Posts

In recent years, offering very different product categories under one brand umbrella has become increasingly popular. Xerox expanded its core brand from copiers to computers. General Electric also sells financial services. We can book rooms in luxury Versace hotels, or surf the Internet with Ferrari notebooks. We can even wear shoes or watches from Caterpillar, Porsche or Jeep.

This horizontal brand expansion, i.e. the expansion of a brand into what at first glance appear to be untypical product fields, is also a popular strategy in emerging countries. The reason is simple: it not only helps to accelerate market access and reduce costs, it also uses the leverage of well-known brands in rapidly growing new product categories. One of the most important drivers for the expansion of a single brand into other categories or even industries is the fact that building brands and their distribution channels in large countries such as China or India is very costly. Companies often shy away from making additional investments in a second brand if this is not supported by strong strategic considerations.

Dr. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group) explain in our new Springer publication “Successful brand development in the major emerging markets” (written in German) what is important for horizontal brand expansion.

More confidence in manufacturers with several brands

There is also scientific evidence for this behavior. Research shows that Chinese consumers generally trust better-known brands more than others. First and foremost, because the brand helps to convey greater confidence in product quality and product safety. More than one in three consumers in China believe that companies active in many product categories are more trustworthy than those that are limited to only one or two product segments. This confidence is twice as high as in the US (18%).

This attitude on the part of many consumers in major growth markets gives companies the opportunity to expand their brands in these markets to a very large extent. Perhaps that’s why Coca-Cola presented a casual clothing collection for young and fashionable consumers during Fashion Week in Rio de Janeiro. The beverage company wanted to strengthen its position as the world’s most valuable brand and called on Brazilian designer Thais Rossiter to create a mix of retro, sporty and urban design full of pictorial and floral prints from various sources. The collection ranged from glamorous evening gowns to nylon shorts – all bearing the Coca-Cola trademark.

Haier: First refrigerators, then also electric kettles and computers

China’s largest household appliance manufacturer Haier also extended its core brand, refrigerators, to televisions, kettles, mobile phones and even computers. However, this horizontal brand stretching was also used as an example of overstretching. But this does not seem to have had too negative an effect on Haier, as the company is still the world’s number 1 manufacturer of white goods.

Horizontal brand expansion has particularly good prerequisites in the major growth markets, because consumers here are not yet so strongly committed to certain brands and as they are keen to experiment. In addition, companies active in several product categories between Rio, Shanghai, Mexico City and Mumbai usually become more trusted.

Authors: Florian Haller, CEO Serviceplan Group, and Niklas Schaffmeister, Managing Partner Globeone

Again and again, brand managers underestimate the simple fact that brands are first and foremost created in the minds of local consumers. The results don´t always meet the expectations of the top management at HQ. A Volkswagen may be a mid-size car in Germany, in China it is definitely a premium car for most buyers and perhaps even a luxury car in India. The development of an international positioning strategy therefore requires a thorough analysis of one’s own brand perception in the target market. This is necessary to ensure that the communication of one’s own strengths can be aligned with consumer needs. In recent years, we at Globeone and Serviceplan have advised numerous blue-chip clients and brands in international expansion projects. Based on this experience, we have identified four major stumbling blocks in brand communication that may cause an international positioning to falter. For all the details, see our new Springer publication “Successful brand development in the major emerging markets”, written in German, by Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).

1. Brand awareness: Wishful thinking should not subdue reality

It is an old truism: awareness is not everything, but without awareness almost everything is nothing. However, brand awareness cannot be achieved with the crowbar – especially not in large emerging markets, which are difficult to understand due to their enormous geographical spread and diversity. In addition, there are often horrendous costs for classic media, frequently forcing brands to switch to cheaper digital advertising channels. This, however, runs the risk of communicating below the critical perception threshold in the fight for the attention of target groups. The development of brand awareness should therefore not be based on intuitive assumptions about consumer needs, but on empirically proven facts and a well thought out communication concept.

2. Brand image: Known but without profile

If a brand enjoys excellent recognition values but is hardly bought, it usually has a veritable image problem. The brand has not been sufficiently focused on the wishes and needs of local consumers or is simply interchangeable because it is not sufficiently differentiated from competitors. In this case it is important to act quickly in order to not jeopardize the success of market entry in the long term. A clear understanding of the brand drivers – i.e. the most important decision factors for a brand – must be developed and translated into a convincing communication concept and storytelling that sufficiently differentiates from local champion brands.

3. Country-of-origin: Communicating the strengths of the country of origin correctly

Notably in the premium segment, brands can often benefit from the image of their country-of-origin. This so-called image transfer from the country-of-origin to the brand (e.g. “Made in Germany”) is an important competitive advantage that is difficult to imitate. Nevertheless, brands frequently fail to properly bring this advantage of a strong and positive country-of-origin image to bear in their communication concepts. Often there is simply no strategic storytelling that systematically establishes the connection between the brand tradition and the history of the country-of-origin. But strong brands live from exciting stories about their origins.

4. Purchase activation and loyalty: If the customer still does not show up

Even with high popularity and image values, sales figures may fall short of industry standards. Usually two things lead to this problem: either a narrow focus on an undersized target group, or an incomprehensive local sales and logistics structure. Brands must regularly ask themselves whether they are attractively priced for a sufficiently large target group and whether they are actually available everywhere. Digital sales channels may help, if a brand can’t build enough local branches.

A comprehensive brand monitor in the corresponding target country will help to identify and avoid these stumbling blocks. However, the conceptual effort should not be underestimated: careful preparation is essential in order to understand the local perception and performance of your own brand correctly.