Adidas running shoes. Adidas cologne?
Pierre Cardin clothing. Pierre Cardin wine?
Levi’s blue jeans. Levi’s shoes?
Colgate-Palmolive: “We want to leverage our basic core brands and trade on our brand names to extend
Campbell Soup Company: “Leveraging and extending high-quality, repeat-purchase brand names is
always preferred over launching a new name.” David W. Johnson, CEO.
Del Monte: “We’re dedicated to the single brand concept. We’re going to keep extending the Del Monte
Ultra Slim-Fast: “There will be soups, pastas, salad dressings, soda, fruit juices and a new, thicker diet
(Good luck and good night, Mr. Abraham.)
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Why does top management believe that line extension works, in spite of the overwhelming evidence to
the contrary? One reason is that while line extension is a loser in the long term, it can be a winner in the
short term (chapter 11: The Law of Perspective). Management is also blinded by an intense loyalty to
the company or brand. Why else would PepsiCo have introduced Crystal Pepsi in spite of the failures of
Pepsi Light and Pepsi AM?
More is less. The more products, the more markets, the more alliances a company makes, the less money
it makes. “Full-speed ahead in all directions” seems to be the call from the corporate bridge. When will
companies learn that line extension ultimately leads to oblivion?
Less is more. If you want to be successful today, you have to narrow the focus in order to build a
position in the prospect’s mind.
What does IBM stand for? It used to stand for “mainframe computers.” Today it stands for everything,
which means it stands for nothing.
Why is Sears, Roebuck in trouble? Because the company tried to be all things to all people. Sears was
big in hard goods, so it went into soft goods and then fashion. The company even hired Cheryl Tiegs.
(Do fashion models really buy their miniskirts at Sears?)
In the conventional view, a business strategy usually consists of developing an all-encompassing vision.
In other words, what concept or idea is big enough to hold all of a company’s products and services on
the market today as well as those that are planned for the future?
In the conventional view, strategy is a tent. You stake out a tent big enough so it can hold everything
you might possibly want to get into.
IBM has erected an enormous computer tent. Nothing in the computer field, today or in the future, will
fall outside the IBM tent. This is a recipe for disaster. As new companies, new products, new ideas
invade the computer arena, IBM is going to get blown away. You can’t defend a rapidly growing market
like computers even if you are a financial powerhouse like IBM. From a strategic point of view, you
have to be much more selective, picking and choosing the area in which to pitch your tent.
Strategically, General Motors is in the same boat as IBM. GM is into anything and everything on
wheels. Sedans, sports cars, cheap cars, expensive cars, trucks, minivans, even electric cars. So what is
GM’s business strategy? If it runs on the road, or off the road, we’ll chase it.
For many companies, line extension is the easy way out. Launching a new brand requires not only
money, but also an idea or concept. For a new brand to succeed, it ought to be first in a new category
(chapter 1: The Law of Leadership). Or the new brand ought to be positioned as an alternative to the
leader (chapter 9: The Law of the Opposite). Companies that wait until a new market has developed
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often find these two leadership positions already preempted. So they fall back on the old reliable line
extension approach.
The antidote for line extension is corporate courage, a commodity in short supply.
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