I am sure that many people know of a couple of brands that were great but have now gone into extinction. Anyway, brands disappear due to different reasons. However, a once great brand can get washed away by bad decisions or for other reasons ranging from design, price, modifications, market forces, collaborations, endorsements, service quality issues, conducts, quality questions, positions on social issues and many others.
Have you watched a brand you love just mean less and less? The brand might have gone in a direction you just couldn’t follow, or the quality of their product just kept slipping until their reputation was totally gone. You are probably not alone on this plain. What you have experienced is called brand dilution, and most times, it doesn’t end well for most brands.
What is Brand Dilution?
Brand dilution happens when a brand loses its value from overuse. Value is lost when a product does not meet the expectations customers have of the brand. This is like the essence of the brand being watered down. In a previous piece, I explained brand extension as a good and, sometime, necessary process. However, this strategic move can result in brand dilution, especially if the new product does not live up to the brand promise of the original product.
In a previous piece, while discussing the definition of brand, I touched on the preconceptions customers have with products that feature a brand, and that can increase sales and profit. That creates brand equity; there is a value to a brand because it is an asset that generates future revenue profits.
Brand dilution or overuse of the brand is when those preconceptions are lost or changed. Brands come with expectations; and when a product or piece of media does not live up to those expectations, the customers’ minds adjust.
Put in another way, customers can be disappointed or confused when something does not live up to a brand’s promise, and that diminishes the power of the brand in their minds. It makes the brand less meaningful. This effect multiplied over many customers is brand dilution.
What Causes Brand Dilution?
Dilution can come from a brand putting its name on a type of product that just doesn’t make sense. Sometimes, a company builds a brand with one product or service and starts making a new type of product. That can be great if the brand promise brings something to the new category and it has the necessary technology and expertise to do well in the new market. This tactic is a brand extension or a line extension.
Brand extensions are a great strategy for growth. BIC started with pens and writing materials and did well with pocket lighters and shavers. Teslar started with electric cars and now are making electric semi-trucks. Does it make sense for a Teslar brand to be on a semi-truck? Probably it does, as long as it is electric.
There is nothing wrong with those line extensions. But sometimes, companies over extend themselves and run into brand dilution. This happens when the original brand promise is not applicable to, or not upheld by, the new product. A brand promise is the explicit expectation that customers have when they see a brand. If I see a Chicken Republic sign on a building, I know inside will great meals, pleasant environment and courteous service.
Let us run some hypotheticals. Everyone loves Levi’s jeans. What if Levi’s starts making wallets? Fair enough, they will probably be well made and wallets just go with pants. What is Levi’s goes to make cologne? Okay? But it is getting harder to imagine. What if Levi’s now manufactures a smartphone. It will be absurd and have no credibility. It will dilute the brand because people will question what Levi’s meant anymore.
That example was intentionally absurd, but there are real life examples that are almost as absurd. Imagine Guinness making iced tea, Cadbury making school bags, or Golden Penny making shoes. All these brand extensions will make customers ask: if they make this, what does the brand really mean? They make the brand meaningless and cause brand dilution.
Brand dilution can be a cost we don’t realize we are paying. Incremental revenue from line extensions is immediate, but the cost of brand dilution happens over the long term.
Be careful who you license your brand to or who you give your brand’s franchise. Companies that make poor quality products or give bad services on behalf of licensed brands can kill the brands. Licensing or franchising is one of the biggest causes of brand dilution; poor quality or unrelated products with the brand name on it can take away the brand’s meaning.
Havard Business Review had a case study of Belgian fashion designer, Diane von Furstenberg. In 1972, von Furstenberg made a wrap dress that had so many functions and this really revolutionized the market. By 1976, sales of the wrap dresses were up to five million units annually. Then she started licensing her name to be put on beauty products, luggage, fragrances, eyewear, jeans and books. The damage to the Furstenberg brand was not immediately apparent. All of the licensed products sold well at higher than the normal margins. But then the brand hit a brick wall a few years later; retailers could only move Furstenberg products on sale. Profit margins plummeted as the premium brand went from high to nearly nothing.
In theory, there is nothing wrong in licensing or selling a franchise. Infact, it is a veritable source of profit if you have a strong brand. You just have to make sure that you are licensing your brand to good quality manufacturers and that the products or services have, at least, something to do with your brand promise.
Is Brand Dilution the same as Brand Damage?
Brand dilution should not be confused with a brand damage Brand dilution is different from brand damage. Brand damage refers to a black mark on a brand’s name owing to a bad press or product/service failure. Brand damage is when a brand is irreparably harmed by a bad press, failed product/service or corporate irresponsibility.
A good example of brand damage involves the German carmaker, Volkswagen. In 2015, the car company did damage to its brand when it used a software subroutine to fool emissions test, while its cars polluted twenty times more on the road. When regulators tested the cars in a different way, Volkswagen suppressed the results and changed their cheating programme to fool the new tests.
Apart from the huge penalty that the company had to pay (over $33 billion in vehicle refits and regulatory fines), the Volkswagen brand still carry a black mark in terms of environmental friendliness and honesty, and this will go on for more than a generation. This is far more severe and harder to recover from than brand dilution.
Last line: Brand dilution is something that every brand custodian needs to be vigilant against. You need to be a steward of a brand’s meaning; if a brand is meaningless then it has no value.