EBay Express a failure, I’m shocked. (just kidding)

December 20, 2006

In today’s Wall Street Journal the top headline is “EBay’s Bid to Go Beyond Auctions Isn’t Selling Well.”

Really? I’m shocked!

Well, actually I’m not shocked. I could have told you that months ago because the idea of EBay going beyond auctions violates a fundamental law of branding. And when you violate a fundamental law your brand suffers.

The Law of Expansion states that the power of a brand is inversely proportional to its scope. In other words, expansion weakens a brand. When you try to stand for everything and appeal to everybody your brand loses its meaning in the mind.

EBay owns online auctions in the mind, a powerful and profitable position to own. EBay owns it because online auctions created the category by being first in the mind.

EBay selling goods at fixed prices make no sense for the brand or to consumers. EBay Express is totally confusing and contradictory concept.

So why do companies constantly mess with a good thing? A never ending demand for growth on a quarterly, monthly or even daily basis at all costs. Unfortunately, building a brand for long term with a solid focused strategy like Southwest Airlines and no frills is the exception rather than the norm in business today.

To attain growth business leaders constantly try to move beyond the boundaries of their brands for a quick growth fix. Unfortunately the quick fix usually fails and many times even leads to long term losses for the brand.

Some examples:

1. Volvo C70 convertibles & coupes.

A carefree sporty convertible is the complete opposite of what the Volvo brand stands for. Not surprisingly the sporty Volvo C70 models did not sell well and were the biggest automotive sales flops of 2005.

2. Kids “R” Us clothing.

At its peak Toys “R” Us, the former top U.S. toy retailer, expanded its brand into Kids “R” Us and Babies “R” Us. Babies “R” Us has succeeded in spite of its lousy line extension name because it was first in a new category and faces no serious competition. (It might have been a better idea to give the brand its own name.) On the other hand, Kids “R” Us was a total disaster. And the toll it took on management’s time and attention under minded the Toys “R” Us brand. Today, Wal-Mart is the leader.

3. IBM personal computers.

When IBM launched its PC line in 1981, the company was the most powerful, most admired company in the world. The PC line was even first in a new category (the first 16-bit business personal computer.) Yet IBM reportedly lost $15 billion in personal computers over a 23-year period. Finally IBM threw in the towel and sold out to Lenovo, a Chinese company.

Every company wants to increase sales. Fortunately there is a right way and a wrong way to do so. In most situations, line extension is the wrong way.

Launch a second brand.

A better strategy is to launch a second brand. As Toyota did with Lexus. As Sony did the PlayStation. As Apple did with iPod. As MTV did with VH1.

A second brand allows a company to expand while still protecting the integrity of its core brand. Even today, IBM still means mainframe computers. Twenty-three years of marketing personal computers didn’t change its basic perception.

The truth is that nothing in marketing or in life is more difficult than changing a human mind. Go home and try and change the mind of your spouse and you’ll see what I mean.