Understanding the boundaries of your brand. What you can or cannot do and what you should or should not do with your brand when it comes to launching second brands.

In my consulting practice, I work with big companies, small companies, old companies and new companies. While the actual laws of branding never change, what laws are most relevant for a particular client often do. What might work for one brand is not necessarily going to work for another.

The most frequent troubles occur with the law of the second brand. Launching a second brand is a powerful tool in expanding the power, success and growth of a company. However, companies often misunderstand when a second brand is necessary. Companies that should launch second brands often don’t and companies that shouldn’t launch second brands often do.

A company should launch a second brand when its initial brand is so strongly positioned in the mind that the new idea will undermine its meaning. But sometimes launching a second brand while strategically sound would undermine the focus of a company and overtax management’s time and attention.

Here are five brand attributes to analyze before your company launches a second brand:
1. SIZE- Bigger companies have more to gain from second brands. Smaller companies have more to lose from second brands.
2. AGE- Older companies need to launch second brands to enter new markets. Newer companies need to dominate an existing market before moving on to a new market.
3. COMPETITION- Companies with many focused competitors need second brands more than do companies with fewer line-extended competitors.
4. OPPORTUNITY- The bigger the opportunity, the more important it is to use a second brand. The less significant the opportunity, the more confusion a second brand will cause.
5. RESOURCES- The man who chases two rabbits catches neither. Unless he hires another man. Can your company afford the resources required to launch a second brand? Resources don’t just mean the money for a second marketing budget, but also the additional drain on management’s time and attention.

Coca-Cola would have been wise to make Diet Coke a new brand instead of a line-extension. While Snapple would have been foolish to give Diet Snapple a new brand name. (Big companies should generally launch second brands. Small companies should not.)

General Electric, a company over a century old, can survive with one brand because in most categories it does not faced focused competition. But GE got slaughtered in mainframe computers because it faced IBM and other focused competition. (Companies with focused competitors need second brands.)

Toyota needed a second brand to move up-market into luxury automobiles (Lexus) and a third brand to move down-market into cool, hip machines for the younger crowd (Scion.) Lexus smartly keeps its brand focused by using model numbers instead of new brand names for its sedans, SUVs and sports cars. (Both luxury cars and cool cars are big opportunities that deserved new brands.)
Understanding the world of branding is important, but knowing where your brand (and therefore your company) can go is even more important.