Research Notes

Brand Extension opportunity for both Media Companies and Retailers

For media companies and retail chains it can be good business sense to contemplate using their well-known brands to market their mobile products to customers.
For media companies, brand extension is a natural and important element – and one of the main reasons – for launching a mobile provider. The customers’ knowledge and trust in the media companies brand can help the media company achieve success as a mobile provider.
For retail chains there are other methods that can help create success. Therefore one questioned quickly arises in connection with launching a mobile provider; which brand to use? Some retail chains choose a strategy where they use their Company Name + Mobile (e.g. Virgin Mobile), while others choose to create a new brand name for their mobile venture.
A retail chain can use their existing brand to market their mobile products to customers, as their existing brand gives them a number of advantages over creating a new brand. For example:

  • The retail chain’s brand is well-known amongst consumers and already has value
  • Customers will perceive the product as being less of a risk
  • Customers will associate the quality of the existing brand name with the new mobile offering
  • Mobile products from the retail chain will attract customers attention and their willingness to try the product will be greater
  • Costs for promotion and marketing will usually be lower

For retail chains there are not only advantages in using an existing brand, there are also a number of disadvantages that can have a large influence on their existing business, as these disadvantages can negatively influence consumers perception of the retail chain, if problems should arise with their mobile offerings.

  • Lack of competitiveness
  • Lack of success in the mobile area
  • Customers experience poor mobile service
  • Customers experience an inferior mobile  product
  • Brand dilution
  • A possible later sale of the mobile provider is more difficult

The list of the negative elements when using an existing brand for retail chain is very long and it will therefore usually make more business sense to create a new brand name for their mobile launch, as it is easier to sell or close a mobile company that has a different name than the retail chain, rather than seeing a failed mobile venture displayed in national newspapers with the headline: “Company name Mobile closes after huge financial fiasco”.
The European retail chains’ brand strategy can be divided into the following:

  • Own brand combined with Mobile
  • Other brand combined with mobile
The recommendation to the retail chains must therefore be that they should carefully contemplate their brand strategy. Most retail chains will find it most advantageous not to use their existing brand, as it could have too large consequences on their core business – retailing. Bad publicity on their mobile offerings could result in customers choosing other shopping possibilities, whereby their mobile offering negatively influences their existing retail business.
Much more information about retail chains doing business as mobile providers is available in our latest report  ” , How to Succeed in the Second-Generation MVNO Marketthat analyses the retail chains future role in the mobile universe and why retail chains need to have a mobile strategy. Included in the report is an analysis of retail chains’ assets/strengths and risks/disadvantages when doing business as mobile providers. The report examines relevant and inspiring cases that document that the retail chains entrance/involvement in the mobile area is not something that may happen in the future, but is in fact a very current phenomenon that will become even more dominant and visible in the mobile industry over the coming years.

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