2. LITERATURE REVIEW
This chapter intends to set the theoretical frame of the thesis by introducing the main areas needed to create the basis of our analysis, shaping the ways towards our own main purpose. Thus, it begins with the roots of brand extension and starts of with the concepts of brand, brand identity and brand hierarchy and then leads into brand extension and explains it as a ‘means of growth’ for a brand. Narrowing down the scope, it goes into the typology of brand extension and identifies the successful and unsuccessful factors of brand extension. Finally it identifies certain rules for the success of brand extension and looks at different models used for the effectiveness of brand extension.
In today’s world of increased competition and consumer awareness, the marketing of new products has become ever more complex. We have moved into a time where consumers are literate enough to choose their own products on the basis of their judgment and where competition among products and services gives them an opportunity to select the best product that would suit their need. Branding has become one of the most important issues in the launch of a new product. Having functional and emotional attributes attached to it, branding has gained popularity as consumer relates more and more to it. Historically examples of branding can be found as early as 9000 years ago when owners or manufacturers used to give distinctive and distinguishing symbol or name to their property or product. However it was the 19th century that arguably saw the dawn of the modern branding era and it was the industrial revolution that caused its birth. It was the industrial revolution that created the mass production that meant an ever- increasing proportion of people worked for a manufacturer and not themselves. They no longer needed to mark the products that they produced as their own; rather what they produced was collectively produced for one company. Before we proceed further, let’s look more deeply into branding and then link that to the concept of brand extension.
2.1.1 DEFINITION AND EXPLANATION
Different scholars have defined the word brand differently as different meaning or contexts have been attached to them. Balmer and Greyser (2003) have given the most explanatory definition of branding explaining both the traditional and their own perspective about branding. They have stepped forward from the traditional definitions of branding and have defined branding on the corporate level having corporate implications. According to them three type of definitions have been identified. The first two are traditional whereas the third one is the advanced version of branding which incorporates their point of view about branding. They are:
Erstwhile. ‘In its simplest sense a brand denotes a name, logotype, or trademark and was originally used to signify ownership as with branding of live stock. These are, increasingly, seen to be points of entry to the essence of a brand rather than the essence of branding per se’. (Definition similar to the one given in Oxford Concise Dictionary)
Established. ‘This refers to the added values that a brand brings to a product. Products may or may not have brand values. Product brand values are superimposed by the organization by its marketing and communication experts and advisers. They are made memorable. In the main, such values are fashioned in the mind; not on the production floor. They are, essentially, synthetic. Whereas products are made in a factory, brand values exist in the mind. Brands can be timeless in a way that products may not be.’
However Balmer and Greyser(2003) have identified a new understanding about brands. They call this aspect of branding as emergent Emergent. ‘While the category most certainly is established, the fundamental differences between this category and the other two are only beginning to be appreciated. This category refers to brands at the corporate level. Corporate brand values are not contrived; they need to be bona fide. The role of personnel and of ‘culture’ in establishing and maintaining and understanding corporate brand values is of essence’.
In the words of Sir Michael Perry, a former Chairman of Unilever, brand is much more than a symbol to differentiate goods and services:
‘In the modern world, brands are a key part of how individuals define themselves and their relationships with one another…. More and more we are simply consumers… We are what we wear, what we eat, what we drive.’
This description of brand explains that brand is much more than the physical and functional value that it holds. It’s a bundle of attributes both functional and emotional. Thus brands not only meet our physical needs but also address our emotional needs. A blind test was conducted on Pepsi and Coca Cola. It was found that Pepsi was preferred over Coke in regards to its taste. Yet the sales of Coke are much higher than Pepsi that shows that despite being functionally better, people are emotionally attached to coke. Stephen King was Director of planning at one of the largest advertising agencies, J Walter Thompson, when he described brand as:
‘People choose their brand as they choose their friends. You choose your friends not usually because of specific skills or physical attributes (though of course these come into it) but simply because you like them as people. It is the total person you choose, not a compendium of virtues and vices’.
2.2 BRAND IDENTITY
Brand identity refers to the public image of a product, line or service in the eyes of a consumer. McClendon (2003) considers that brand identity is something that exists in the minds and hearts of the consumers when they hear the name of the brand. He further adds that it is the identity of the brand that provides the real strength to the business. It is the visual link between the company and the consumer. Brand identity includes brand names, logos, positioning, brand associations and brand personality. Upshaw (1995) has identified brand identity as a brand’s DNA configuration. He supposes that the particular set of brand elements is blended in a unique way to establish how the brand will be perceived in the market place. According to Kapferer (2001), it is critical for each business to understand that the attributes of a brand represent the indispensable elements. Not all brand managers are aware of this. Yet in order to find out which of the extended brand elements is needed to mediate with the market, pre testing is done and this is considered to be the best method to avoid trails and errors.
In his book, Aaker (2000) argues that a brand is more than a product. Creating an extension can benefit the parent brand by helping it ‘break out of the box’. According to him, there are several reasons for building a rich extended brand identity, reasons that are going to be illustrated in the following figure and explained underneath it.
“A richer brand identity is a more accurate reflection of the brand. Just as a person cannot be described in one or two words, neither can a brand. Three word taglines or an identity limited to attributes will simply not be accurate” (Aaker, 2000, p. 54).
Aaker (2000) considers that the identity of a brand represents what the brand stands for. Taking into consideration that the brand identity is inspirational, it must comprise and reflect the values and cultures of the entire organization. Moreover, customer concern should dominate the strategy of the business. And lastly, Aaker emphasizes in his picture that “the extended identity provides a home for constructs that help the brand move beyond attributes. In particular, brand personality and symbols normally fail to make the cut when a terse brand position is developed, yet both are often extremely helpful strategically as well as tactically” (Aaker, 2000, p.54).
Balmer (2003) has emphasized on the concept of corporate identity and in his historiography model, we are currently in stage 4 in which the emphasis would be on organizational identity, corporate identity, corporate communication, corporate reputation and finally but most importantly corporate branding.
2.3 BRAND HIEARCHY TREE
Brand structure can be illustrated logically by using the brand family tree together with all the related sub-brand branches. The figure below can be viewed as an organizational chart. The horizontal and vertical dimensions are grouped after numerous factors such as segment, product, quality and design (Aaker, 2000).
The horizontal dimension shows the scope of the brand in terms of the sub brands that lie under the brand umbrella in the box visualized “Colgate” as a parent brand. The vertical dimension represents the brands and sub-brands that exist for an individual product- market entry (Aaker, 2000).
The visualized overview of the whole brand guides the brand managers to keep an eye on its entire brand and to analyze if there are too many or too few. The question is how these brands can be reinforced, what message they deliver to the consumer and what improvements to the particular message can be done (Aaker, 2000).
Keeping an eye on this hierarchy is quite important as it enables a company to identify the fit for new extension and also helps to maintain a clear vision of each product keeping in view the rest of the brands in the hierarchy. Thus it’s easy to maintain fit and leverage in brand extension with the help of this brand hierarchy.
Every company would like to see its brand growing and prospering. Brands grow through two principle means. The first mean is called organic growth whereas the second one is called growth through extension.
2.4 ORGANIC GROWTH FOR BRANDS
In this case making a brand or product frequently available or adding incentives to the brand makes it more popular. Sales of any one brand increase because what they have to offer becomes attractive to somebody, somewhere. Brands can be made more attractive by improving either the functional or emotional attributes of the brand. Thus in functional attributes we can improve any of the four P’s whereas in emotional one can improve the personality or image of the brand. A good example would be of Coca Cola and their distribution. Not only have they made it available from Atlanta to Zanzibar, from Moscow to Melbourne but also you can buy it from supermarkets, newsagents, cinema, restaurants, street corners, café, football stadium, pop concert and even at car parks where you have vending machine1.
Whilst there are numerous marketing tools to achieve organic growth, this type of growth stems from three things: getting that brand used by more people, getting it used by the same people more often or getting people to use more of it on any of the occasions they use it in the first place.
2.5 GROWTH THROUGH EXTENSION
The second and relatively newer way of growing brand is through extension, which is the core focus of this study. Before going into detail about how brands grow through extension, I will firstly define extension and try to differentiate the various types of extensions.
Due to the relative immaturity of the concept, there is no standard definition of brand extension and various marketing scholars have given different definition to the same terminology. From the readings that I have conducted of books and research papers, it’s obvious that around a decade back scholars used to give a more generalized definition of brand extension. The generalization of the definition can be observed from the fact that brand extension was used for extension into both related and non-related products. The following definition will clarify my point of view.
‘In a typical brand extension situation, an established brand name is applied to a new product in a category either related or unrelated, in order to capitalize on the equity of the core brand name (DeGraba and Sullivan, 1995; Pitta and Katsanis, 1995)’.
Also certain research papers indicated that brand extension being generalized was then differentiated into two types as indicated by this piece of research work.
‘Brand extensions come in two primary forms: horizontal and vertical. In a horizontal brand extension situation, an existing brand name is applied to a new product introduction in either a related product class, or in a product category completely new to the firm (Sheinin and Schmitt, 1994). A vertical brand extension, on the other hand, involves introducing a brand extension in the same product category as the core brand, but at a different price point and quality level (Keller and Aaker, 1992; Sullivan, 1990). In a vertical brand extension situation, a second brand name or descriptor is usually introduced alongside the core brand name, in order to demonstrate the link between the brand extension and the core brand name (e.g. Marriott Hotels, Courtyard Inn by Marriott)’.
Most recently the word ‘line extension’ has been given to extension done in the same product category whereas ‘brand extension’ would refer to extension in unrelated products and in this study I will undertake this understanding of extension. Taylor (2003) has referred to them as direct and indirect stretch. Jobber (2003) has given the term brand extension to line extension whereas brand extension has been referred to as brand stretch.
The current emphasis on the subject has been due to its enormous success. Consumers being the end users have become friendlier to the concept and are now accepting it as illustrated on the next page.
It’s obvious from this graph that consumers are becoming much friendlier to the concept then they were a decade ago and this shows the popularity of the concept and the frequency at which it has been used in the past decade. Let’s get an insight into the various types of extension.
2.5.1 LINE EXTENSION OR DIRECT STRETCH
‘Line extension is defined as being a variant of the same basic product. It might be a new flavor or a new size’. Basically it’s a slight variation to the original product. Examples would be of Colgate. We used to have Colgate regular but now we have Colgate total, Colgate Max fresh Gel, my first Colgate for kids, Platinum, Deep clean etc. The basic purpose of this strategy is to encourage more people to use a brand. It can also be considered as a first step towards brand extension. But the only bad thing about too many variations in the products or having too many line extension is that it may confuse the user in regards to which product should he/she use. Also it may cause a cannibalization affect within the product range.
2.5.2 BRAND EXTENSION OR INDIRECT STRETCH
Brand extension on the other hand would refer to extending your product range into a product category that wouldn’t be commonly associated with it. A simple definition described below will illustrate my point of view.
“Brand extension is using the leverage of a well known brand name in one category to launch a new product in a different category.” (Brandextension.org)
Giles Lury in his book about ‘Brand Watching’ has defined brand extension as:
‘Brand extension is the use (and occasional misuse) of an existing brand name and equity to launch a product or service into a category or market not normally associated with that brand.’ (Lury, 1998)
Thus in contrast to earlier scholars, who had generalized the concept of brand extension, new researchers have distinguished the concept well from line extension.
2.6 RATIONALE BEHIND USING BRAND EXTENSION
Brand extension has gained a lot of popularity and is considered to be the key tool for launching new innovations. A survey was conducted by Brand gym in 2003 in which marketing directors were asked about brand extension. The following graph illustrates the response.
The results indicated that 83% of the marketing directors thought that brand extension would be the main way of launching new innovation in the next two to three years. Yet research has also shown that only 50 percent of brand extension survives after the first three years.
Firstly brand extension differs from line extension because where line extension offers customers more varieties or styles of the original brand in its original market, a brand extension takes an existing brand to pasture new ones. Taking Mars as an example we see that the original chocolate bar has been line extended into different styles including Mars Kingsize, Mars miniature and for a limited period Dark chocolate Mars. However when Mars launched the Mars ice cream, it entered a new market for the brand and as such had extended the brand franchise. Mars also extended into flavored milk drinks market with Mars in a bottle.
The rationale behind brand extension’s popularity is that it’s difficult and expensive to launch a completely new brand. The most often quoted statistic being that ‘nine out of every ten new brands fail’. New brands are therefore seen as a high, though sometimes high return strategy. On the other hand, brand extension is a cheaper and more reliable method of building on what already exists. Not surprisingly companies who have already invested a lot of money in creating a brand are keen to maximize its full potential. Finally it can be concluded that companies would like to leverage and thus give initial success to the new brand by exploiting the equity that has been established by the parent brand.
2.7 KELLER AND AAKER’S WORK ON BRAND EXTENSION
Keller and Aaker (1998) extending on their typology of product range extension and corporate brand extension have examined the impact of corporate marketing on a company’s brand extension. In their research paper they have described how consumers evaluate brand extension in general and then concentrating on corporate brand extension, they have studied the impact of corporate marketing on consumer evaluation of corporate brand extension in the presence and absence of supporting product advertising. The initial research work describing product brand extension is as follows:
‘Research on consumer responses to extensions of product brands, suggest that two key factors influence consumer evaluation.
- the types of association that make up the parent brand image
- the relationship between the parent brand and the extension product
These factors affect the consumer belief about whether the new product fits as a member of the product line. In sum, the record therefore suggests that a variety of different associations for the parent brand can be transferred to an extension, assuming a basis of fit exists.’
Now an extension that they made in regards to brand extension was that they applied this concept to corporate brand extension. But before going further it’s important to know Aaker’s three dimensions of corporate credibility. They are:
- Corporate expertise is the extent to which a company is thought able to competently make and sell its products and services.
- Corporate trustworthiness is the extent to which a company is thought to be honest, dependable, and sensitive to consumer needs.
- Corporate likability is the extent to which a company is thought likable, prestigious and interesting.
This results gathered from this study have strategic implication both to the benefits/risks associated with brand extension and also to the effectiveness of brand extension. Thus a summary of the results are as follows.
Firstly by showing that corporate marketing related to product innovation enhances perceptions of corporate credibility and extension fit, and thus much favorable extension evaluations, this study showed benefits for brands with reputation of high quality products.
Secondly this study provided a more detailed account of particular dimensions of corporate credibility, namely corporate expertise, trust worthiness and likeability. Thus this study concluded that corporate expertise appeared to play a more influential role in evaluation of corporate brand extension than either corporate trustworthiness or likeability.
Thirdly this study suggested the merits of leveraging a strong brand to introduce a new product. One advantage of using a brand extension strategy to name a new product is that a less concerted advertising effort may be necessary. To the extent that brands extensions are able to leverage existing parent brand associations in consumer memory, a company should find it easier to achieve brand image with an extension branding strategy instead of giving a new product a new name. The fact that corporate marketing activity impacted consumer evaluations of a corporate brand extension in the absence of any product specific advertising is further an empirical support for the benefit of adopting a brand extension strategy.
Fourthly this study suggested that corporate marketing activity significantly influenced extension evaluations even when the extension was advertised on the basis of another image dimension point. Thus corporate image associations are more likely to transfer to an extension on the basis of the branding strategy.
Lastly this study also suggested that where a company is in a situation of having a trade off between various strategies like reinforcing a strong association, strengthening a weak association or creating a new association, then it wholly depends on the situation of each of the elements to decide which strategy to choose. For example: In some cases, existing associations may be so strong that they may be better off emphasizing other information to fortify a weak or supply a missing association.
2.8 TYPES OF BRAND EXTENSION
Limited work has been done on the typology of brand extension. From various research papers, books and websites that I have consulted regarding brand extension, very few have distributed brand extension into different types. (Brandextension.org) have generated the following typology of brand extension taking functional and emotional attributes of the brand into consideration.
1. Similar product in a different form from the original parent product. This is where a company changes the form of the product from the original parent product. An example is (frozen) Snickers Ice Cream Bars. 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. E.g. Peanut butter is a characteristic ingredient in Reese’s Peanut Butter Cups candy. Chocolate is a characteristic ingredient of Hershey. Brand Extension Research identified Reese’s Peanut Butter as a logical extension that capitalizes on this association.
3. Benefit/attribute/feature owned. Many brands “own” a benefit, attribute or feature that can be extended. E.g. Brand Extension Research showed Armor All 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. E.g. Honda’s 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. E.g. 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. E.g. Nestlé’s 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 marketer’s effort to sell something else to its customer base. This works particularly well when that customer base is large and to some extent captive. E.g. 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. E.g. Designer clothing labels have been extended to furniture, jewellery, 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.
The above-mentioned typology is quite useful as it indicate the key areas where extension is done along with the methodology used to extend the product line. Yet it must be said that not all research work would agree with this typology as it is felt that certain types confuses line and brand extension or in ways generalizes it more to extension rather than brand extension. For example: Adding attribute to the products in the same product line would be line extension and not brand extension. Still it is a good base for my research work and also for further research into the typology of brand extension.
Aaker (1998) has described two types brand extension differentiating the concept on a corporate level. The first type described by him is product brand extension. ‘A company makes a product brand extension when it uses an existing brand name distinct from its corporate name to introduce a new product outside its current product offering’. With product brand extension consumers are often completely unaware of the company involved. The second type described by him is corporate brand extension. ‘A corporate brand extension is one which relies on the corporate name to launch a new product ‘. A corporate brand extension clearly identifies an organization with a product, and so evokes different reactions from consumers than a product brand extension. A corporate brand may create associations in consumer’s minds that reflect the values, program, and activities of the firm.
2.9 SEQUENTIAL STRETCHING AND UMBRELLA BRANDING
Extension to parent brand is usually a sequential process in which brands are initially line extended and then brand extended. This sequential stretching of brands leads to the formation of a whole family of brands thus giving rise to the concept of ‘Umbrella branding’. As the name indicates, umbrella branding refers to extension of a parent brand into a variety of products such that a whole range of products would come under the same brand. Taylor (2003) has divided the sequential extension into three main steps namely core brand extension, direct stretch and indirect stretch.
I will illustrate the concept using Dove as an example. Brand extension was a key driver of Dove’s explosive growth during the 1990’s. Coupled with geographic expansion, it helped grow sales fivefold, to almost $1 billion. The brand continues to grow at 20 percent per year and is well on its way to hitting the $ 2 billion mark in the next few years. Let go through the sequential process and apply it to Dove.
The first and most crucial step to be noted is that Dove didn’t extend its product line until it had achieved the following two things.
- A strong bar business had been built
- The brand had satisfactory scores on attributes rating for mildness and moisturizing.
An important thing to be noted is that extension took place only after Dove had secured its soap bar business and had improved it. Thus once there was strength in the brand, it extending it to other products. Stretching went through the following stages.
Stage One: Core Range extensions: Dove remained a product brand with a single format at this stage. It extended (line extension) its product range by adding new versions such as sensitive skin that now accounts for up to a third of sales. Further growth of the bar through product and pack innovation, remains a key source of profitable growth. Diagrammatic illustration of this step would indicate the extension into the two types.
Stage Two: Direct stretch: In this stage extension is done into markets that are quite relevant to the product line. In the case of dove, it extended its product range into bath and shower products. Yet till now dove is focused on personal washing. The key reasons of dove extension at this stage were strong product delivery and innovative packing that differentiated them from other products in the range. The following diagram illustrates their stretch in to shower and bath products.
Stage three: Indirect stretch: Capitalizing on their skin care outlook, Dove decided to be ambitious and to move beyond the washing and bathing market. Although they started off selectively, they introduced products like deodorants and hair gels etc. that were once again a big success. This process of broadening a product range is referred to as ‘Umbrella Branding’ as illustrated by the diagram given below.
The dove success has been due to consistent marketing and a consistent communication campaign. Consistency has been a key part of building brand identity and has been an additional ‘glue’ to tie together the extension.
2.10 BENEFITS AND DRAWBACKS ASSOCIATED WITH BRAND EXTENSION
Brand extension being the most popular mean of brand growth has some surprising statistics. Success rate of brand extension is hard to find, especially as what constitutes a success varies enormously. Yet a survey conducted by OC&C using a simple and effective definition of success (still being on shelf after six years after launch) found out that 50 percent of all brand extension fails. This figure is certainly an eye opener for most companies as half of the product fails using brand extension. Taylor (2003) has associated this huge failure figure due to ‘Brand ego tripping’ and also gives effective steps to avoid it. But before we go into the detail of this concept, let’s look into the benefits and drawbacks of brand extension.
2.10.1 BENEFITS ASSOCIATED WITH BRAND EXTENSION
The remarkable popularity of the concept over the last decade is a confirmation of the fact that there are marked benefits that can be associated with brand extension. Taylor (2003) has described the consumer benefits of brand extension in which he has identified consumer knowledge, consumer trust and lower cost as the major benefits of brand extension. Tauber (1988) has differentiated the benefits on the basis of efficiency and effectiveness emphasizing more on the cost benefits.
An existing strong brand promotes a new product or service as there is less need to create awareness and imagery. Thus in a way awareness is already present and the only thing left is communicating the message of a new product to the end consumer. Consumers trust strong brands to deliver against a particular promise. A survey by Brandgym (2003) indicates that 58% of UK consumers are more likely to try a new product from a brand they know versus only 3% for a new brand. Thus an extension uses the reputation of an established brand to create a compelling value proposition in a new segment or market. Taylor (2003) has referred to this as consumer knowledge and trust.
The cost benefit attached to brand extension is certainly one of the key reasons of the concepts popularity. Tauber (1988) has described awareness as an efficiency benefit in which cost advantage is achieved. This leads to the second most important benefit of brand extension that is lower cost. Tauber (1981) has pointed towards lower cost to achieve awareness and trial target level as the cost benefit of brand extension. Brandgym (2003) have shown that cost per unit of trial is 36 percent lower with brand extension and that repurchase is also higher.
Brand extension also opens the door to the possibility of other extensions thus broadening the scope of the parent brand. Every product has a definite life cycle and once in maturity has to be rejuvenated other wise it will end up in the decline stage of its product life cycle. Brand extension gives a new life to the brand name and survives the brand name over a longer period of time.
"Brands are the barrier to entry into new categories; they are also the means to entry."(www.brandextension.org)
An example can be taken of typewriters. With computers coming into the market, the demand for typewriters declined dramatically. Now if the typewriter companies would have extended their brand to electronic typewriters or computers at that time, then their brand name would have still existed with even better success chances in comparison to a new computer company although the parent product would no longer exist.
Another major benefit of brand extension is that which it brings to the rest of the brands in the product range. A successful brand extension creates synergies among the rest of the brands in the umbrella and in particular the parent brand. It reinforces the consumers' perceptions of the parent brand name that in return affects the sales of the parent brand and rejuvenates it. In a study Martínez (2004) has shown that the perceived quality of the brand and consumers' attitudes towards the extension positively influence both the general brand image (GBI) and the product brand image (PBI) after the extension. While familiarity with the products of the brand only affect the GBI, the perceived degree of fit affects the PBI. Thus this study indicates that positive attitudes are established due to successful brand extension.
2.10.2 RISKS ASSOCIATED WITH BRAND EXTENSION
Brand extension has a number of risks that can be associated with it. Taylor (2003) in his risk analysis model has described three things that can seriously damage the health of the core brand.
The first one is 'cannibalization'. As the name suggest, this is the risk of an existing eating up other family members in the hierarchy tree. The biggest risk occurs with range extensions that are brand clones lacking differentiation versus the existing brand. Thus with cannibalization not only is the volume of the core brand decreased, but also the profit margins of the extended product is also decreased due to extra cost owing to goodies yet failing to be priced up. Tauber (1981) in his risk benefit table has described cannibalization as a risk to existing lines. Chung and Anne (1996) have concluded that the effect of a step down brand extension in quality would affect the parent brand in three principle ways.
- Cannibalization of the core brand's sales,
- Tarnishing the prestige of the core brand name, and
- Negative feedback effects among the core brand's consumer franchise
The second risk described by Taylor (2003) is 'stealing thunder'. According to him, when extension would not improve the profitability of the business, then it would be better to improve the core brand rather than investing on new brands.
The third major risk described by Taylor (2003) is 'new toy syndrome'. When efforts are concentrated on new extended products, it leaves the core branded unattended to and the competition seeking this weakness would strike on the core brand and thus the extended product would fail automatically with the fall of the core brand. Aaker (1990) has also expressed this view when he wrote that extension (successful or unsuccessful) may potentially dilute the equity built up by the parent brand. Chen (2000) has also shown that unsuccessful brand extension may dilute the equity of the brand irrespective of the level of equity held by the parent brand.
Tauber (1981) has also mentioned that new product might create confusion or negative connotations in the minds of consumers and thus weaken the core values of the brand.
Much has been written as scare tactics about the negatives and risks of brand extension. In reality, if a brand extension is so off target or lacks fit and or leverage, it likely will fail and will damage the brand image and reputation of the parent brand. Most of these misfires though die in limited test market. In a study Chen (2004) studied the impact of a parent brand on the trial of the extension and the reciprocal effect of a successful trial of new brand extensions positioned horizontally and vertically on the parent brand. Results showed positive influence of the parent brand on the trial of the extension. Yet there can be real damage to the parent brand, however, when too many unrelated brand extensions are launched. Names like Betty Crocker, General Electric and Kraft have been extended profusely. While they have not lost their awareness as household words, the strong associations they once had to specific products and related qualities (e.g. cake mix, light bulbs and cheese) may be diluted. This is especially dangerous when a brand is used synonymously with a specific product. Brands that are not legally generic but are used that way such as Kleenex, Scotch (Tape), and Band-Aid should not be extended broadly or they risk losing this valuable quality.
It is crucial that one weigh these advantages and disadvantages of brand extension before launching a new product. Let's look into the concept of brand ego-tripping and then try to make brand extension an effective tool.
18.104.22.168 Brand ego-tripping and its detection
Taylor (2003) has described brand ego tripping as the biggest risk for brand extension. Brand ego-tripping refers to a company's inability to properly assess the challenge of creating a truly compelling and credible extension. Thus a company loses sight of what made them famous in the first place, what helped them deliver differentiation, relevance and value. They end up focusing internally on the needs of the business and its management rather than externally on the needs of the consumer.
Thus Taylor (2003) taking the example of Virgin has explained and given five points where a company may lead to brand ego tripping and has recommended ways on which if emphasis is given would lead to the success of the company.
- Neglecting the core: Taylor (2003) recognized that Virgin was neglecting the core brands of travel and entertainment and if it would have focused on this sector then it might have made a greater success.
- Forgetting what made you famous: Taylor (2003) recognized that part of virgins' failure in cola, vodka and jeans products could be because they couldn't differentiate effectively as they did in the airline and entertainment business.
- Failing to understand consumers and markets: Taylor (2003) also thought that the lack of real success in jeans, cola and vodka also reflected that virgins could understand these markets effectively. Consumers mostly want inspirational, fashionable badge values. Their differentiation on price wasn't quite successful.
- Scatter gun stretching: If virgin would have concentrated on a few products, then they would have achieved greater success as they would have emphasized adequately of each of them.
- Neglecting execution: Finally the last reason for brand ego tripping is neglecting execution. Virgin Energy was not able to meet the demands of the consumer and could not offer the service as promised.
It's quite important to recognize this concept and identify the five reasons for brand ego tripping because it can damage the brand identity of the parent brand and can create negative connotation about the brand. Thus once brand perception is developed negatively then it's hard to rectify the image of the brand and convey a positive image about the brand.
2.11 EFFECTIVENESS OF BRAND EXTENSION
Now we come to the most important part of the literature review and that is seeking ways to making brand extension an effective tool for the launch of new products. In order to study the effectiveness of brand extension different principles and models will be presented that would discuss the effectiveness of brand extension. A few principles have been indicated below which can be viewed as a gauge to measure the success of brand extension.
The first and foremost principle is that brand extension should have a balance between fit and leverage. In order to illustrate this concept further, following are the definition and explanations of fit and leverage.
Fit: What categories will consumers accept from a brand? Thus it defines the ability of a brand to stretch or to identify the boundaries of the brand. According to Tauber (1988) perceived fit is achieved "when the consumer accepts the new product as logical and would expect it from the brand". Aaker and Keller (1990) suggested that perceptual fit is whether a consumer perceives the new item to be consistent with the parent brand. For example, Consumers accepted the concept of Duracell flashlights but when asked about Duracell cameras, they replied no. Duracell didn't have that expertise in the mind of the consumer. Whether they did or not didn't matter. Perceptions dictated that Duracell (www.brandextension.org)
Leverage refers to the distinctive properties, which a brand "owns" that provide a competitive advantage to the brand extension in its new category. Leverage is the impact of these distinctive properties that lead customers in the new category to perceive the brand extension as superior to existing competitive products on an important dimension. There is often an inverse relationship between fit and leverage (www.brandextension.org).
Martinez and Pina (2003) have concluded in a study that if the consumer does not "get" the connection between the main brand and the extension - the link is too distant, tenuous or seems downright daft - then the extended brand is likely to fail. In a study Zimmer and Bhat (2004) investigated the impact of extension quality and fit on the parent brand. The results showed that the impact of good fit on the brand attitude of the parent brand was quite positive whereas the impact of bad fit on the brand attitude of the parent brand was relatively less. Although this study would decrease the importance of fit yet I would still recommend brand extension to posses fit and leverage as little negative affect from one product would lead into another extension and would gradually become significant enough to create an impact on the parent brand.
Another important aspect of brand extension which is crucial to the concept is that the product should be well distinguished from the parent brand and other brands in the range other wise it would lead to cannibalization of the brand. Crest spent decades launching new toothpaste twists such as tartar control, gum protection and whitening. In the USA, share halved from 50 per cent with one product to 25 per cent with 50 products (Lury 1998). Speed (1998) has indicated in his study that management decisions about branding strategy are driven by consideration of risk and return. According to him managers seek to minimize their exposure to cannibalization risk and capture possible benefits from transfer and reciprocity.
Taylor (2003) has proposed a brand extension work out in which he has presented six practical steps that would help in applying the principles of brand added value to boost the chances of success. The following figure would illustrate things further.
Step One: Strengthen the core step emphasizes the importance of a strong core brand and product for successful stretching. Thus in this first step it is essential that the core brand is strong and healthy and one that can add real value to new extensions. Taylor emphasizes on the fact that if the core brand is under performing, it may decrease the appeal of the new product or services.
Step two: With a healthy core product, attention can be turned to the future. Developing a clear and ambitious brand vision is a great stimulus for successful extension. By developing a broader definition of the market, opportunities for brand extension and potential threats from competitors can be highlighted. It also gives the whole team a sense of direction, assisting in ensuring that extensions not only build sales, but also play a role in building one big brand idea.
Step three: With a clear and inspiring vision in place, the next step is generating ideas. This should start with a search for opportunities to extend the core range, using a number of different insight springboards. Importantly, consumers are only one source of ideas.
Many successful ideas come from borrowing ideas from competitors and companies in other categories, or looking within the company itself.
Step four: Having generated extension idea, teams need to employ a process of focus on those with the best potential to build the business and the desired brand vision. Clarity is also needed on the company's competences to ensure that the product promise can be fully delivered. Without such a disciplined approach, companies risk launching too many small extensions that add limited value for consumers and so build little extra business.
Step five: Even when one has focused his/her efforts and investments on extensions with the best potential, poor execution can still let a company incur losses. Failing to deliver on the promises made in the concept is rated by marketing directors as one of the main causes of extension failure. In contrast, excellence of execution has several positive effects. First and foremost, it helps boost repurchase and so increase the probability of profitable growth. It also helps generate positive word of mouth and free publicity, by far the best forms of extension promotion. Finally product quality can allow a product to push the brand extension boundaries: people will tend to buy a fantastic product even if the fit with the brand is not obvious.
Step six: As a brand extends it becomes a bigger challenge to manage and risks running off in too many directions. A multitude of messages confuses the consumer and dilutes the image of the parent brand. It also leads to a loss of clarity on priorities within the company. Brand architecture (Brand Hierarchy tree) helps to structure all the brand extended product range so that brand values are developed consistently within the umbrella of brands.
This sequential, logical, simple and practical model given by Taylor (2003) will help all companies in identifying the pitfalls in brand extension and would help them in having a successful brand extension as it not only emphasizes on the sequence of steps leading from strengthening the core to brand architecture but also within each step identifies the possible mistakes that companies have been making over the years. This model also seeks to address the issue of brand ego-tripping. The table described on the next page will summarize the activity of this model and will link it to the problems created by brand ego-tripping. Solutions to each problem are also provided.
2.12 CONCLUSION FROM LITRETURE REVIEW
From the literature review it's obvious that brand extension should occur only if the core brand is strong enough to be translated on to another brand. Thus there is no use of extending a brand that isn't strong because then it would risk having negative effects on the parent brand. Also it's concluded that brand extension should be done only if it has fit and leverage. The significance from a consumer perspective is that if it doesn't have fit and leverage then the consumers would be able to associate the image of the parent brand to the new one that would cause it to fail.
Weighing the benefits against the drawbacks determines the strength of any brand extension. Although it is recognized that brand extension may serve different functions yet its imperative that a clear vision is kept about the product category in which extension is expected. The matrix given by Taylor (2003) summarizes the use of brand extension for building the business of any organization. On one axis he has business build and on the other axis he has taken brand vision build as the key elements that a brand extension would achieve. Thus he described four kinds of extension
According to Taylor (2003) hero extension are those that intend to build business and the brand vision of the parent brand. The bulk of the marketing activities should be concentrated on this extension. On the other extreme is drain extension, which doesn't intend to build business and brand vision. This is the type of extension that business should be aware of and companies that aren't aware of the concept usually end up in this box. The other two extensions are used for tactic and are situational in nature.
Thus taking the above matrix into consideration, I would conclude this literature review by emphasizing on the fact that the aim of extension should be to become a hero extension. Yet ambitions have to be controlled and the benefits and drawbacks of the extension should be taken into consideration. If done properly brand extension can turn out to be an excellent mean of brand growth.
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