When markets turn hostile, it's no surprise that managers are tempted
to extend their brands vertically-that is, to take their brands into a
seemingly attractive market above or below their current positions. A
nd for companies chasing growth, the urge to move into booming premium
or value segments also can be hard to resist. The draw is indeed stro
ng; and in some instances, a vertical move is not merely justified but
actually essential to survival-even for top brands, which have the ad
vantages of economies of scale, brand equity, and retail clout. But be
ware: leveraging a brand to access upscale or downscale markets is mor
e dangerous than it first appears. Before making a move, then, manager
s should ascertain whether the rewards will be worth the risks. In gen
eral, David Aaker recommends that managers avoid vertical extensions w
henever possible. There is an inherent contradiction in the very conce
pt because brand equity is built in large part on image and perceived
worth, and a vertical move can easily distort those qualities. Still,
certain situations demand vertical extensions, and Aaker examines both
the winners and the losers in the game. Managers may find themselves
facing a situation that presents both an emerging opportunity and a st
rategic threat, and alternatives to vertical extensions may have even
higher risks and costs. Furthermore, a number of brands have been exte
nded vertically with complete success. If after assessing the risks-an
d rewards you conclude that a vertical extension is on the horizon, pr
oceed with caution. And keep in mind that your challenge will be to le
verage and protect the original brand while taking advantage of the ne
w opportunity.