Stretching a brand to the break point

Marketing: the extension of household names to new products offers a low-cost route to business growth but the strategy can backfire

BOTH Marks & Spencer, by selling knickers and pensions, and Virgin, with flights to New York and cans of cola, have seized opportunities for extending their brand names into new areas. But it is difficult to manage successfully. If you stretch a brand too far, the elastic can snap and the core value of the name becomes devalued - as some companies have found to their cost.

Brand extension has become fashionable in the past five years. During the recession, hard-pressed marketing directors in the food industry offered consumers more choice by adding new flavours, taking out fat or sugar, or moving from one tried and tested category, such as confectionery, to an allied one such as soft drinks. It was a low-risk strategy - it avoided the huge costs of new product development and offered variation on an existing purchase.

A new flavour or a move to an allied area such as Persil washing-up liquid or Mars ice-cream is technically not too difficult to achieve and does not require a leap of understanding by consumers who already recognise the brand's inherent qualities.

But some companies have expanded into new and often unexpected areas. Among them are tobacco companies, which - by moving into sectors such as luxury goods and clothing - keep their brand names in the mind of the public despite stringent regulations on advertising.

Dunhill was one of the first to recognise the power of its brand name, and has successfully built up a luxury goods empire. Marlboro and Camel are associated with clothing and even travel.

Laura Haynes, managing director of the branding specialist Beresfords, says: "If a company is looking at what it can do with its brands, it must identify what it is about the brand that makes it special - what are its core values? Can you move in a linear way? Cadbury, for example, could not use its name on frozen fish - it wouldn't work - but Porsche might be able to move into watches, because the name is synonymous with excellence and style."

She adds that Marks and Spencer's move into pensions is logical, because it already has its own charge card and "consumers trust the brand name. It is solid, safe and reliable."

However, there is a limit as to how far companies can stretch credibility. Paul Southgate, chief executive of Wickens Tutt Southgate, the brand consultants, says: "Some brands are more elastic than others - but you can only stretch it as far as the core values will allow before you start to devalue it."

Mr Southgate points to Pierre Cardin as a company that has overextended itself. It had been associated with luxury goods, and was considered up-market and aspirational, but now is seen as more mass-market, having put its name to almost everything from umbrellas to slippers.

Another example is Scottish knitwear company Pringle, which tried to move into luxury goods launching luggage, blazers and accessories almost two years ago. The company admits that it made a mistake and that it under- estimated the difficulties involved. It is now concentrating on its core product, pullovers.

As well as diluting the quality of the brand, inappropriate spin-offs can also cause another problem. David Adams, business development director of Tutssell's, the brands consultancy, says: "If a company broadens its product range, one of its biggest headaches is finding the budget to support it through marketing and advertising."

Perhaps the brand that is currently being stretched the most is Virgin. Last year, Richard Branson told the UK's leading marketers that Virgin was "more than a bearded brand in a sweater". The company has subsequently launched a cola, a vodka, and a personal equity plan. More products are believed to be in the pipeline.

But is Mr Branson pushing it too far? Mr Southgate thinks not: "The Virgin brand has more elasticity than most. If you accept that Virgin mirrors Branson, then he has a certain chutzpah - and that quality can be embodied in a number of products."

Although Mr Branson is confident of the power of the Virgin name, others companies are beginning to review the number of brand extensions they have in their product portfolios. Both HP and Golden Wonder are getting back to core brands. They are unlikely to be the last.