Brand Dilution

One of the dangers of the business world is that our success is not measured by the efforts we have dedicated to something, but by the results we bring to the table. Good results are great, and we should always measure our progress. However, these should not be our main business drivers, especially not when it comes to branding.

In other words, we need to work hard and expand our brand, but we should also tread with caution and make sure our expansion efforts do not undermine what we built so far. The risk of an unsuccessful brand expansion could be greater than the gains. And when the risks become apparent and unavoidable, that’s when you know you are dealing with brand dilution.

When brand value dilution occurs, all the efforts that went into building your brand might go to waste. Your brand image shrinks, your brand authority is weakened, and your loyal customers are reaching out to your competitors. Read on to understand the dangers of brand dilution and what you can do to avoid it.

Brand dilution is when a brand becomes weaker due to overuse. This usually happens as a result of an unsuccessful brand extension that does not meet the brand’s promise to consumers.
As a result, the brand might experience higher profits and grow its existing customer base, but this does nothing to strengthen the brand image. Loyal customers might be disappointed or confused by the extension and fail to perceive the meaning and values that drew them to the brand in the first place.

The most common causes for brand dilution are the following:
Brand Licensing

This happens when you allow another company to use your branding elements on their products. In itself, brand licensing is not a bad thing. Unless your brand does not add value within that targeted niche and does not reflect the quality and expectations of the brand. Michael Jordan partnering with Nike to produce the Air Jordans is one example of brand licensing done right. Had he chosen to partner with a brand that sells kitchen utensils, that would have led to brand dilution.

Expanding into Inappropriate Markets

Again, all brands must grow and expand. But they should do it wisely and aim for adding long-term growth. A brand extension could lead to brand dilution if the company decides to launch a new product that is not on-brand or cannot compete with the quality standards in the market.

Inconsistent Brand Messaging

Each brand starts from a brand manifesto that pervades all products and services. And this brand manifesto should be central to new product developments as well. For examples, if a retailer claims that it wants to contribute to a more sustainable future but later moves production to sweatshops in Asia and fails to provide appropriate wages to its workforce, it fails to live up to its brand expectations. In turn, this upsets its customer base and leads to brand dilution.

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Harley-Davidson Perfume
In 1994, Harley-Davidson launched its own eau de toilette in an attempt to extend its product line with different merchandising products. As expected, the product did not resonate at all with its loyal customer base and was later withdrawn from the market.

Crystal Pepsi
The Crystal Pepsi tasted like Pepsi but its color was transparent. The change in color resulted in a surge in sales, but soon after enough people tried it, its popularity diminished and consumers wanted to go back to the original cola drink. This drink was particularly popular in 1992-1993, but it never stuck with consumers in spite of significant marketing efforts.

Cadbury’s Smash Instant Mashed Potatoes
This is another example of a successful product that did more harm than good. Cadbury’s Smash Instant Mashed Potatoes ran between the early 1960s to the mid 1980s and generated a lot of revenue for the chocolate manufacturer. But this also affected the perceived quality of their chocolate business, as more and more consumers associated it with low-end products.

In spite of your best efforts, brand dilution is difficult to prevent. However, this does not mean that you should not go to great lengths to avoid it. Here are some strategies that could help you steer clear of the dangers of brand dilution.

1. Identify why consumers enjoy your products and do not change it
2. Partner up with another brand when entering uncertain markets
3. Stick to what you know and keep it simple
4. Create a sub-brand when you want to reach a new audience
5. Establish a common thread that weaves through your product offering and keeps it togethe

Brand dilution and brand damage are totally different terms. Brand dilution occurs when a company fails to deliver its promise to consumers while brand damage is more tangible than that. The latter happens when a brand is affected by a news story, improper product quality, or unethical business practices.

One example of brand damage is Takata’s product quality issues. The airbag manufacturer operated with faulty quality processes and this led to the recall of 42 million vehicles throughout the US. The damage caused by the quality issues determined the company to file for bankruptcy as it was unable to cover the compensation damages.

While brands can recover from brand dilution, the same cannot be said for brand damage. As in Takata’s example, brand damage is more severe and can have dire consequences for the future of a brand.

Expanding your brand is exciting, but not if it comes at the expense of your brand image, brand authority, and loyal customers. The brand dilution risk hits big and small businesses alike, and any additional revenue will have to be heavily invested in restoring the initial brand image.

As a result, any expansion opportunity should be consistent with the brand as a whole and heavily analyzed with the dangers of brand dilution in mind.