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Brand Extension

Brand Extension

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Published by Rishab Mehta

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Published by: Rishab Mehta on Feb 22, 2012
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 Knowledge Box Jan 2007|
 
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Brand extension can either be taking product to market faster or diluting the parent brand ...
BRAND: A PART OF MARKTING MIXClassical 4Ps (Marketing Mix: Product, Price,Promotion, Place) is in continuous use by marketingpractitioners and academicians to design anintegrated marketing plan. Along with STP(Segmentation, Targeting and Positioning), marketingmix plays a major role for designing marketingroadmap starting from early stage of new productdevelopment until maintaining market share.Regardless what content inside the product, howmuch it is priced, how intensive the promotion takes,and how large the coverage of distribution, a clearidentity to distinguish the product to other productsthat have existed in the market is crucial. Inmarketing study, such identity labeled to a product iscalled brand. A brand is created to foster long termchained connections between company andcustomers. As more alternative of products availablein market, customers take bigger trust on brand theycan rely on, to products that offering values closelymeet their needs.Brand is a powerful tool for marketing strategy.Luxurious brands like Gucci and Prada are negativelyaffected on counterfeits sold by illegal vendors indeveloping countries. Consumers who buy theproducts know dissimilarity of quality. They,however, still make buying decisions as driven bypower of brand. The typical consumers won’t make
Brand Extension
The Benefits and Pitfalls
KNOWLEDGE BOXis a periodical publication of BLOOMHEADwww.bloomhead.commail@bloomhead.comStrategy
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purchases when no brand is attached to thecounterfeited products.A series of programs to promote products relying onbrand images is called branding. Branding is crucial toincrease perceived consumer value. Successfulbranding programs lead to brand loyalty andconsequently transfer the loyalty to brand extension.Similar with humans, brand has an image asaccumulations of some attributes. Physical productquality, the most tangible and easiest to detect,belongs to the collection of attributes. In the longrun, however, the product quality is perceivedseparately from brand image. Some argues thatbrand image is more important that physical productquality. In executing brand extension, high profileand well known brand image is more applicable thanone with low image.BRAND EXTENSION AND LINE EXTENSIONBrand extension is a part of brand management todiversify and leveraging the existing brand byentering into new product category by new productdevelopment. Positive images and strengths of existing brand / parent brand are leveraged to bringanother success story for new product. Brandextension is increasingly used by companies as a partof strategy for product developments. It is viewed asone of means to attain integrated brand architecture.The use of same brand on existing product (parentbrand) for a new product in different category(extension brand) increases rate of new acceptanceand purchase intention to consumer. The strategymaintains efficiencies on advertising and promotionexpenditures yet still can create new marketsegment. Company is not in position to allocatemarketing expenses at the same level as spent by theparent brand, yet may gain similar level of success. Astrong reputation of parent brand can minimize riskof new product launch by taking advantages onconsumers’ knowledge and experiences of theestablished brand.In comparison, line extension strategy is sometimesmixed up with brand extension. While takingcompletely different approach, line extension offersnew products, under the same brand name, in thesame product category. Line extension can also byextending same product and same brand withdifferent product features (e.g. introducing newflavors and selling different sizes of packaging). Fromrisk management perspective, brand extension posesmore risk than line extension. Poorly executedextension of brand to new product categories can jeopardize current image of parent brand. In lessdegree of risk encountered, line extension deals onlywith the product itself with slight connections to thebrand.Entire processes of new product developments takesignificant hours and efforts to bring about a success.Particularly for some type of products having short-term product life cycle, a marketing strategy thatleads to a shortcut of achievement is a preference fora marketing program. Instead of working up from azero point, one would start from an establishedground-base. From marketing view, brand extensionstrategy is a solid base and perceived for a mainchoice to continue the legacy of a successful parentbrand. Also, it optimizes economic scale of company’s intellectual property. However, brandextension strategy is not a risk-free and does not
 
 Knowledge Box Jan 2007|
 
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fully secure the results. It poses some risks since thebrand associations of the parent brand must beappropriately transferred and linked to the newproduct. The failure of associating brand to newproduct can negatively affect not only to the newproduct, but also does affect the parent brand. Theimage and financial figures of parent brand may beendangered due to the failure of strategyimplementation.BRAND EXTENSION IN FMCG AND PHARMACEUTICALFor FMCG (Fast moving consumer goods) companies,the use of brand extension is increasing for last fewyears. Very high cost required to launch a newproduct becomes a major factor for company torethink and locate different marketing approaches.Marketers find that using the same brand (of course,the established and reputable one) in the company’sportfolio to be used by new product in differentcategory can be the answer to financial efficiencies.As this approach becomes popular and widelyleveraged by more companies, supplemental risksoccur as brand concentration is focused to big brandsonly. Too many products under a brand portfolio canalso endanger overall brand image.Two FMCG companies P&G (Procter & Gamble) andUnilever are concentrating on big brands thatgenerate sales of more than $1 billion. P&G recentlylaunched two new products using brand extension:new biodegradable wipes named Kandoo, launchedunder Pampers parent brand, and a new product forwashing cars under Mr. Clean parent brand.Different nature and marketing practices,pharmaceutical companies tend not to implementthe brand extension. Some products were in trial butresulted in little success. In branding strategy,pharmacists show a significant role. They providemain stream on how label a product name.Pharmacists fear that extending brand to differentactive ingredients increase chances of dispensingmistake. For instance, Panadol is the brand of genericparacetamol. Adding one or more active ingredientsyet maintaining same brand of Panadol would bedifficult for marketing and safety reasons. Uniqueapproaches experienced by pharmaceutical sectorsand can be seen as a brand extension is by using twodifferent brands for the exactly same product and fortreating two different treatments. The generic nameof Bupropion hydrochloride is manufactured andmarketed by GSK (GlaxoSmithKline) as a brand nameWellbutrin for treating depression and as Zyban forsmoking cessation.BIG NAMES WITH SUCCESSFUL BRAND EXTENSIONNot many companies can be compared to Virgingroup in doing A-Z of brand extension. Virgin Groupflies high with brand extension. By simply attachingname of “Virgin” in every product they market, Virginrolls out so diverse categories. Virgin decisions totake this approach are tightly tied to the founder andCEO of the group, Richard Branson. With one singlebrand (Virgin), Branson and team have introducedand promoted so diverse product categories, fromcola drink to wedding service and further to budgetairline. A few were not running as planned, yet not sofew can contribute cash inflows to the company.Founded in 1970s as a mail order record company,Virgin has now more than 200 individual companieswith total $5 billion in turnover. Recipe spread byBranson on taking his company grown so rapidly is by

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