How to Create a Brand Extension Strategy

TLDR: Wondering how to get cracking with brand extension strategy? You’re in the right place. These steps will guide you through everything you need to create a next-level brand extension strategy – including why you should do it, what success looks like (and what it doesn’t look like), defining your brand DNA, competitive reviews, digging out data and how to pick the perfect licensing agent.""

Step 1: It’s question time

First thing’s first – your business case. Lots (and lots) of brand extensions fail because their business case hasn’t been given the attention it deserves. You’ll need to establish the reason you’re doing it, what success would look like and the pitfalls you’re at risk of falling into. So, let’s kick off with a few home truths:

Why do you want to do it?

As with any business initiative, starting with the ‘why’ is super important. It’s not all money money money when it comes to brand extension – it needs to be a key part of your business plan too. So whilst revenue could be one motivation, there are plenty of others to consider. These might include the opportunity to appeal to new audiences (whether that’s geographical or age groups), dip a toe into an entirely different category or share the risk (both financial and reputational) if you’re cautious about expanding into new territories.

Over at Netflix, brand extension has offered them a golden marketing opportunity. From exclusive collabs with Ben ‘n Jerry’s ice-cream (get yourself a scoop of “Netflix & Chill’d”) to co-branded merch for hit series Stranger Things – everything they create works to drive consumers back to the platform.

For YouTube collective, Sidemen, brand extension is all about feeding their fan communities. Although revenue is presumably a very nice element of it, for them it’s more about creating a fan eco-system – tying in their merch, product ranges and media offerings to create a well-rounded brand. Basically, it’s important to have a think about what you really really want (à la the Spice Girls) out of it.

What would success look like for your brand extension strategy?

If reaching a whole new audience is your aim, it might be that a cool collab like Gucci x Peter Rabbit or Dolce & Gabbana x Smeg is the answer. By joining forces with a brand that has a completely different audience, there’s a chance to introduce two brands to an audience that might not have come across each other. Both of these collabs are tapping into brand new age groups and sectors.

If your aim is to increase profit, there’s no better example than Mattel. The recent success of their blockbuster Barbie movie (and over 165 consumer product partnerships – it was hard to miss just how *pink* everything was last summer) bought in £1.12 billion at the box office. Now we’ll just have to wait and see whether the lessons they learned from Barbie transfer to their other IP – look out for all things Polly Pocket and Hot Wheels.

For brands looking to get stuck into an entirely new category, it’s worth having a look at Ferrero Rocher – the latest chocolate brand to find success moving into ice-creams. By branching out into the frozen foods aisle, they aimed to “drive cross category purchase between confectionery and ice cream”. It was a smart move – the UK ice cream market continues to expand and the summer of 2022, just before they launched, saw chocolate ice cream sales growth at £26.4m.

What about the bad bits?

One thing’s for sure, you won’t be laughing all the way to the bank in a couple of weeks’ time. Royalty share has a much longer cycle – you’ll need to find the right partners, develop your creative, sell to retail and make sales before you see any revenue. Which means that it can take quite a while to see any profits and is likely to be more of a long term investment.

It’s also worth considering that if things don’t go to plan, it could reflect badly on your brand. American YouTuber, MrBeast, launched MrBeast Burger – his very own virtual restaurants in partnership with Virtual Dining Concepts – bringing burgers and french fries to his fans. But it didn’t quite go to plan. The chain operated with lots of different ghost kitchens, resulting in varying quality and complaints of bad service, long wait times and poor food. Ultimately, MrBeast (real name Jimmy Donaldson) filed a lawsuit against VDC because they failed to uphold the quality he wanted – saying “it’s terrible for my brand”.

On the more dramatic end of the fail scale, bad brand extensions can go viral. Though not exactly a brand extension of Coke, Dasani was still inextricably linked to Coca Cola – and despite doing great in the US, its UK launch bombed. This was all thanks to the fact that it was presented as a mineral water, only for the papers to discover that it was actually just filtered tap water. This was all a bit too similar to an Only Fools and Horses episode (series 7, episode 9 if you’re interested) and so quickly became tabloid fodder and was ridiculed for weeks, with one PR disaster after another.

On the less dramatic side, your brand extension might just not take off at all. Have you heard of Virgin Pure? We’re guessing, probably not – but it’s a water purification system for the home. Unlike other Virgin initiatives, this one was probably received with such a massive ‘meh’ because the product and the brand DNA just don’t match.

So – once you’re clear on the ‘why’, you can get stuck into strategy.

Step 2: Let’s get cracking

It’s in your DNA

We know it’s easy for brand DNA to get overlooked. If success sweeps you off your feet and takes you by surprise, it might only be later down the line that there’s time and money to spend on it. But if you’re going to dive into brand extension, then it’s vital to have a well-defined DNA. So first thing’s first: go back to your brand DNA and look at it afresh – review it, get to grips with it and update it if necessary.

Don’t be afraid to be more flexible with your guidelines, too – brand docs can often be quite regimented, but modern audiences are far happier to see their favourite brands flex. From here, you can easily spot the themes in your DNA that could inspire new products and services.

Competition time

Yep, you need to eye up your competition with a good, old fashioned competitive review. Firstly, you’ll need to suss out who you’re up against – both directly and indirectly. A direct competitor is a brand that’s targeting the same market or a similar product (for example, Evian vs Volvic) and an indirect competitor is a brand that’s answering a similar customer need, but in a slightly different area (for example, Evian vs Tropicana). Once you’ve pulled those together, you can start to analyse what they’re all doing with brand extension. You’ll need to get online and into shops to look at exactly what they’re selling, where they’re selling it and at what price points – then get it all into a presentation so it’s easy to compare like for like.

It’s also a smart idea to go outside of your core competition and widen your idea of what’s possible. For example, if a client of ours wants to look at how illustration is used for their children’s book brand – we might suggest they look at illustration for high-end, luxury brands or food packaging. It’s a great way of breaking out of the echo chamber lots of brands can find themselves in. Finally, you can gather up your team and sit down to start sharing, analysing and discussing.

Master rank mapping

By this point, you’ll know your brand and know your competitors – so this step is about taking that and figuring out your priorities. When it comes to rank mapping, it all comes back to why you’re extending your brand in the first place. Whether that’s profit, exploring new categories or engaging with new customers – it’ll dictate all the answers.

You’ll need to start by listing every category, product or service that feels applicable to your brand and ranking them against your criteria. Then, brainstorm the key themes associated with your brand (for example: a fizzy drinks brand might say ‘refreshment’, ‘energy’, ‘zest’ or ‘sunshine’). From there, you can start to consider categories that tie into those themes (for our fizzy drinks brand, that might be the outdoors, beaches or holidays). Finally, think about the demographic of your audience and what other categories work for them (if the fizzy drink was skewed towards a younger audience, they might choose to focus in on lifestyle apparel and accessories).

A great example is Chupa Chups extending into their very own cosmetic range. The lolly brand brought their colourful, fruity brand DNA to the world of eyeshadows and lip balms – which just goes to show how far from your core brand you can successfully go. At this point it’s just about the number of ideas you come up with, so rather than focusing on quality, just see where your ideas take you.

Dig out your data

A good market review is all about understanding your audience. Quite often, brands have a huge amount of demographic data they’re not making use of. Before you start commissioning new research, it’s worth going back into what you already have and looking at it through the lens of brand extension. Remember to refer back to the ‘why’ again – if you want to introduce your brand to a different market, then you might want to identify a retailer within that market. If, however, you want to target a particular type of consumer, you might want to come up with a consumer profile and explore brands they like that would work for a collab.

From there, you should be able to draw up a list of target retailers that would be a good fit for your brand (if not, get into shops or online and review your potential retail partners – breaking down their product mix and how they market to their audience). Finally, see how all that aligns with your product brainstorm.

Psst! Here’s a Skew example:

When a (much loved) mobile game came to us, we spotted straight away why their first attempt at brand extension hadn’t worked. Although it was a game with ‘cute’ graphics – a dive into their data showed that their core audience was 35+ women. The lifestyle apparel they’d created was all geared towards younger teen girls – so we adjusted the strategy, product mix and creative and soon had their merch flying off the shelves.

Grab a cuppa and take five.

At this stage, you should have something that looks suspiciously like a brand strategy marketing plan:

• A strong brand DNA that’s ready for franchise action
• Scoped out the competition and have some solid brand inspo
• Matched your data to your DNA review, product brainstorm and retail partner targets

From here, you’ve got all the ingredients you need to turn your plan into a product. If you’re focus is brand extension, then you might want to set up an entirely new business division. If, however, you’re focused on licensing, then you’ll either want to develop an in-house team dedicated to the job (hiring someone skilled in product development and someone experienced in licensing sales would be a great start) or work with a licensing agent to help you take it to market. If you’ve got this far, they’re likely to run at you with open arms – and we can point you in the right direction…

Step 3: Picking the perfect agent

If you’re looking for a licensing agent, follow these simple steps and the one of your dreams won’t be far away:

Get out your goals

Figure out your objectives, criteria and what success will look like – a quick look back at your brand goals will help with this one. All agents have different strengths (specific category experience, creative skill sets, understanding of the market, relevant networks) – so it really helps to be clear about what you’re looking for.

Do your research

Check out the trade press like License Global, The Licensing Awards or we’ll be happy to help – our team work with lots of different agents all the time so can point you in the right direction.

Send out your RFIs

Reach out to the agencies on your list with an RFI (Request for Information) to gather handy information about their experience, capability and approach.

Review your responses

Look through your responses, considering the goals from step one. Then, create a shortlist of around 3-5 agencies.

Send out your RFPs

Create a detailed RFP (Request for Proposal) and send it out to your shortlisted agencies. This is your chance to ask for brand strategies and ideas they might use, along with case studies from similar projects.

Review your responses

Again, look through your responses – this time focusing on creativity, strategic fit, methodologies and potential ROI. If you like what you see, organise a meeting to discuss their proposal in more depth and see whether they fit in with your team’s culture.

Check out those references

Get in touch with your shortlisted agency’s references. They might be other brands or clients they’ve worked with before who can give you some real insight into their working style, effectiveness and reliability.

It’s decision time

Gather up everything you’ve learned and evaluate each agency. Licensing is a people business, so take some time to get to know them before picking the one that best aligns with your brand’s goals, culture and needs. Have they watched The Traitors, for example? Important questions must be asked.

The legal stuff

Finally, you’ll need to negotiate the contract – including terms and conditions, deliverables, timelines and costs. Once it’s signed, sealed and delivered, it’s time to onboard the agency and hand over the ‘keys’ to all of the resources they’ll need to get started.

Top tips:

• Don’t forget to talk money – make sure you’ve clearly outlined your budget and financial terms, including payment structures, royalties and additional costs.

• Remember to set some expectations around how and when you’ll communicate, from status updates to performance reporting.

Let’s see what Skew can do for you

At Skew we focus on driving amazing results, and we do that by measuring what works and what doesn't, thinking strategically, and delivering crafted creative at the point it's most effective. Get in touch and let's discuss how we can help you achieve your goals

If you’re not ready to take the plunge today but want to try Skew on for size, sign-up for a bi-annual one-day masterclass here. During this bespoke workshop you’ll be coached by our expert team to crack a particular brand challenge and receive expert insights from our team.

P.S.

A quick message from the marketing team at Skew. The illustration for this blog was created in Midjourney and inspired by the Peter Rabbit x Gucci collaboration.