In the rapidly changing marketplace, companies seek every possibility to optimize a branding strategy in pursuit of maximum impact and profitability. Among the major decisions involved in the process of brand dilution is whether to allow a product or service under the protective shield of the parent brand or hive off into a brand by itself. The decision isn’t one-size-fits-all but may vary concerning various parameters related to market trends, consumer behavior, product lifecycle, and brand equity.
The Case for Standalone Brands
- Distinct Target Market: If a service or product targets an important different target demographic or segment than the core target market of a parent brand, it might make more sense if it’s separately branded. For example, Procter & Gamble created the Swiffer brand to target people who clean quickly, which is quite different from more significant segments in the household product category.
- Value Proposition: Products with a value proposition or innovation that does not align with the image of a parent brand will succeed independently. For example, Alphabet Inc. has Google operate strictly with internet services, while Nest works in the smart home arena with separate branding for each.
- Risk Reduction: It reduces risk in that the diversified portfolio protects or shields the mother brand from any possible negative associations. For example, Toyota created the Lexus brand as its luxury line to preserve its image of producing reliable, affordable vehicles.
- Market Saturation: A single brand can be carved out when the market includes similar products. For instance, L’Oréal has brands such as Garnier and Maybelline, each positioned differently to target different consumer segments within the same market.
Overextension is not a good thing and can dilute brand meaning. According to Harvard Business Review, only about 10% of brand extensions succeed since too many of them are overextended from the core equity of the parent brand.
Stand-alone Brands in the Real World
Research has shown that brand extensions work better when there’s a perceived fit with the parent brand. In a Nielsen study, when consumers are familiar with a brand, they are four times more likely to purchase; however, in doing so, the risk of being overextended increases for the brand. One example of Dove’s successful creation of Dove Men+Care is when an adequately strategized brand extension capitalizes on familiarity to address a new segment.
However, the Journal of Marketing Research estimated that a new product’s survival chances increase by around 20% when launched under an existing brand. On the other hand, a strategically launched standalone brand would have been created by Google with YouTube to retain its unique creator community and tap into the market’s potential without being restricted by constraining factors of the parent brand identity.
Considerations Before Creating a Standalone Brand
- Market Research: Use market data to understand if there’s a gap or opportunity that can be better exploited by a standalone brand than a sub-brand. Consumer Perception: Apply consumer insight to how the new product could change the perception of the existing brand in an undesirable way.
- Brand Equity: The strength of the parent brand’s equity must be evaluated. If it is strong, a sub-brand could use that to its advantage. If not, a stand-alone brand may be a better route.
- Financial Implications: Consider the financial consequences of building a new brand through marketing costs, operational changes, and possible revenue streams.
- Long-term Strategy: Consider the company’s long-term vision and precisely where a stand-alone brand fits. Is it in line with the company’s strategic direction of growth?
A decision to develop and launch a standalone brand should be strategic, informed by thorough marketplace analyses, consumer insight, and strategic fit within the company’s longer-term objectives. This is not a light decision, with lots of investments and hard work in building and establishing a new brand in the market. But with proper strategic planning and implementation, a standalone brand can be expected to seize new opportunities, reduce risks, and finally help bring growth to the company’s success.