Elephants and Brand Extension

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!

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