Is growth always possible? In times of rapidly changing consumer behaviour, technological disruption and stagnating global economies, what can firms big and small do to encourage growth? One such device is brand extension, whereby existing high brand equity is used to market a new product in an adjacent segment.
On the Offensive
This approach can be developed by confident brands to foster innovation in unrelated markets. Perhaps the best-known example of this is Apple’s iPhone. The iPhone turned Apple into a serious attacker. As well as producing impressive results in its own right, these innovations can create a feedback loop that attaches new identity facets to the original brand. So, in the year of the first iPhone launch, Apple Mac computers also saw sales grow by over 15 per cent – over seven times the growth rate of the PC segment.
The key for incumbents in becoming attackers is to capitalise on strong brand equity and the distinctive perceptions of the brand in the mind of consumers. Without creating these through brand renovation and building them, and instead simply colonising an adjacent market segment, the brand cannot expect to bring innovation to the market.
What Does It Take?
There are three fundamental aspects that are key to becoming a successful attacker in new territory. Firstly is the necessity of a strong brand-customer relationship. Communication in relationships should be a two-way flow, so in this context, the brand should understand and even able to pre-empt the needs and desires of its customers.
Secondly, attackers need high levels of brand equity and trust, the creation of which companies such as http://www.blondideasgroup.com/ specialise in. Depending on the market segment in the brand’s sights, it may be possible to capitalise on a corresponding lack of trust towards the existing incumbents in that segment. An example of this is Virgin’s move into UK high street banking with Virgin Money after the 2008-9 financial crisis, positioning itself as untarnished by comparison to the high street banking heavyweights.
Lastly is the need to possess the capabilities and assets to make such an attack feasible. This could involve technical capabilities or cross-cultural understanding. Not every incumbent has what it takes, but for established businesses seeking a boost of growth, the strategy can certainly provide some food for thought.