Despite careful planning (or perhaps due to the lack thereof) companies may find themselves with a business that is NOT increasing the equity of the brand or of the bottom line, and a decision is made to terminate that extension. Two pivotal factors in determining your strategy:
a) whether the product or service is produced in-house or through a partner
b) whether or not there has been substantial brand equity damage
The termination of extensions produced in-house is largely a matter offinancial planning. Internally, inventory and staff liabilities will needto be assessed. Externally, any product currently in the distributionchannel must be taken into account, as well as the potential relationshipdamage which may ensue. Factored into your planning should be sell-off ordisposal plans for existing product, timing of any necessary write-offs andplans for affected staff and facilities.
Should you have a partner, either licensee/licensor, franchisee/franchisoror joint venture collaborator, your contract should spell out the plan fortermination, including potential actions and liabilities. Up-frontnegotiation of these issues is critical, though often overlooked bycompanies new to eager to launch a new business and not contemplating itsdemise. Early in my career, I had the job of terminating a pre-existinglicensee without a detailed termination clause and learned firsthand thetime, expense and bad feelings caused. If your contract does not articulatetermination procedures and liabilities, these will need to be negotiatedwith your partner at this time, with consideration of your brand equity inmind.
Ideally, you will want to quietly exit the market, following an orderlyplan. However, if the failure of the business extension has causedsubstantive damage to your brand equity, consumer confidence and/or channelrelationships, a PR plan will need to be developed, ensuring that affectedparties understand that you are terminating the business specifically torepair any damage, attempting to turn negative impact into positive support.
Principal, Maven Marketing Solutions