The secret to brands living forever

It’s feeling quite gloomy on the British high street. The Christmas boom is over and late January tends to be the time when the effects of recessionary consumers and increased competition takes its toll on formerly big brands that discover they are unable to carry on.

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So far, three big trees have fallen in the retail forest. First was photographic retailer Jessops, which was founded in Leicester in 1935 and has a long and proud history of being Britain’s leading photographic specialist. The second chain to enter administration was entertainment retailer HMV. Its landmark store on London’s Oxford Street was opened in 1921 by Edward Elgar. The third was completed barely 48 hours later when Blockbuster’s 528-strong British operation brought in the receivers.

What can we conclude from these fatalities? We might assume that they had reached the natural end of the road. After all, there would appear to be limited growth opportunities for companies that offer photographic services, CD sales and video rental. All three are, to use the strategic term for it, knackered.

You can make a strategic argument that there was little the management teams could have done to prevent failure. After all, when the fundamental product or service you offer becomes redundant what else can you do except fail?

I’m amazed that Jessops even made it into the 21st century let alone 2013. And any company that is still associated with the image of an old dog listening to a gramophone should probably have been expecting the worst too.

But all that assumes that what these companies were selling was a commodity service that became defunct. But this is simply not true. All three businesses might now be bankrupt and fading icons, but that was not always the case. Each brand was once not only commercially successful, it also enjoyed big brand equity among the British population.

Unfortunately, they all chose to leverage that brand equity solely within the category they were based and not into new ones through brand extension. HMV stayed in music retailing and rode that wave beautifully for almost a century until it disappeared into the digital sand. Jessops remained focused on cameras while Blockbuster kept renting movies.

At some point the original reason for a brand’s creation and its core business usually become threatened and eventually obsolete. The older the brand, the more likely this threat becomes. Brand extension, however, provides the proverbial promise of eternal youth. Big brand awareness and distinct brand associations will always offer many opportunities to diversify into new categories that can complement or supersede a brand’s original category.

Take Halfords for example. Founded in 1892, it’s older than the three brands about to exit the high street. Its origin as an ironmonger is also a more challenging starting point. But the difference is that Halfords used its brand and strong customer relationships to open up new lines of business that were unconnected to its origins but directly applicable to its strong brand equity: bikes, automotive, DIY. The brand is healthy, modern and growing.

Imagine the challenge of being a 200-year-old locksmith from Winchester in the digital age. Chinese competition and advances in security have made your business entirely untenable. And yet Chubb remains a strong and profitable brand. The fact that it now make most of its profits from diversifications like security alarms and fire extinguishers, speaks to the ability to diversify into new, rejuvenating businesses.

Nokia would be long gone if it was still making paper. The same is true if Sony had remained focused on transistor radios. And Apple would be struggling to exist if it was making printed circuit boards. Brand extension is the eternal gift that brand equity gives an organisation, provided those in charge are smart enough to realise that diversification should always be considered while the brand is at its zenith and full of cash.

HMV, Jessops and Blockbuster had opportunities to not only survive but prosper into the 2020s through brand extension. When we talk about this as marketers, too often we look at the approach as a way of adding minor new revenue streams to existing business. But the reality, when viewed from a much longer perspective, is that brand equity is perhaps the greatest of all the advantages of building brands.

If we can build brand equity, we enjoy a multitude of advantages. Price premium, brand loyalty, increased advocacy, improved marketing efficiencies - the list is long and attractive. But at the top should be brand extension because it’s rare to find a business more than 75 years old, still doing well, that has not only diversified but is making most of its profits from those diversifications rather than its original core.

That is the true advantage of brand extension and the real tragedy of Jessops, HMV and Blockbuster. Their current businesses are defunct, but their brands could have lived forever.

Readers' comments (11)

  • the avatar of brand extension has to be Virgin

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  • Dinger makes a sound point, but alas virgin are not the best case study for brand extension. They have certainly done a lot if it, but that's not the benchmark for success if most of their extensions (90%) have been failures. Any brand that extended itself into cola was clearly bonkers.

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  • HMV did try to diversify into concert venues, ticket retail and technology but I think by that time their brand equity was in decline. How Blockbuster got beaten to the punch by LoveFilm and Netflix is beyond me, they were caught with their pants down by two up-starts in an industry they had dominated for decades.

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  • Good piece. probably one of the best diversities are the supermarkets who branch into any market with margin (FS, Electricals, Delivery to Home, Online access, Broadband...the list goes on. The key though is trust in the brand that their customers have.

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  • I think all three brands tried to diversify. They just did it too late. That's the key point of the article - extend while times are good and brand and budget are at max.

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  • "You can make a strategic argument that there was little the management teams could have done to prevent failure. After all, when the fundamental product or service you offer becomes redundant what else can you do except fail?" - I challenge you, Mr Ritson. It's exactly lousy management that "contributed" to the these companies' compacency and subsequent failure. An organisation's core products/service/competencies/assets is indeed the fundamental responsibility of management. That's called corporate strategy, i.e. where to compete and how to succeed.

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  • I agree, management too shortsighted to see the changing horizons of their industries. Key to HMV's problem was they chose to ignore changing technologies and refused to move online until it was too late. Poor decisions cost them their organisation.

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  • Blockbuster probably got beaten to the digital streaming market by Netflix and Lovefilm because at the time they should have been investing in the new technology they would have regarded it as cannibalising the market they dominated. Fearful of destroying their successful model they waited. I agree with Mark's point: when the going is good, start work on the next brand extension, before it is needed.

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  • I think that it was a lack of management vision that has caused the collapse of many of these previously major brands. The internet has been around for years and we have all seen the rise of sites such as Amazon, Argos, Comet and others should have seen this and realised they were ahead of the game and should be joining the party with massive product offerings and next day deliveries. Instead they waited until it was too late and in the world of the internet, playing catchup is exceptionally difficult. The supermakets have also played a part, with their huge buying power they have focussed on just about every sector, selected the top sellers and then bought in mass in order to undercut their competition and become one stop shops for just about any key product line. A recession now again does not do any harm it sorts the wheat from the chaff an the recession we face has done just that, however there are some major brands which are only existing still because the banks can't afford to let them go under - simply look at the holiday industry as a perfect example.

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  • Fair challenge Dmitry!

    But in your definition of corporate strategy - where to compete and how to succeed - you leave the gap open to whether this is within the category or without.

    And that's the point I am trying to make in the article. I do not think any of the three management teams did a poor job of managing their organisations. They just ran out of categorical runway.

    I do think that in an earlier period, when the brands were run by an earlier generation, they should have jumped - or tried to jump - into other businesses.

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  • I think this piece is as much to do with core competencies as brand extensions. The fundamental question for any firm is "What business are you in?". If HMV had seen themselves as an intelligent filter and/or provider of music content/services and not a retailer, it would have made all the difference.

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