Brand equity: Category expansion

The most frequently asked questions by brand managers and CEO’s are:  “How do we increase sales” or “how do we increase web traffic” usually followed by “we’re thinking about expanding into (insert random product category here)”.

It’s understandable why brands assume entering a new product category will deliver rapid growth and may even see positive traction because of it, but that is a short term solution to a long term challenge. Rather, a growing brand should narrow its focus to increase brand equity within its core market, building a strong consumer following that are easily mobilised. An example of this strategy is skater clothing brand Supreme or Rapha - the cult biking clothing line. Supreme focused on producing functional clothing for skaters, never drifting away from three core product bases; T-shirts, Hoodies and caps. Any other brand would have attempted an aggressive move into sneakers as a way to increase sales, instead, Supreme benefitted from maintaining a narrow focus and continuing to cater to its core fanbase. this strategy intensifies brand equity within a specific community.

Otherwise a brand risks dilution due to over-stretching. Some examples of brand equity dilution due to overstretch are Ralph Lauren and Calvin Klein. One of the reasons that these brands diluted their equity was to use the brand name to sell a wide range of products. By franchising their brand names to almost every conceivable product category, the brands significantly diluted their equity. This was because of a simple reason – a brand cannot have transferable equity, in simple terms brand equity cannot be passed simply by adding a name to different product categories. The further the overstretch of category is from the brand’s base, the weaker the consumer desire for that product. Consequently weakening the overall brand name resulting in negative brand perception.