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Brand Extension Strategy: Aaker v. Ries — Who is Right?

By Ray Baird

If you’re in branding, you’ll recognize the names Ries and Aaker: they’re bona fide authorities in the field. If you are new to branding and don’t know them (and even if you’re not, and you do) — we recommend getting familiar with their work — especially as it relates to strategic brand extensions. Brand extensions — more specifically, getting them right — is critical to the fate of your brand and your business.

But, before we get into looking at contrasting approaches to brand extensions and the trade-offs, let’s begin with a definition. Here is the definition via Investopedia:

Brand Extension Strategy: A common method of launching a new product by using an existing brand name on a new product in a different category. A company using brand extension hopes to leverage its existing customer base and brand loyalty to increase its profits with a new product offering. For brand extension to be successful, there usually must be some logical association between the original product and the new one. A weak or nonexistent association can result in brand dilution. Also, if a brand extension is unsuccessful, it can harm the parent brand.

It sounds straightforward — even simple — but, it’s not. The first questions are always: Do we use an existing brand or create a new one, built-to-purpose? If we decide to use an existing brand, does it require modification or can it be employed ‘as-is’? If we build a new brand, should it have some clear derivation from an existing brand or should it ‘break free’ and function in a highly autonomous way? It’s critical to grasp in advance all of the implications of these decisions and it requires a fair amount of strategic business analysis. Answers to these questions must obviously be decided on a case-by-case basis, drawing on considerations specific to each. That said, there are theoretical frameworks to address the broader issues. Enter Aaker and Ries …

Prophet Brand Strategy’s David Aaker holds a view in sharp contrast to that of author, Al Ries. In his work (I have especially in mind, FOCUS) you’ll find story after story, case after case (IBM, Xerox, and Westinghouse to name three), and industry after industry, demonstrating that brands must stay committed to their own brand context — to the original brand matrix out of which they arise — to remain relevant and keep from fraying. His belief centers on the concept of owning one idea. One word. One name. One brand…and one brand at a time. Pure and simple.

Ries takes the view that brand extensions are almost invariably dangerous, hardly ever work, and mostly weaken the parent brands from which they draw their equity. Ries demonstrates how a corporation can increase its competitiveness simply by narrowing its focus and spinning off divisions (or sub-branding products) that can dilute its strength.

By contrast, in his recent book, Brand Portfolio Strategy, and in a recent blog post, Aaker summarizes the reasons why brand extensions can be a good thing:

1. An extension can, in many cases, preserve brand equity rather than dilute it
2. An extension that is successful can even provide (‘lift’) energy, visibility, and new momentum, to a lagging core or master brand.
3. Customers are capable of having brand perceptions that are different in different product contexts (for example, brand perceptions of GE may differ in certain respects in the kitchen appliance category versus the aviation or capital categories, but NOT in ways that negatively impact the GE brand).
4. Product relevance should not be affected by an extension (that is, product’s performance and quality will be judged ‘on the merits’ and the fate of the brand will ultimately ride on that, rather than vice versa).
5. And, if there IS a risk to a given brand extension, you can simply develop a sub-brand instead, to provide a cushion of protection around the core brand.

Aaker also explores the above concepts further in a past BrandingBusiness™ radio show.

What we appear to have here are two ‘polarities’ in thinking about brand extensions. But are they really (or, are they only that)? Aren’t there zones of overlap? We’d say there are. Brand commitment and brand focus are clearly central to both perspectives. Brands should not re-position themselves wherever and whenever the (market) winds blow. We agree: looking and being fickle in branding, in an attempt to conform to every twitch in market fluctuations, is as foolhardy as it is in investing. Staying a course through storms pays off in the long haul.

To the extent that Aaaker stands for ‘all brand extensions are good’ and Ries for ‘all brand extensions are bad,’ then clearly we have a face-off. But the difference seems to be more about differing degrees of emphasis than mutual exclusivity. Aaker give us ‘an out’ with the option to sub-brand (and protect core, master brands), an approach not unlike Ries’ counsel to sub-brand and spin-off. Both of them respect relevance: how close in or far out is the product- or service-to-be-branded from the core offer? Is it a matter of business apples and oranges or Granny Smith and Gravenstein? There’s a difference between Nike going into the sports drink category or even a niche in apparel outside of athletic ware, versus acquiring a company that makes motherboard technology. And what is the projected success path of the new offer? Is it a game changer that meets an unmet or unanticipated need or is it an incremental improvement that lets you dial up performance a notch or three? What is the size and maturity of the new market it is an entré to? These are just some of the questions that need to be addressed to really answer the question — in any given scenario — between brand extension and sub-branding.

As to the central question of whether brand extensions are a good thing or a bad thing, we think the answer is: it depends. On a lot. We’d even go so far as to say that you can’t resort to a theory or an expert (however esteemed) for the ‘right’ answers. And there is probably always some level of risk attending ANY brand extension. It is a matter of degree. It’s a balancing act. And it’s almost invariably complex. Don’t go it alone. Let BrandingBusiness help.