diversification of brands

Diversification of brands

Core Strategy Division

Introduction

The diversification of brands into broader and surprisingly different areas has been a growing trend in recent years.

As a business growth strategy, diversification is not a new concept – brands have always developed new products or entered new markets to increase sales, block competitors, spread risk or create new opportunities.

Introduction

But diversification has evolved.

Its pace has accelerated.

Brands are making bigger leaps into new territories.

We are seeing diversification emerge as a strategic marketing tool – a new way for brands to talk about themselves and connect with consumers.

Introduction

Consumers have evolved.

We have become more open to this kind of diversification.

A 2005 survey found American shoppers could see eBay creating a dating website, Wholefoods supermarkets entering high-end dining, and Apple producing its own mobile phone (two years before launch of the iPhone in 2007).

Introduction

One driver of this trend is the era of ‘post-demographic consumerism’.

Simply put, consumers are no longer behaving the way marketers think they ‘should’.

The majority of UK video game players are women, and there are more gamers aged over-44 than under-18.

Introduction

Not only do brands have license to defy conventions, consumers expect brands to surprise them with the products and services they offer.

The ‘post-demographic’ world is one in which people are defined more by values, attitudes, behaviours and culture than by their age, location or social class.

Introduction

Business strategy is evolving.

Within this new environment, brands are under more pressure to balance long-term strategy with shorter-term adaptability due to tectonic shifts in the marketplace brought about by technology and new consumer trends.

This brings challenges and opportunities.

Introduction

To survive, brands are looking far outside their categories, markets, continents for threats and opportunities.

As Rishad Tobaccawalla, Chief Strategist of Publicis Groupe, says, successful brands today are those that constantly disrupt themselves.

What do brands need to know about what diversification can do for them?

We have identified three ways diversification can make for better marketing strategies.

1.

Diversification is a different way to talk about your brand

Different way to talk

Many brands have used diversification as a different way to talk about what their brand stands for or to signal a shift in ethos.

Craft brewer BrewDog recently announced they would open a ‘beer-themed hotel’.

Where previously they had concocted special brews like ‘Roadkill’, with its hotel, BrewDog is continuing its tradition of finding creative ways to express their beliefs about beer and their brand.

In this case, by giving fans a unique experience to drive brand awareness and growth.

Luxury department store Harvey Nichols’ ‘I Spent it on Myself’ Christmas campaign went against the grain by celebrating selfishness. They launched a range of far from luxury products bearing the tagline.

The brand never really intended to sell these products, but they quickly caught on as ironic Christmas gifts, driving customers into their stores, boosting Christmas sales and grabbing a share of culture.

Around the release of the movie Supersize Me, McDonald’s used diversification as a way to signal change when they came under pressure as consumers became more concerned about the health effects of their food.

In response, the quintessential burger chain launched the McSalad, using diversification to signal they were responding proactively to people’s concerns.

So what?Diversification is a different way to talk about your brandExpanding into different territories can be a better way to communicate what your brand stands for than a traditional ad campaign.

Providing memorable experiences is becoming a more powerful and important means to connect with consumers, particularly Millennials and Generation-Z.

Check out our Slideshare for more.

2.

Diversification is a way to sustain competitive advantage

Think tech, services & products

Today, branding is no longer simply about creating and building on distinctive symbols and assets.

We now know consumers usually see little difference between most brands. We are also seeing globalisation and new technologies shortening the life-span of many brands’ competitive advantage.

This can be countered by thinking differently about technology, products and services.

In 2006, Nike launched Nike+iPod, enabling runners to track their own performance. The launch included a unique range of running shoes with space under the insole to place their Nike+ sensor, linked to the runner’s iPod (and later, iPhone).

Through the development of new technology, Nike created a strong point of difference converting many runners from other shoe brands to Nike, the only shoes compatible with the system.

With MyMilkman.ie, Avonmore created their own door-to-door dairy delivery service. With the subscription-based services like Dollar Shave Club, Avonmore noticed consumers respond well to brands that make their lives easier – in this case taking the drudgery out of buying milk.

By creating an owned sales channel that solves a real consumer pain point, MyMilkman.ie bypasses their competitors and blocks shoppers’ consideration of rival brands at the supermarket.

Through iTunes, Apple diversified out of computing into music, creating a platform for iPod and iPhone users to manage their music.

Masters of product-led communications, iTunes gave PC users a taste of the Mac experience. This helped lower the barrier of entry for many to the Apple ‘ecosystem’, endearing PC users to Apple in a way traditional advertising could not do on its own.

So what?Diversification is a way to sustain competitive advantageMany brands are overcoming the challenge of brand relevance and resonance by creating owned technologies, services and products.

This can be a tactical or strategic way to block or bypass competitors. More importantly, it is a way to appeal to Millennials and Generation-Z who increasingly expect brands to understand their needs and to provide them with unique, meaningful and tangible solutions.


3.

Diversification is a way to engage new audiences or target new occasions

Engaging new audiences & occasions

Diversification can be an effective way to reach new audiences or to expand the occasions for consumers to enjoy your product.

Around 2013, sports brand Underarmour was losing market share because its brand was invested in masculine, ‘meat-headed’ iconography.

They realised they were missing out on an $11 billion market of women’s sportswear.

Through their ‘I Will What I Want’ campaign, they redefined what athletic performance meant for women, resulting in 30% growth in sales, increased market share and a surge in Underarmour’s share price.

In Ireland, Tayto is one of the most surprising, inspirational, brands when it comes to diversification.

Who could have thought a crisp brand would open a theme park? But Tayto Park has changed the brand’s fortunes.

With the success of Tayto Park as a family entertainment destination, it has helped expand people’s occasions for eating crisps as more of a family moment.

So what?Diversification as a way to target new audiences and occasions

In this post-demographic, disruptive marketing environment, old strategies and tactics are not working as well.

It is becoming more important than ever to look outside your category, audience and product to look for new opportunities to reshape your brand and grow sales.


Interested in learning more?

Contact us.

Thomas Geoghegan

Shane Doyle

Andy Pierce

16 Sir John Rogerson's QuayDublin 2, Ireland

Tel : +353 1 649 6316

Email: [email protected]