Introducing a new product can be a long and costly process with no certainty of success. However, launching a product through leveraging an established brand can be a great way to de-risk a new project whilst reducing time and cost. This approach is often referred to as ‘brand extension’. This model for business growth has been adopted by a plethora of leading brands. For example, easyGroup leveraged its success in the airline industry with easyJet to accelerate their entrance into other industries like easyHotel, easyCar and easyCoffee. Despite the attractiveness of this strategy there are still risks to keep in mind. Below are 3 tips to consider when implementing brand extension.
1. The consumer viewpoint is key
A brand’s value derives from the consumer’s perception. An inherent risk in undertaking brand extension is the possibility of alienating consumers by falling short of their expectations. Choosing an inappropriate extension can ultimately lead to not only the sub-brand failing but collateral damage to the core brand. It is, therefore, crucial to research the target market to ensure brand values fit with consumer perception before utilising brand extension.
2. Protection, Protection, Protection
Using the brand extension model will create new sub-brands which have the potential to generate and broaden the goodwill and reputation associated with the brand. Despite living off the reputation of the parent brand, it is important to view these new sub-brands as distinct. Failure to adequately scope out a protection strategy for the sub-brand may leave it vulnerable to counterfeiting and other malicious activities. Ask your legal advisors to analyse the viability of registering the sub-brand’s name and logo as a distinctive trade mark separate from the brand.
3. Duty of Confidentiality
Launching a new product can be a lengthy process. Employees and contractors may leave the company during the planning stages of brand extension. As with all commercially sensitive plans it is imperative to impose clear duties of confidentiality on those parties privy to sensitive information. This duty of confidentiality should be expressed in writing either within a pre-existing contract or as a stand-alone non-disclosure agreement. Depending on the nature of your proposed extension this agreement may include protection for:
- Customer names and lists;
- Business plans;
- Operations processes;
- Brand protection strategies;
- Product infrastructure; and
- General know-how.
Failure to implement enforceable non-disclosure agreements can lead to loss of intellectual property rights and ultimately lead to expensive litigation proceedings. Speaking with legal professionals who have the drafting expertise to ensure your confidentiality agreements are enforceable is essential.
Hamlins combine commercial, corporate, regulatory and drafting expertise to help our clients protect and add IP asset value to their brands with commercially-astute advice. If you are considering utilising brand extension as a method to grow your business and would like additional information about how this strategy can work for you, please contact Matthew Pryke.