Should You Take Your Brand to Where the Action Is?

When markets turn hostile, it’s no surprise that managers are tempted to extend their brands vertically—that is, to take brands into a seemingly attractive market above or below their current positions. And for companies chasing growth, the urge to move into booming premium or value segments also can be hard to resist. The draw is indeed strong; and in some instances, a vertical move is not merely justified but is actually essential to survival—even for top brands, which have the advantages of economies of scale, brand equity, and retail clout. But leveraging a brand to access upscale or downscale markets is more dangerous than it first appears. In fact, the battlefield is littered with dead and wounded brands that should serve as a warning to managers who are thinking about such extensions.