Large enterprises and small businesses alike face a temptation in business that can compromise their strong positions. They try to diversify their product or brand when they are succeeding.
GM has confused consumers because they made big, small, expensive, cheap cars. A small business that sells business accounting services and now sells IT software can totally miss customers.
Our minds are filled with an immense amount of information and we try to simplify our intakes as much as possible. If I talked to you about Xerox, you think about copiers. What if I told you they sold computers? They tried in the past and failed. IBM tried to sell copiers and had to pull out of that market as well. IBM means computers not copiers.
The problem is that greed kicks in. Companies and individuals want to extend their success in one domain and associate it with a new product line, also known as line extension.
It would take millions of dollars of wasted effort to even persuade a few people that Xerox means computers when Xerox means copiers in their minds.
Your brand has a meaning in the mind of your customers or potential customers. It does not mean two things. It means one thing.
We do this all the time in the simplest conversations. When someone’s name is mentioned, there is a characterization of that person. Their reputation precedes them. Some of your friends immediately arouse a word such as “cheerful” or “serious” or “stubborn”. This is what you and everyone that knows the person perceives.
If that person goes off for years and comes back a changed person, they are a prophet without honor in their own home time. That is because their brand is fixed in everyone’s mind and a mind is a difficult thing to change.
When you think about your own brand, it has a word that you have spent a lot of energy, time and money to get into the mind of potential customers. If you are building an audience and consistently nurturing them, they will trust your brand but also narrow the definition in their minds.
When You Want to Do Something New
So what if you want to try a new line of service or product? You have to create an entirely new brand. Cendant does this. They own the brand Avis, which we are familiar with. Avis is car rentals. However, Cendant is the parent holding company. That brand doesn’t mean anything to us unless you are an investor. They own many other types of businesses unrelated to car rentals.
If you have a different line of product or service, the best strategy is to build an entirely new brand. Of course, this is less attractive because there is a lot of extra management. You have to build an entirely new audience and build marketing systems, service systems and everything else the business requires under a different convention.
However, this is thinking in terms of your customer rather than yourself. It is thinking about what works rather than what is convenient. You have to be one-dimensional with a brand.
Thus, if you sell accounting services, make that one company or brand and build relationships in the marketplace with an audience by continually reinforcing that repuation.
If you decide to sell enterprise software, build a second brand and position this. You can get creative in cross-referring each brand, but keeping them separate matches with how people think. We think one concept or one word when it comes to a brand around a service or product.
Also, you can establish the leadership position around that by narrowing your niche further and establishing your expertise rather than diluting your perceptions.
Al Ries does a great job articulating this further in his classic, The 22 Immutable Laws of Branding. The law of branding cannot be violated if you want to experience. It has less to do with efficiency and everything to do with the reality of how everyone’s minds work.
Have you thought of extending your business? How can this thinking help?