Continuing our conversation with Laura Ries on her new book, Origin of Brands:
Jennifer asks: You make the point that a brand is designed to fill a hole in the mind, and that brands cannot be successfully transferred to other products or categories. Yet I believe that good brands often grow on 2 different trees or branches; one is defined by the category and the other by the target audience or lifestyle. You say that McDonald's is defined by the category (hamburgers), yet it is also defined by a target audience (restaurant for kids). If you can associate a brand with multiple branches, you stand a good chance of evolving the brand and successfully expanding it to fit other products. McDonald's, for example, can expand from hamburgers effectively IF (and only if) their new offerings fit on the "restaurant for kids" branch. Nike is not confined by the "athletic shoe" branch as it has also defined itself on an aspirational 'athlete' branch, so it has been successful in launching other products under the Nike brand (we'll see about the golf clubs). You say in the book that the Cayenne is the first step in the downfall of Porsche, yet I see it as a successful venture because the Cayenne is designed for the same upscale performance-minded buyer; it doesn't fit on the 'sports car' branch, but it does fit on the corollary high-performance lifestyle branch. The VW Phaeton failed because it didn't fit on the VW 'for the people' branch; the VW Touareg succeeded because it did (despite the spelling of the name). IBM successfully extended its brand from computers to tech services by leveraging its position on the "trusted" technology branch. I'd enjoy your comments and responses on this subject.
Laura responds: There are two issues involved here:
(1) Would the companies you mentioned have been even more successful if they didn’t try to associate the brand with multiple branches?
(2) Were the competitors to these companies asleep at the switch which allowed these companies to line extend the brands?
Take one example. Both McDonald’s and In-N-Out Burger started in California. Both were originally focused on hamburgers, fries and drinks. Nothing else.
Today the average McDonald’s does slightly more than $1.5 million in annual sales while the average In-N-Out Burger unit does $1.9 million.
Which brand has the better strategy? We say In-N-Out Burger does because they still sell only hamburgers, fries and drinks and out-sell McDonald’s.
Both companies made mistakes. McDonald’s by expanding their menu. And In-N-Out Burger by not expanding their geography.
Jennifer asks: There’s a recent article in Reveries Cool News about McDonalds turning around their business through line extensions. I looked up their stock trend and, in fact, it’s more than doubled in the last two years as they’ve moved away from both burgers AND kids. I'd enjoy your thoughts on how that’s happened… because I agree with you; I have no idea what McD’s stands for anymore.
Laura responds: McDonald’s sales are up, but so is Burger King’s. The question is why. My feeling is that McDonald’s has greatly improved operations and that the line extensions have had little to do with its recent successes.
I think you’ll also find that the improvements are likely to be temporary in nature.
Questions & comments welcome!