Learn about: 1. Introduction to Brand Extension 2. Meaning of Brand Extension 3. Types 4. Approaches 5. Hierarchy 6. Bases 7. Strategic Framework 8. Factors Influencing 9. Why Companies opt Brand Extension 10. Advantages, Disadvantages and Future 11. Guidelines.
Brand Extension: Introduction, Meaning, Types, Examples, Advantages, Disadvantages, Approaches, Factors, Guidelines and More…
Brand Extension – Introduction
Brand extension is a part of brand management to diversify and leveraging the existing brand by entering into new product category by new product development. Positive images and strengths of existing brand/parent brand are leveraged to bring another success story for new product. Brand extension is increasingly used by companies as a part of strategy for product developments. It is viewed as one of means to attain integrated brand architecture.
The use of same brand on existing product (parent brand) for a new product in different category (extension brand) increases rate of new acceptance and purchase intention to consumer. The strategy maintains efficiencies on advertising and promotion expenditures yet still can create new market segment. Company is not in position to allocate marketing expenses at the same level as spent by the parent brad, yet may gain similar level of success.
A strong reputation of parent brand can minimise risk of new product launch by taking advantages on consumers’ knowledge and experiences of the established brand. It may not be feasible for companies to build new brands as frequently as demanded by the market place. They hence resort to extend the equity of the existing brands to support extensions in unrelated or related product categories. The former is termed as brand (category) extension and the latter as line extension.
According to Philip Kotler, “a brand extension strategy is any effort to extend a successful brand image to launch new or modified products or lines.”
According to Kelvin Lane Keller, “brand extension is the use of established brand names to enter new product categories or classes.”
Brand extension is certainly a way in which the brand can be made much stronger but it also has the potential to dilute the brand equity or cannibalize sales of the parent brand. Too much brand extension that we see nowadays could be viewed as indicative of poor brand practice.
Brand extension is a strategy used in marketing. A company which is already branded in the market with a predefined image will make use of the same brand name to market a different product category. By using the new product category linked with the existing brand name, the market reach of the new product can be made easy. Since the market is already aware of the existing products that are associated with the brand, the new product will reach out faster to the customers.
When a new brand is combined with an existing brand, the brand extension is called as sub-brand.
An existing brand which gives rise to a brand extension is called a parent brand. In a scenario, when the parent brand is already linked with many products through many brand extensions, then it is called as a family brand.
When the customers of the existing product have greater values of the product, it is likely that the customers will accept the new business.
Brand Extension – Meaning
There is a lot of equity in a brand name which the marketers try to exploit to the fullest. Extending in different categories with the same brand name is called Brand Extensions. It refers to taking a brand name that is already established in one product category to another category by encashing on its name.
Mars is no longer a chocolate but, also a chocolate drink, bar of chocolate and an ice cream. Horlicks was only a health drink but, now includes a Nutribar along with Foodies as its products. These examples tell us that a renowned brand name can help a company to launch new categories related or unrelated. These siblings with the same name coming from the same company are the marketing manger’s asset.
The degree of extension possible in a brand depends on how closely the introduced lines relate themselves to the core of the brand and its value proposition. Building new brands is risky and expensive. The studies show that cost of establishing a new brand in international markets is more than $100 million.
Thus, the companies prefer the route of brand extension to leverage the equity of the already existing brand. For some product categories brand extensions form more than 90% of the new product introductions.
The brand extension is successful as long as the new product can relate itself to the core of the brand and live up to the expectations of the brand .Wipro extended its brand from FMCG to IT solutions, medical transcripts, etc., all related to the brand core ‘applying thought’ throughout innovation. The correct brand extensions make the customer aware of the new product and strengthen the core of the mother brand. It gains the trust of the customer with the help of parent brand name at a much lower cost.
The success of the brand extension depends on the rationale behind the extension. The company should segment the target market in a way as never before and leave the competitors stupefied so that they take longer time to react. But if incorrect, it may dilute the brand image, cannibalize other products or even damage the parent brand’s name.
Brand Extension is defined as ‘the process by which a brand leverages its strength and reputation and enters with more variant either related or unrelated so as to draw the benefits of brand popularity in entire new segments and new market to create value for itself and its customers’. – Dr Y. RamKishen
Top 5 Types of Brand Extension (With Examples)
Brand extension can be categorized into the following:
1. Line Extension:
When the same brand is used to launch a product in a different way it is called line extension. Byline extension, the product will be a slight variation to the existing ones. For example, Amul launched condensed milk which is an extension of milk; head and shoulders launched many shampoos that cater to different hairs. It can also indicate the resizing of the product. For example, Tropicana juice that comes with long and small packs.
When the company launches an entirely new product it is called as the product extension. For example, Colgate Company which first used to make paste later started launching many products related to oral care, personal care etc. Hence customers who were already using Colgate paste will tend to use the new products as they are already aware of the quality of a product.
Based on the customer group, the product range is extended. This type of extension basically targets a specific group of customers. For example, Johnson and Johnson’s company mainly focuses on products that are specific to babies like baby shampoo, powder, soap etc.
Based on the expertise of the company, the company launches product category that makes use of the same name. For example, Samsung launches many products likes washing machine, mobiles, refrigerator etc.
5. Extension of Brand Distinction:
There exist many brands that are unique with respect to the benefits. These brands are mainly highlighted with respect to the benefits that they offer to the customers. For example, Dhatri oil has been imbibed in customers for its herbal nature that reduces hair fall and improves hair growth.
Brand extension need not always be a success. It can lead to some failure brand extension. Let us consider some examples.
i. Consider the brand Dove – It was mainly known for soaps. But now it is extended too many products like shampoo, deodorant and body wash. The brand extension of the dove for the new products has been a great success.
ii. Consider Adidas – The company started its brand of shoes. Later they launched many products related to footwear, clothing, accessories, and sports.
iii. Consider Titan – The company started its brand for watches, later positioned itself into the Titan house of jewellery, watches, eyewear and leather products.
i. Colgate Kitchen items – This brand extension was a failure as it was not accepted to associate Colgate with meal as it was associated with oral and personal care.
ii. Consider new Coke – Coco-cola could not become successful in case of Coke.
iii. Rasna Ltd is one of the famous soft drinks. When it tried to change it product to its fizzy drink Oran jolt, it could not succeed.
Different Approaches to Brand Extension
Brand can be extended in many different ways – new product development is not the only option. Existing products should undergo a continuous process of review and refinement to ensure that they remain focused on changing customer needs.
There are number of different approaches to brand extension as:
Enhancing an existing product is a suitable strategy for products which are in a growth or mature phase. The enhancements might include new features and/or performance improvements. These changes can be based on a customer- needs assessment or a competitive-matching strategy.
Price may be inhibiting factor for some prospective customers. Thus, introducing a lower-priced version of an existing product may broaden the market for the brand. In producing a budget version, care must be taken to avoid diluting any of the brand values that differentiate the product.
Extending the range of an existing product-line allows building on the reputation and success of the existing brand to sell more products through the same sales channels. The critical decision is whether to extend the range with similar products, or to introduce entirely new types of product. Customers may be more likely to accept new offerings when they are comprised of similar products, due to a familiarity factor.
This strategy is based on the refinement of existing products to meet the different requirements of distinct market sectors. Essentially, product variants allow segmenting the market more effectively. Adopting this strategy allows the organisation to concentrate on meeting the precise needs of individual sectors while focusing resources on the most important ones.
A niche market is a small, specific market sector identified by some special, common characteristic. As an alternative to concentrating on the whole market, a company might focus on specific niche sectors where it has strengths or opportunities that are not available to competitors. This approach typically delivers lower volumes – a niche market, by definition, is small in size- but higher prices.
A private label sale is the practice of licensing the product, in standard or modified form, to other companies to sell under their own brands, rather than under the company’s brand name. This strategy is a low-cost option that generates revenue, but reduces the opportunity to improve market share for company owned products.
An existing product can be sold in combination with additional products or services from a third party. This practice is referred to as bundling. A bundling strategy, like the private label strategy, allows companies to increase their own range and extend the brand without a heavy investment in new product development. Bundling products reduces the cost of product development and accelerates the time to market.
In a competitive marketplace, a strategy of matching or responding to the actions of competitors is sometimes necessary. With this strategy, one may be successful in retaining market share, but is a defensive approach that does not necessarily drive the company forward.
This strategy reduces the cost and risk of new product development, but it focuses on retaining market share rather than market development. There is minimal competitive advantage because these product developments are easily imitated.
Brand Extensions Hierarchy
1. Single Brand Extension:
The recognition for a brand can be more than the corporate name and other brands available in the company’s basket. The company may decide to launch all extensions with the name of that brand. So, the customers will see a range of products with the same brand name. For example, Nivea is a brand that belongs to Beiersdorf from Germany.
The brand recognition across markets for Nivea is much more than its parent firm and their other brands like Florena, Eucerin, and Slek, etc. Thus, they extended their brand Nivea into men’s and women’s creams, deodorants, lip care, body care, and bath care, etc.
2. Category Extension:
If the company enters a new segment where its presence was not there before it is called category extension. The company may choose entirely unrelated category from its present image. For example, wills brand extended itself from Cigarettes to Clothing by the same name. They launched Wills Lifestyle and Wills sports wear and accessories, etc. In another example, ‘Economic Times’ extended themselves from print media to electronic media with their television channel ET Now.
3. Line Extension:
Different variants in a same product type are called Line Extensions. Generally, a brand should look for a niche or a segment that is either empty or only taken by competitors. This should be done to avoid cannibalization among the brands. For example, Sunsilk, has different variants in the shampoos namely Sunsilk Black, Sunsilk Yellow, Sunsilk Pink, etc. Also, Lux with almonds, aqua, chocolate, soups are all examples of brand extensions.
4. Corporate Extension:
When the corporate name is used as the brand name for extensions in various businesses and products it is called Corporate Extension. For example, Tata is one of the largest and the strongest corporate brand that belongs to India. Tata’s name represents reliability and trust.
The company initially started with steel and chemical business from where it has moved to consumer products like IT services (Tata InfoTech), Finance (Tata Capital), Real estate (Tata Housing), Insurance (Tata AIG), and Consultancy (TCS). The brand has seen such diverse extensions due to the equity that it enjoys and has been able to extend from manufacturing, machinery to services.
Bases for Brand Extension
The following seven important factors make companies pursue extensions as a significant element of their marketing strategies:
i. Consumer Segmentation:
Line extension is perceived by managers as a low-risk way to meet the needs of various customer segments, and by using more sophisticated and lower-cost market research and direct-marketing techniques, they can identify and target finer segments more effectively than ever before.
In addition, the depth of audience- profile information for television, radio, and print media has improved; managers can now translate complex segmentation schemes into efficient advertising plans.
ii. Consumer Desires:
There is widespread volatility in the consumer behaviour and brand loyalty has taken more or less a back seat in many different categories of consumer goods and services. More consumers than ever are switching, brands and trying products they’ve never used before.
Line extensions try to satisfy the desire for “something different” by providing a wide variety of goods under a single brand umbrella. Such extensions, companies hope, would fulfill customers’ desires while keeping them loyal to the brand franchise.
Managers have found a novel way of increasing profitability through line extension. Managers often tout the superior quality of extensions and set higher prices for these offerings than for core items. In markets subject to slow volume growth, marketers can then increase unit profitability by trading current customers up to these “premium” products. In this way, even cannibalised sales are profitable — at least in the short run.
In a similar spirit, some line extensions are priced lower than the lead product. For example, American Express offers the optima card for a lower annual fee than its standard card, and Mariette introduced the hotel chain Courtyard by Mariette to provide, a lower-priced alternative to its standard hotels. Extensions give marketers the opportunity to offer a broader range of price points in order to capture a wide audience.
Line extension helps in utilizing the excess capacity of the production facilities of the firm. In the 1980s, many manufacturing operations added faster production lines to improve efficiency and quality. The same organisations, however, did not necessarily retire existing production lines. The resulting excess capacity encourages the introduction of line extensions that require only minor adaptations of current products.
Besides sales promotions, line extensions represent the most effective and least imaginative way to increase sales quickly and inexpensively. The development time and costs of line extensions are far more predictable than they are for new brands, and less cross-functional integration is required.
In fact, few brand managers are willing to invest the time or assume the career risk to introduce new brands to market. They are well aware of the following, major brands have staying power (almost all the 20 brands that lead in consumer awareness were on that list 20 years ago); the cost of a successful new launch is now estimated at $30 million, versus $5 million for a line extension; new branded products have a poor success rate (only one in five commercialised new products lasts longer than one year on the market); and consumer goods technologies have matured and are widely accessible. Line extensions offer quick rewards with minimal risk.
Senior executives often set objectives for the percentages of future sales to come from products recently introduced. At the same time, under pressure from stock exchanges for quarterly earning increases, they do not invest enough in the long-term research and development needed to create genuinely new products. Such actions necessarily encourage line extensions.
vi. Competitive Intensity:
Mindful of the link between market share and profitability, managers often see extensions is a short-term competitive device that increases a brand’s control over limited retail shelf space and its overall demand for the category for new branded or private-label competitors and to drain the limited resources of third and fourth place brands.
Close-up and Colgate toothpastes, for example, both available in more than 15 types and package sizes, have increased their market shares in the last decade at the expense of smaller brands that have not been able to keep pace with their new offerings.
vii. Trade Pressure:
The proliferation of different retail channels for consumer products, from club stores to hyper-markets, pressures manufacturers to offer broad and varied product lines. While retailers object to the proliferation of marginally differentiated and ‘me-too’ line extensions, trade accounts themselves contribute to stock-keeping unit (SKU) proliferation by demanding either special package sizes to fit their particular marketing strategies (for example, bulk packages or multi-packs for low-price club stores) or customized, derivative models that impede comparison shopping by consumers. Black & Decker, for example, offers 19 types of items in part to enable competing retailers to stock different items from the line.
Strategic Framework for Brand Extensions
The brand Extensions help the company by increasing its customer base as the company enters into new segments. It also helps in converting new users to the brand and retaining its already existing customers. For the company the risk of launching a new product in the market through extensions reduces drastically. MTR Group extended itself into various unrelated businesses like ice creams, masala powders, ready to make foods and concept kitchens.
Thus, given below is the strategic framework to understand how brands can diversify using brand extensions to their advantage:
1. Why use brand extensions?
The brand extensions are used to increase acceptance of the new product in the market. If the image of the parent brand has high quality the same will be associated with the new brand. The customers risk in trial purchase is reduced considerably as they trust the brand. Launching new brands with the same name also cuts down on the advertising expenses. Brand extensions can also be used to create a new segment in the market.
2. Selecting Brands from the Portfolio:
If a brand is successful, then temptation of leveraging its success is natural. But, if there are more than one power brands with the company, deciding on which brand to extend becomes critical. For example, Reckitt Benckiser has 19 power brands; they decided to extend Dettol but, did not extend Cherry Blossom.
Dettol has extended in different categories from being an antiseptic solution to antiseptic soaps, liquid hand wash, body wash, shaving cream and plaster.
3. How is brand extensions done?
A brand can be extended in various ways. The dilemma is whether to extend the brand with the same name and/or a different name. The name here refers to the corporate brand or the product brand. For example, L’Oreal has extended itself in consumer products, professional products, luxury products and active cosmetics.
L’Oreal uses its corporate brand name on its hair care products, beauty products and skin care products as well. However, it does not use corporate brand name on Gamier products.
4. Select the Type of Brand Extensions:
The brand extension can be extended as a product form extension, companion product, customer franchisee, and company expertise; depending on the company’s core strength will marketers decide from these extensions.
i. Product Form Extensions:
The form of a product may be considered as two different categories. Thus, a product may be launched in a new product form and it will be a brand extension if the consumer behaviour perspective for the two forms is different. For instance, Milk when dry and in liquid state is considered as two product forms.
Similarly, the Chocolate bars and Chocolate powder belongs to two different categories. For example, Amul milk and condensed milk are an example of product form extension. Also Real Juices and Real Active Concentrate are two different forms.
ii. Companion Product:
This form of extension is most common and here the company tries to piggi back on one successful product. When the product has the companion need, this form of extension becomes successful and thus, companies can get success in product categories together. Like toothbrush and tooth paste are companion products and thus, Colgate toothpaste and toothbrush. In another example, Gillette razors, shaving cream and after shave lotion are examples of companion products.
iii. Customer Franchisee:
The company may decide to cater to a customer group and their diverse needs. Thus, establishing a strong hold in that segment and reinforcing its positioning for that segment. For example, Johnson & Johnson launched baby shampoo, baby talc, baby oil and baby diapers. These extensions have helped Johnson & Johnson to grow in the baby care segment. Thus when it comes to baby care the name with the highest recall is Johnson & Johnson.
iv. Company Expertise:
A company’s expertise may entice them to launch extensions emanating from the same expertise. This is particularly prevalent in Japanese companies. For example, Honda is specialized in automotive parts and engine. Thus, Honda has extended to cars, bikes, scooties, and generator sets.
v. Brand Image or Prestige:
The brands with high Equity and prestige can easily extend into other categories. The exclusivity in the brand bestows ample opportunities for brand extension. The products may be different but, they are held with the same prestige and appeal that they hold for its customers. These are aspirational brands. For example, Cartier jewellery, watches, purses and pens. Satya Paul Saris and Ties, etc., are examples of extensions leveraging the Brand image or prestige.
vi. Brand Distinction:
The brands may attain distinction in the form of unique attributes, benefits or features which get uniquely associated with the brand. Thus, the company can launch various products exploiting this distinction and may work backwards to think of various products. For example, Parachute expertise is the coconut oil that it is associated with; thus, Parachute hair oil and Parachute hair cream are all exploiting the coconut associations.
vii. Distinctive Taste, Ingredient or Component:
A distinctive taste or ingredient can also be used to develop equity. These associations are developed over a period of time after customers have used or experienced the brand. These associations stay with the customers and marketers can capitalize on the same. For example, Nescafe enjoys proprietary association of a distinctive taste, which has been leveraged in launching extensions like Nescafe coffee, chocolate, biscuits, cold coffee and supplement.
5. Check List before Launching a Brand Extension:
The brand extension should be launched after screening the brand through the following checklits.
There are various questions that will help the company understand the brand profile and its own image so as to decide how to extend the brand:
i. What is the brand’s philosophy?
Brand Philosophy, is its vision, mission and the values, and whether these are clearly understood or not. The brands have to decide whether, the new extension will be in line with the same or not.
ii. What is brand awareness level and brand recall and recognition level?
This will help the company understand whether the customers are aware of the brand or not. Can the customers recall the brand name, is the brand recognized or not? The awareness level and the recall will help the company decide is it beneficial to launch an extended brand with the existing brand name.
For example, if we take the example of Virgin Group, it had extended into various businesses unrelated and related to each other. All the brands from Virgin carry this name. The brand stands for fun and lifestyle and each of its extended brands are launched on the same values.
iii. What are brand’s personality associations?
The personality associations signify how the brand is perceived among its customers. The extended brand should have the same personality associations as the parents’ brand. For example, Crayola, a subsidiary of Hallmark inspires artistic inspirations in the children. All its extensions have been in the spirit. They have Crayola crayons, coloured pencils, markers, paint colours, glow stations and glue, chalk, etc.
iv. What benefit associations are connected with the brand?
The benefits can be functional and emotional associations that customers link with the brand. The brand can provide more than one benefit to the customers. For example, Volvo customers see the safety benefit in the brand.
v. What are the symbols associated with the brand?
Symbols are images, logos and colour association with the brand. For example, Parachute has always used coconut in their communications to stress the fact that it is pure coconut oil. Hence, when they extended into hair creams the image was maintained.
vi. What are the brand user’s associations?
This helps the company understand the user profile or what is thought to be the user of the brand. For example, LG had tied up with Reliance for their handsets and it got the user profile of a low end handset for the lower sections of the society. Thus, LG had to break the tie up to improve the image in the market.
The brand extension strategy implementation phase will take care of all the steps required to make a positive impact about the new offering. The creative for the advertisements and the logo design, the packaging design, etc., has to be kept in mind. The name of the main brand will be small or prominent, etc.
An extension can be further taken forward in the form of sub-brands. For example, once Real juices from Dabur were successful, they launched a sub-brand for its extension called Active. So, they launched Active juices in various flavours like apple, carrot, mango, etc.
The brand extension performance is evaluated after 6 months of its launch. This is to evaluate whether the new extension has been accepted by the market. The company checks whether the brand is able to compete against its competing brands or not. For example, Bingo Mad Angles were compared with Kurkure after its launch.
The successful brand extension leads to value creation and saves the cost of launching a new brand for the company. The brand visibility increases and the brand is successful in creating a new segment in the market. The extensions also help to develop value for the brand. For example, in case of GE, they only advertise their corporate brand.
GE deals in a variety of businesses, ranging from medical equipment, lighting and avionics, etc. They have imprinted an image of credibility by these extensions, delivering the same value and quality as the parent firms.
7 Important Factors Influencing Decision for Extension of Brands
Factors influencing decision for extension of brands are as follows:
1. Company Factor:
Enterprises should be in the leading position in existing products, should have sufficient financial resources and talent pool for new products or new extension of the industry. Otherwise, not only new industries easy-to-die, but will also lead to the main industry in decline.
Every brand extension is lost opportunity to build a new brand. While extension takeaway lot of pressure from the marketers, one should have a clear understanding about the potential loss of an opportunity to build a new brand.
Enterprises in brand extension decision-making must take into consideration the psychological concerns of consumers. If an industry, the consumer brand attention, is not high, enterprises in this industry, the brand extension, the resistance will be smaller. Concerned about the high degree of consumer brand industry, enterprises of this industry, the brand extension, the resistance may be higher.
Because consumers in choosing the products of such industries, it is usually better to invest time and effort to understand the alternative brands, such as the observation of brand image, to understand the brand quality, brand reputation, different demands and other brands, due to information a symmetry, etc., reason, most consumers would choose in this industry already exists in the strongest brands. For enterprises, give full consideration to their own industry characteristics and consumer involvement is an important brand extension success factors.
The biggest threat of brand extension is the possible loss of focus on the parent brand because of extensions. Brand extensions are opportunities for growth. While extending, marketers should not largest that the extensions are based on the equity of the original brand. Any change in the marketing mix strategy of the extensions will have an effect on the parent brand. This strong relationship between the extensions and parent brand should be taken into consideration during every brand promotions.
3. Product Factors:
Talking about the brand, a very important concept has to say, it is brand association. Brand association can be seen as a brand and competitive brands to distinguish the attributes or benefits, or the brand associated with a unique meaning. Many brands in the consumers stirred some unique associations, they can be abstract attributes, such as elegant, noble, stylish, but also can be a specific associations, they can be abstract attributes, such as elegant, noble, stylish, but also can be a specific product attributes, such as a specific colour, flavor, corrosion-resistant, waterproof and so on.
In the brand extension, if the original positive brand associations can be transplanted to new product, then it can safely carry out the brand extension. For a new brand, the decision to extend or not to extend in future will have its implication in the selection of brand name and positioning.
A brand name which is highly associated with a product features or category will have limited scope for future extensions. The positioning strategy will also have to be crafted in a manner which will facilitate future brand extensions. For an existing brand, the decision to extend or not will bring about a need for a change in the current positioning strategy.
The product factors are:
i. Fit between Parent Brand and Brand Extension:
The fit between the parent brand and the brand extension is probably the most important factor that impacts the success of the brand extension. Fit can be analyzed from multiple perspectives. But generally fit refers to the compatibility of the brand extension’s product category, product attributes and associations to the parent brand’s product category, product attributes and associations.
Greater the fit between the parent brand and the brand extensions, higher is the probability of the success of the brand extension.
ii. Parent-Brand Conviction and Parent-Brand Experience:
The other important factor that influence the success of the brand extension is the quality of experience that consumers would have had with the parent brand.
Such brand experience can include the physical quality of the product, the service encounters, the price and value perceptions, the post- purchase service, the retail atmosphere and such. Also, the parent brand conviction, which refers to the extent of support and commitment the parent brand has towards the brand extension, also impacts the success of the brand extension.
4. Market Factors:
Brand extension success depends largely on the capacity of the market, the market level of competition, product lifecycle stages and other market factors. In general, the market capacity, as long as the enterprises have strength, have the opportunity to bring a brand bigger and stronger, it is appropriate to multi-brand; on the contrary, even if the success of using an independent brand, and is not effective, so is appropriate to brand extension.
The study also showed that in the product life cycle into embryonic period of the effect of the use of brand extension will be better than the obvious maturity. Competition in the market conditions affecting the effectiveness of brand extension to another market factor, if the market competition is not fierce; it is easy to extend the success of the other hand it is easy to defeat.
The market factors are:
i. Extendibility of the Original Brand:
The most important task for a marketer looking for brand extension is to have a vision for the brand. Brand extensions, as a short-term marketing strategy will be damaging for the parent brand. The development of a long-term vision starts with the critical questions as to whether the brand should be extended or not.
Once the marketer has decided on the extension, he has to chart a growth path for the brand. The vision involves deciding whether the parent brand should be used as an umbrella brand or as an endorser. The careful planning of the brand’s future will eliminate lot of confusion in terms of positioning, category decisions, etc.
ii. Suitability to the Product Lane:
Marketers should be clear about the impact of the brand extension on the product line of the company. Authors John Quench and David Kenny in Harvard Business Review article – Extend Profits Not Product lines suggest that the company sales officers should take a line logic test where they should be able to explain in one sentence, the strategic role played by each SKU (Stock Keeping Units) in the product line. The consumer should also be able to understand the how these extensions fits his/her needs.
iii. Retailer Experience:
In spite of the ever increasing influence of the internet shopping of even the branded products, retail spaces in the physical world still continues to have a strangle hold on distribution. As such, the successful- Brand Extension Success – New profit growth of many brands is contingent on securing shelf space and the marketing push provided by the retail establishment. Similar is the case with brand extension. If the companies that extend their brands are not welcomed by retail stores and are not offered marketing support and push by the retail stores, then the success of such products are limited.
v. Marketing Support:
This is one of the important factors that determine the success of brand extension that is under the control of the company. Given the proliferation of brands in the market, it is only natural that the company that invests highly in promoting its brand extension eventually ends up in a better position. Such support will help achieve two objectives – one, it will facilitate a very aggressive push and pull demand for the brand extension, and it will help to create positive perceptions about the company in the minds of the consumers.
The brand name identification and the original product, if not linked directly to the extension of an impact, some of the brand identity of the symbols of the original description of the product too, implying that the interests of the product, so that the brands of natural and original products are closely linked, the reach is very limited.
After the brand extension is a new product with the original brand-name products in the same channel sales and promotion, brand extension is an important issue in decision- making. First, the brand extension of a great benefit is that one can use a similar marketing channel in order to save the cost channel. In addition, the questions are whether the location of the managers on the consumer to test the brand extension decision is correct.
Brand extension of the competitive environment includes peer brand strength, the degree of competition, as well as peer- peer level exit. The more intense competitive environment, brand extension is the more difficult.
Generally speaking, such a competitive environment includes the following aspects:
i. Brand Strength Counterparts – A new product in the market and it will directly face the competition with the brands.
ii. Peer Marketing Power – Refers to an extension of the product counterparts in advertising public relations, promotions, staff promotion, channels, and so forth.
iii. Peer Level of Competition – Refers to an extension of product markets where the same quantity and quality of production enterprises.
Why Companies opt for Brand Extensions?
1. Piggy Bank on Existing Brands:
Companies can piggy bank on the awareness of the brand name and the equity it has generated in the market. The new product gains instant recognization due to the exiting brand equity of the parent brand. It is generally observed that brands with higher equity and high perceived quality will be successful in launching an extension as the quality will be associated to the new offering as well. For example, Apple has a huge equity in the market. Thus, all apple products like I-Phone, I-Pod, I-Pad etc., are readily accepted by the market.
2. Leads to Improved Brand Image:
The strength of the existing brand can be leveraged and its core be strengthened. The marketing communications set certain expectations in the customer’s mind. As these expectations are met certain positive associations will be linked to the brand. It is likely to improve the associations of the brand and will imprint the distinctiveness in the minds of the customers more clearly. For example, Surf Excel, Surf Excelmatic and Surf Ultra strengthened the brand’s image and position against competitors.
3. Consumer Benefits:
Brand Extension keeps the brand updated and prevents it from losing its relevance over a period of time. Sometimes customers’ feedback may be useful in keeping the brand relevant for its customers. For example, Johnson & Johnson got the feedback that their baby shampoo was used by mothers as well. Thus, they launched a shampoo for mothers.
The key merits that brand extension brings to the marketer’s brand are as follows:
A new brand costs anywhere between 50 to 100 million dollars to develop, hence the huge investments required to develop and launch a new brand act as a major deterrent. Brand extensions, therefore, present irresistible option in such situations. By extending a brand, the marketer can bring the costs down substantially while increasing the probability of success.
Individual brands promotion cost structure goes up and investment in one brand does not help the other brands. When the Dettol brand of soap is advertised, it indirectly benefits other brands which share the same name. The extension enhances promotional efficiency.
3. Consumer Benefits:
From the customer’s point of view, brand extensions offer a less risky route to a new product category. Familiarity with a brand name reduces the risk perceived by the prospect in a brand buying situation. Accordingly, customers may be more predisposed to typing a brand extension than a completely new brand.
Brand extension are justified not only for what they deliver in terms of promotional efficiencies and consumer benefits, they also help the parent brand in many ways, the first benefit being the clarity in brand meaning that an extension can bring. Extension can broaden the product meaning. For example, Johnson & Johnson is not about baby shampoo it is about baby-care.
Once a brand sustains itself in the market, it’s obvious that it satisfied a value proposition that is in demand. The equity that the brand enjoys depends on how the value proposition is fulfilled. This equity building takes some time.
By offering consumers a portfolio of brand variants within a product category, consumers who need a change – because of boredom, or whatever – can switch to a different product type if they so desire without having to leave the brand family.
With a brand extension, consumers can make inference and form expectations as to the likely composition and performance of a new product based on what they already know about the brand itself and the extent to which they feel this information is relevant to the new product.
There’s another distinctive advantage of promoting brand extensions – the parent brand gets strengthened whenever any extension is promoted. Every time an extension is mentioned in a commercial or written in copy of a print advertisement, it is along with the parent brand. The whole brand extension becomes the name to be promoted.
In today’s competitive markets, scale of operations is increasingly becoming a strategic tool to build marketing muscle. Attaining a position of strength requires a commanding market presence in related product categories. This process is helped immensely when a market that is very strong in a category spreads to other related categories.
10. Expanding to a Wider Market:
Once presence is established in a product category, entry is gained into a family’s benefit consciousness. Taking off from this benefit, other offerings can be made which fulfill other family members’ needs and wants. This way, the markets to which a player caters get widened.
A poorly managed brand extension can bring several limitations to the marketers’ brand as given below:
The extensions are using the most important asset of the company, i.e. its brand name. It can be a major advantage for the extension but it represents as well a huge risk for the existing brand because the brand image can be diluted. Those positive and negative consequences are – reciprocity effects” and defined as “a change in the initial customer’s behaviour regarding the brand, after an extension.”
A brand extension can damage the brand. A dilution of the brand capital can happen by the occurrence of undesirable associations or by the weakening of the existing associations. This later can be a consequence of new associations transferred from the extension.
Asker states that the extensions can cannibalize the existing products of the brand when they are positioned in a close market. It means the extensions sales are increasing while those of the existing brand’s products are following the opposite curve. Asker underlines that these good sales figures for the extensions cannot compensate the damage produced to the original brand’s equity. He argues that this situation is however better than seeing his happening with a competitor’s brand.
Asker explains that a disaster which cannot be controlled by the firm – e.g., that Firestone tyres used for the Ford Explores were potentially unsafe – can happen to any brand. The more extensions the brand made, more important the damages will be.
The risk of linking multiple products to a single brand is that the brand may not be strongly identified with any one product. Thus, brand extension may unclear the identification of the brand with the original categories, reducing brand awareness.
5. Company Abstain from the Chance to Develop a New Brand:
One easily overlooked disadvantage to brand extension is that by introducing a new product as a brand extension, the company abstains from the chance to create a new brand with its own unique image and equity.
6. Confused or Frustrated Consumer:
The different varieties of line extension may confuse and perhaps even frustrate consumer as to which version of the product is the “right one” for them. As a result they may reject new extensions for tried and true favorites or all-purpose versions that claim to supersede more specialised product versions.
The business organizations are becoming more customer centric and brand conscious. A lot of investment goes in building a brand and it seems only logical to exploit the situation. The companies will continue to launch brand extensions to encash the equity. The extension to different sector will be successful if the marketers can match the image and the perception of the extension to the parent firm. Wipro extended itself from vegetable oil, lighting to software services on the basis of attitude and brand fit.
Guidelines for Extension of Brands
To retain competitive advantage, brand must be proactively managed; once it is established and successful, it can be profitable to extend a brand in a new direction. Brands can be extended in a variety of ways, from enhancing a product with additional features and benefits, to varying or re-positioning the product for different market sectors.
The following points are very important to know while the task in hand is intended towards extending a brand.
These points are very crucial to the success of extension of brand:
A brand can be extended if market conditions are favourable and the new launch does not distract the company from its core brand activities. If an existing brand is not performing well in the market nor has quality problems, a new brand extension is not as likely to be successful.
Introducing similar products reduces risk and increases the likelihood of customer acceptance. However, the new product could cannibalize the sales of existing products in the range, and may confuse customers. Some brand extensions, whether similar or dissimilar, may succeed on the reputation of the established brand name, but they should always embrace the same core brand values as existing products.
Some companies extend their brand but fail to maintain product quality and neglect to commit adequate sales or marketing resources to the new products. Poor performance or failure of a new product can damage the other products in the range, so it is important to carefully plan a brand extension.
Some new products are able to draw on the strengths of the main brand and may be successful without the support of specific, individual marketing programs. However, some marketing support is usually required. If the extension represents a change of direction for the brand, heavy marketing support will be important.
Factors to be Avoided While Extending a Brand:
Companies with successful brands are sometimes reluctant to change them. If customer needs change, or if competitive products improve, a successful brand cannot remain stagnant. If the company fails to respond, the brand may begin to lose share and, in extreme cases, may not recover.
Relying solely on an existing brand to promote and support a brand extension is not a commonly successful strategy. A new product launch should be supported effectively, even if it is only a brand extension. Introducing a new product can be risky; no company should invite failure.
Some companies with successful existing products introduce new products in a haphazard way, hoping that customers will adopt the new product just because it carries an established brand name. A brand extension should be a natural outgrowth of the existing brand, embracing the same core values. Ultimately, customers will judge a product on its performance and its ability to meet their needs, not on its brand name.
It is just as common to see companies overlook the opportunities offered by a strong, well-accepted brand. Developing or introducing new products that offer customers the same brand values can generate additional income and broaden the customer base. When performed effectively, brand extension is a very useful technique for growing a business.