Nowadays, brands are using both vertical and horizontal branding techniques to expand their brands. Vertical and horizontal branding came about as a result of branding strategies, which state that a brand should be positioned in the market by having a significant impact on both online and offline audiences through appealing products and content.
Giving a brand a strong and distinctive personality through branding takes a very long process to establish in the market. The most crucial factor in this is that the brand needs to be “different” or “better.”Now let’s get to the subject.
What is Horizontal Branding?
Horizontal branding is when a brand acclaims itself or differentiates itself as being “different” or being “unique”. It shows itself as having so many different qualities than the brand of a similar niche; it makes itself as being different. For example: Mini cars, are quirky smaller cars, that target to attract stylish people. In horizontal branding, the product is usually appealing to a certain type of customer, and that becomes their quality customer.
In this horizontal branding strategy customer is loyal to the brand much more than the vertical branding because it tends to show the unique nature of their product which is not at all a lie, the product is meant to be different and hence the trust of the customer remains constant.
The price is a little high but customers cannot compare the price as being a unique and different product.
Claiming a company is unique and different, attracts a person by gaining attention to the uniqueness of the product rather than being better or not, “the change in lifestyle is always attractive” and hence the buyers get eager to adopt the change and brands apply this strategy to get the traffic.
Benefits of Horizontal Brand Extension
A brand can benefit from horizontal brand extension in a number of ways, including by expanding its reach and awareness, improving its reputation and equity, taking advantage of cross-selling and loyalty opportunities, and lowering expenses and innovation risks. A brand may be able to increase its share of voice and exposure by branching out into a new market, category, or sector and exposing itself to new consumers, markets, and distribution channels.
Furthermore, a brand can strengthen its identity and uniqueness and foster favorable associations with its customers by providing a good or service that aligns with its values, personality, and positioning. Increasing the lifetime value and retention of devoted consumers can be achieved by making use of their preexisting trust and preference to persuade them to test and purchase the new good or service. Additionally, employing a well-known brand name can lower the chance of failure and save time and costs associated with creating and introducing a new good or service.
However, horizontal brand extension also entails potential drawbacks, such as diluting brand identity and meaning, cannibalizing existing products or services, damaging reputation and equity, or facing legal or ethical issues. For example, stretching the brand too far or too frequently can confuse customers and make them question its credibility and quality.
Additionally, introducing a new product or service that competes with existing ones can erode sales and profits, and create negative associations among customers. Moreover, entering a new category or segment might lead to trademark infringement, regulatory compliance issues, or social responsibility challenges.
Pros and Cons of Horizontal Branding
Customer loyalty. People will be loyal to a brand that makes products specifically tailored to their needs. Not only are they better served, but the brand also expresses who they are.
Market less sensitive to price. Customers don’t compare prices when they feel like one brand uniquely serves them.
Defensible position. While maintaining a technical advantage can be impossible, staking out a unique value proposition can be maintained for decades.
Horizontal branding requires media spending. A brand needs to promote the brand personality and vision they are going for.
Subject to ups and downs of the category. If the lifestyle wains in popularity, the brand’s sales will too. For example, DC Shoes sells less merchandise when skateboarding is less prevalent.
Consumer tastes change. Fads die off, and lifestyles change. If a brand’s demand is tied to one of these, then sales may go down if tastes change.
Demographics will force you to change. If a horizontal brand is lucky enough to have a long-term appeal, then demographics will force it to rebrand eventually. People will age out of the market.
What is Vertical Branding?
Vertical branding is branding in which a brand differentiates and describes itself as “better”, it shows itself as having a better product than any other brand. For example: apple produces apps such as computers and phones, iPads, etc, but it makes itself as being better than any other brand by introducing a slimmer screen and pretty well software.
Read Also: What is Co-branding?
This vertical branding strategy has been in trend for a few years, many companies like Himalaya water bottles, coca-cola, axe deodorant, etc. are using the same strategy to build a factor of trust in their audience. Trust is also a factor in gaining traffic and converting viewers into clients.
While claiming that a company is better than any other brand, it makes the third party believe that this company must have something good and makes them try the product at least once. A company with a vertical brand strategy utilizes a technology, material, structure, or process that makes the product better in some objective measurement. Examples of these objective measurements include horsepower, gigahertz, miles per gallon, cost per acquisition, server response time, etc.
How Brand Extensions Can Help Brands Grow Faster
Brands typically concentrate on creating, positioning, releasing, and promoting their main product or service throughout the early stages of their business expansion. The business usually expands as this offering does.
The difficulty changes for a business once it learns how to increase brand recognition. A later-stage company has to hold on to clients’ enthusiasm, loyalty, and attention, along with a portion of their cash, rather than competing for brand visibility.
What is a Brand Extension?
A brand extension is one type of extension strategy that companies may use to increase revenue, find new customers, grow their share of the target market, and diversify their business. In theory, brand extensions cost less than starting a new brand or offering from scratch. Because consumers already recognize the brand’s name, the company can spend less on advertising, price promotions, and other startup costs, according to an MIT Sloan Management Review article on the advantages and possible pitfalls of brand extensions.
However, their success rate is mixed and appears to differ by industry and geographic market. For instance, 80% of brand extensions from consumer goods companies fail, according to a University of Hamburg study of what drives extensions’ success. Need an example of failed brand extensions? Consider Colgate’s frozen lasagna.
Other studies, however, have reported brand extensions to be much more successful than completely new launches. Because research is limited on this topic, coming to broadly applicable conclusions is difficult.
Types of Brand Extensions
Classifying brand extensions is somewhat subjective. What one person considers a line extension could be labeled a brand extension by someone else. Though the categories overlap, what follows are two major perspectives on the types of brand extensions.
Product Line Extension vs Brand Extension Strategy
A brand extension means using a brand name that’s already established for one segment or channel to enter another in the same general market, according to Bayes Business School’s report on extension strategy. The brand itself expands into a new geographic territory (e.g., Chick-fil-A expanding beyond the Southern United States) or a new product market (e.g., Ford producing electric cars).
A product line extension (sometimes called a line extension or product extension) refers to expanding an existing product line, as defined by Chron’s small business resources. Clif Bar’s developing snacks for kids and plant-based pet treats exemplify the strategy. This type of extension could also be introducing a new flavor of a current product — consider peanut butter M&M’s and Ben & Jerry’s The Tonight Dough — or new packaging, such as Pepsi in a can instead of a bottle.
Horizontal Brand Extension vs Vertical Brand Extension Strategy
A horizontal brand extension occurs when the brand name is “applied to a new product or service in a related product class” or a new product category, as described in the Bayes report. For instance, Uber offering food delivery could be considered a horizontal extension of its original ride-hailing service.
On the other hand, a vertical brand extension refers to introducing a product or service in the same category as the core brand but at a different quality level or price point. For example, a high-end fashion house selling a “ready-to-wear” collection could be considered a vertical extension, as ready-to-wear is usually mass-produced (instead of custom) and often at a lower price point than haute couture (though still exorbitantly expensive).
Successful Brand Extension Examples
A brand extension is a risk no matter the category, but those who execute this marketing strategy well can become legends — and teachers.
- Dove Brand Extension
Original Product: Moisturizing soap
New Products: Full range of beauty and skincare products
Founded in 1957, Dove started out with the now-iconic cleansing bar, a type of soap that both cleanses and moisturizes the skin. This core product sold well. Still, the company wanted to shore up its brand equity in the evolving beauty marketplace, as described in a case study on Dove’s extension strategy.
Over the next decades, Dove added body washes, hand and body lotions, facial cleansers, shampoos, conditioners, and hair styling products to its core offering. We consider this a brand extension, where Dove used the brand equity accrued from selling soap to sell other types of personal care products.
- Apple Brand Extension
Original Product: Personal computer
New Products: Consumer electronics (Apple Watch, iPod, Apple TV), computer software (macOS, Garage Band, iWork) and online services (Apple TV Plus, Apple Music)
Today we know Apple as a technology hub, a place to purchase computers and software, cell phones and tablets, streaming and news subscriptions. But the company began with just one product: a personal computer.
Since its founding, Apple appears to have deployed every kind of extension strategy. For instance, the iPod Touch (32, 128 and 256 GB) sold at different price points is a vertical brand extension, while the AirPods and accessories it sells alongside the iPhone could be considered a horizontal brand extension.
- Nike Brand Extension
Original Product: Athletic shoes
New Products: Clothing, equipment, and accessories for sports ranging from basketball to cricket
Similarly to Apple, Nike has likely tried many extension strategy variations, but its early vertical brand extension is especially notable. Originally named Blue Ribbon Sports, the company marketed its products “exclusively to serious athletes,” who paid “premium prices” at specialty stores, according to a report on product innovation in fashion.
Once Nike recognized the market potential of casual exercisers and fashion-conscious consumers, the company began producing apparel and shoes for the mass market, generally at a lower price point.
As we’ve seen, businesses with great brand equity and loyalty can use an extension plan as a vehicle for brand growth. We’ve selected a number of brands that have benefited from an extension strategy and routinely rank in our annual Fastest Growing Brands report to further highlight the idea.
- Brand Extension: Credit Karma
This company began in 2007 as a personal finance company that provided free credit scores and credit reports. In 2016, the company launched a brand extension called Credit Karma Tax, a free tax preparation service (which was later acquired by Cash App).
- Product Line Extension: Snickers
Mars, Incorporated introduced Snickers, a chocolate candy bar topped with caramel and peanuts, in 1930. Since then, the product line has expanded to include different flavors (almond, brownie, creamy peanut butter, hazelnut, and more) and different variations (bite-sized Snickers, Snickers’ minis).
(Snickers also developed an ice cream bar, a brownie ice cream bar and a protein bar in multiple flavors — which could be considered a horizontal brand extension.)
- Horizontal Brand Extension: HBO and HBO Max
Gone are the days when most consumers knew HBO as just a channel on television. Since its inception, HBO has played many roles in the media industry, but we’d like to highlight HBO Max, the company’s subscription streaming platform that launched in 2020. We consider this a horizontal extension, as a streaming service is a new category of product but in a related class.
- Vertical Brand Extension: Midol
Today Midol offers multiple product lines for period symptom relief: two options for multi-symptom relief (original and caffeine-free), one for muscle aches, one for bloating and one for travel. This series represents a vertical extension, as Midol sold just one option at first (which was actually meant for toothache relief).
Businesses considering an extension strategy should evaluate their industry’s landscape as well as consumer sentiment around their brands — metrics available through syndicated platforms such as our Brand Intelligence. For those with strong brand equity, brand extensions of any kind can help grow revenue, attract new customers and edge out the competition — when executed well.