When first starting a business, you may focus on a marketing strategy aimed at a specific target audience. Once your brand experiences that satisfying initial success, it's only natural to want to build upon it. In fact, many brands start developing revenue streams and casting a wider net in their market.
But what if that next step ends up becoming a misstep and customers lose trust and respect for your brand? Enter, the dreaded brand dilution—a stretch so large that customers no longer recognize the brand they once favored over all others.
In this post, we’ll break down what exactly brand dilution means, the common causes of it, and how to save your brand from losing value.
Tip: Want to avoid brand dilution? Create a logo that clearly represents your brand upfront.
What is brand dilution?
Brand dilution happens when a brand fails to live up to customers’ expectations and, as a result, they negatively perceive the company's value, quality and authenticity. However it happens, the change is usually wildly out of character for the brand or out of sync with their original brand values. As a result, customers feel confused and betrayed.
Think of it like a diluted alcoholic beverage: Too much dilution from a mixer and the drink will become weak and the flavor muddled. The customer might even feel like the bar or restaurant overcharged them and decide not to return—even if they were once regulars.
Research backs this up. InnerView and FocusVision found that brand dilution leads 51% of customers to feel confused and 49% of them to consider alternatives options.
Brands spend a lot of time developing their branding because perception matters business. By maintaining a positive brand reputation, a brand can increase its sales and maintain its loyal customer base. Brand dilution can easily undo all of this, though.
When does brand dilution occur?
When does brand dilution negatively impact one’s brand image? These common scenarios can lead to the watering down or tainting of a brand’s reputation:
A brand releases an unrelated product or enters a different market
Brands become successful when they have a clear message, a valuable product and a relatable brand identity. As they pursue greater profitability, they have a choice:
They can expand by creating products or services that extend the value of their current offering. On the other hand, they can move away from what made customers fall in love with them and try something new.
Brand extension in and of itself is fine. However, when the extension makes no sense given the brand's context and history, it confuses customers and can negatively impacts a company's integrity.
A brand licenses their product or service to someone else
To find success, your business must deliver a consistent and predictable experience. However, the licensing of one’s product or service to another company can diminish your brand perception. diminished brand perception. This can happen in franchising, asset licensing and even brand collaborations.
Brands will license their name and identity to other companies seek, as they know their new venture will generate brand loyalty. However, it doesn’t matter if the original brand has little to no control over the resulting product or experience. Just having their brand name or image attached to it can lead to brand dilution if things go awry.
A brand grows too fast and too big to keep up with demand
You want your business to grow, but not at the expense of quality. Cutting corners because you don't have enough resources to keep up with the work or because you want to grow for growth's sake will not lead your business anywhere good.
When a brand gets sloppy and inconsistent, many business factors can suffer as a result. Product quality may drop, customer support may suffer or the company may compromise its values. Any dramatic shift in the status quo can alter how customers perceive the brand in the future.
Brand dilution examples
Brand dilution can happen to everyone—from small businesses to enterprises, and entrepreneurs to major celebrity brands. You may have heard of these notable brand dilution examples:
BIC’s disposable pantyhose
Today, people know the BIC brand for its ballpoint pens, lighters and razors. What do these products all have in common? They’re dependable, simple products that you can regularly dispose of and replace thanks to the multipacks you buy them in.
In 1976, however, BIC decided to branch out into disposable pantyhose. As Brand Failures blog shares a quote from marketing writer Al Ries that perfectly nails down the biggest problem with this brand extension:
“If you have a powerful perception for one class of product, it becomes almost impossible to extend that perception to a different class. Names have power, but only in the camp in which they have credentials and when they get out of their camp, when they lose focus, they also lose their power.”
Pepsi’s collaboration with Madonna
In 1989, Pepsi paid Madonna $5 million for a year-long contract. During that time, Pepsi was set to sponsor the iconic star’s tour and run ads featuring her.
Problems with their partnership arose after she released her "Like a Prayer" video for the day after their first ad ran. As AP News reported at the time:
“Spokesman Tod MacKenzie said Pepsi was hearing from consumers who confused the song and video, complaining to Pepsi about the music video because they thought it was Pepsi’s commercial.”
Essentially, the timing caused Pepsi’s brand to become entwined with Madonna’s image. Despite their on-brand commercial with Madonna, people started to boycott Pepsi.
Simply attaching the controversial artist with its brand to cost Pepsi some brand equity. To resolve it, they pulled the existing ad and terminated any future ones with Madonna.
Elizabeth Berkley does Showgirls
A study in the Journal of Marketing Research claims consumers carry brand associations with celebrities in the same way they do products, and that those associations can positively or negatively affect how they perceive an upcoming movie or television show.
“Our rationale is as follows: First, in our study context, the brand name of the movie star not only provides the movie with some immediate consumer base (i.e., loyal fans of the movie star) but also serves as a signal to convey information about the expected quality of the movie. This rationale is consistent with previous findings that when a branded component appears in a new product, it facilitates the acquisition of initial consumer awareness and provides an endorsement of product quality.”
As such, celebrities are just as susceptible to brand dilution as businesses. Take the example of Elizabeth Berkley. She made a name for herself doing wholesome TV movies and shows, with her most notable role as Jessie Spano in Saved by the Bell.
After four-plus years playing the ambitious character, she took on the lead role of Nomi Malone in the provocative film Showgirls. Going from a quirky teen comedy show to an NC-17 film did not sit well with her audience.
As Berkley explained to People.com:
“Of course it was disappointing that it didn't do well, but there was so much cruelty around it. I was bullied. And I didn't understand why I was being blamed. The job of an actor is to fulfill the vision of the director. And I did everything I was supposed to do.”
The leaked Starbucks memo
In 2007, Nation’s Restaurant News reported on the leaking of an internal memo written by Starbucks’s co-founder Howard Schultz. The post provides some context on the leaked message:
“Schultz wondered if some of the decisions of the past 10 years that helped the chain advance from fewer than 1,000 to more than 13,000 locations worldwide had led to a ‘commoditization of our brand.’ He lamented more ‘sterile, cookie-cutter’ store environments, their loss of coffee aroma since the adoption of flavor-lock bags, and the diminished service theatrics that came with a switch to robotic espresso machines.”
While Starbucks was and still is one of the top coffeehouse brands in the world, Schultz rightly wondered if brand dilution had set in. Around that time, Starbucks was losing ground to companies like Dunkin’ and McDonald’s for the very reasons he states in the memo.
In this case, franchising didn't cause brand dilution, as all the locations followed the same playbook. The problem was the playbook itself—the brand had consistently lowered product quality as it attempted to scale its operation.
How to avoid brand dilution
Part of good brand management is making strategic decisions—especially when extending the business in a new direction. Avoid brand dilution as you grow by following these management strategies:
01. Hold tightly to your core values and messaging
Make a list of your brand values and place them in a visible location. Before you commit to any new product developments or brand changes, make sure they uphold these values, messaging and vision.
02. Choose your partners wisely
The same holds true if you license your brand or collaborate with influencers or brand ambassadors. If a potential partner can't reflect your brand image, then you shouldn’t work with them. It will take much more time and money to rebuild what you lost than passing on the opportunity in the first place.
03. Scale slowly
Achieving foundational success can be exciting. However, trying to race to the finish line often leads brands to cut corners and sacrifice quality and user experience for anticipated profitability. Carefully plan out what you'll do and take each step slowly and carefully.
04. Always do user research and testing before making any changes
Just as you’d show your users a rebranding of your website before implementing any changes, you should do the same before you grow your brand. After all, you’re attaching your brand name to a new product, partnership or venture because you assume that your loyal customers will follow whatever you do. The only way to ensure that you won’t confuse or disappoint them is by getting their direct input through research and testing.