Most people have, at some point or another, encountered brand dilution. Once you discover a company you know and love, you realize that it has evolved in a way that no longer serves your requirements or upholds your beliefs.
As businesses expand, it’s normal for them to add new product lines, provide more personnel the opportunity to represent the brand, or even buy up rival companies. As a result, there is a chance that the initial promises, ideals, and quality that the brand stood for will gradually fade away.
You can concentrate on a marketing plan that is directed at a certain target market when you first launch your company. It makes sense to desire to expand on your brand’s initial success after it has been achieved. In reality, many companies begin creating new revenue streams and expanding their market reach.
But what if that next move turns out to be a mistake, and clients stop respecting and believing in your company? The feared brand dilution enters the picture—a stretch so significant that consumers can no longer identify the brand they once preferred above all others.
What is Brand Dilution?
When a brand loses value, often referred to as excessive brand expansion, it usually happens after the introduction of a product that isn’t in line with the initial goals of the business. For instance, you would view the sudden release of a line of tennis shoes by a chocolate bar company as brand dilution.
Brands frequently aim to draw in a new market segment when they introduce new lines and products. Several products may be released by certain firms before they discover the ideal market for their success. Companies offering numerous goods that lower the quality of their overall line of products can likewise dilute their brand.
Brand dilution can lower customer loyalty as well as the value of previous items that aren’t immediately impacted. Businesses must maintain a positive brand reputation if they want to keep their customers satisfied and confident in their brand. Businesses can modify the next product launches to promote a more favorable response from the general public by using the information from earlier brand dilutions.
Research backs this up. InnerView and FocusVision found that brand dilution leads 51% of customers to feel confused and 49% of them to consider alternative options.
Brands spend a lot of time developing their branding because perception matters business. By maintaining a positive brand reputation, a brand can increase its sales and maintain its loyal customer base. Brand dilution can easily undo all of this, though.
How Does Brand Dilution Happen?
Brand dilution occurs when a company attempts to develop or offer a product or service that’s outside its area of expertise. Here are some factors that can lead to it:
Licensing
Licensing is the renting or leasing of a trademarked or copyrighted asset for use with a product or service. For example, if a popular brand of coffee creamer collaborates with a popular chocolate bar company to release a chocolate-flavored creamer, they can license that new product. The practice of licensing brands is very common in the commercial world, usually only on a case-by-case basis. In many cases, licensing can be beneficial to two brands. However, it might lead to brand dilution if the product being licensed is unrelated to the collaborating brand.
Quality
One of the elements that keeps customers loyal to a brand is consistent product quality and values. If a brand maintains its core purpose and principles throughout all its business ventures, customers may be confident in the brand’s integrity. However, brand dilution can happen if a company is inconsistent in its values and quality.
Read Also: Nurturing Brand Relationship
For example, if a cruelty-free makeup brand collaborates with a brand that tests on animals, consumers who support the company’s original values may no longer support the brand. Similarly, if the makeup brand’s product quality begins to decrease, customers may feel less confident supporting that business.
Experimentation
Experimenting with new market segments can also result in brand dilution if a business enters a segment that’s outside its expertise. For example, if a company that produces high-quality car tires suddenly releases a collection of eyeglasses, customers may not understand why the tire company is producing a different type of product in another market. It’s important for experts to be part of every development stage of a product to help ensure a business considers the right knowledge and information when experimenting with new products and markets.
Brand Dilution Examples
Brand dilution can happen to everyone—from small businesses to enterprises, and entrepreneurs to major celebrity brands. You may have heard of these notable brand dilution examples:
BIC’s disposable pantyhose
Today, people know the BIC brand for its ballpoint pens, lighters and razors. What do these products all have in common? They’re dependable, simple products that you can regularly dispose of and replace thanks to the multipacks you buy them in.
In 1976, however, BIC decided to branch out into disposable pantyhose. As Brand Failures blog shares a quote from marketing writer Al Ries that perfectly nails down the biggest problem with this brand extension:
“If you have a powerful perception for one class of product, it becomes almost impossible to extend that perception to a different class. Names have power, but only in the camp in which they have credentials and when they get out of their camp, when they lose focus, they also lose their power.”
Pepsi’s collaboration with Madonna
In 1989, Pepsi paid Madonna $5 million for a year-long contract. During that time, Pepsi was set to sponsor the iconic star’s tour and run ads featuring her.
Problems with their partnership arose after she released her “Like a Prayer” video for the day after their first ad ran. As AP News reported at the time:
“Spokesman Tod MacKenzie said Pepsi was hearing from consumers who confused the song and video, complaining to Pepsi about the music video because they thought it was Pepsi’s commercial.”
Essentially, the timing caused Pepsi’s brand to become entwined with Madonna’s image. Despite their on-brand commercial with Madonna, people started to boycott Pepsi.
Simply attaching the controversial artist with its brand to cost Pepsi some brand equity. To resolve it, they pulled the existing ad and terminated any future ones with Madonna.
Elizabeth Berkley does Showgirls
A study in the Journal of Marketing Research claims consumers carry brand associations with celebrities in the same way they do products, and that those associations can positively or negatively affect how they perceive an upcoming movie or television show.
“Our rationale is as follows: First, in our study context, the brand name of the movie star not only provides the movie with some immediate consumer base (i.e., loyal fans of the movie star) but also serves as a signal to convey information about the expected quality of the movie. This rationale is consistent with previous findings that when a branded component appears in a new product, it facilitates the acquisition of initial consumer awareness and provides an endorsement of product quality.”
As such, celebrities are just as susceptible to brand dilution as businesses. Take the example of Elizabeth Berkley. She made a name for herself doing wholesome TV movies and shows, with her most notable role as Jessie Spano in Saved by the Bell.
After four-plus years playing the ambitious character, she took on the lead role of Nomi Malone in the provocative film Showgirls. Going from a quirky teen comedy show to an NC-17 film did not sit well with her audience.
As Berkley explained to People.com:
“Of course it was disappointing that it didn’t do well, but there was so much cruelty around it. I was bullied. And I didn’t understand why I was being blamed. The job of an actor is to fulfill the vision of the director. And I did everything I was supposed to do.”
The leaked Starbucks memo
In 2007, Nation’s Restaurant News reported on the leaking of an internal memo written by Starbucks’s co-founder Howard Schultz. The post provides some context on the leaked message:
“Schultz wondered if some of the decisions of the past 10 years that helped the chain advance from fewer than 1,000 to more than 13,000 locations worldwide had led to a ‘commoditization of our brand.’ He lamented more ‘sterile, cookie-cutter’ store environments, their loss of coffee aroma since the adoption of flavor-lock bags, and the diminished service theatrics that came with a switch to robotic espresso machines.”
While Starbucks was and still is one of the top coffeehouse brands in the world, Schultz rightly wondered if brand dilution had set in. Around that time, Starbucks was losing ground to companies like Dunkin’ and McDonald’s for the very reasons he states in the memo.
In this case, franchising didn’t cause brand dilution, as all the locations followed the same playbook. The problem was the playbook itself—the brand had consistently lowered product quality as it attempted to scale its operation.
What is The Best Way to Avoid Brand Dilution?
In order to accomplish their commercial objectives, organizations must maintain and enhance the reputation of their brand. The performance of the business can be impacted by how consumers view a brand and the goods and services that go along with it. Brand integrity can be maintained and brand dilution can be avoided by carefully planning and managing brand extensions for businesses.
Here are some additional measures you can do to stop a brand from deteriorating:
1. Perform market research
Before releasing a new product to the market, it may help to conduct research regarding the demand for it and the target market to prevent the venture from failing. Preliminary research can provide you with valuable insight that allows you to assess the probable performance of the product you want to introduce. It can also help you identify possible issues with the product that may result in the weakening of the company’s brand, such as if it doesn’t fit the brand’s image or deviates from the organization’s values.
2. Prioritize the flagship product
In planning business expansions, it’s important to be selective with regard to what brand to expand and on which market segments to focus. It’s also crucial to prioritize or protect the brand’s core or flagship product to maintain its reputation and customer base.
You can do this by continuously developing the product to ensure that it remains relevant and profitable, even when you introduce new products to the market. Another way is to create another brand for the company’s latest ventures, especially if the new products or services don’t align with the brand where the core product belongs.
3. Keep product quality consistent
While expanding the product line of a brand is often a sensible and profitable business strategy, it may strain the company’s capacity to perform optimally. This may lead to a decrease in the quality of their products and weaken their brand. To avoid these, it’s important to assess the company’s capability to expand before developing and introducing a new product to the market. It’s also crucial to ensure that the quality of existing and new products and services remain consistent because this promotes customer loyalty.
4. Introduce new products slowly
Create a timeline for launching the company’s new products. This ideally includes the phases before you introduce them to the market, such as development and creation, and the details for each marketing strategy. This helps ensure the quality of the products and maintains the brand’s integrity because the company follows a process instead of rushing into a product rollout without careful planning.
5. Listen to the company’s customers
Conduct market research by gathering information on the needs and demands of your target consumer groups. Obtain feedback from them regarding existing and new products through surveys and other data collection tools. Use these and the customers’ perception of the company’s brand as a guide to design new products that align with the brand’s image and values. This strategy can help you retain customers because they feel that the company understands their needs and values their opinions.
