Many of my small business clients think that the more products or services they offer, the more money they can make. Unfortunately, they fail to understand several critical elements of branding. Building a solid brand is crucial to the long-term success of a small business. Creating a distinct and recognizable brand can be the key to attracting and retaining customers in a world saturated with competition. The addition of products or services under a single brand contributes to clouding the consumer’s perception in what is known as the “Law of Expansion.”
Amidst the pursuit of growth and increased market share, there is a critical lesson that every small business owner must heed: the Law of Expansion. Understanding this principle is essential for maintaining brand integrity and ensuring that the power of your brand remains intact. By examining the mistakes of renowned brands like Cadillac, Yahoo, and Coca-Cola, we can uncover valuable insights and apply them to the strategic decision-making of small businesses. The Law of Expansion teaches us that a brand’s power must be preserved by maintaining a narrow focus to avoid confusing the consumer.
According to the Law of Expansion, the strength of a brand is inversely proportional to its scope. In simpler terms, when a brand expands its reach by putting its name on numerous products or ventures, it risks diluting its power and weakening its core message.
Consider Cadillac, once renowned for its luxurious and high-quality automobiles. When Cadillac introduced the low-cost Cimarron model in 1981, it hurt Cadillac’s sales and reputation. The Cimarron was positioned as an entry-level luxury car but was essentially a rebadged version of the Chevrolet Cavalier, a more affordable compact car. The Cimarron lacked the quality and luxury features customers expected from a Cadillac, leading to a significant decline in overall Cadillac sales.
The introduction of the Cimarron diluted Cadillac’s brand message and damaged its reputation for producing high-quality, prestigious vehicles. Customers were disappointed by the subpar performance and lack of luxury features in the Cimarron, which undermined the perceived value of the Cadillac brand as a whole.
Cimarron’s poor reception in the market resulted in a substantial decline in Cadillac sales during the early 1980s. It took Cadillac several years to recover and regain customer trust after Cimarron’s failure. This episode serves as a cautionary tale for brands regarding the potential consequences of diluting their brand image and introducing lower-quality or mismatched products.
While attempting to cater to a broader market, the move compromised the brand’s identity and left consumers questioning the authenticity of the luxury experience. As a result, many customers fiercely loyal to the brand fled to other brands with a more explicit message of luxury.
What do you think of when you hear the brand Google? My guess is “search engine.” Now, what do you think of when you hear the brand Yahoo? Is it a search engine, news, finance, sports, or email? Did you know that Yahoo had a 4.5-year head start over Google?
Yahoo was founded in early 1994 as an Internet search engine, while Google was not started until late 1998. In the early days of the Internet, Yahoo was a dominant player in the search engine. However, as the Internet landscape evolved, Yahoo embarked on an expansion strategy that encompassed adding a wide range of new services, including email, news, finance, sports, and more. Yahoo’s expansion diluted its message and lost the brand’s focus in the consumer’s mind on its core strength, search.
Google, which maintained a clear and streamlined brand message, surpassed Yahoo in relevance and user adoption. Yahoo’s failure to effectively manage its expansion ultimately led to a decline in its market share and diminished its brand perception.
The cola wars offer another excellent example of the Law of Expansion. The early 1960s saw a societal and cultural shift towards health and wellness, with increasing concern about sugar consumption and weight management. Coca-Cola and Pepsi were competing head-to-head for the cola-drinking consumer and saw the need to offer a sugar-free version of their cola.
Coca-Cola didn’t want to dilute its brand identity, so in 1963, it introduced Tab, a sugar-free cola option under a completely separate brand name. Most consumers had no idea that Tab was a Coca-Cola product.
Pepsi, not wanting to miss out, introduced Diet Pepsi in 1964. Pepsi drinkers chose Pepsi over Coke because it was sweeter, and regular Pepsi drinkers were not particularly diet conscious. As a result, the brand’s extension only confused the Pepsi brand since Pepsi drinkers no longer knew what Pepsi stood for. In contrast, Tab, which represented a unique diet cola brand, outsold Diet Pepsi by more than a third and dominated the diet cola market for almost 20 years.
For many years, Coke dominated the regular cola market and Tab the diet cola market. Then Coca-Cola made a colossal mistake; it introduced Diet Coke. For the most part, regular cola drinkers were not persuaded to abandon regular cola for the brand’s diet version. Consumers fell into either the regular cola drinking or diet cola markets. As a result, the addition of Diet Coke simply added yet another diet cola option that essentially stole market share from Tab, the diet cola market leader, while diluting the Coca-Cola brand.
The Law of Expansion warns against the lure of increasing market share at the expense of a brand’s core values. When a brand seeks to extend its reach by offering multiple products or services under a single brand, they risk diluting their brand’s reputation. By studying the cautionary tales of brands like Cadillac, Yahoo, and Coca-Cola, marketers can learn the importance of preserving a brand’s core identity and message, ultimately safeguarding its power and influence in the marketplace. Better to create a new brand than a line extension that only serves to confuse your prospects.
How can you apply the Law of Expansion to your business?
