The Law of Division<\/strong><\/h2>\n\n\n\nOver time, as the number of companies in a market shrinks, the category tends to divide into more specific categories. For example, what was once a single \u201ccomputer\u201d category eventually divided into mainframes, minicomputers, personal computers, laptops, and notebooks. Even popular music evolved from one general category into the multiple categories, including jazz, R&B, dance, Latin, country, and pop. Each new category then develops its own hierarchy of brands. If a market leader wants to enter one of these emerging categories, it needs a new brand name for that category. <\/strong>Although it seems logical to extend the same, successful brand name to a new product, doing so confuses customers and hurts the company\u2019s credibility. Customers have come to associate the existing brand name with a specific attribute, so the company needs a different brand name to link to an appropriate word for the new category. <\/p>\n\n\n\nFor example, Volkswagen found success with its Beetle in the small car category, but the company flailed when it tried to extend its dominance to categories for bigger and faster cars with the Vanagon, the Cabriolet, and the Scirocco\u2014all under the Volkswagen brand. As a result, Volkswagen lost a huge portion of its market share. By contrast, when Honda decided to enter the luxury car market, it created the Acura, which allowed Honda to maintain its existing dominance while Acura developed a distinct reputation in its own category. Ultimately, Honda and Acura became the market leaders in two different categories. <\/p>\n\n\n\n