Tag Archives: Line extension

General

Virgin – The Extension Empire

Virgin has extended to more categories than any other company. Does it do any good for the company?

The Entrepreneur Magazine did in June 2012 a special on Richard Branson, the founder of Virgin. The article opened up with the following:

‘Fueled by frustration with the status quo, Richard Branson built his Virgin Group empire attacking verticals that had long been dominated by lumbering legacy companies. Now he’s extending his entrepreneurial philosophies to a new market that’s out of this world.’

The extension referred to is Virgin Galactic, which aims to take people and satellites into space at ‘a fraction of the price it currently costs’.

The Virgin brand started as the label for a record shop founded in the 1970s. Currently, it operates in an extreme amount of categories. Virgin uses the simple Brand + Descriptor naming structure. The below list of extensions is directly from the Virgin Group website.

Entertainment: Virgin Racing, Virgin Bet, Virgin Books, Virgin Casino, Virgin Fest, Virgin Games, Virgin Megastore, Virgin Radio, Virgin Records

Health & Wellness: Virgin Active in Australia, Italy, Singapore, South Africa, Thailand and UK, Virgin Care, Virgin Pulse, Virgin Pure

Money: Virgin Money

Technology: Virgin Connect Virgin Media & Media Business, Virgin Media Ireland, Virgin Mobile Canada, Chile, Colombia, Poland, Saudi Arabia, and the United Arab Emirates, Virgin telco

Travel & Leisure: Virgin Atlantic, Virgin Australia, Virgin Balloon Flights, Virgin Experience Days, Virgin Holidays, Virgin Hotels, Virgin Hyperloop, Virgin Limited Edition, Virgin Voyages, Virgin Wines UK, Australia, and the USA.

Space: Virgin Galactic, Virgin Orbit

People & Planet: Virgin Money Giving, Virgin Startup

With this enormous list of companies and categories, most people think the Virgin Empire must be doing exceptionally well. The reality is that the group reported a profit in 2019 of £60 million, up from £53 million in 2018.

Virgin proves that a healthy business with a narrowly focused brand and a dominant market share is much better than having 30+ extensions with very low market shares.

Portfolio

Mercedes-Benz Perfumes: wanna buy one?

Mercedes-Benz Perfumes was launched in 2012 as “the new star of the perfume world”. Ten years later, the product line is still around.  

The Mercedes-Benz Perfumes product line is according to Mercedes-Benz an obvious product range expansion because defined style and exquisite design are central to Mercedes-Benz as a leader within the design industry worldwide.

Design and style are not only essential ingredients for the world of luxury cars, it is a natural step to extend this expertise into other luxury categories.”

Creating luxury products beyond the cars has been a natural evolution, starting with Mercedes-Benz eyewear, leather accessories and other luxury goods. In recent years, the brand has naturally gained visibility and credibility in the most exciting, joyful and vibrant industry: fashion.

 

The Mercedes-Benz Perfumes are available for Him, Her and Home.  The parfum product line follows eyewear, leather accessories and other “luxury goods”.

The idea behind launching all these extensions is of course  that Mercedes-Benz owners would finally have an all-encompassing Mercedes-Benz lifestyle. Drink coffee in a Mercedes-Benz cup, spray some Mercedes-Benz perfume, leave home in a Mercedes-Benz Bodywarmer, drive in the Mercedes-Benz, call with an iPhone covered in a nice Mercedes-Benz cover and when it rains use the Mercedes-Benz umbrella. This is the Mercedes-Benz life.

The question is who is living the encompassing Mercedes-Benz brand life?  And who wants to live life like this?

Still the Instagram account of the Mercedes Benz Parfums has 46.8K followers, not a lot compared to the fashion brands. The Facebook page has 1.36M followers and almost the same amount of likes.

Mercedes-Benz in a tax free shop

I cannot help thinking that this conversation feels weird for anyone linking the brand Mercedes-Benz with cars “Hey want kind of perfume are you wearing?” “Mercedes-Benz”.

And the reaction to the above question is the key to success: when buyers have a strong connection with the Mercedes Benz brand as a car, it will be much harder to accept the brand in another category. When there is no strong connection, the brand can be accepted in parfums.  

An example of a brand like in the case of Caterpillar, the brand for tough equipment and shoes.

Most Cat work boots buyers are not Caterpillar equipment users. They might not even know at all that Caterpillar is heavy duty trucks. And when buyers somehow know that the brand has something to do with toughness then that is exactly the right connotation. On top of that: Caterpillar did something smart to distinct: in work boots the brand uses a different logo “Cat”.

Being successful in multiple categories with the same or similar brand is a careful balance of managing buyer perception. Usually this is easier and much more successful when the categories are perceived to be more distant, like in the Caterpillar case.

 

Brand Promise, Brand Strategy, Perception, Portfolio

Birkenstock – from “sandals and shoes” to “sleep systems” (Part II)

Birkenstock makes moves outside the perceptual category of “comfortable and stylish quality sandals and shoes”  

I discussed the Birkenstock Natural Skin Care line extension in the previous post. After sharing it on LinkedIn, I learned from Ruben Lekkerkerker that Birkenstock had already extended into sleep systems.  

To recap: Birkenstock is known for its quality sandals and shoes, and Google confirms its strong positioning. Yet the company wants to be known for: sandals, shoes, socks, bags, cosmetics (creams, cleansing, oils) and belts, mattresses, frames, beds, and pillows.

 

Birkenstock also saw the opportunity in sleep systems and connected the world of a Shoe with Sleeping. In their words:

“Taking a great idea one step further: Just like the original BIRKENSTOCK footbed, our anatomically designed sleep systems also adapt to the shape of your body. This enables our mattresses, slatted frames and beds to support and ease the strain on the human body in an ideal manner when lying – helping you sleep as comfortably as possible. Feel refreshed from tip to toe.”

If you think this sounds like any other sleeping systems brand, then you are right – it does. Great mattresses adapt to your body and all great sleeping systems help you sleep as comfortably as possible, so you can feel refreshed when it is time to wake up…   

The thinking inside the company must have something like this: we are known for our “anatomically shaped cork-latex footbed” – this is all about adapting. In which growing category can we extend this thinking? SLEEP SYSTEMS!

The question is: will consumers buy Sleep Systems from a high-quality shoe and sandal brand?

Turn it around, would people buy Shoes or Sandals from sleep systems brands like Tempur or Hästens because they have great nights of sleep?

I seriously doubt it.

The secondary problem with these many line extensions is that Birkenstock signals that they are not so serious about what the brand is known for: shoes and sandals. Shoes and sandals are now part of the many other things the brand does.

In other words: if you have to make a call on buying shoes and you can choose between a brand that is only designing, manufacturing and selling shoes or one that does shoes, skincare, bedding and more… which one would you pick? Most often, the specialist wins over the generalist.

The best path for Birkenstock would have been to do exactly what Google and Facebook recently did: sell products with different target audiences or purchase intensions under different brands. The product looks so great that it would be a shame if they do not succeed because of the position Birkenstock has in the mind of the buyer: Birkenstock = Shoe/Sandals.

Brand Promise, Brand Strategy, Perception, Portfolio

Birkenstock sandals and shoes going natural skin care

Birkenstock stands for comfortable and stylish quality sandals and shoes. With Birkenstock Natural Skin Care, the company moves into a new category. 

Birkenstock is known for its quality sandals and shoes, using the legendary footbed, providing support and comfort since 1774. A quick search on Google confirms the strong positioning.

The brand is moving in many directions. Its 1774 line is taking a position in the luxury sandals and show segment. Birkenstock joined forces with, for example, Maison Valentino, “Dior by Birkenstock” (reread the last three words again…), and other high-end brands.

At the same time, the brand is moving into a new category with “Birkenstock Natural Skin Care”

Birkenstock line extensions
Birkenstock line extension logos

 

While the 1774 product line is connects to the Birkenstock core, Natural Skin Care is an actual departure into a new category.

The product development team connected the world of sandals and shoes with skin care  using a cork cap on all-natural skin care products.

The question is: will consumers buy natural skin care products from a high-quality shoe and sandal brand?

Like any other professional company, Birkenstock has probably done all the research to answer the question with a firm Yes.

My experience is that consumers who purchase the core product are often asked whether they would buy the line extended products as well.

The answer is often Yes, simply because the people who were asked the question already like the core product. Never mix the intention to purchase with an actual purchase decision. People buying skin care products will do so in the context of the skin care category. Birkenstock competes with brands like SkinCeuticals, CeraVe, Kiehl’s, and Rituals. A tough one!

To answer whether Birkenstock Natural Skin Care will be a huge success inside the skincare category, we could turn the question around. Would Kiehl’s “Finest Apothecary Skincare” ever be a success as the finest shoe and sandal brand? I doubt it.

What Birkenstock could have done is to apply the Conquer strategy: growing a new brand in a new category. Using a new brand gives freedom to operate and grow into currently impossible areas. At the same time it is also easier to stop without harming the brand in the original category. The Birkenstock Natural Skin Care products look great on the paper – it would be a shame if they do not succeed because of the “wrong logo”.

Portfolio

Snickers Shake! Do the Flip test

I found this Snicker Shake image on my phone. I took this photo back in 2017 to keep it as a memory of yet one more failed line-extension.

It is quite amazing to see big brands falling for the line-extension trap. In The Only Book You Will Ever Need on Branding, we introduced a simple tool to check whether a brand extension makes sense. We called it the Flip Test.

If your brand and category are Snickers candy bars, and you want to see whether consumers could make the stretch and buy Snickers Shakes, then… flip it! Take an established brand in shakes, like Ripple, and extend it to your category of candy bars.

Then ask yourself… does this make sense? NO! So, in this case, the brand Snickers should not extend into Shakes.

One more…

Current: Red Bull energy drink
Extension: Red Bull Cola

Flip it!

Current: Pepsi cola drink
Extension: Pepsi energy drink

Does this make sense? No.
So Red Bull should not have extended into cola drinks.

Flip before you stretch your brand!

Brand Promise, Brand Strategy

Amazon.com: what happened to the promise of Earth’s Biggest?

Back in the days the promise of Amazon was “Earth’s biggest bookstore”. How easy to believe! Millions of books at a good price with a brand named after another earth’s biggest.

Remember?

Then Amazon moved on from just books to CDs/DVDs/Games. In my view all still very logic and Amazon executed the right strategy to stay “Earth’s Biggest” in these categories. How? By being The Biggest.

It did not stop there, Amazon expanded further, according to their website “today, Amazon offers everything from books and electronics to tennis rackets and diamond jewelry.” Still, this enormous expansion works. When living in New York City we “amazoned” pretty much everything. Amazon became “Earth’s Biggest Retailer“. This positioning was supported with help of “Amazon Prime”: free 2 day shipping for a yearly fixed fee that tremendously helped taking away the two headaches of internet shopping: delivery fees and delivery time.

At the moment Amazon has expanded even further. This time however the expansion goes beyond the Retail category. This expansion is where future problems for Amazon will come in.

 

The Amazon.com shopping experience is now split in “Digital” and “Physical”. In other words: the line extension split is made very explicit to consumers. Why will this not work in the long run?

Firstly, Amazon has expanded the brand from retail to digital media consumption. As we know expanding brands in new categories include a risk: consumers can get confused with your current position. Why risk it? Fast forward a couple of years and think about what consumers would answer to the question “What is Amazon in one word?”: is it web shopping, cloud storage, a sort of Netflix or still the best place to buy products online?

Secondly, this move endangers Amazons current positioning of Earths Biggest in physical goods, a position they should simply not give up!  There is plenty of competition that has a very reduced scope and focus, such as The Book Depository. Book Depository sells well… books (and only books) but differentiates with free worldwide shipping. Since we live in Finland it has become my number one go to book site. So Amazon will  need to improve in all the sub categories of the products they are selling to stay Earths Biggest.

Thirdly, in “Digital” goods Amazon is far from being Earths Biggest, and even if Amazon would be in terms of numbers they are not in consumer’s mind. In this space there is lots of existing and established competition.

The option I would have recommended to Amazon is to strongly consider launching a new brand, let’s say Everest. Amazon did it right with Kindle. Calling the current Kindle product the “Amazon reader” would have been a disaster. Think about it… would a consumer go to a shop to buy an Amazon? No, they wouldn’t, but they do go to the shop for a Kindle. And it pretty successful: Kindle is now synonymous with e-books/ digital reading.

Everest would on one hand be an part of Amazon, just like how Kindle and the Kindle Store are today. On the other hand on Everest.com would attract new customers who not necessarily would go to Amazon.com for digital media consumption. The “only” thing Amazon would need to make sure is that Everest.com would create a consumer need based on something new, not serving consumers the same or very similar stuff they can get with the established players.

General

Porsche Panamera – I wish Porsche would stick with 2 doors sports cars

panameraThere is no doubt about it: the Porsche Panamera is a great looking Porsche! It has all the beautiful Porsche design details and it looks way more part of the family than the Cayenne.

The Panamera advertisement in the newspaper reads:

Until now, you had to choose between a four-door car and a sports car. With the Panamera, the contradictions and compromises end.

And that was the moment I realized something was wrong! I would have hoped Porsche would just remained to be that 2 seat super sports car! If you would be interested in a 4 seat sports car you would after all compromise for a Mercedes CLS class or something similar. With wife (or husband) next to you and kids on the back seat there is not going to be so much sports as there would have been with a 911 or Boxter that you would drive alone.

Porsche is / was(?) the symbol for sports cars: in my mind 2 seat sports cars. No “sports” SUVs or four-door “sports” cars. There are not many SUVs and four door cars on a race track, for a reason… it’s not really sporty… So, surely, Porsche will make some serious money with the Cayenne and Panamera but the downside is that the Porsche brand imagine has changed in a blimp. It has gone from those desirable high performance sports cars to well…. all kinds of cars with a sporty feel to it.

What do you think? Right or wrong line extension?