing and promoting bills,” says Iyer.

Then there may be Jaquar Group, which began by manufacturing taps in 1960. Over time, it included wellness options as effectively—whirlpools, bathe panels, steam cabins and spas—and lighting too. “We utilised our experience, legacy, manufacturing and distribution prowess to foray into the lighting enterprise method again in 2001,” says Sandeep Shukla, head, advertising and marketing and communications, world operations, Jaquar Group, including, “We felt that the gradual transfer in direction of LED was the precise one. It was a strategic enterprise resolution to progress from bathtub and sanitaryware to lighting options, a choice which reaped wealthy dividends for us because it was a well-researched and insight-based transfer.”

Pursuing innovation

Model extensions all over the world are created because of inspiration and innovation, and at this time, no sector is left untouched. Take, as an example, gin makers, who’ve up to now put their model identify on a field of candies and even a pair of socks.

Indian corporations and sectors are additionally pursuing innovation and gaining recognition. In 2020, Delhi-based Anand Virmani, founder and CEO, Nao Spirits & Drinks, introduced the primary model extension within the type of a limited-edition gin known as Juniper Bomb, an extension of one other variant known as Better Than. “The restrictions on promoting alcohol have led manufacturers during the last twenty years to create model extensions with the first motive of utilizing these as surrogates by means of which to advertise the mom model. Assume Bacardi Music CDs or McDowell’s Soda Water. Whereas the consequence is identical in each circumstances, the distinction is that surrogates are principally empty shells and nobody actually cares to promote or, for that matter, buys these merchandise,” says Virmani. “A perfect model extension is one which advantages not simply the dad or mum model, however can be a self-standing product in its personal proper. Each ought to complement one another, with the entire being higher than the sum of its elements,” says Virmani, including, “Better Than was the primary craft gin in a market that didn’t as but have a tradition for consuming gin. Our intention at that time was to create a strong base for a gin tradition. Now, having seen it take maintain, we wish to construct a brand new degree and get gin drinkers to experiment with completely different flavour profiles.”

If, nevertheless, there isn’t any understanding of the core values or manufacturers are simply attempting to increase into different classes, it’ll end in failure, say specialists. In 2002, cleaning soap and detergent main Nirma aimed toward various development avenues to scale back its dependence on the stagnating and extremely aggressive cleaning soap and detergent market by check advertising and marketing toothpaste and shampoo. It failed. Pond’s, too, suffered an analogous destiny in its preliminary years. “After a couple of hits and misses with toothpaste and deodorants within the early years, Pond’s took off when it targeted on skincare and wonder. It used its fairness in magnificence and skincare, and added gravitas with its premium portfolio by extending the goal group,” says Malthankar, who has been a part of the model’s ‘mass-to-class’ journey moreover working with different FMCG manufacturers like Clear & Clear, ITC Skincare, Go Air, Jo & Doycare soaps and Ferrero Rocher, amongst others.

“A model extension benefitting the dad or mum model is totally depending on the success of the extension,” says Malthankar, who’s engaged on a model that has entered a unique class—from automobile to attire. “When a model has a robust goal and perspective, it makes for a greater extension than a model that’s primarily based on the success of a specific product class. Good examples of robust goal are Reliance, which is understood for worth, and Tata for belief,” she says, citing examples of some current Tonic Worldwide initiatives equivalent to Glucon-D ImmunoVolt (immunity bites for youths), Nutralite Choco Unfold (a wholesome choco unfold) and lingerie model Enamor’s athleisure put on.

As per Shukla, extending a model outdoors its core product class might be helpful because it helps consider a model’s total relevance and attraction. “In our expertise of shifting gears, it labored to our benefit as the shoppers of our new product extension (lighting) had values and aspirations that synchronised and matched with our core enterprise… and the core promise of the brand new product embodied that of the model. Since Jaquar was already a well-established model identify, it elevated client curiosity and willingness to strive our new product. Therefore, our transfer was accepted by the market. Extending a model outdoors its core product class might be helpful because it helps consider a model’s total relevance and attraction. If the model enjoys nice belief and fairness, an extension that addresses a necessity hole out there can increase the model’s attraction and enterprise. Having stated that, the flip aspect can’t be ignored too. Model extensions in unrelated markets could result in lack of reliability and, if the transfer goes improper, the brand new product could generate implications that may hamper the picture of the core/authentic model,” he says.

Going forward what we’d like, Shukla says, are home-grown cutting-edge concepts. “We’ve an extended approach to go. India will actually take the highlight as a worldwide hub when actual innovation takes place on the again of cutting-edge concepts which can be home-grown and able to competing with nations just like the US, Germany and Japan,” he says.

A perfect model extension is one which advantages not simply the dad or mum model, however can be a self-standing product in its personal proper. Each ought to complement one another, with the entire being higher than the sum of its elements — Anand Virmani, founder & CEO, Nao Spirits & Drinks

When a model has a robust goal and perspective, it makes for a greater extension than a model that’s primarily based on the success of a specific product class — Anjali Malthankar, nationwide technique director, Tonic Worldwide, a digital-first inventive company