Is ‘radical brand stretching’ right for you?
“The Future of Brand Stretch: 5 burning questions to answer” is the provocative title of a white paper that popped into my in-box today, from a consultancy called Mash. It grabbed my attention as brand stretch is one of our 3 core services, and a subject that we’ve written a book on, here. The paper makes three key recommendations that I sum up as ‘radical brand stretching’:
- Brand stretch is no longer about new services or products, its about brand experiences and specifically ‘ecosystems’ of inter-related businesses
- Brand stretch an imperative not an option: every brand should be stretching, right now
- Brand stretching should be big and bold, with brands leaping into totally new categories. Brands that take a more cautious approach to brand stretch will decline and either be acquired or die
Below I look at each of these points in turn and what they might mean for your brand.
1. Should you explore brand ‘ecosystems’? YES
The central idea of the paper is about brand ‘ecosystems’, defined as “networks of businesses that make money in very different ways, but are united by a single brand.” This is a subject you should be considering, though its far from futuristic. I first posted on brand ecosystems seven years ago here, using the example of Apple’s iPad being part of an ecosystem including the Apple retail stores, the App store and the range of accessories sold by Apple and 3rd parties.
The best sort of ecosystems are where the brand stretch initiatives have a direct and positive impact on the core business, a point missing in the white paper. I posted on the example of Linked In here, where the stretch into online learning grows the core by enhancing the skill base of the people on the site, making them more attractive to employers looking to hire.
2. Is brand stretching is an imperative? NO
The paper suggests that you have no choice but to stretch your brand. For example, because Spotify owns ‘music’ in the minds of many Millennials, “getting into the concert business was a requirement, not an option“. Sorry, but I don’t see any reason that requires Spotify to get into the concert business? A better idea might be to focus first on how to become profitable in their core streaming business, where losses doubled in 2016 to 539 million euros, despite sales jumping 52% percent to 2.93 billion euros.
Sure, it’s a good idea to look at the broader set of needs your brand is meeting and highlight opportunities to stretch your brand beyond the core. But any brand stretch idea should be rigorously evaluated against other growth opportunities, including growing the core, based on two key criteria:
- Size of the prize: how big and profitable is the new opportunity, based on market size and the added value you can bring
- Ability to win: what core competences can you leverage (or build) to create a superior value proposition?
There are plenty of companies who can succeed by focusing on their core business. Radical innovation is cooler and sexier but growing the core is the best way to create sustainable, profitable growth according to 78% of marketing directors in our research. I posted here about how Tesco got back to growth by re-focusing on the core under new CEO Dave Lewis (see the green bit of the graph below). He sold off the multiple acquisitions made in an ill-fated spate of radical brand stretching, much like that proposed in the white paper (see the red area in the graph below). This saw Lewis’ predecessor, Phil Clarke, buy Giraffe restaurants, Harris + Hoole coffee shops, Dobbies garden and the Euphorium bakery. Tesco lacked the ‘ability to win’ in these new markets; its core competences were in making shopping easy, convenient and affordable, not delivering upmarket experiences to make Tesco a ‘retail destination’. An additional issue not addressed in the white paper is the risk of brand stretching distracting time, money and attention away from the core. In the case of Tesco, this happened at a time when it was under attack from the hard discounters. Like-for-like UK sales fell in 12 out of 16 quarters, culminating in a £6.4 billion loss in 2014/15.
Another example is innocent. They stretched their brand from being a smoothie business to also making veg pots. They struggled to make this new business profitable, and the brand stretch diverted attention from the core business as the recession hit and they got attacked by own label. innocent eventually sold off the veg pots to re-focus on their core drinks business, expanding into new drinks like cocoa water, as I posted here.
3. Should all brand stretching be big and bold? NO
“It’s not ‘are you stretching too far?’ it’s ‘are you stretching far enough?’“, suggests the white paper, urging brands to think radically. “Brand stretch used to stay close to the category. Today it’s about staying close to the consumer – and finding out where you need to be to be relevant to their lives.” My heart sunk when I saw that the example used to illustrate this no-holds-barred approach to brand stretching was that oldest of old chestnuts Virgin. “Virgin spanned disparate categories in their quest for growth, using its cult-like, Robin- Hood equity as its engine for stretch.”
In reality, the vast majority of Virgin brand extensions were flops, especially in product categories like cola, jeans and vodka, as I posted on here back in 2007. Why? because the majority of Virgin brand extensions lacked any real added value versus the incumbent leader. Virgin simply licensed their name to 3rd parties who ‘slapped’ the logo on a mediocre product. The few successful extension were in services including airlines (c. 50% of group turnover by itself), telcos and banking. These didn’t rely on emotional ‘sizzle’ alone, they backed this up with superior product ‘sausage’ in the shape of distinctive Virgin service.
The bit I took most issue with in the white paper is the scaremongering statement, “Brands who are cautious in how they stretch – who only venture to near-in spaces – are not brands that will live a long life. They’ll be devalued, or acquired, or otherwise made obsolete.” The vast majority of brands should be able to deliver profitable, sustainable growth with a selective approach to brand stretch, focused on those opportunities where i. they can add value and ii. they have the ability to win.
In conclusion, if you’re a ‘digital darling’ brand like Uber, Spotify or Snapchat, with billions of dollars from investors who don’t give a s**t about boring things like profit, then why go for some sexy stretching? Irrespective of whether you can make any money out it, you will grab some headlines and raise your profile, hopefully making your stock even more fashionable. However, if you are a business with shareholders where profit matters, then we recommend you ‘follow the money’: focus on your core business and what you do really well, stretching selectively and where possible ensuring these new ventures grow the core, rather than distracting from it. The following words from fast growing denim brand Hiut sums up this approach nicely:
We make jeans. That’s it. Nothing else. No distractions. Nothing to steal our focus. No kidding ourselves that we can be good at everything. No trying to conquer the whole world. We just do our best to conquer our bit of it. So each day we come in and make the best jeans we know how. Use the best quality denims. Cut them with an expert eye. And then let our ‘Grand Masters’ behind the sewing machines do the rest.
There is a great deal of satisfaction to be gained from making something well, of such superior quality that you know it is going to stand the test of time. It makes the hard work and the obsessing over each and every detail worth all the effort. That’s our reward. That’s why we stick to just making jeans. Yup, we just make jeans. That’s all folks.