Three Reasons Not To Diversify Your Brand

Three Reasons Not To Diversify Your Brand

There are certainly good times to consider diversifying your brand, but equally there are times when such a strategy should be avoided. Here are three situations when your brand shouldn’t go there.

A weak brand shouldn’t attempt to diversify. It’s tempting to think that changing sector and/or shifting into another part of the same sector is a great way to bolster a brand that is struggling. Offer current customers new places to experience the brand, the thinking goes, and collect new customers along the way. Unfortunately, the effect is often quite the opposite. The brand becomes more confusing to everyone and what strength the brand does have is distracted through venturing into unfamiliar territory. If you are going to expand your brand’s presence, always do so from a position of strength and carry that through into your broader presence. Otherwise your initiative will be seen for what it really is – revenue hunting.

If you are going to diversify, don’t simply bring a variation of the same idea to the new market. By doing this, you are, in effect, simply adding to the noise. If you cannot enter a market with a specific and distinctive point of view – one that draws on what you’ve achieved as a brand to change what consumers can expect in a sector – chances are you have no place being there. Recently, Chipotle decided to expand into the burger sector with a offer called Tasty Made. The problem is that, according to social media, they have simply brought another variation of a well established product to a well established market. There are some product variations to be sure, but what seems to be lacking is a fundamentally different philosophy and approach that would enable the brand to add value in a sector where value is often defined by volume.

Finally, if you are going to diversify, don’t expand into an area where growth is stalled, either because the market itself is saturated or because consumer interest is waning. In the case of Tasty Made, for example, while fast food and fast casual are significant players in the restaurant sector, and hamburgers account for over 30% of industry sales, this is still a very full market, with high quality competitors and low compound growth forecast over the medium term.

Standing out in such a market is always going to be difficult. The critical judgment for any brand looking to expand into new sectors, therefore, is not only that it can apply its philosophy and skills to that sector, but that the sector has tangible demand and untapped potential.

Diversification presents paradoxical pressures. On the one hand, brands have no choice but to seek out and explore new territories in their bid to stay relevant and interesting. Brands that don’t do this will only ever find themselves in situations where they are defending or receding, and they will be confined to the dynamics and growth patterns of the sector that they have aligned themselves with. At the same time, when they do diversify, brands must be very careful to do so within the competitive capabilities of the brand itself and at a pace that the wider business can absorb and add value to.

I have one question when marketing teams tell me they want to take their brand into new places, and it’s a question I apply not just to new sectors but also to new regions: Why will you be welcomed? Because, in the end, successful diversification of product or footprint is not about where your brand wants to participate, where it feels it is entitled to make a profit because others are doing so, or where it wishes to move because it’s run out of ideas where it is. Diversification is about the response your new presence will generate. If you’re not acting to excite buyers, you have no place being there.

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