[coauthored]Co-Authored with Mark Di Somma[/coauthored]
Every brand ever crafted is seeking to extend by both internal and external measures. Many are looking to go beyond what they are currently known for into categories, markets and channels that they believe will increase their presence, profits, awareness, trust and ultimately brand loyalty. But, expanding a brand is a more complex undertaking than many entrepreneurs concede. It requires a true three-point understanding of the brand’s positioning and architecture.
[subheading]First, understand your business motives and the ability to expand.[/subheading]
While there has been a proliferation of brands around the globe, only a few participate in sectors where organic growth means they are able to hit their growth targets. Most will at some stage need to look beyond the growth they get from just being in the sector if they want to meet their objectives. Deciding which expansion options to explore comes down to five key considerations:
- Growth in your sector
- Length of the business cycle (aka, the economic cycle)
- Direct and indirect factors affecting demand and profitability in the sector
- Regulatory barriers to entering the sector
- Current political environment’s impact on growth
These considerations along with consumer permission, competitive advantage and brand positioning, will help affirm specific sectors where the brand is likely to have the best expansion success moving forward.
[‘subheading]Second, understand your basis for expansion.[/subheading]
Once you have identified why you need to expand and perhaps the time frame you have to do so, the most important thing you must know is your brand’s expansion point — the pivotal idea that underpins the perception consumers have of the brand and that will act as the emotional connector for consumers as the brand travels from one sector to another. That idea must be simple and clear, but it must also have enough latitude to stretch where the brand wishes to go. It must be universal enough to be recognized and valued, and specific enough to be distinctive and sought after. If you have aspirations to take your brand places, nailing this is critical to success. Without a powerful expansion point to underpin where you are going, your growth plans risk creating confusion, lessening the brand’s value and eroding emotional connection.
In our LASSO model (lateral/logical, addictive, storied, scalable, own-able), described in Pete’s recently published book Expand, Grow, Thrive, we identify expansion potential as being either logical or lateral, depending on the nature of the brand’s expansion point. Brands with expansion points based on direct associations to what they do — where the brand’s identity intertwines with the product(s) — will find it hard to escape the trenches of their core category. Their best strategy in many cases is to pursue logical growth: rationally and efficiently growing their presence in the space they are known for via expansion mechanisms such as line extensions, vertical integration, franchising and/or merger and acquisition.
By contrast, brands that are more broadly affiliated with an idea, a ritual, a mythology or an aspiration, are more conducive to a wider range of lateral connections. These connections more easily enable them to expand into new areas and categories, pushing further away from their original sector in pursuit of additional opportunities and profits.
Consumers’ perceptions provide a clear understanding of the extent to which the brand can expand as well as where it can expand. Regardless of the opportunities that you may have identified, those opportunities only become real when “permission” from consumers is granted. Neither approach is better than the other. The reality is some brands are much more powerful when they stay close to home while others can more easily enter channels further away and begin to yield influence. Brands must carefully judge whether their transition into other categories will produce bewilderment or new meaning and revenues. The difficulty for many is that they see themselves as having one mandate while their customers may hold a different point of view.
[subheading]Finally, identify what you bring (not just what you want to sell).[subheading]
The final factor to consider is contribution. If you are looking to expand, what will your presence add to the sectors that you are looking to expand into? If your answer is more competition or because the time seems right (but may not stay right), that is no reason to be trying to grow deeper (through market penetration) and/or broader (through diversification). Expanding involves more than just being a “fad”; your brand needs staying power in the areas you are looking to move into. If the brand is considered a passing interest rather than a perennial refuge, failure is on the horizon. Furthermore, if the brand does not contribute something valuable to the new sector through association and expectation, then it frankly has no business being there.
Consumers will want to know the problem the brand is solving for them and why they should look to your brand to solve it. Your brand’s entrance into a market must “fit” with what consumers expect to see, but the brand also needs to be capable of achieving a competitive advantage in that sector. Expansions are not a license to go wherever a brand feels like going. Expanding into new categories should reinforce positioning while conjointly mirroring the perceptions of consumers. Entering sectors where the brand has a specific competitive advantage based on consumer perception creates a strong following and produces positive and potentially profitable associations within new categories that can then diversify revenue streams.
[subheading]Expand with care.[/subheading]
Brands are complex creations and deciphering why growth initiatives will work and whether they will work for you can still cause stress and consternation. Take your time to identify the extent of your growth potential based on your expansion point, and where the brand could enter a market based on its potential.