Brand extension

Introduction:
Brand extension refers to the corporate activity whereby companies introduce new
products, new product variants or product improvements by leveraging the brand
equity of the existing parent brand. When Starbucks decided to launch its line of
bottled cold coffee called Frappucino (a mixture of coffee, water, milk and
different syrups), the logic used was to leverage the very strong equity of the
Starbucks brand in gaining wide spread acceptance for the new product line.

As such, brand extension is a type of short cut that companies resort to, to
minimize risk and maximize their investment in the brand. But more often than
not, brand extensions fail. The simple reason for such failure is that the equity of
the parent brand is one of the many factors that impact the success of brand
extensions. Much has been researched on the success factors of brand extensions in
the industry and in academia. Knowledge from the collective wisdom of the
industry, best practices of some of the biggest brands and empirical evidence from
research is used to present some guidelines on brand extensions to companies.
There are several aspects of considering brand extensions:

1. Product line extension without a sub-brand as (Rasna) has various variants.

2. Extending the brand with sub-brands (junior horlicks)

3. Extending the brand to related categories (Liril to Liril talcum powder)

4. Extending the brand to more related categories (Wipro in computers, finance,

edible oil, medical equipments, soaps and baby powder).

Some examples of successful brand extensions:-

 • Horlicks come up with Horlicks junior
The credibility of its existing brands, which are positioned as health and energy
drinks, acts as an easy launch pad for new products in the foods market. The
company has successfully launched a variety of brand extensions of its popular
Horlicks brand such as ‘Mother Horlicks’, ‘Junior Horlicks’ and ‘Horlicks Three-
in-one’ sachets. SBCH is aiming to grow both organically and inorganically by
exploiting existing opportunities supported by its well-established distribution
network.
 • Shirts from the GANT Rugger collection.
No brand has reincarnated itself better than the preppy New Haven born GANT. In
the past few years they have shaped and polished themselves into a very stylish
and smart collection. A few seasons ago, they collaborated with Jeffery Kalinsky
on a small offering of shirts that has since become a full collection of suiting,
outerwear and of course the GANT mainstay - woven shirts. The new GANT
Created by Jeffrey collection features detailing that is quirky and cool. They
used their signature oxford-cloth to tip the pockets and for piping in the trousers.
The idea was to create Classic pieces that will remain stylish for years to come.
GANT has done something unique by taking a small collaboration with a selection
of shirts and turned it into a commercially successful brand extension aimed at a
wider, yet very fashionable market. Well done.
Essential factors that impact brand extension success:-

1. 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.

2. Parent brand conviction and parent-brand experience – The other important

factor the influences 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.

3. Retailer experience – In spite of the ever increasing influence of the Internet on

shopping of even the branded products, retail spaces in the physical world still
continues to have a stranglehold on distribution. As such, the successful- Brand
Extension Success – New profit growth Martin cess of many brands is contingent
on securing shelf space and the marketing push provided by the retail
establishment.
Similar is the case with brand extensions. If 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.

4. 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 two, it will help
create positive perceptions about the company in the minds of the consumers.

Advantages and disadvantages of brand extension

strategy:-

According to David Taylor this strategy of brand extension is

popular because it is less risky and cheaper compared to the
creation of a new brand (Leslie de Chaternatony and Malcolm
McDonald point the same economical advantage by indicating
that .The economics of establishing new brands are pushing
companies more towards stretching their existing name into new
markets.

Advantages of brand extension strategy are:-

1. Consumer knowledge: The remaining strong brand used to

“promote a new product” makes it less critical to create
“awareness and imagery”. The association with the main brand is
already done and the “main task is communicating the specific
benefits of the new Innovation” Taylor.

2. Consumer trust: The existing well-known-strong brands

represent a promise –of quality, useful features etc. - for the
consumer. Thus, the extension will benefit from this fame and this
good opinion about the brand to create “a compelling value
proposition in a new segment or markets” Taylor. A satisfied
customer by an extension will be more willing to repurchase the
same brand. For example in the sport field, a customer will more
likely prefer a brand offering a complete equipment-shoes, outfit
and accessories.
3. Lower cost : compared to launching a new brand, brand
extension strategy is cheaper especially because the new product
use the name of an already well-known brand, the advertisement
budget for brand extension are smaller than for new brands.

4. Enhancement of brand visibility: when a brand appears in

another field it can “be a more effective and efficient brand-
building approach than spending money on advertising”. The
relationship with loyal customers will be strengthen because they
will use the brand “in another context” and it is expected as well
that they will prefer this brand to the competitors’ one.

5. Provide a source of energy for a brand: The brand image-

especially when the brand is a bit tired- is expected to be
reinforced by the extension. Indeed, this latter gives energy to the
brand because it increases the frequency with which the brand is
associated with good quality, innovations and large range of
products. In addition, the customer sees the brand name more
often and it can strengthen his idea that it is a good one.

6. Defensive strategy: An extension can prevent competitors

from gaining or exploiting a foothold in the market and can be
“worthwhile even though it might struggle”. For e.g. - Microsoft
for instance has decided to operate in different areas with the aim
of limiting the “ability of competitors to encroach on core
business areas”.

Disadvantages of brand extension strategy are:-

1. Dilution of the existing brand image: The extensions are
using the most important asset of the company that 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. Park, McCarthy & Milberg, that 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..
Indeed, an accident occurring with a product can lead to tarnish
the image of the brand. In addition, it is sometimes difficult to
associate one brand to two products without weakening the brand
position in the customer’s mind.Aaker said that when a brand
benefits are ensure by the fact that it is not “for or available to
everyone”, doing too much extensions could reduce this image of
brand selectivity. He takes the example of the overuse of the
name Gucci – at one moment there were 14,000 products Gucci-
was a part of the factors leading to the “fall of that brand”.

2. Cannibalization: Aaker states that the extensions can

cannibalize the
existing products of the brand when there 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
curved.
Aaker underlines that these good sales figures for the extensions
can not compensate the damage produced to the original brand’s
equity.
Examples of failures in brand extensions:-
Red Bull gives you... uh... Cola
You might just go the way of when will BRANDS learn to embrace the true
perception of their BRANDS?
BevNET reported on March 24th that Red Bull will be launching a brand
extension... Cola. Natural Cola. With only 32 mg of caffeine, it will focus on flavor
and not on buzz. This doesn't seem like a natural extension of the brand... granted,
they sell beverages in the same cooler as Coke and Pepsi, but people have always
reached for them out of function... not because they wanted to feel like they were
drinking a Smarties-flavored soda.
A better brand extension might have been, I don’t know... caffeine pills. Caffeine
patches. Caffeine gum. Trying to compete with Coke and Pepsi will probably lead
to failure... The best thing a brand with such a strong identity can
do with its money is run with its public persona - no matter how
ugly. Embrace it, poke fun at yourself, and above all, DON'T try to
be something you're not.
Sorry, Red Bull... but we fail to see the possibility of ordering a
nice, tall Red Bull Cola at Applebee's in the next few years.
Crystal Pepsi.
• CONCLUSION

In the light of very high rates of new product failures,

brand extension seems very attractive. After all, all
companies seek to extract the maximum possible returns
from the investment in their brands. Brand extensions done
without due diligence can be equally detrimental to
companies. But if companies carefully study the brand
extensions and follow the general guidelines, brand
extension success could indeed become a corporate reality.