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.