There’s a famous story about brand extension. It goes like this: when Steve Jobs returned to Apple as interim CEO in 1996, the company had chalked up a staggering $740m loss for Q1. Jobs’s first move was to cull 70% of the product line, which had even included printers.
His vision for the brand was far simpler; to reduce consumer confusion and create products to appeal to people who would be using them. He shifted Apple back to its core ethos of personal computers; two desktop computers and two portable devices, one of each aimed at professionals and one at consumers.
The four products targeted consumer needs: the brand talked about them clearly, helping consumers navigate a crowded marketplace. Not long after, Apple received a cash flow injection of $150 million from long-time rival Microsoft, ending the long-time tech cold war between the two giants.
Today, Apple’s range may have expanded a bit, but that 1996 decluttering gave it the bedrock from which to achieve gross profit of $153bn in 2021, a 45.62% increase from 2020.
The lesson is that when innovation is constantly additive, a product range proliferates to the point of consumer confusion. And this overwhelm of options has the potential to create friction, turning a simple transaction into a stressful and overcomplicated process, often resulting in no purchase at all.
Brand extension or dilution?
Although adding products might seem like a quick cost-effective way to increase profits, when that product comes under an existing brand umbrella, it risks shunting market share from the existing product to the new one without actually gaining new customers. Rather than increasing overall sales, a shift like this cannibalises and injures the existing product.
What’s more, range proliferation typically leads to overstretched marketers who spend less time on each brand. The risk is that cognitively stressed consumers will do the same, and the business suffers. But by reducing shoppers’ cognitive loads and making navigation really clear, brands can help their consumers navigate to the right product for them – and complete the purchase journey.
It’s equally true online, where shoppers want the same convenience they get in a shop, and vice versa. In fact, 41% of respondents in a survey by PayPal pointed to the disconnect between online and in-store shopping as one of the main moments of frustration in the commerce experience.
Counting the true cost of “quick-win” brand extensions
There’s another downside here, which is that land-grabbing of shelf or screen space through brand extension often shoulders out true innovation. Replacing real NPD with the quick win of limited editions can undermine the role of innovation across an organisation.
Over time, many FMCG brands have devalued themselves after popping out constant variations, which often caused confusion and failed to drive repeat purchase. Think Coca-Cola, which canned 200 underperforming beverage brands in 2020, including Diet Coke Lime and Cherry Coke. Extending the brand to protect shelf space means the consumer is confronted by a scary and unnecessary line-up of choices, and panic-buys whichever is cheapest. Long-term relationship and brand loyalty also becomes a casualty of range proliferation.
Tell the consumer what they need
One way to solve the problem, especially in already over-extended categories such as vitamins, is to literally tell the consumer what they need.
The acceleration of simple, easy-to-use home tests have potentially life-changing effects across multiple categories. In the UK, estimates say more than 60% of the population used home testing for Covid – a colossal increase from pre-pandemic. It’s a behavioural shift that opens a world of possibilities for helping consumers choose products more suited to them.
With authoritative testing, it would be possible to prescriptively inform individual customers what toothpaste best suits their needs, which foods to consume, and even what bedding they should choose for optimum sleep.
As shoppers get increasingly comfortable with the idea of home testing, it is already being used widely across the vitamin category. Direct-to-consumer brands like Numan offer at-home testing and create bespoke supplements based on the results, which are then delivered via subscription.
As markets become ever more flooded with range proliferation, brand extensions can lead to damaging dilution. In these leaner times, brands will need to lean into strategies like range-simplification, clearer signposting, and home-testing if they are to distill and intensify their power.
Cover image source: Viki Mohamad