Once any product oriented company is successful they start exploring strategies for further growth.
The next logical step many companies take is to create additional products. Marketing experts call this expanding the brand. Even though this is a common growth plan it does have some risks that should be considered. The main concern is that expanding the product line to quickly may cause damage to the established brand.
Expanding the brand quickly can give the company some short term growth but may also damage the brand in the long term.
A classic example of damaging a brand by expansion is provided by the big three American car manufacturers.
All of the manufacturers had a devoted following of customers who identified themselves by which brand of car they drove either Ford, Chevrolet or Chrysler. As they added more and more car models to their lines their customers started to identify with the models instead of the main brand.
This eventually saturated the market, weakened their brands, decreased each of their market shares and made room for more competitive manufacturers to enter the marketplace.
Expanding a brand does not always have bad consequences however. With the right market and competitive situations it can be a great way to increase sales and profits.
The trick is to know everything you can about the company’s customer. If they align themselves with the product, that is to say they identify with or are proud of being the company’s customer weakening the brand may not result in overall increased company performance.
Expanding a brand that was once exclusive due to price point or availability may drive away the segment of customer who valued this aspect of the product.
For example, if Mercedes Benz decided to pursue the economy car market and introduced a line of cars that could be purchased for less than $20,000 it would affect how their traditional customer viewed the company’s products. It would remove some of the exclusivity of the Mercedes Benz brand.
Should a company expand their brand? That answer is different for each company and market.