Monday, 3 March 2014

Why not all brand extensions make sense

The Social Market Foundation (SMF), a cross party think tank, has called upon Transport for London to apply for a banking licence for its highly successful Oyster card.

SMF argues that the trusted pre-paid Oyster card, used to pay for rail, underground and bus journeys throughout London could become a real competitor to the retail banks.

Transport for London (TfL) has given the proposal a chilly reception, arguing that while Oyster is a tremendous success, its focus is on ‘making the journeys of our customers better’.

TfL is ruling out a significant brand extension for its Oyster card and cutting off a potential source of revenue by declining to seek a banking licence.  On this occasion I think TfL has got it right.

TfL’s primary purpose is to facilitate the travel of its nine million customers across the capital.  And, let’s face it, it has some way to go before it can rightly claim to have solved all the issues commuters face.  To seek to extend the Oyster brand might well look attractive on paper, but TfL has rightly concluded that it should ‘stick to the knitting’.

While Osyter might well be a convenient way for commuters to travel easily across London, TfL must be well aware of both the limitations of its own reputation and, perhaps more importantly, the reputation minefield that getting into retail banking entails.

Some brand extensions – where brands seek to leverage their reputations to move into new categories - make great sense.  The Virgin brand has successfully embraced air travel, financial services and health.  While Nescafe has used its strong heritage in the coffee market to move into coffee makers.  But both brands have a strong core reputations and values and have a loyal customer following.

In this case, TfL is right to draw the line