Faced with the challenges of achieving growth in today's market, companies can leverage strong brands to introduce new products and services. Utilizing the trust and positioning that a brand has established in one category and transferring it to others is generally more efficient than starting from scratch with a new brand.
Capitalizing on brands that have been built over a long period of time, as opposed to relying heavily on promotional schemes to drive demand, can provide a sustainable competitive advantage over time.
However, the fear of affecting or weakening a brand that has been working properly is always present in this type of decision, for which there are several alternatives in the development of this strategy.
Line extensions of the existing product: It is the most common and used by companies, it consists of the launching of packaging, presentations, light versions, with special vitamins, or new flavors, seeking: Expand the consumer base or block the competition. Vertical Growth: It consists of launching products with characteristics and prices well differentiated from the current one, that allow reaching segments of lower and/or higher purchasing power, it can launch products with characteristics that allow them to be perceived as Premium or of much higher quality, or the opposite, products or services without so many added values but with relevant specifications for the customer. For example: "Armani Exchange", the economic clothing brand of designer Armani, or Lexus, Toyota's premium brand.
Co-branding/ co-branding: This is when two strong brands in different categories come together to launch a product e.g. McFlurry M&M, Porsche- Adidas Shoe Line. This is used when one brand can be a powerful ingredient for another brand's product e.g. Dupont Teflon frying pans.
Horizontal Growth: Consists of taking the brand to new product and service categories, where it competes with new players, for example Dove soap to hand creams, Adidas shoes to sports watches, Cereals to Milo. This modality implies great risks but also great benefits because the risks of cannibalization are very low, and if accepted by the market, it allows the company to continue entering new categories.
The decision to pursue horizontal growth is the most complex of all and requires in-depth analysis due to the investment involved in product development and launch. Academic studies have been conducted to provide guidelines for evaluating whether this approach is the best strategy, which will be further explored in the next column.
RAFAEL LOPEZ LLAMAS