Brand Extension
Brand Extension
Brand Extension
BRAND EXTENSION
IN PARTIAL FULLFILLMENT FOR SEMINAR ON CONTEMPORARY MANAGEMENT ISSUES (PAPER NO. 207) IN M.B.A. PROGRAMME OF RAJASTHAN TECHNICAL UNIVERSITY, KOTA
SUBMITTED Mohammad
2010-2011
contents
1. Introduction Of Brand Extension
1.1 What is the Means of brand Extension? 1.2 Types of Brand Extension 1.3 Benefit of Brand Extension 1.4 Risk of Brand Extension 1.5 Characteristics of successful Brand Extension 1.6 Brand Extension Failure 1.7 Principle of Brand Extension 1.8 Brand Extension Research Case history- Carnation 1.9 Brand Extension Research Case History-Dole
2. Research Methodology
2.1 Tile of Subject 2.2 Objective of Study 2.3 Type of Research Design 2.4 Instrument use in study 2.5 Method of data collection 2.6 Simple size 2.7 Conclusion 2.8 Questionnaire
Bibliography
Acknowledgement
This report is to acknowledge my indebtedness to my guide, Mrs. Savita Choudhary DMS SKIT, Jaipur for his guidance and suggestions for completing this report. Her great presence always encourages me to hardworking and completes this task timely. I really thankful to their Hartley support in every step of this Report.
1. Introduction
Recognizing that one of their most valuable assets is their Brands, Many firms have decided to leverage that asset by introducing a host of new products under some of their strongest brand names. Most new products are in fact line extension typically 80 to 90%in any year. Moreover, many of the most successful new products, as rated by various sources, are Extension (e.g. Microsoft Xbox video game system, apple iPod digital Music player, and Nokia 6800 cell phone). Nevertheless, many new products are introduced each year as new brand (e.g., Zyprexa mod stabilizer drug, TiVo digital recorder, and mini automobile).
When a firm uses an establishment brand name to introduce a new product Brand extension or brand stretching is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category. Organizations use this strategy to increase and leverage brand equity (definition: the net worth and long-term sustainability just from the renowned name). An example of a brand extension is Jello-gelatin creating Jello pudding pops. It increases awareness of the brand name and increases profitability from offerings in more than one product category. A brand's "extendibility" depends on how strong consumer's associations are to the brand's values and goals. Ralph Lauren's Polo brand successfully extended from clothing to home furnishings such as bedding and towels. Both clothing and bedding are made of linen and fulfill a similar consumer function of comfort and hominess. Arm & Hammer leveraged its brand equity from basic baking soda into the oral care and laundry care categories. By emphasizing its key attributes, the cleaning and deodorizing properties of its core product, Arm & Hammer was able to leverage those attributes into new categories with success. Another example is Virgin Group, which was initially a record label that has extended its brand successfully many times; from transportation (aero planes, trains) to games stores and video stores such a Virgin Megastores.
In 1990s, 81% of new products used brand extension to introduce new brands and to create sales. Launching a new product is not only time consuming but also needs a big budget to create awareness and to promote a product's benefits. Brand extension is one of the new product development strategies which can reduce financial risk by using the parent brand name to enhance consumers' perception due to the core brand equity. While there can be significant benefits in brand extension strategies, there can also be significant risks, resulting in a diluted or severely damaged brand image. Poor choices for brand extension May dilute and deteriorate the core brand and damage the brand equity. Most of the literature focuses on the consumer evaluation and positive impact on parent brand. In practical cases, the failures of brand extension are at higher rate than the successes. Some studies show that negative impact may dilute brand image and equity In spite of the positive impact of brand extension, negative association and wrong communication strategy do harm to the parent brand even brand family Product extensions are versions of the same parent product that serve a segment of the target market and increase the variety of an offering. An example of a product extension is Coke vs. Diet Coke in same product category of soft drinks. This tactic is undertaken due to the brand loyalty and brand awareness they enjoy consumers are more likely to buy a new product that has a tried and trusted brand name on it. This means the market is catered for as they are receiving a product from a brand they trust and Coca Cola is catered for as they can increase their product portfolio and they have a larger hold over the market in which they are performing in.
Well known brand: One client wanted us to help extend Crosse and Blackwell (a sauce brand). Research showed people did not recognize the brand or incorrectly thought they made electric drills! (Black & Decker)! Leverage with customers of the new category: Remember that by definition, a brand extension is
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a product in a different category from the parent brand. Our study of Snickers revealed that ice cream bars do not necessarily sell to the same people who buy Snickers candy bars. What is important therefore is what ice cream bar customers know of and think of Snickers. In practical terms, leverage means that customers in this new target category would perceive the new brand extension to be superior to existing competitive products on an important dimension. This is extendable equity. Leverage is not the same thing as consumer acceptability: Marketers often spend too much effort on extending brands into categories just because consumers allow it. If our Dole research had revealed that consumers thought Dole vegetables was a reasonable sounding brand extension, does that mean it is a good one? Not necessarily. If there is no competitive advantage of Dole vegetables versus existing brands of vegetables, it will likely fail. Entering a new category is always a risky undertaking. There is a steep learning curve in production, distribution, promotion, etc. But most of all, we are competing for consumers business where they have loyalties to established brands. Why should anyone switch to something new and untested? That is what a new brand extension (like any other new product) must provide: a strong reason why the consumer in the new category will prefer us to what they are buying now.
An example is (frozen) Snickers Ice Cream Bars identified in our brand extension study. The original Snickers bar is a shelf stable candy. The brand extension is a similar product, but in a different form. Jell-O Portable Pudding and Pudding Cups is Jell-O pudding in a different form and section of the store.
2. Distinctive flavor/ingredient/component in the new item. When a brand owns a flavor, ingredient or component, there may be other categories where consumers want that property.
Peanut butter is a characteristic ingredient in Reeses Peanut Butter Cups candy. Chocolate is a characteristic ingredient of Hershey. Brand Extension Research identified Reeses Peanut Butter as a logical extension that capitalizes on this association. Research also suggested Hershey chocolate milk.
3. Benefit/attribute/feature owned. Many brands own a benefit, attribute or feature that can be extended.
Brand Extension Research showed Armor All that that brand was defined by automotive surface protection which can go beyond vinyl dressing. Paint needs protecting also. Arm & Hammer owns a benefit of deodorizing. Their baking soda product has claimed that it removes odors from refrigerators, etc. As a result, they extended the brand into other products such as Arm & Hammer underarm deodorant and cat litter deodorizer.
4. Expertise. Over time, certain brands may gain a reputation for having an expertise in a given area. Leverage can be achieved when extending into areas where this special expertise is deemed important.
Hondas expertise in reliable engines led to lawn mowers, gas powered generators and a variety of other gasoline engine powered devices. What brand comes to mind when we think of baby products? Gerber. As a result of this acceptance of their expertise, they successfully launched Gerber Baby Powder, Gerber Baby Bottles, etc. Sara Lee is known for baked desserts, so why not other baked goods like bread.
5. Companion products. Some brand extensions are a natural companion to the products the company already makes.
Contadina was a tomato paste and sauce brand. In brand extension research, consumers thought Contadina pasta was a logical companion product that would have the leverage of the Italian heritage of the parent. Aunt Jemima (the pancake mix brand) launched pancake syrup, as a companion to compete with Log Cabin syrup.
6. Vertical extensions. Some brand extensions are vertical extensions of what they currently offer. A brand can use their ingredient/component heritage to launch products in a more (or sometimes less) finished form.
Nestls Toll House chocolate refrigerated cookies is an example. Most Toll House chocolate chips are used in cookies, so why not make a brand of Toll House chocolate chip cookies. Mrs. Fields Cookies were ready-to-eat. They offered frozen cookie dough, moving backwards as a vertical extension. Rice Krispies has always been used in kids' treats. Kellogg offered Rice Krispies Treats ready-to-eat.
7. Same customer base. Many brand extensions represent a marketers effort to sell something else to its customer base.
This works particularly well when that customer base is large and to some extent captive. VISA launched travelers checks directed to its credit card customers.
8. Designer image/status. Certain brands convey status and hence create an image for the user.
Designer clothing labels have been extended to furniture, jewelry, perfume, cosmetics and a host of other items. Some brands promote a lifestyle and can extend to items that people wear, as a badge of identifying themselves with that lifestyle. Tommy Bahamas extended their brand from clothing into furniture. A notable success is Harley Davidson. Their extensive collection of licensed lifestyle items goes way beyond any expertise inherent in the brand.
Extension
Introduce the same product in a different form. Example: Ocean Spray Cranberry Juice Cocktail Introduce products that contain the brands distinctive taste, ingredient, or component. Example: Philadelphia cream cheese salad dressing Introduce companion products for the brand. Example: Coleman camping equipment Introduce products relevant to the customer franchise of the brand. Example: Gerber insurance Introduce products that capitalize on the firms perceived expertise. Example: Honda lawn mowers Introduce products that reflect the brands distinctive benefit, attribute, or feature. Example: Lysols deodorizing household cleaning products Introduce products that capitalize on the distinctive image or prestige of the brand. Example: Calvin Klein clothes
Identify logical new product possibilities Capitalize on the paid-for equity in established brand names Enable a company to enter new categories at significantly lower cost Reduce the risk of failure given the already established awareness and trust Create a positive synergistic effect with the efficiencies of umbrella branding and advertising Reinforce the consumers perceptions of the parent brand name Bring news to existing brands when there is otherwise nothing new to say about them
Brands are the barrier to entry into new categories; they are also the means to entry. Brands (not production capabilities) are the prime barrier to entry into most categories. Many companies could make a cola, but only Coca-Cola owns that brand. As a result, well known existing brand names can be the way for a company to enter a new category that otherwise would be impossible. Our brand extension study for Reeses identified peanut butter as a logical brand extension. Hershey could not have efficiently entered the peanut butter category without the Reeses brand. In effect, brand extensions allow a company to capitalize on the previously paid for recognition, reputation and leverageable equity of its brand names. With the prohibitive cost of establishing new brands (just ask ex dot-coms), brand extensions save companies money. When done correctly, they also reinforce the properties of the existing parent product through synergy and bring news to the brand. It is not uncommon to find sales of the parent product rising after the launch of a successful brand
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extension.
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Eonfuse or frustrate consumers Encounter retailer resistance Fail and hurt parent brand image Succeed but cannibalize sales of parent brand Succeed but diminish identification with any one category Succeed but hurt the image of the parent brand Dilute brand meaning cause the company to forgo the chance to develop a new brand
1.5 Characteristics of Successful Brand Extensions Successful Brand Extensions have Fit and Leverage. Fit: What categories consumers will accept from a brand? A brands stretchability or boundaries. Leverage: Distinctive properties a brand owns that provide a competitive
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Parent brands considered for extension must own some distinctive properties (though not necessarily exclusive ones). Some brands own an ingredient - Toll House (chocolate chips), some own a benefit or attribute Bounty (absorbency), and others own an expertise Honda (experts in reliable engines). Brands that own nothing usually are not good candidates for brand extension. Being well known is not enough. Some reasonable segment of consumers in the new category must want this property. The critical factor in a brand's extension success is whether the distinctive property owned by the brand is important in the new category and provides a competitive edge. If absorbency is important in peoples selection of napkins, then Bounty napkins might be a success. If absorbency is not important for polishing cloths, then a Bounty version will have no edge in that category. Another example: Honda has a unique expertise in reliable motorized products. A Honda lawn mower with a claim of superior engine technology and reliability offers distinctive benefits that flow from the essence of the brands reputation. The key here
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is the importance to lawn mower buyers of the attributes of engine performance and reliability. Honda lawn mowers, not surprisingly is a successful product. Note the issue is not just fit. Many mistakes are made in launching brand extensions because the consumer will allow it. Without leverage, a brand extension is a weak idea. Studies conducted by Brand Extension Research have revealed that there is often an inverse relationship between fit and leverage. Brands that consumers will allow to be on a wide range of products have little leverage (own nothing special). Consumers may think, for example, the Betty Crocker brand would be fine on many food product categories. But if that brand brings little strength other than recognition and a general good feeling, it may have little leverage. In contrast, Philadelphia brand stands for cream cheese. This limits its extendibility but it means that any brand extension where cream cheese is an important ingredient (e.g., cheesecake) will find the Philadelphia brand to be a strong competitor. Successful brand extensions are not that easy to identify, develop and position. Just sticking a known name on a new product does not guarantee its success. If it were that easy, companies with national brands would not have so much difficulty in launching big new product successes. One trap companies sometimes fall into is what we call the great reputation trap. Clients have told us that what their brand owns is a great reputation. Customers tell them that they offer a quality product, the best in its category, one of their favorites, etc. Unfortunately, hundreds of brands have a great reputation. What is relevant is whether customers in the new target category find some reason to prefer the new brand extension to current offerings. Having a great reputation for quality is not enough.
Literature related to negative effect of brand extension is limited and the findings are revealed as incongruent. The early works of Aaker and Keller (1990) find no significant evidence that brand name can be diluted by unsuccessful brand extensions. Conversely, Loken and Roedder-John (1993) indicate that dilution effect do occur when the extension across inconsistency of product category and brand beliefs. The failure of extension may come from difficulty of connecting with parent brand, a lack of similarity and familiarity and inconsistent IMC messages. Equity of an integrated oriented brand can be diluted significantly from both functional and nonfunctional attributes-base variables, which means dilution does occur across the brand extension to the parent brand These failures of extension make consumers create a negative or new association relate to parent brand even brand family or to disturb and confuse the original brand identity and meaning.] In addition, Martinez and de Chernatony (2004) classify the brand image in two types: the general brand image and the product brand image. They suggest that if the brand name is strong enough as Nike or Sony, the negative impact has no specific damage on general brand image and the dilution effect is greater on product brand image than on general brand image. In consequence, consumer may maintain their belief about the attributes and feelings from parent brand. On the other hand, their study shows that brand extension dilutes the brand image, changing the beliefs and association in consumers mind. The flagship product is a money-spinner to a firm. Marketer spends budget and time to create maximum exposure and awareness for the product. Theoretically speaking, flagship product is usually had the top sales and highest awareness in its product category. In spite of Aaker and Kellers (1990) research reported that the prestige brand do no harm from failure of extension. Evidence shows that the dilution effect has great and instant damage to the flagship product and brand family. But in some findings, even overall parent belief is diluted; the flagship product would not be harmed. In addition, brand extension is also diminish consumers feelings and beliefs about brand name. To establish a strong brand, it is necessary to build up a brand ladder. Marketers may go behind the order and model created by Aakerand Keller which they are authorities on brand management. But branding is not following a rational line. One mistake can damage all brand equity. In practical issue, a classic extension failure example, such as huge company like Coke Cola launching the New Coke in 1985, has conflict the consumers perception. Although the early acceptance pervades in the beverage market, the backlash of New Coke sooner emerges among consumer. Then the extension strategy creates a negative impact to parent brand. Not only did not success in developing new brand but also decrease the original flavors sales. The Coke Cola pay a lot effort to regain the customer back who turns to Pepsi cola. This is a classic example of negative effect on extension failure. Although there are few works about the failure of extensions, literature still provides sufficient in depth research around this issue. Studies also suggest that brand extension is a risky strategy to increase sales or brand equity. It should consider the damage of parent brand no matter what types of extension are used. Example. BIC Pens tried to produce BIC pantyhose. You can read some more here .
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Here we might discuss in more detail the last three points. Many brand extensions are simply bad business ideas. Just because consumers would accept chocolate pudding from Nestl doesnt mean this is a good business idea. The category may be dominated by another company. Nestl may not be able to efficiently manufacture the product. The margins in the new category may be too small to justify the investment, etc. In point 9, we suggest that every brand extension should open a new category for the company and in point 10 that long term possibilities should be contemplated in
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advance. When Ocean Spray launched Ocean Spray Cranberry Juice Cocktail, that product opened the door for the company to enter the bottled juice business in a big way. A myriad of other flavors followed creating a sizable business. Launching a brand extension that is an orphan in the category can be a prescription for failure because the item cannot generate sufficient sales to be adequately supported and defended. Developing a long term plan using brand extension as a means to enter a category is what brand extension should be all about.
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business of the brand hidden in the mind of the consumer! What business are they in?
Caterpillar
Coleman
Jim Beam
In 1960, Harvard professor Theodore Levitt highlighted this basic strategic question in his classic paper Marketing Myopia. He challenged management to think broadly about what was or could be their realm of domain pointing out the failure of the railroads to recognize they were in the transportation business. The result was missed opportunities. Sometimes there are alternative definitions that are possible and management has to choose. Originally offering pens, Bic chose to define its brand as disposables rather than office supplies and extended accordingly. When management doesnt make an implicit choice and brand extensions are launched without regard for a clear definition, damaging dilution may occur. Note the extensive licensing activity of Sunkist extending to candy, soft drinks, vitamins, pistachios, etc.
If we ask consumers to tell us what business xyz brand is in, they draw a blank or just state the category. Consumers might say: Clorox is in the bleach business. Hershey is in the candy business. Duracell is in the battery business. Carnation is in the milk business. Dole is in the pineapple business. And so on.
However, when we research these brands we find a range of properties that are associated with them ingredients, benefits, attributes, expertise, etc. (See the section on the 8 types of brand extension.) Using our proprietary methods, we can discover what the brand owns its extendable equity - and write a definition of the business of that brand. This definition usually contains issues relating to what the brand cannot be as well as what it can. The true test of the accuracy of this definition is that it allows us to predict with any new category whether consumers would find the brand fits there and has leverage (See examples in our case histories). In almost every brand we have studied, there has been a difference - sometimes a huge difference - between what management thought the brands definition
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and boundaries were and how the consumer defined and set boundaries! The company that makes a product has one database from which it perceives its brand. The consumer has a far different and more personalized database that he or she uses to form impressions about the brand, its extendibility and competitive advantages.
conducting an international survey about the Dole brand. The sunshine imagery was confirmed and an appropriate new logo was designed by Landor. Brand extension activity has continued at Dole with the launch of various items, some that contain pineapple and some that do not.
2. RESEARCH METHODOLOGY
2.1 RESEARCH METHODOLOGY - DEFINED
a. Research is the systematic investigation to establish facts or collect information on a pre-decided subject. b. Methodology is the specification of the system of principles and techniques used in a particular discipline.
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done because the units in which the factors were organized were in quantitative terms. Exploratory research design was used for this project. The main purpose of this research is to interact with retailers and to know the satisfaction level by the quality of services being rendered by different telecom service providers. emphasis in such studies is on discovering of ideas and insights. The major
2.5 RESEARCH INSTRUMENTS USED Methods used under this kind of research design are: Developing plans for the research Drafting questionnaire Survey Analyzing and interpreting the results.
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Here I have used method of research-based survey. Brand Extension is research subjects. The object of the survey is to obtain the insight into the relationship between the sales and services rendered by the companies. Advantages It is fast and easy to comprehend. It can get good result even with a small sample size. It gives the research the necessary flexibility to get a deeper understanding of the respondents. 2.6 METHODS OF DATA COLLECTION
SECONDARY SOURCES: For the completion of the research it was important that the secondary data should be supplemented by primary data originated specifically for the research in hand. The primary data was gathered through questionnaires. My research findings are based on information collected from filled questionnaires. The main sources of secondary data were: Internet Newspaper
Advantages
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Disadvantages
It is expensive. Sometimes accuracy is not passed on telephonic interview, due to lack of clarity in the questions.
Method used to collect primary data is: Questionnaire Questionnaire Method: For the purpose of the study survey was conducted across areas of Jaipur. The Questionnaire (a sample copy is attached) was prepared according to the objectives of the project and was administered accordingly. The data gathered through this exercise became the primary data.
chosen. This would further help the whole research to reach the final solution.
SAMPLE SIZE: 10 corporate people SAMPLING UNIT: company SAMPLING DESIGN: Non Probability Quota Sampling
CONCLUSION:I have found in my research that Brand extension is depended on the image of the company. Some time it may be useful for the company next time it may be not fruitful. It is depended no. of affecting the brand extension. Brand Extension is help to decrease the cost of the company. It is also help the increasing the image of the company .this factor are depend on when the company made any product also constraint the preference of the customer because whole market are depended on the customer . In this situation which company will be success? Which fellow customer test.
Questionnaire
Designation:
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1) What is the brand Extension? -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------2) What are the Advantages of Brand Extension? -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------3) What are the Disadvantages of Brand Extension? -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------4) How is it beneficial for a company? ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------5) You have any idea about the successful brand extension company?
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BIBLIOGRAPHY
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In this project report, while finalizing and for analyzing quality problem in details the following Books, Magazines/Journals and Web Sites have been referred. The all material detailed below provides effective help and a guiding layout while designing this text report.
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