Individual Assignment: One successful and one not so successful

Brand Extension in the Indian market .

Submitted in partial fulfillment of the requirements of the course

Seminar on Brand Management

Instructor: Prof. Abraham Koshy

Academic Associate: Ms. Sonal Kureshi

By

Snehangshu Barman

PGP-13338

Date: 4th August, 2014

INDIAN INSTITUTE OF MANAGEMENT, AHMEDABAD

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Definition of Brand Extension: Brand Extension is the phenomenon in which a company
ventures into a new product category using an existing brand name.

This is slightly different than Line Extension, in which a company uses the existing brand
name to launch products into same category. In Indian context, examples of brand extension
would be Wipro venturing into consumer care and lighting category using Wipro brand name
or Ponds launching Ponds toothbrush. Whereas line extension examples would be Perk
launching Perk with Glucose or Colgate launching Colgate Advanced etc.

Why and When to go for Brand Extension?

Brand Extension can be done to serve multiple objectives. The main motive is to leverage the
Brand Recognition or awareness already existing in the customers’ minds. Whenever a
company sees opportunity to introduce a new product in new categories, the safest way to do
that would be to use an existing and well going brand. But, here is the caveat, while doing a
brand extension, a number of things has to be kept in mind. Proper market research is needed
before taking brand extension decisions. Below is the representation of ‘Kapferer’s brand
extension model’.

Image 1 & 2: Source: (http://file.scirp.org/Html/1-1530022/399552c1-c73f-47a1-

b75f-162ff13ec71b.jpg) (accessed on Aug 3, 2014 at around 9.30 pm)

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In the x-axis of the diagram, extension space is represented while in the y-axis, brand position
is depicted. As we can see, extension based on products has the least amount of extension
space while extension based on interest and values has huge space in the extension space.
This is very important and not all the time these spaces are apparently visible. Before taking a
brand extension decision, the importance of market research is therefore immense.

Pros and Cons of Brand Extension:

Pros of Brand Extension:

1. Leveraging Brand Equity: Using a reputed existing brand means new product will
be able to leverage the loyalty and equity of the parent brand.
2. Minimizing Risk: Lower Risk due to brand awareness and/or loyalty of pool of
customers.
3. Low cost of initial ad/ promotion campaigns: Parent brand acts as the promoter and
guarantor for the new brand, resulting in lower cost.
4. Use of existing distribution and sales channel: Often newer products use sales and
distribution channels of the parent brand. This increases synergy and efficiency.
5. Feedback Benefits: Introducing new product in the same brand name increases share
of voice in the market. This helps reviving the parent brand.

Cons of Brand Extension:

1. Brand Dilution: As we can see from above image (2), venturing into product
categories which are different in interest and values from the parent brand results in
huge gap in extension space. This exposes the brand to the risk of brand dilution.
2. Risk of damaging the parent brand: Sometimes the performance of the new brand
may damage the goodwill of the parent brand. This is a huge risk.
3. Overconfidence Risk: There are chances of less awareness and trial because the
management may not provide enough investment for the introduction of new product
assuming that the spin-off effects from the original brand name will compensate.

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One Successful Brand extension:

Brand: TATA

Parent brand domain: Steel

Extension: Automobile, Agribusiness, Salt, Beverages, Fashion & Jewellery, Telecom,

Airlines, Hospitality, Consulting etc.

Why are the extensions successful? An analysis:

Before trying to analyze the reason of TATA’s successful extension, let us try to
understand TATA’s brand identity using ‘Kapferer’s brand identity prism’.

Image-3: Source: ( http://tuesdaydigital.wordpress.com/2013/01/06/applying-

kapferers-brand-identity-model-to-digital-marketing/) (accessed on Aug 3, 2014 at
around 11 pm)

Both in Internalisation and Externalisation aspects of the brand, TATA has given stress
on building trust in the name ‘TATA’. If we break identity into dimensions, we will

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find that TATA’s personality is that of a trusted and experienced person, through
initiatives like ‘TATA values’, ‘TATA code of conduct’ TATA has successfully built a
culture of high level of service, devotion to excellence and quality within the
organization. This self-image obviously reflects when TATA employees or TATA brand
interacts with consumers. In the external side, the internal values have driven a culture of
strong relationship with customers. Thus over the ages, TATA has built an image of
quality and trustworthy brand name.

The brand identity of TATA is so strong that over the last few decades TATA has
effortlessly extended into as diverse product categories from agribusiness to airlines or
from automobile to telecom. Along with the brand identity, there are other factors too
which has led to the success of TATA brand extension. These include,

a) Internalizing the core values of quality and service. Every TATA employee is
extensively trained to abide by these mantras. This culture is imbibed in the
organizational DNA.
b) Competent workforce and management have always set examples of trust and
quality. The phenomenal courage and commitment of TATA employees and leaders
during and aftermath of horrifying 26/11 terror attacks, where they reopened the Taj
Hotel within a month of the attack despite losing so many employees and incurring
huge damage. Not just that, they stood by the families of the dead and injured
employees and showed the commitment. Events like these has increased the
perception of TATA in the minds of people and strengthened the image of ‘Trust’.
c) TATA has been a first mover in the most of the categories it operate, this added pearls
to their image of quality and trust.

So, as all the extensions of TATA brand was based on the core values of the promise of
quality and trust. Not just that, they have ensured that the promise is well delivered. This
resulted in the creation of unique ‘TATA’ brand across products and services.

One Unsuccessful Brand extension:

Brand: Pond's

Parent brand domain: Face Cream, Face Wash.

Extension: Toothpaste.

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Why is the extension Unsuccessful? An analysis:

Pond’s was a well-known beauty product brand in Indian market. Pond’s had always tried
to communicate the message of ‘soft and caring’ beauty products through all their
marketing efforts and ad campaigns like ‘Googly Woogly Woosh’. Now, when they
ventured into toothpaste, the first reaction of the consumer was of confusion. If we refer
to Kapferer’s brand identity prism (Image-3), Pond’s initial external identity to the
consumers that of a soft and skin friendly beauty product did not match with the image of
a toothpaste brand. In the mind of a common Indian consumer, toothpaste creates the
image of a product that is used to fight germs and considered to include medicinal
elements in formula. So toothpaste is a medicinal and chemical heavy product in the mind
of an average Indian consumer whereas earlier they used to view Pond’s as a soft and skin
friendly beauty product. So, the brand extension was mostly a failure due to clashing
images of the brand in the minds of the consumers. Another point was the functional use
of beauty cream/facewash and toothpaste. While beauty cream/facewash is for external
use and its major attribute is fragrance. Whereas major attribute of toothpaste is taste.
This again proves that for a brand extension to be successful, the functional benefits must
remain the same. If we go back to the TATA example, the functional benefit across the
categories for TATA was trust and quality which remained a constant throughout.

If we try to analyze the phenomenon using Kapferer’s brand extension model, we will
find that there was a difference between the perception of the company and consumers
about the brand extension. In the mind of the company, they were extending the brand
across formula. Whereas in the mind of the consumer, it was an extension of products in
conflicting category. So, there was no space for extension in the mind of the consumer.

Above factors resulted in the fact that Pond’s not only failed to take leverage of the brand
name but was in danger of brand dilution. The Pond’s toothpaste brand died after
struggling for some time, again proving the importance of prior market research before
taking brand extension decisions.

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Sources/ References:

1. http://www.eurib.org/fileadmin/user_upload/Documenten/PDF/Brand_stretching_EN
GELS/r_-_Merktypen_en_vermogen_tot_uitbreiding_van_Kapferer__EN_.pdf
(accessed on Aug 3, 2014 at around 9.41 pm)
2. http://www.managementstudyguide.com/brand-extension.htm (accessed on Aug 3,
2014 at around 10 pm)
3. http://chatbhandaar.brainmaalish.com/ponds-toothpaste-a-failure-owning-to-brand-
perception/ (accessed on Aug 4, 2014 at around 1 am)
4. http://www.thehindubusinessline.com/todays-paper/tp-new-manager/brand-
extensions/article1015824.ece (accessed on Aug 3, 2014 at around 9.30 pm)