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Virgin: An extension-based
business model
Case study
South Africa
Johannesburg
Hong Kong
Canada
Kenya
India
Virgin: An extension-based
business model
300 companies
Brand’s DNA: Seek opportunities in
markets choked by ‘false competition’
(Underdog business model)
Virgin: An extension-based
business model
Values: service quality, innovation, fun and
value for money
‘Way of life’ brand – enjoy life to the full –
make customers happier
Umbrella branding is the ‘glue’
Virgin: An extension-based
business model
To finance his expansion, Branson usually
seeks support from appropriate partners in
order to minimise his own investment, even
if this means not being the majority
shareholder (Virgin Megastores in UK)
Virgin allows start-ups to begin with a world
brand as their ‘birth gift’
Virgin: An extension-based
business model
Branson also resells his businesses - but
only after adding value with his brand
(Virgin Atlantic)
The Virgin brand remains the property of
Virgin Enterprises, a company of which he
is the sole owner
Virgin: An extension-based
business model
Weakness: The further you get from the
British zone of influence, the weaker and less
emotive the brand becomes
Major failures: Virgin Cola, Virgin Clothing
Question: If Virgin = Branson then what
happens to the company after Branson?
Leveraging
Leveraging
the
theBrand
Brand
Stretching
Stretching
Line
Line Brand
Brand Co-
Co-
the
theBrand
Brand
Extensions
Extensions Extensions
Extensions branding
branding
vertically
vertically
Down
Down Up
Up
Brand Extensions
When a firm uses an established brand name to
introduce a new product
Brand extension classification
– Line extension
Marketers apply the parent brand to a new
category
Line Extensions: Why
At its beginning, there is only one form of the
product (Coca-Cola)
With time, the brand acknowledges differentiated
expectations and decides to respond with product
offerings - it evolves with the consumer
Therefore, the extension is an expression of the
brand that it cares - reinforces the relationship
Line Extensions: Why
Growth and profitability
Successful Category
Extensions
Apple
Kingfisher
Ivory
Nirma
Caterpillar
Unsuccessful Category
Extensions
Harley Davidson wine coolers
Bic perfumes
Kleenex diapers
Levi’s Tailored Classics suits
Bournvita biscuits
Pond’s toothpaste
Advantages of Extensions
Facilitatenew product acceptance
– Improve brand image (VAIO from Sony)
– Reduce risk perceived by customers
– Increase the probability of gaining distribution
and trial
– Increase efficiency of promotional
expenditures (Brand is already known. Focus
on product in marketing communications e.g.
Dettol)
Advantages of Extensions
(Cont.)
Facilitate new product acceptance
– Reduce costs of introductory and follow-up
marketing programs (“Halo effect” – iPod)
– Avoid cost of developing a new brand
– Allow for packaging and labeling efficiencies (e.g.
printing and merchandising – “Billboard effect” –
Coke)
– Permit consumer variety seeking
Advantages of Extensions
(Cont.)
Provide feedback benefits to parent brand
– Clarify brand meaning (e.g. Kingfisher,
Gillette)
– Enhance the parent brand image
– Bring new customers into brand franchise and
increase market coverage (Chota Coke, Allen
Solly for Women, Women’s Horlicks)
– Revitalize the brand (Lifebuoy)
– Permit subsequent extensions (Becomes
easier)
Disadvantages of Extensions
Can confuse or frustrate consumers
Can encounter retailer resistance
Can fail and hurt parent brand image (Mercedes
A Class, Maruti Versa)
Can succeed but cannibalize sales of parent
brand (Diet Coke, Mach 3 Turbo)
Disadvantages of Extensions
Can succeed but diminish identification with any
one category (Cadbury in UK – food products)
Can succeed but hurt the image of the parent
brand (Evian licensed to J&J – skin care
products)
Can dilute brand meaning (Gucci – 22k products
– 7k)
Can cause the company to forgo the chance to
develop a new brand (Levi’s & Dockers)
Identifying potential
extensions
Perimeters of brand extension
No-go area
Extension zone
Outer core
Inner core
Kernel line
extension
Spontaneous
associations
Latent potential
Building a brand through
systematic extensions
Nivea extensions galaxy
No Go
Beauty
Face
Lip-
Deo care Vital
No GoNo Go
Hand NiveaNo Nivea
Go
Creme Soft For men
Body
Sun Baby Hair care
Bath care
No Go
Reading
StrategicBrand Management by Kevin
Lane Keller. Chapter: 12
The New Strategic Brand Management by
Kapferer. Ch: 12