Successful brands tend to take on a life of their own. While a company is made up of employees, products, and processes, a brand is so much more than the sum of its parts. A brand embodies the persona of the company, its mission, and its reputation within the target market.
As your company grows, so will your brand’s ability to expand into new markets via new products or services. To pull this off, many companies utilize a sub-brand or brand extension strategy. Brands that do this include FedEx, Apple, Proctor and Gamble, Kellogg, and many more.
That said, making this kind of move can be tricky. Companies today face a number of challenges with the creation and development of new brands. Let’s break down how successful companies execute this kind of strategy, and how you can expand your own brand through a sub-brand or brand extension.
While a brand refresh or rebrand is meant to change or update the perception of the brand, a sub-brand or brand extension strategy aims to expand what the brand can offer to new and existing customers. Here’s a look at how each of these concepts work.
A sub-brand occurs when a parent brand creates a new brand with an independent identity. While they may present themselves as separate brands, the products offered by the sub-brand are often somewhat related to the parent brand. As a result, there may be some overlap with the original target audience. But this isn’t always the case. With this strategy, consumers may or may not be aware of a sub-brand’s connection to the parent brand.
For example, Proctor and Gamble (P&G) has multiple sub-brands of household products, such as Tide, Dawn, Febreeze, Crest, Head and Shoulders, Charmin, and so on. Each one has a unique visual identity, but captures a similar target market and serves a related purpose (household tasks). However, most consumers don’t know these brands are all owned by P&G. They make the purchase based on the sub-brand.
A brand extension occurs when a parent brand expands its products or services under the same brand name. While a sub-brand has a unique identity, a brand extension takes advantage of the existing brand’s equity and adheres to those guidelines. Because of this, consumers are almost always aware of the connection.
Coleman used this strategy to become one of the most well-known retailers of camping and outdoor related products. In the early 1900s, Coleman exclusively sold lanterns that became known for their durability and reliability. This was especially true in outdoor settings, including camping, but also sporting events and outdoor gatherings. The move to make sleeping bags, coolers, and other camping gear under the same Coleman brand name was somewhat of a risk, but it turned out to be a great decision. As a result, they were able to expand into all sorts of different camping product sub-markets. Today, people trust Coleman products to be reliable and durable for outdoor use — just like the original lanterns the brand was known for.
Creating one new sub-brand or brand extension is a big move. But if you can execute it successfully, the new structure can allow you to grow your business well beyond the original scope.
With that, it’s important to consider your new brand architecture, i.e. how your new brands will relate to the parent brand. While there are plenty of ways to think about this, the brand architecture style you choose should work with the goals of your brand expansion strategy. Here are the three most common architecture styles, used by many of the most successful companies around the world.
A branded house structure uses multiple brand extensions to leverage the equity of the parent brand. FedEx is a great example of this structure. The parent brand (FedEx Corporation) offers FedEx Express, FedEx Ground, FedEx Freight, etc.. You may also think of Apple and their brand extensions (Apple iPhone, Apple Watch, iPad, Macbook, etc.).
With this structure, the connection between the brand extensions and the parent brand is clear. The visual identity of each new product is often just a variation on the main brand identity. In some cases, it may not feel like these are separate brands at all, since they can’t stand on their own without the connection to the parent brand. However, the variations often serve unique submarkets or offer specific features that match customer preferences while still carrying the same trusted reputation as the parent brand.
In a house of brands structure, each sub-brand under the parent brand aims to capture a different submarket or sell a unique product. However, in this structure, none of the sub-brands carries the parent brand name. All have unique brand identities with no obvious connection to the parent company or to each other.
Block is a great example of a house of brands. While you may not have heard of this parent company, you may be familiar with their popular sub-brands Square and Cash App. Block also owns TBD and Spiral, both of which have unique visual identities and offer unique but related services.
You may also think of Unilever, who owns Dove, Lipton, Klondike, Axe, Vaseline, and much more. However, you may not have heard of Unilever at all if you’re a consumer of these products. Their brand identities are unique from one another and speak to different audiences.
In some cases, a house of brands may create artificial competition between their sub-brands that offer identical services or products. This usually happens when one company acquires a competitor but maintains it as a sub-brand. The consumer may view the two brands as competitors only because they are unaware of the parent company’s involvement. However, some companies want to capture two different target markets and may create multiple brands and products to serve those different customer types.
For example, Anheuser Busch (AB) owns many popular non-craft beer brands such as Budweiser, Bud Light, Michelob Ultra and Stella Artois. All of these aim to capture a more general consumer audience. However, they also own smaller “crafty” brands such as Goose Island, Golden Road, Elysian, and Devil’s Backbone, all aimed at capturing a segment of the craft brew market. Some of their customers may choose the craft sub-brands over the popular commercial brands because they believe they are supporting a smaller competitor brewery, and that’s the appeal. But in reality, they are all part of the same company.
Endorsed brands are independent sub-brands that take advantage of the parent company’s brand equity. While the brand may have its own identity in many ways, they are also “endorsed” by their parent brand.
In this structure, the connection to the parent brand is evident, but not overtly broadcasted. The sub-brand identity is the most prominent, but the parent brand name is often visible as well.
This allows the parent company to serve new sub-markets and offer new products to their existing customer base at the same time. In this structure, the parent brand works like a stamp of approval, endorsing the various sub-brands.
For example, Krave, Corn Pops, Frosted Flakes, and Apple Jacks (among many others) are all owned by Kellogg. If you look at the boxes, you’ll notice, while each cereal brand has a unique visual identity (and target market), they all feature the parent brand name in smaller print above the sub-brand name. This means that anyone already familiar with the Kellogg brand family is more likely to try a new product they endorse.
The same goes for Hilton, who owns Hampton, DoubleTree, Home2, and Embassy Suites. If you see these logos featured on signs or billboards, you will probably also see “by Hilton” printed nearby. This shows customers that the sub-brand is connected to or endorsed by a well-respected hospitality brand. Each one promises a slightly different hotel experience, but customers familiar with Hilton are more likely to trust that this new brand has the same quality standards.
While building an empire of products and services under one umbrella brand may seem like a foolproof strategy for building a company, it isn’t something you can do overnight. Any move like this is going to pose certain risks, and navigating the challenges inherent with any branding strategy takes careful thought and attention to detail. Here are a few challenges to look out for when expanding your brand.
During any phase of company growth, market share is always an important factor. But within established markets, market share can’t be created out of thin air — it has to be siphoned from the competition that has already captured that market.
However, if you create a new sub-brand that’s too similar to one you already own, you may unintentionally siphon market share from your own company. In other words, your new brand may simply attract some of your existing customers without attracting any new ones. While you may not lose money, you may waste a lot of time without making much of a profit.
Think about it: if you only take market share from an existing brand, you aren’t really gaining anything new. You may still earn the same profits from those sales, but consider how much it would cost to launch the new brand and how much you may not make from customers who are converting to the new product. That revenue doesn’t come in addition to what you already earn — they are simply displaced. At best, you may only break even if you end up cannibalizing your existing brand.
Launching a new brand is a lot of work, and if you don’t end up gaining new market share from your competitors, it may be a useless move.
In recent times, the financial pressure on companies and consumers alike is very real. It can be difficult to introduce a new product into a saturated market where potential customers don’t have a lot of extra money to take chances on new products. Customers want to make sure that purchases like this are going to be worth the investment, and sometimes even a well-executed strategy will fall flat because that market simply isn’t willing to take a chance.
It can also be hard to predict whether a new brand is a good fit within your existing structure. Leveraging your existing resources and brand equity to serve a new market can be tricky.
For example, when Cosmopolitan magazine decided to launch a brand extension into Yogurt products bearing the same name in 1999, the move probably made sense in theory. After all, health often goes hand in hand with beauty and fashion. Imagine a delicious, fruity treat that’s also healthy and low in calories. In theory, this could help you achieve the slim figures famously displayed on the covers of Cosmopolitan magazine. It was portrayed as light, fresh, and colorful like the beloved print publication. However, consumers didn’t see a clear enough connection. The yogurt market was already saturated enough by competitors that won out in the end, and the product was discontinued after 18 months due to low sales.
There are plenty of other examples of brand extensions and sub-branding efforts failing for the same reasons. Sometimes it’s poor execution, poor timing, or just not a good idea in the first place.
Any time you expand your brand, you are taking a risk. The moment a connection is made from one brand to another, the reputations of both (especially the original) are on the line. If you are leveraging the existing brand equity with a new brand, you are making a promise to those customers about what it can offer. If you fail to deliver the same level of quality with your new sub-brands or brand extensions, your brand equity could diminish overall. That’s why it’s important to make sure you have enough resources to maintain quality across all new brands.
In the same way, creating too many sub-brands or brand extensions may dilute the equity of your parent brand. Consider Virgin Group, the company that offers everything from banking to comic books, as well as energy drinks, mobile phones, hot-air balloon rides, and now space flight. While most of these brand extensions have been successful, this is exceedingly rare. Virgin Group has been fortunate in their ability to add unique value to a wide variety of industries simply in the way they do business. However, many companies that try to expand into so many different markets fail to maintain their original brand equity. If your company has a hand in too many markets without adding enough unique value to those markets, customers may stop associating your brand with anything at all.
If you are considering expanding your brand with new sub-brands or extensions, you may be on your way to a new stage of company growth. But how you execute your brand architecture strategy will determine much of your success.
Here are some things to keep in mind as you move forward with your branding journey:
In a house of brands structure, the connection between the sub-brand(s) and parent brand may not be obvious for consumers. In most cases, the parent brand simply functions as the legal entity (company) that owns and manages the sub-brands.
However, it’s still important to develop your parent brand for your direct customers. For instance, while Procter & Gamble is not a consumer-facing brand, they still have their own direct customers who distribute their sub-brands. As a result, they develop the P&G brand to speak to that specific market of distributors.
If your parent brand is more obviously connected to the rest of your structure, developing that brand is essential to your success. That brand equity filters down into the rest of your sub-brands or brand extensions, so it needs its own brand identity and guidelines to stand on.
Any time you choose to create a new brand, it needs to be a natural extension of your existing brand.
Ask yourself, “Does this fit with what customers expect of our parent brand?” and “Is our target audience going to go for this?” So much of this answer (if not all of it) depends on perception. The new brand should make sense with what the parent brand is known for.
Even if the quality of the new product or service is objectively good, your existing brand must have the reputation necessary to support the new brand. It must establish faith with the target market that this new product or service is going to work out.
For example, it's a little known fact that Coleman also tried to expand into making waffle irons, coffee percolators, and toasters. While these were good quality products, the brand’s reputation was already being developed in a different direction. During World War I, farmers were using Coleman lanterns (deemed necessary for wartime operations) for light when gathering wheat and corn rations for the allies. Because these other products were seen as household appliances, Coleman’s reputation for durable outdoor products did not allow them to compete in the same market with companies like Westinghouse or General Electric.
Similarly, imagine if FedEx decided to expand into the handbag industry. Although they are associated with packaging and carrying items, this reputation likely wouldn’t translate well into handbags. People associate handbags partly with convenience, but mostly with fashion. FedEx doesn’t exactly have a fashion-conscious brand, so it wouldn’t be a great move. On the other hand, FedEx is known for shipping, so expanding into freight and global trade networks makes sense for them.
Of course, your sub-brands and brand extensions should also be somewhat connected to the parent brand for practicality’s sake. If you don’t have the resources or experience necessary to serve this new market, it probably still won’t pan out.
If you are going to expand your brand, it’s important to make sure you have enough resources to take proper care of the new extension in the long term. It’s going to take a lot of resources to develop, test, and launch the new brand in the first place. Even so, it may not take on a life of its own for a long period of time, and you don’t want to spread yourself too thin.
This is another major reason for making sure your new brand captures new market share — it should start generating resources on its own after some time. Ideally, it will feed back into the entire structure so that everything thrives.
To gain a practical sense of what‘s actually going to work, you need to gather and analyze lots of data. Compile market research and sales projections that give you a clear estimation of how your target market may receive the new brand. Good market research will help you understand what already works with your current brand. It will also help you analyze the preferences, beliefs, fears, and style choices of your target market that you’ll need to account for when designing the new brand.
You don’t want to create a solution that’s searching for a problem. Whatever new brand you want to create, the product or service should make customers’ lives better or easier in some immediate way. Otherwise, you may encounter the same problem inherent in saturated markets — there won’t be any room for a new brand because the existing players are already solving the right problems.
If this is not executed properly, you may cannibalize your own brand or frustrate your customers with too much variety. Although each sub-brand or brand extension may accomplish a new function, trying to pick between several similar options can make each one less valuable to the customer.
With any sub-brand or brand extension strategy, there’s always the risk that it won’t work out. However, there’s also the potential for substantial reward. Companies have evolved into household names due to their ability to grow and expand into new markets. As this happens, the legacy of the brand itself has the potential to become iconic (especially if they provide excellent service across every industry).
The goal of this kind of expansion is to leverage the equity of your existing brand in ways that make sense with the mission of the company. To pull this off, you’ll need to gain a deep understanding of your target audience and design a brand that speaks to them from every angle.
That’s where we can help. At Fusion Media, our team looks at branding and design on a deeper level. We know that great design is essential to launching a successful brand, from the inception of the idea to the final launch and beyond. We design powerful brand identities, user experiences, digital marketing campaigns, and more essential assets that are truly in line with your company’s vision.
If you want help with designing and implementing your sub-brand or brand extension (or you just want to talk about your design ideas), get in touch with us. We’d love to help you design something great.
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