On Thursday, Donald Trump will be inaugurated as the forty fifth president of the United States. His campaign to win the presidency will go down as one of the most divisive, offensive and controversial in US political history. His comments on islam, Mexicans, Hillary Clinton, journalists and even elected representatives within his own Republican party have resulted in Trump achieving the worst ever popularity ratings for a president-elect.
Many marketing commentators have already discussed the underhand and at times unethical tactics used by Trump’s campaign. The vast majority of PR and marketing experts are appalled at the tactics trump used and have warned that they may come back to haunt his presidency, particularly when many of his more outlandish promises, such as getting Mexico to pay for a border wall, fail to be delivered.
However, what will be the effect on Trump’s business interests. Interests he seems unwilling to fully divest himself from?
Trump’s property development and leisure empire has been built on his image as a tough, no nonsense businessman. His business was completely reliant on his personal image and lifestyle. It is an image of unrestrained luxury and of excessive bad taste. Much of his election campaign was built on his success as a billionaire property developer. However, as was repeatedly pointed out during the campaign, Trump inherited his wealth and his property portfolio from his father. Trump’s attempts to expand his personality brand into other markets has seen repeated business failures or bankruptcy’s, e.g. Trump Steaks and Trump University. One analysis of Trump’s business holdings concluded that if ‘the Donald’ had simply invested his father’s fortune in a low risk commercial investment portfolio; rather than starting new companies; his wealth would be far greater than it currently is.
Trump’s campaign, and his controversial statements have already cost his corporation $78 million in television contracts as well as lucrative tie-in deals with the PGA, NASCAR and Macy’s department stores. Many of his opponents, have already started campaigns to boycott Trump products and celebrities are refusing to attend Trump sponsored events including his inauguration.
Okay, a political campaign may not be the traditional brand extension strategy but there have been examples where attempts to extend a brand have come back to damage the core product. Harley Davidson, for example, harmed their hard man image by trying to extend their brand into cake decorating kits and perfumes. This was a strong example of a brand extension not matching the expectations of target customer segments.
There are effectively two forms of brand extension. Brand stretching and line extension. Line extension is the application of a brand name to a new product. Anadin, started as a paracetemol brand but the name is now used on products containing ibuprofen, caffeine and aspirin. Brand stretching is using an existing brand name in a completely new market segment. For example Peugeot started life as a manufacturer of bicycles before moving into the motor car market.
Brand extension can have significant advantages. It allows you to use a halo effect from a core product to develop a presence in new market segments. You can play off existing goodwill and existing intellectual property rights. It can lead to economies of scale and reduce promotional costs. Most importantly, it can lead to increased sales of core product lines due to the additional brand exposure provided by a presence across different market segments.
However, brand extensions which offer no functional, psychological or price advantages over competitors product will likely fail.
Poor brand extension policies can lead to cannibalization. This is where a brand extension product takes sales from the existing core product. For example, Absolut Vodka launched a range of flavoured vodkas. These new product significantly damaged sales of Absolut’s core vodka product. Bad publicity for a brand extension product can have a knock on effect to the core brand. For example, Samsung’s exploding mobile phone batteries had a knock on effect to their wider electronic brands.
Sometimes a brand extension simply doesn’t work as it does not meet consumers’ existing expectations. For example, Virgin wedding products such as dresses failed. Consumers saw Virgin’s laid back and rebellious image as inconsistent with their luxury and formal expectations of weddings. Tag Heuer, the luxury watch brand, completely failed to match consumer expectations when the launched a mobile phone.
Martinez and Pina (Journal of Product and Brand Management, Vol 12, No. 7, 2003) examined brand extensions and identified the following implications that must be considered when initiating a brand extension programme:
- What is the impact on the parent brand. Will a brand extension draw away sales?
- Will the extension harm or confuse the existing brand image?
- Will consumers get the link between the existing brand and the brand extension product?
- Is the quality of the core brand and the brand extension consistent? high quality core product may be harmed by a poor quality brand extension? Similarly, if the core product is of lower quality, will consumers be attracted to the higher quality brand extension?
- Does the extension make sense? Extending into a completely new market may not make any sense to your target consumers.
- If the brand extension fails, how will this affect existing product lines? Will the brand extension dilute the existing brand image?
- Are you exploring brand extension simply because that is what your competitors have done? Is the brand extension a ‘me too’ product?
Six questions must be satisfactorily answered if a brand extension is to be successful:
- What is the attractiveness of the new category or market segment?
- What advantages does the new extension being to existing products?
- Can these advantages be made durable?
- How will competitors react to the brand extension?
- Is the extension legitimate? for example, if you sell family-orientated health foods, is it sensible to enter the alcoholic beverages market sensible?
- How will the image of the brand extension feedback onto the image of core products?
With Trump having to either remove himself from his business empire and at the very least ceasing being its image driver, could have a disastrous effect on his business. The bad press and controversy regarding his far right policies and public statements may expose his business to significant bad press.
Some of his business practices; and the fact that his property empire is leveraged to the hilt; will face constant scrutiny in the press.
Trump may have won the presidency, but his political brand extension may destroy his family business.