Stretching brands until they snap

By Tim Fawcett
BBC News Online business reporter

A Courvoisier cognac bottle against a background of black and white tiles, a woman and a man dressed in evening attire holding amber-coloured drinks, a woman's necklace and cleavage. All the pictures reinforced by a CV logo mimicking legendary fashion houses.

Armani is stretching loyal customers' imagination

The launch of the initial Courvoisier "Autumn collection" marked the liqueur company's attempt to transform it from the label behind "the world's first cognac" to an icon of fashion.

The launch was also part of a wider trend where makers of luxury brands try to capitalise on their labels by extending them into new areas of business.

Marketing professionals have long recognised that strong brand names which deliver high sales and profits have the potential to wave the magic wand on new products.

But the risks involved can also be massive, and brand stretching exercises can easily backfire.

Not only can they be costly in that the money spent on a parallel product could be lost if customers are not interested.

If the new launch goes wrong, it can even damage the credibility of the original product.

Exotic and expensive

Courvoisier invested $600,000 into its fashion collection and aimed to clock up sales between $1.5m and $3m a year.

This should come from sales of wares such as a deerskin trench coat with a price tag similar to that of a small car.

Courvoisier is a 170 year-old brand name, owned by the world's second largest drinks company Allied Domecq.

That is a huge amount of tradition in a product aimed predominantly at the male market.

Some brand and image experts are cynical about the Courvoisier attempt to translate it into women's designer clothes.

"It'll be a very tough sell for a liquor brand to get women wanting to buy luxury goods to buy a Courvoisier branded garment unless its design and tactile qualities are exceptional, which is fairly unlikely," says Allyson Stewart-Allen, director at International Marketing Partners.

Fashionable hotels

This spring's new "Atelier Courvoisier" collection of luxury clothes was unveiled at about the same time as Armani announced it would join other famous Italian designers in the own-branded luxury hotels market.

Are women prepared to wear Courvoisier-branded fashion?

Over the next seven years - in conjunction with Dubai-based Emaar Properties - it will invest more than $1bn into 10 hotels and four vacation resorts in London, Paris, New York and other major cities around the globe.

The idea is that this sort of luxury brand extension catches the eye and lends itself well to exotic and expensive advertising campaigns.

Consumers know the designer and can perhaps visualise what the hotel experience would be, say brand experts.

New ground

The Courvoisier and Armani brand extensions are what is called brand stretching.

It refers to the use of an established brand name for products in unrelated markets.

When done successfully it has several advantages.

Customers will associate the quality of the original product with the new and are more likely to trust it.

Launch costs are usually lower and customer awareness can build more quickly.

It makes good sense, says Allyson Stewart-Allen.

But "the risk is that if one of these designers has a bad couple of seasons, falls out of favour, or does something stupid like Martha Stewart, the whole chain is vulnerable".

"If Marriott for example is prepared to marry one of these designers, it needs to ensure that such risk doesn't taint their global chains".

Failure

For branding experts, the general rule of thumb is that if the brand extension contributes more value than the original core product it ultimately tends to fail.

Pierre Cardin was criticised for over-extending its brand and lost credibility for exactly this reason.

Gucci, under new management, is rebuilding itself - partly by reducing its wide range of licensing agreements.

Holiday firm Club Med once launched a shower gel called Club Med and a unisex cologne of the same name.

The idea had been pioneered by Disney at its theme parks, selling dolls of giant cartoon characters the children had just met in the flesh.

The rationale - a good experience on holiday would be recreated at home. This is what marketing people refer to as "memorialising" the good experience.

It failed.