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Brand Extension

Brand extension is using the leverage of a well known brand name in one category to launch a new product in a different category. or Brand extension is a part of brand management to diversify and leveraging the existing brand by entering into new product category by new product development. Positive images and strengths of existing brand / parent brand are leveraged to bring another success story for new product. Brand extension is increasingly used by companies as a part of strategy for product developments. It is viewed as one of means to attain integrated brand architecture. The use of same brand on existing product for a new product in different category increases rate of new acceptance and purchase intention to consumer. A strong reputation of parent brand can minimize risk of new product launch by taking advantages on consumers knowledge and experiences of the established brand. For FMCG (Fast moving consumer goods) companies, the use of brand extension is increasing for last few years. Very high cost required to launch a new product becomes a major factor for company to rethink and locate different marketing approaches.

Essential factors that impact brand extension success

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 extensions product category, product attributes and associations to the parent brands 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. 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.

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 success 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. 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 of Brand extensions

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. 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. 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. 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.

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.

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.

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.

Examples of Successful Brand extensions(related to Pakistan)

If we talk about the Nestle Brand. It has lots of brand categories like: Nestle Milk Pak: Here Nestle is the parent brand and Milk Pak is the further brand category. Nestle NESCAFE: Nescafe is another successful brand extension of Nestle. Nestle Pure Life: Pure Life is the bottled water of Nestle brand, which is also a successful brand extension. Nestle Cerelac: Cerelac for babies as a baby food is another brand extension of Nestle. Nestle KitKat: Kit Kat is another brand of Nestle. Which is a brand extension from Nestle. SuperAsia: SuperAsia is manufacturer of Room coolers and washing machines started producing Super Asia motor Bikes, that is brand extension of Super Asia Brand. YAMAHA: Before deciding to launch a new product with completely different from parent brand, Yamaha had developed sound reputation in manufacturing musical instruments. Perception to Yamaha musical instruments referred to engineering quality and precision. The two value creation were successfully transferred to new product and as the result, Yamaha is now one of the worlds largest manufacturer of motor cycles under Yamaha Motor Company.

Examples of some international Brand extensions Caterpillar: A very bold brand extension was taken by Caterpillar. Its move from a brand solely used for manufacturing on specialist construction and mining equipment into footwear market was highly perceived as a big mistake. However, the trial has been a big success. Available in over 150 countries, unit sales exceeded 5 million in 2001, making Cat Footwear one of the largest youth non athletic footwear brands in the world. The perception tried to transfer from the parent brand to footwear clearly demonstrate the strengths and outdoor equipment. A line in Caterpillars website points out that At Caterpillar, we build the machines that help our customers build a better world. The boots and shoes we build are made with the same commitment". Nike: Nike is an example on how a brand is extended to enter some different product categories and still sustains to business competitions. Product categories of running, basketball, volleyball, golf, soccer, baseball and recreational media are some of total categories set by management. In 2000, Nike introduced a series of electronic gadgets. Ahead of time, Nike was already running in diverse product categories of athletic shoes, watches and apparel. The brand extension transferred by Nike mostly fit perceptions and image of parent brand into consumers mind.

Some Disadvantages of Brand extension

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 customers 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 customers 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.

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 brands 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 brands equity.

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.

Assignment of Marketing Management

Brand Extension

Submitted to: Mr Jawad Saleem Submitted by: Fawaz Hassan ID 081329