Navigating brand stretch: The risks and rewards of the diversification strategy

The importance of brand distinctiveness and differentiation has been widely debated, with businesses often seeking white spaces in crowded, competitive markets to establish brand loyalty. However, the most successful brands are those that can accurately assess and value market potential, not simply differentiate or launch new products to fill the market gap without strong analysis.

If done right, brand stretching and diversifying can offer huge opportunities for business growth, but missteps can lead to cringe-worthy moments and damage to a brand’s reputation - diversifying, going too far, too fast, and neglecting the core brand identity are just some of the common mistakes brands make.

Here we examine how some brands have successfully expanded into new categories, while others have learned tough lessons from failure - generating some important considerations for all bold, big-dreaming brand managers out there!

Venture Beyond the Core Identity for a Successful Brand Stretch

Brand stretch refers to a brand’s ability to expand into new or unrelated areas while maintaining its core identity. The global brand giants that many of us know and love aren’t tied to a single product or category and at the heart of such expansion is a resilient, distinctive and future-proofed brand.

Amazon, Virgin and Tesco are prime examples of brands that have stretched successfully. Amazon grew from an online bookstore to an e-commerce and cloud computing giant, whilst Virgin expanded from a record label into airlines and telecommunications. Tesco, initially a grocery retailer, ventured into financial services by offering credit cards and home insurance, as well as fashion, optical and mobile All maintaining a consistent core brand identity while broadening its horizons.

Brands like these can leap more easily into new categories allowing the business to evolve and take risks without compromising their core brand values. Not a matter of luck, but often the result of intricate understanding of their core brand identity, and careful strategic planning and execution – ultimately knowing where and how to stretch.

The Importance of Strong Brand Identity for Stretching

Stretching requires brands to truly understand their ‘core’; the distinct elements that make them instantly recognisable but also the market penetration strategy showcasing what they could be great at doing: how does the stretch opportunity fit with their strategic direction of travel (mission or purpose), or their existing products or services, their culture and their capabilities, and even distribution network – apple’s apple stores provide the physical availability to support successful brand stretch – think iPhone to mac book.

If Ferrari were to suddenly venture into budget-friendly products, it may run the risk of losing its luxury image, diluting the brand and falling into the trap of losing sight of what made them famous in the first place – the elements that helped them to deliver differentiation, relevance and value. However, a stretch into lifestyle products like luxury apparel, watches, and even theme parks (Ferrari World) are a much better fit, as the brand has stayed true to its core identity and continued to satisfy their loyal set of customers - and perhaps even acquired loyal customers in new markets as the brand for some, might feel more accessible.

Whilst we understand that brand stretch is most likely to succeed when it fits the long-term vision and also involves playing to a brand’s strength, this of course, is not without risks.

Mark Ritson, recently warns against brands that overestimate their ability to stretch. According to Ritson, many brands climb "the benefit ladder" too quickly, jumping from product features to aspirational promises, often losing sight of what made them successful in the first place and what their consumers truly need – the product and human truth. This can result in what has been described by others as “brand ego tripping,” where brands become more focused on internal growth goals than consumer needs.

Stretching a brand too far can backfire. Without a thorough assessment of market potential, businesses risk diluting their brand identity, spreading themselves too thin, or confusing consumers with irrelevant products.

For example, a lesson from Cadbury’s failed brand stretch attempt to launch instant mashed potatoes – obviously famous for its chocolate, Cadbury’s venture into instant mashed potatoes confused consumers and the association between chocolate and instant mash just didn’t resonate.

Or Pepsi that launched Crystal Pepsi – developed to tap into consumer’s interest in purity and health back in the 1990’s. But the drink didn’t catch on with a huge breakage in ‘memory structure’ for a couple of reasons – Pepsi Cola is associated with a dark black colour, so a clear Pepsi created confusion. People also still expected the famous Pepsi taste (always the winner in a blind taste test!) whereas in fact it was citrus flavoured. It is important not to break those distinctive memory structures that are so important to brands – but instead identify what they are, understand them and then build on them in a complimentary way. Rather like – Pepsi Max offering the same colour and great taste with no sugar. This variant now accounts for over half of Pepsi’s UK grocery sales.

Other notable examples of brand stretch failures include Colgate's venture into frozen foods in the 1980s, Cheetos' misguided lip balm, and Harley-Davidson’s foray into perfumes and colognes. These attempts perhaps felt more like a leap of imagination than a well-thought-out extension of brand identity. Each brand overextended into categories that clashed with their core image, resulting in consumer confusion and lack of interest.

Assessing the Opportunity and Ability to Win Brand Diversification

Customers may respond positively in research to new concepts or category expansions from their favourite brands, and more often than not, strong, popular brands have the advantage of being nice and stretchy, BUT, successful execution can be a different challenge altogether.

Armed with the right research on the brand expansion strategy to aid successful execution is key; firstly, brands must assess the size and growth of the desired category or market, followed by understanding and mapping the competitive landscape and available white space, and finally, the development of a strong and differentiating brand value proposition to compete successfully against the rest of the category.

Brands that can successfully spot new opportunities and bring this relevant added value by launching something that others aren’t are likely to reap the reward. This is especially critical when entering completely unrelated areas.

Virgin is an example of successful brand stretch and diversification as previously mentioned, but despite the strength of the brand, Virgin's ventures into new markets haven't always been so successful. Some of their brand stretch attempts, such as Virgin Cars, Virgin Vie (beauty and cosmetics), Virgin Cola struggled to gain traction. These efforts often felt more like a ‘brand ego trip’ by simply placing the logo on new products, without offering anything different to compete with established leaders like Coke or Pepsi, ultimately leading to failure. Without meaningful differentiation or tangible added value, these attempts failed to make an impact in their respective industries.

However, when Virgin focused on their core – their brand strengths and expertise to provide real value, especially in service-driven markets their brand stretch efforts paid back. Prime examples include Virgin Active and Virgin Atlantic.

The health and fitness brand focused on creating a better customer experience compared to traditional gyms; flexible membership options, customer-friendly terms – generally more accessible and approachable alternatives within the category.

For the airline, it stood out by introducing features that created a unique experience for passengers, such as onboard massages, complimentary ice cream, and advanced in-flight entertainment systems – branded a ‘Rockstar’ customer service! These offerings not only differentiated Virgin in new categories but also enhanced the overall customer experience, showcasing the power of strategic brand extension.

An intriguing question arises amidst all this: “Do you always have to win in stretch or expansion ventures?” The straightforward answer might be yes—especially if the stretch opportunity is touted as the next big strategic brand move aimed at generating long-term sustainable growth.

But what if the brand diversification initiative is so outlandish yet compelling that it can contribute to the core brand’s growth in unexpected ways? In other words, sometimes a bold, unconventional move can yield benefits that aren't immediately apparent, shaking up perceptions and invigorating the brand, even if it doesn’t follow the traditional playbook for success.

The beloved Greggs bakery chain has just rolled out an extravagant twist that’s equal parts amusing and arguably quite clever: a collection of 22-carat gold-plated jewellery inspired by the iconic Sausage Roll. Yes, that’s right! Die-hard fans can now not only enjoy Gregg’s iconic golden bakes, but also accessorise with golden bakery bling, thanks to their new dazzling jewellery pieces starting at just £36.

This bold move I’d guess is part of a clever marketing tactic designed to create lots of buzz on social media. Think about it: when loyal customers sport these luxurious creations, they’re bound to share and talk about their fabulous finds, driving brand reach and boosting penetration, all crucial ingredients for brand growth.

This jewellery collection screams fun and accessibility while celebrating the die-hard fans of this much-loved UK brand. It’s a playful nod to the loyal customer base that has made Greggs a household name, which may explain why its jewellery collection sold out in just 48 minutes! Could this brand stretch attempt be a smart tactical move from the bakery giant? It might be too early to tell, but one thing’s for sure: this golden endeavour leaves us with plenty of food for thought!

Key Learnings for Brand Managers

For all bold, big-dreaming brand managers – whether you're aiming to launch your brand to new heights or dive into an exciting new brand stretch project, these six key takeaways will hopefully help to fuel your next big move!

1. Brand stretching is not about filling gaps: Successful diversification is more than just identifying market gaps; it’s about aligning new ventures with your core identity and strengths, not just launching products for the sake of differentiation.

2. Always maintain the core identity: A brand’s identity is its foundation. Before expanding, brand managers should clearly define the core elements that make their brand distinctive. This ensures that any new product or service aligns with what consumers already know and love about the brand.

3. Understand the opportunity and brand’s ability to win: Assessing market potential and ensuring the brand has the capability to win in the new category is crucial. Strong brand stretch research such as the types run at Hall & Partners; Opportunity sizing, Brand and Market Mapping, White Space Exploration and Proposition Development, are all necessary steps to evaluate the new venture and ensure a successful launch.

4. Don’t dilute your brand: Stretching too far, too quickly, or into irrelevant categories can confuse consumers and dilute the core brand. Brands should avoid overextending into areas that do not reinforce their core strengths or distinctive memory structures.

5. Play to strengths, add value: Brand extensions are more likely to succeed when they align with long-term brand strengths and bring relevant value to the category. Virgin Atlantic succeeded by enhancing customer experience with unique offerings, while Virgin Cola failed because it didn’t offer anything unique or added value to an already saturated category

6. Beware of ‘Brand Ego Trips’: Diversifying for internal growth without considering consumer needs or relevance can lead to failure. Brands must prioritise consumer relevance over ambitious growth to avoid diluting their brand’s equity.

Brand stretching is a high-reward, high-risk strategy that requires a deep understanding of core identity and market dynamics. To succeed, brands must align their diversification with their strengths, add real value to new categories, and avoid overextending or losing sight of consumer needs. By playing to their strengths and maintaining focus, brands can stretch into new territories without diluting their essence or confusing their audience. Strategic execution, not just bold ambition, is key to winning in brand stretch.