Brand extensions are a valuable tool, especially when they are well thought out.
As someone connected to the licensing business, the headline on a column in Advertising Age brought me up more than a bit short: "Slowly But Surely, Line Extensions Will Take Your Brand Off Course." The author was well-known longtime marketing and branding guru Al Ries. Even allowing for the "Columnist In Desperate Search of A Provocative Idea" syndrome—a state of mind with which I'm all too well acquainted—that headline struck me as an overly sweeping, if not totally misguided, indictment of a basic consumer products technique in which licensing often plays a starring role.
It turns out that the headline overstated Ries' point. His idea centers on extensions that remain in a brand's core category. His specific example was the introduction of Bud Light (and later, Bud Light Lime) as an offshoot of the muscular Budweiser brand. The advent of Bud Light may have opened a new segment and demographic group to Bud and generated healthy sales in its first few years, he says, but ultimately it has led to the watering down of the Bud identity and weakened the parent Budweiser brand. Sales of the parent brand, he points out, have plunged nearly 50 percent in the past two decades. (You may or may not agree with the cause-and-effect relationship he's constructed.)
At best, Ries' thesis certainly has its limits. Jeff Greenhouse, president of marketing and brand development agency Singularity Design, points out in an online response to the column that "there's no law that says a large, leading brand will maintain that position. In fact, the more likely scenario is a Golden Age followed by a decline as the world changes and the large, heavily-rooted company doesn't." More important to licensing professionals, though, is Greenhouse's next point. "I'm just saying that brand extension isn't necessarily bad; you just have to make sure that the extension fits the profile and personality of the successful brand you've already built.
"For a few examples, I'd offer up Jell-O extending from gelatin into pudding, Hershey's extending the Reese's brand from peanut butter cups to Reese's Pieces (and then licensing it for Reese's Puffs), and Ralph Lauren extending from clothing into fragrance. In each case, the extension was a natural fit to the existing market, rather than an attempt to stretch and capture a different demographic."
Though we are reminded every day that there are no absolutes in marketing and branding, the vast majority of successful licensed brand extensions would seem to follow Greenhouse's description—finding new merchandise and service areas that make sense for the existing demographic. The diversity of licensed brand extensions that have come onto the market in just the past couple of years is exceptional in its breadth and execution. A brief handful include such products as: Crayola children's cameras and electronics; Jeep strollers; Stanley work gloves and ladders; Food Network cookware; Milk Bone pet accessories; Mr. Clean mops and brooms; Champion fitness equipment; Michelin automotive accessories; TGI Fridays frozen appetizers; and Burger King snack foods.
As in much of the rest of the licensing business, market conditions in the corporate trademark and brand segment are more challenging than at any time in recent memory. Brand owners are more methodical and slower to pull the trigger on deals, and both they and retailers are testing products and programs more than ever before.
Retailers themselves have put increasing emphasis behind their private brand/private label programs, raising the barrier that even the most worthy product carrying a licensed brand needs to surmount to get into the store and in front of the consumer. That's partly a function of the consumer concentrating more on price and value during tough times. It's also partly a result of major retailers having improved their own direct-sourcing capabilities over the past two decades or so.
A major question is whether the private label momentum will continue once the economy starts improving. In some cases, it likely will. A few retailers have built legitimate, sophisticated brands that will be continue to be able to perform next to, and instead of, national and licensed brands. In other cases, though, when a private label stumbles, retailers will likely decide that their real expertise is as retailers, not brand builders, and more shelf space will open up.
Marty Brochstein Senior vice president of industry relations and information, International Licensing Industry Merchandisers' Association