Monthly Archives: February 2007

Every so often it happens that a new brand comes and shakes the existing players in the market to become the dominant player. But every ones in a while it happens that a big company goes for brand extension and shake the things for the preexisting market leader. I would say that this is a more astonishing scenario than being shaken up by a new entrant (it might not sound right, but please read on…) Reason being, when a newbie comes up with a killer product (or service), its product starts gaining market share and crosses the chasm before the big players even notice it. In normal cases the preexisting companies are so highly engaged in their own products and existing competition, that they give the new company a free run till it becomes worth their efforts. So by the time this newbie comes on the radar of these companies (and it comes only if it gets successful), it has already become a considerable player in the market. But on the other hand, when a company with well established base in some other market goes for brand extension, every move it makes is placed under high scrutiny by the market leaders. So the case of a free run doesn’t exist here. You won’t expect anyone to take any successful brand less seriously even for a single day. But then too they go for brand extension and disrupts the preexisting market leaders. Well that’s elephants doing brand extension “correctly”.

So how does this happen? They must be doing brand extension correctly (and I think we discussed this in some good details in my previous posts, so a re-run is not required here). Along with that, a few other things, that these companies already own, are of great help. First of all, a strong brand identity. That’s something invaluable and can be of immense help for this company to sell it’s product in the new market. For example, consider General Electric. GE has a strong brand recognition, so no matter which market they go, it helps them a lot.

Second important thing, which is in some ways a requirement for brand extension by big companies, is monetary muscles. These companies have a lot of investment capacity in the new markets. So they can stand the price wars and competitive challenges with a comparative ease as compared to the new start-ups. For example, Microsoft launching Xbox. Thanks to the deep-pockets, Microsoft was able to fend-off the competition from Sony PlayStation 2 and go for a successful brand extension in the video game market.

Now let’s talk about a couple of things that are required for the company to be successful during and after brand extension. The company got to plan ahead and be innovative. This is like a requirement because existing market leaders are going to race ahead. The existing market leaders are not going to stay idle (like they might if it was a small start-up). They are going to double their efforts to make sure they have the edge over the new big players entering the market. So in order to have successful brand extension, the new entrant will have to not only match the products provided by existing market leaders, but out innovate them, both in quality and price.

Another very important point, and probably the most important one, is to maintain the market leadership in their existing market. This company cannot afford to go loose in the market where they have a leadership position. This is the channel through which it is fueling the capital that is required for brand extension. This is the market from where it has cultivated a strong brand identity. And of course, there are always other companies that are planning to do brand extension in this market. So who says Elephants can’t go for successful brand extensions? They absolutely can, and when they get it right, it’s brand extension at its best!

Cult branding is the phenomenon of building a brand some people love, not a brand no one hates. If we talk about cult in general, we talk about an exclusive group with some particular beliefs and practices. These are the groups comprising of people who just love being part of it, and sometimes, or may be often times, are hated by the people outside of it. Based on the same concept, some companies started marketing their products to target a specific customer segment. When a company designs and markets its product with a very specific customer segment in mind, it ends up creating a social group, something like the cult. This group has customers who love and trust the brand, and have great loyalty towards it. Some famous companies that fall in this category are Apple, Harley Davidson, Ikea and Whole foods.

It totally makes sense when a company builds this cult brand and develops a group of loyal customers. The thing that fascinates me the most is how these cult brands every once in a while captures the mainstream market share. Some of them have become so much mainstream that we don’t even remember or notice that they were actually cult brands once upon a time.

So how do cult brands establish themselves in mainstream market? Here’s my take on it. A new product launched in any market by any company needs to reach a tipping point before it becomes mainstream. Initially, to start with, the company brands itself to gain attention of a certain demographic to which their product has the greatest appeal. These initial adopters of the product help the company, in terms of Geoffrey Moore, cross the chasm. They become the advocates of the product and ambassadors of the brand. This is where the marketing to the mainstream starts. The company broadens its target customer base to strike a broader segment. They get a lot of help from the cult members in this attempt. If the product has that mass appeal to the mainstream World, slowly the cult gets bigger and bigger and as the brand starts taking the mainstream position, the cult shapes itself as the mainstream market.

To support this argument with an example, I cannot think of a brand that explains it better than Apple Computers Inc. Apple has been historically a brand which was loved by a certain group of people who loved using the Apple branded computers with Mac operating systems on it. Apple came up with the same phenomenon of coupling up its proprietary hardware with software when it launched the Apple iPod. iPod worked only with Apple computers and was warmly received by the same people who loved the Apple computers. The cool look and feel of iPod soon started making buzz in the industry. After getting substantial product feedback and a loyal customer base, Apple launched the next version of iPod which could work on Windows powered computers as well. This was the first step Apple took to bring itself and the iPod product into the mainstream. The initial adopters of the brand helped Apple by making iPod a fashion symbol attracting more and more people towards it. Apple also launched iTunes that allowed people to download music one song at a time, revolutionizing the music industry. Next Apple came up with models of iPod to meet the requirement of an even bigger market, attracting everyone with an iPod for every budget. And the rest is all well known. Apple iPod holds more than 80% market share of the US hard drive-based music player market and iTunes has captured more that 70% share of all PC-based digital music download market. So a brand that started with a cult has now captured the mainstream market.

An important point to note here is that the iPod has a mass appeal. It is very important to notice this. Everything aside, a cult brand can only take on the mainstream competitors if it has that mass appeal. But if it does, it is better positioned than any other brand out there of the same strength to take on the mainstream market. Why? The answer is simple, and I think logical, its easier to convert a noticeable brand that some people love into a brand everyone loves as compared to a not noticeable brand that no one hates.