BRAND EXTENSION AS A MARKETING STRATEGY Many companies adopt brand extension as strategy with the aim of benefiting from the brand knowledge achieved in the current markets. When a company launch a new product and market under the umbrella a well-known brand name, failure rates and marketing costs are reduced (Keller, 1993). Keller (1993) states that more than 80 per cent of firms resort to brand extensions as a way of marketing goods and services. Competition forces firms to adopt strategies that create a competitive advantage for the firm. Creating a brand name with well established associations is one way of achieving this aim. Firms invest heavily in developing a brand. It is a very costly process but has many returns once success is achieved (Keller, 2008). Brand extension as a marketing strategy has become even more attractive in today’s environment where developing a new product costs a lot of money and can be time consuming. Literature on extensions dominantly addresses the question of how the parent or core brand helps the new product during its launching stage. Although literature touches on
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BRAND EXTENSION AS A MARKETING STRATEGY
Many companies adopt brand extension as strategy with the aim of benefiting from the brand
knowledge achieved in the current markets. When a company launch a new product and
market under the umbrella a well-known brand name, failure rates and marketing costs are
reduced (Keller, 1993). Keller (1993) states that more than 80 per cent of firms resort to brand
extensions as a way of marketing goods and services. Competition forces firms to adopt
strategies that create a competitive advantage for the firm. Creating a brand name with well
established associations is one way of achieving this aim. Firms invest heavily in developing
a brand. It is a very costly process but has many returns once success is achieved (Keller,
2008). Brand extension as a marketing strategy has become even more attractive in today’s
environment where developing a new product costs a lot of money and can be time
consuming. Literature on extensions dominantly addresses the question of how the parent or
core brand helps the new product during its launching stage. Although literature touches on
the possible reciprocal effects of the new product launching on the equity of the core brand,
their number is limited. This article presents a research study of brand extension with
developing an innovative product in a new product fast moving consumer goods category.
2.1. Brand extension as an important element in the process of brand management
Launching of a new product is usually done through brand extensions. The newly introduced
brand extension capitalizes on the equity of the already established (core) brand name
(DeGraba & Sullivan, 1995, Pitta & Katsanis, 1995) or even the company or corporate name
(e.g. Coca-Cola). Consumer familiarity with the existing core brand name aids new product
entry into the marketplace and helps the brand extension to capture new market segments
quickly (Dawar & Anderson, 1994, Milewicz & Herbig, 1994). This strategy is often seen as
beneficial because of the reduced new product introduction marketing research and
advertising costs and the increased chance of success due to higher preference derived from
the core brand equity. In addition, a brand extension can also produce possible reciprocal
effects that enhance the equity of the parent brand (Chen & Liu, 2004).
Market is a place of competition and cost associated with introduction of new brand always
soars, many firms are trying to decrease the risks involved in new product introduction and
market the new product using the name of already well known existing brand as brand
extension. Many firms use brand extension strategies to enter new categories. According to
Ambler et. al. (1997), it is common strategy of last decade that companies prefer brand
extension rather than introducing a new product under new product name. Companies save
their cost as well as minimize the risk by launching a new product as brand extension under
the brand name of already well-known brand. Marketers believe that brand extensions are
evaluated favourably by consumers because consumers transfer positive attitudes or affect
toward the parent brand to its extension.
The whole policy of the brand must be included for the brand extension strategy. Brand
extension strategy determines how far we can extend our brand. Before going into brand
extension strategy we have to answer the following questions (Davis, 2002, p. 508):
− Does the brand extension strategy consistent with the vision strategy?
− Does the brand extension strategy improve the brand image?
− Does the brand extension strategy consistent with the brand positioning strategy?
− What will be the impact on the brand in the case of unsuccessful brand extension?
Possible directions of brand extension
Taylor’s model (2004 in Kline, 2006) (see picture 1) of consumer brand extension attitude
formation has triggered additional brand extension research in various countries. Their
exploratory research provided valuable insight into which extension constructs influence the
attitude of consumers toward the extended brand. The launching of new brands is much more
costly than expanding existing strong brands, but each extension is not necessarily successful.
DIRECT EXTENSION
TOTAL EXTENSION
BASIC EXTENSION
INDIRECT EXTENSION
Brand extension strategy comes in two primary forms (figure 1): horizontal and vertical.
In a horizontal brand extension situation, an existing brand name is applied to a new
product introduction in either a related product class (basic extension) or in a product
category completely new to the firm (total extension). A vertical brand extension, on the
Brand values,
characteristics,
personality
Middle markets
with a clear link
with the basic line.
The new shape or flavor to complement
the basic line.
Extremely wide range of products, without a functional link with the basic
More distant markets with less obvious connection to the basic line.
other hand, involves introducing a brand extension in the same product category as the
core brand, but at a different price point and quality level (direct extension) or in a
product category with less connection to the basic product line (indirect extension). There
are two possible options in vertical extension. The brand extension is introduced at a
lower price and lower quality level than the core brand (step-down) or at a higher price
and quality level than the core brand (step-up). In a vertical brand extension situation, a
second brand name or descriptor is usually introduced alongside the core brand name in
order to demonstrate the link between the brand extension and the core brand name.
Although a brand extension aids in generating consumer acceptance for a new product by
linking the new product with a known brand or company name, it also risks diluting the
core brand image by depleting or harming the equity which has been built up within the
core brand name (Aaker, 1990, Chen & Liu, 2004). Brands value can exploit for its
expansion, which is subject to various factors: the core brand values, the characteristics
and personality and the attitude of consumers to the brand. Successful expansion of the
brand is created by: increased the likelihood that consumers will accept the message of a
new line of products when this message includes a known element, update existing
product line with new brand offerings and more efficient use of the marketing costs.
The greatest risk in the expansion of the brand, however, that there may be fading
original personality of the brand. This causes that consumers do not perceive the
connection between the original brand and created extension. When deciding the brand
extension is to consider the following:
− Where should expand the brand: reach new groups of consumers, new markets,
occasional shoppers, with the same or new products?
− What should we extend the brand: offering related or unrelated products / services
under the same brand, in existing or new customers?
− How to expand the brand: independently conduct or collaborate with business partners
(eg through licensing or placing the franchise).
In many cases, the brand extension proved to be very successful strategy. This strategy is often
seen as beneficial because of the reduced new product introduction marketing research and
advertising costs and the increased chance of success due to higher preference derived from the
core brand equity.
FORMULATING THE BRAND VISION AND THE BRAND EXTENSION
STRATEGY
The focus at the start of a brand extension project is on the client and the clarity of his
thinking. There are three questions which require careful consideration from the outset:
1. What is the motivation for the brand extension initiative?
2. What is the overall brand vision within which the brand extension sits?
3. What strategy or strategies are being considered to bring the extension to
fruition?
At the start of a brand extension initiative it may be that the answers to questions 2 and
3 are as yet unknown. In other words that thinking is still to be done; those decisions are still to
be made. If this is the case then full account of this fact should be taken.Launching into a
consumer investigation of brand extension opportunities without having established the brand
vision and extension strategy is unlikely to be genuinely useful. Indeed the feedback could be
seriously misleading. What should be clear, however, is the motivation for extending.
THE MOTIVATION FOR THE BRAND EXTENSION
Client motivations can be broadly divided into two categories:
Growth motivation
Survival motivation
Growth motivation
The growth motivation can take two forms, one potentially more risky than theother.
The first motivation can be attributed to a businessman’s brain. For example a category
has been identified which is enjoying dramatic growth (or is extremely profitable or is
just plain big) and the manager of ‘Brand X ‘ wants a slice of the action. In this
instance little thought has as yet has been given to issues such as brand credibility and
fit with category or more importantly the potential impact on brand equity.
An alternative way in which a growth motivation can manifest itself is through the filter
of the marketer’s brain. A manager of ‘Brand X’ can see how his brand could compete
successfully in another category. This is a much more comforting state of affairs. The
initiative is brand led rather than volume led and there is a sense of working with the
brand’s equity rather than relying solely on current size and level of awareness.
Survival motivation
When the motivation for brand extension is survival the challenge takes a quite
different shape. The focus is not protecting the current business but shifting focus into
a new category or arena. This survival motivation might arise when the brand’s
business is concentrated in a declining and increasingly peripheral category. In the past
we have worked on the brand TDK. A leader in the cassette tape market, a format
largely superceded, it was imperative that it successfully established its heartland
elsewhere. This also required a redefining of its brand personality and values to ensure
that it was resonating with the new generation of music lovers.
Alternatively the need to extend in order to survive may be because the home category
is simply too niche and, in order to achieve critical mass, the brand must extend into
new fields. No doubt there are many other permutations. It is certainly the case that in the field of
technology boundaries between categories are blurring. Thus arguably a game console
brand like PlayStation can no longer restrict its attention to other console brands but
must compete against other gateways into a virtual world. In such a fast changing
environment you can’t count on your product heartland remaining the same for a
prolonged period of time. Extending your brand remit is an on-going part of managing
the brand.
UNDERSTANDING EXTENSION MOTIVATIONS: WHAT DOES IT BRING?So what real benefit does this understanding of motivation bring? It is, we believe,
crucial in understanding which extension strategy or strategies should be taken forward
into research as well as understanding the extent to which there is a pre-existing vision
of the total brand world within which the extension will sit. In other words it directly
influences the answers to the second and third questions defined above. The motivation
will influence the priority given to different aspects of the strategy going forward. For
example, for a brand like Levi’s, with enormous strength and equity in one category,
safeguarding its status in denim is of paramount importance. If, on the other hand you
are TDK, the focus is on where you are going more than where you have come from.
BRAND VISION AND EXTENSION STRATEGIES
Brand extension ideas should never be explored, certainlyin consumer or even expert
research, without a thorough understanding of the direction in which the brand as a
whole is heading and of how the extension is intended to interact and contribute to the
brand core. Without this vision and context, the brand management team is shirking its
responsibility. It is asking the consumer to tell them what the brand should stand for. It
is asking the consumer to be visionary. It is, as indicated earlier, asking the consumer
to give the brand permission to move forward whereas what should be happening is
that we proactively help clients to develop their vision and their extension strategies.
In order to develop this brand vision there is a need to understand fully the brand in
question and in particular the nature and extent of its elasticity. Armed with this
understanding the brand team will be well placed to move forward to the brand
extension exploration itself. As David Howard put it in an article for Admap in March
1997:
“It is only by gaining a better understanding of the brand’s potential to stretch that
those of us responsible for brand development and management will be able to
distinguish genuine opportunity from genuine opportunism”
BRAND ELASTICITYBrand elasticity describes the extent to which a brand is able to operate credibly in new
categories or is able to accommodate new product offerings whilst retaining a coherent
brand identity. We have identified three salient themes pertinent to this issue, themeswhich
should be investigated fully in order to come to a view on the nature and extent
of a brand’s elasticity. The three themes are:
Brand history
Product world
Brand world
Brand history
A contributory factor to elasticity is a brand’s historical development. Of particular
importance is the length of time that a brand has been associated with one product or
category prior to diversification. The term ‘associated with’ is highly significant here.
This is not just about the reality of a brand’s portfolio, it is about perception of the
brand’s portfolio, likely to be heavily influenced by the nature of a brand’s
communication strategy over the years. The focus of a brand’s communication and
product offering informs consumer understanding of the ‘philosophy’ and expertise of
the brand. It influences the extent to which a brand’s credibility is affected by visible
extension initiatives.
An excellent example of a brand where history has played an important role in limiting
elasticity is Levi’s, a brand we have been involved with on both sides of the Atlantic for
many years. In Europe, until the launch of Levi’s Engineered Jeans (LEJ) last year, Levi’s have
focused the majority of their communication efforts on extolling the virtues of the 5501,
the definitive and original jean. The reality is, of course, that an extensive range of
jeans styles and cuts were available. However the 501 advertising was the brand voice.
Levi’s cared about one product. It held originality and history close to its heart. It
behaved like a mono product brand. The result of this single-mindedness was of course
an incredibly successful iconic brand. But iconic brands with iconic products do not
lend themselves readily to future brand extension. Andy Farr and Graham Page, in a
recent paper based on a large scale quantitative study entitled ‘Do you have an elastic
brand?’, cite Coca Cola as one of the most inelastic brands they investigated – another
example of the effect of a mono-product history. Interestingly this learning confounds the view
that a brand’s strength in one category is permission enough to extend. Again Farr and Page:
“Brand strength does have a role to play in setting expectations about new offerings.
However, it is clear that brands which dominate, or which are closely associated withtheir home
category will find it more difficult to stretch to new territory.”
Returning to our Levi’s example and crossing the Atlantic we can illustrate further how
brand history impacts on elasticity. For although we would by no means describe the
brand in the States as elastic, we would suggest that it is more elastic than in Europe.
Its communication history and to some extent the reality of its portfolio (although we would
argue that here it is the communication which is the crucial factor) have embraced a broader
product base. The focus has been less on one product over a prolonged period of time. For
example there has been advertising for Silver Tab (baggier, more specifically youth oriented
styles) and a campaign directed at women with a ‘Levi’s for Women’ range. The result is a brand
less wedded to one product and which, at least within denim, has credentials in a level of
diversity. Incidentally Japan lies somewhere between Europe and the States on the elasticity
scale. There, consumers have perceived a focus on heritage and an aesthetic of the past
– limiting but less so than the one product focus of Europe.
BRAND ELASTICITY AND BRAND EXTENSION STRATEGY
It is clear from the above that a structured and disciplined analysis process should take
place in order to develop a brand extension strategy. On evaluating the brand’s elasticity,
understanding the relative strength of product versus brand values, it should be possible to draw
up the brand vision and the extension strategy which is coherent with and able to make a positive
contribution to that vision. Clearly consumer understanding plays an important role in this
process. With this approach, however, that understanding is clearly situated within a strategic
framework.
EXPLORING THE BRAND EXTENSION OPPORTUNITYA guiding principle for exploring brand extensions is to begin with the category into
which the brand is entering and not the brand from which the offering is stretching. The
reason for this is simple. An extension may be credible and logical for a brand, building on its
current values, but unless it is genuinely differentiating in the new category the extension will
fail. So for example in 1986 Timotei, the haircare brand, launched a skincare range embodying
the values of naturalness, simplicity and frequent use. It was not a success not because those
values were not relevant in the sector but because they were already offered by brands such as
Simple, Nivea and Body Shop. A second danger is that the values embodied by the range
extension offering are differentiating but simply not relevant. Dove, on entering the deodorant
category, was at pains to establish efficacy credentials rather than leading on a gentle
moisturizing platform. Without efficacy the other values are irrelevant.
So in our structured approach to brand extension research and planning we must next
explore fully the dynamics of the category of entry, gaining a clear understanding of the
product pre-requisites and consumer needs; the brand map and the territories occupied;
the levels of marketing activity and quality of communication support. This understanding of the
status quo may well involve a variety of disciplines such as semiotic analysis, quantitative
evaluation of media budgets set against volume sales and levels of profitability, expert
workshops and of course consumer research. The objective of all this analysis is to ensure that
the extension is evaluated in the right environment against meaningful benchmarks. For the
questions at this point are: How competitive and differentiated is the brand extension proposed?
How will it compete in the marketplace? What is it about this offering that will make people
want to buy it? These are obvious questions but impossible to answer if the offering has only
ever been looked at through the lens of the parent brand and out of the context of the harsh
reality of the destination category.
So what is called for here is a process of analysis and thinking which brings together category
understanding, consumer understanding and an interrogation of the brand extension offering
itself. Note what we are avoiding is a directionless questioning of the consumer along the lines of
‘what if Brand X were to enter this category, what would you think…’ Instead we would be
exploring a defined product offering or offerings (depending on whether the previous stage 1 of
the process had identified only one or a number of alternative extension strategies). Moreover at
this stage we would not be asking consumers to reflect on the implications for the parent brand
but rather to focus on the product’s desirability in its own right within the new category.
If Positive If Negative
THE BRAND EQUITY BALANCE
Consumer research clearly does have a role to play at this point but ultimately the picture is once
again completed by analysis, judgement and intuition rather than consumer answers to a series of
direct questions. The inputs may be many and varied but the aim is to draw up what we have
termed the ‘Brand Equity Profit and Loss’. The concept is very simple indeed although arriving
at the information is rather more complex. We seek to understand what values from the Brand
Core the extension draws on and whether that is likely to result in any sense of dilution or
weakening of the brand equity (Loss). We also come to an understanding of what the extension
will potentially invest in the Brand Core (Profit). Finally we arrive at a view of the resulting
Brand Equity Balance. Only if there is a positive balance would it be our recommendation to
proceed. Weakening brand equity for the sake of sort term volume is not a wise path to tread.
Factors Influencing Brand Extension
(1) Similarity
DestinationCategoryEvaluation
Evaluationof strengthof proposal
JUDGEMENTON SUSTAINABILITY
Brand Equity Balance
STOP
Referent product-extension product similarity (hereafter referred as similarity) is the
degree to which consumers perceive the extensions as similar to other products affiliated
with the brand . It is evident that the most frequently considered antecedent of brand
extensions is the level of perceived similarity between the original and extended brand.
Several studies reported that the greater the similarity between the original and extended
category, the greater the transfer of positive (or negative) affect to the extended brand
This finding is based on the assumption that consumers will develop more favourable
attitudes towards extensions if they perceive high congruence between the extension and
the original brand (see Boush, et al. 1987 for theoretical discussion)..
(2) Reputation
A basic premise underlying the use of brand extensions is that stronger brands provide
greater leverage for extensions than weaker brands (e.g., Aaker and Keller 1992; Smith
and Park 1992). As can be seen in the widely noted definition of brand equity, brand
strength has been articulated implicitly in terms of consumers’ predispositions towards
the brand . In the context of brand extension research, brand reputation has been defined
in terms of consumer perceptions of quality associated with a brand . It has been reported
that high perceived quality brands can be extended further and receive higher evaluations
than low perceived quality brands and . Reputation of a brand in these studies is
considered as the outcome of product quality, the firm’s marketing activities and
acceptance in the market place, i.e. more akin to the views of .Brands with higher
perceived reputation should provide consumers with greater risk relief and so encourage
more positive evaluations than brands of lower reputation. This notion should be true for
FMCG, durable goods, and particularly for services. When a new brand is launched in the
services sector, consumers have neither experience, nor concrete attributes, to judge its
quality. Consequently, consumers rely heavily on cues such as brand reputation .
Conversely, with goods, consumers can obtain useful information about quality through
visual inspection and thus the importance of inferences based on brand reputation may be
reduced.
Perceived Risk
Perceived risk is a multi-dimensional construct which implies that consumers experience pre-purchase uncertainty regarding the type and degree of expected loss resulting from the purchase and use of a product (Bauer 1960; Cox 1967).
Perceived risk is usually conceptualised as a two-dimensional construct.
(a) uncertainty about the consequences of making a mistake;
(b) uncertainty about the outcome
The literature shows that a recognised brand is often relied upon by consumers as a mean
of coping with perceived risk. A brand which is extended into a new product category
offers a new alternative to consumers, but also impacts on consumers’ perceptions of
risk. We believe, based on the literature, that a well known brand is a risk reliever and
enhances the likelihood of product trial. Berlyne (1970) argued that novel stimuli (cf
brand) tend to be highly arousing and trigger aversive reactions. . As a person gains
familiarity with a brand through repeated exposure, perceived risk tends to decline and
positive affect tends to increase (Baker, et al. 1986; Obermiller 1985).
Dowling and Staelin (1994) draw a distinction between product category risk and product
risk. They define the first type of risk as “the person’s perception of the riskiness
buying an average product in the product class” (p. 119), while the second type of risk
reflects the perceived risk of the specific alternatives being considered. When consumers
evaluate a brand extension both types of risk are relevant. We focused on the perceived
risk of the product category into which the brand was extended. When extending a well-
known brand into a product category perceived as risky, the brand can serve as a credible
risk reliever, signal an acceptable quality level, and thus increasing its likely acceptance.
It could also be argued that there is a distinction between goods and services when it
comes to perceived risk. Services are associated with greater degrees of intangibility,
simultaneity of production and consumption, provider consumer contact and, non
standardisation (Zeithaml, Parasuraman, and Berry 1985). In view of these
characteristics, the amount and quality of comprehensible information for consumers is
diminished, and thus the level of perceived risk is anticipated to be elevated. Reliance on
a recognised brand is a popular way of reducing risk. Thus in services brand extensions,
we would anticipate that as perceived risk increases when buying a newly extended
services brand, so there should be greater reliance on the parent brand.
While there is necessarily some degree of risk which accompanies all purchases, it is
predicted that more risk is associated with services than with goods.
4. Innovativeness.
Innovativeness is a personality trait related to an individual’s receptivity to new ideas and
willingness to try new practices and brands. The importance of innovativeness has been
examined extensively in the literature on diffusion of innovation (Rogers 1983) and
consumer behaviour (Engel, et al. 1990). However, there has been limited research into
the effects of consumer innovativeness on brand extension evaluations. Some work was
undertaken by Keller and Aaker (1997), albeit briefly, and more recently by Klink and
Smith (2001). A common observation is that individuals high in innovativeness are more
venturesome and more willing to try new brands (e.g., Stenkamp and Baumgartner 1992).
The response differences between highly innovative and less innovative consumers (cf
early and later adopters) reflects, to some extent, differences in risk-taking propensity.
Innovators tend to be less risk averse than other consumers. According to Rogers (1983),
one of the most salient traits of consumer innovators is the comfort they gain from taking
risk.
CHANGING EXTENSION EVALUATION BY CHANGING THE DECISION
CONTEXT.
Consumers evaluate brand extension in a variety of decision contexts. We propose that
the visual and comparative nature of the decision context can change how consumers
mentally represent the extension . According to construal level theory , people can
represent object at different levels of abstraction, ranging from lower level, concrete
representations that are contextualized and include incidental object features to higher
level., abstract representation which are decontextualized and include only the core
features of the object. We assume that the presence of visual cues and comparison
brands leads the consumer to adopt a more lower level , concrete representation of the
brand extension.
First consider the effect of visual cues. Visual information is readily imaginable and
distinctive , whereas verbal information is more pallid and decontextualized. For example
when when consumers contemplate the mere concept of a “Nike deodorant,” their
representation is not bounded by a particular context. However, adding visual product
cues (however basic) will activate incidental features beyond the core features implied
by the category (e.g., “odor protection”), thus facilitating the formation of a more vivid
and specific image of the product. This suggests that the presence of visual information
can activate a lower level more concrete representation. This view is consistent with
recent findings that people tend to categorize objects into more categories when these
objects are represented by pictures as opposed to words (Amit et al. 2008) and that people
process pictures more quickly when they represent psychologically close objects but
process words more quickly when they represent psychologically distant objects. Similar
to visual cues, the presence of comparison brands in the extension category can also
influence how consumers mentally represent the brand extension. Comparisons with
other brands in the same product category will highlight the lower-level, incidental
differences between the branded products while de emphasizing . The core features of
the product category, which are shared across brands and thus irrelevant to preference
(Tversky 1977). This contextualization and the accompanying emphasis on
(distinguishing) lower level rather than (shared) higher-level features should result in a
more concrete representation when consumers consider brand extensions in the context of
other brands in the product category rather than in isolation. In summary, we propose that
both visual cues and brand comparisons can shift consumers’ representation of brand
extensions from a schematic, abstract representation to a more detailed and concrete
representation thus moving these extensions psychologically closer to consumer. If the
decision context changes how consumers represent the brand extension, how does it
affect their extension evaluations? Building on prior findings in the brand extension and
psychological distance research streams, we expect that more concrete representations
will increase the importance of parent brand quality relative to brand extension fit . Kim
and John’s (2008) recent work demonstrates that concrete mindsets are associated with
reduced sensitivity to differences in fit. Specifically, they show that people who tend to
think abstractly evaluate a high fit extension of brand more favorably than low fir
extrension of brand whereas people who tend to think concretely do not show any such
difference. This is consistent with findings in the literature on psychological distance
indicating that more abstract mindsets tend to increase reliance on normative ideals and
general principles (Kivetz and Tyler 2007; Liberman, Trope, and Stephan 2007). Thus,
consumers in a more abstract mindset should place greater weight on the normative
appropriateness of the extension —that is, whether the extension fits with the image and
skills of the parent brand. Conversely, consumers in a more concrete mindset should
place greater weight on parent brand quality. People in a concrete mindset tend to have an
immediate temporal focus, as well as a focus on lower level features rather than higher-
level principles (Liberman, Trope, and Stephan 2007). It follows that consumers in a
concrete mindset should be primarily concerned about the immediate benefits that the
brand extension can provide them with —benefits that can be inferred from the quality of
the parent brand. In summary, we propose that the presence of visual cues or comparison
brands will activate more detailed, lower level
Benefits for brand extension
Brand extension is always seen as a way for companies to seek growth while introducing
a new product (Carolin, 2007). As it is a phenomenon in strong competitive market,
previous studies report that failure rates are 80 percent of the extension (Völkner and
Sattler, 2006). With such a high rate of failure, brand extension is still one of the most
popular ways for companies to develop. There are reasons why it is so attractive and
profitable. Economic benefit should be the first dynamic of brand extension. In the world
of cash, one of the greatest profits everybody wants to seek is economic benefit.
According to Tauber (1988), the economic as well as the business world, is now a cost
controlled and cost based world. Brand extension can be considered as a costly effective
outcome for new categories, the sales of parent brand will increase when employing
brand extension. On the other hand, brand extension can also reduce the cost of
launching a new product (Jean-noel, 1993).
It is well known that much more investments are required while introducing a new
brand to the market, such as advertisement, and this factor motivates managers to use the
way of brand extension. It is because brand extension can help in gaining financial scale
in the field of advertising (Roberts and McDonald, 1989). One of the most 6 popular and
effective but costly ways of branding is advertising. Good advertising makes great
contribution to the development of brand products. But advertising needs a big amount of
investments into the market to compete with competitors. Brand extension can achieve
the efficiency of advertising (Smith and Park, 1992). In addition, brand extension can
also become an advisable way to introduce a new product without advertising (Hasting,
1990). This can also lower the cost and provide easier chances for the new product when
entering into the market.
Secondly, brand extension reduces the risk of the new brand while entering the market
(Jean-noel, 1993; Lain, 2002). It is considered that the parent brand is famous if brand
extension is applied, because the new product can earn market share and customers more
easily with the help of the reputation of parent brand. Customers will be attracted as they
share the loyalty and trust the brand image of parent product (Aaker and Keller, 1990). In
this case, the risk and chance fail for the new product can be reduced (David Taylor,
2004), since the name of the parent brand can attract a group of customers based on their
loyalty. Also, this is an easier way to compete with the competitors. Moreover, brand
extension expands parent brands’ consumer base and eventually assists in developing
parent brand franchise.
Risks of brand extension
Even though there are thousands of reasons and benefits of brand extension, no matter
how attractive it is, brand extension is full of risks. The probability of success is uncertain
and unpredictable. 80% of the failure examples tell that brand extension is a two-side
sword.
Many managers are motivated by brand extension, since the new product can be
introduced with the image and the popularity of the parent brand. It is acquiesce that the
parent brand is a famous brand when implementing brand extension. Consequently, once
the brand extension is failed, the image of the parent brand will surely suffer from
negative influence. A wide selection of extensions confuses consumers (Quelch and
Kenny, 1994) and then will reduce the parent brand’s original image, consumers’ loyalty
and brand equity at the same time. Much worse, it will bring down consumers’ trust and
belief in the brand name (Ian, 2010; Loken and John 1993; Milberg, Park and McCarthy
1997; Sullivan 1990). Take the example of Coca-Cola, in order to compete with the
biggest competitor Pepsi, in 1980s Coca-Cola Company introduced new flavor coke, but
customers didn’t like the new coke which resulted in the decrease of the sales of original
taste coke.
Brand extension might cause psychopathy conflict of customers, weakening of exiting
associations, and the sharp image of the parent brand can be fuzzed (Aaker, 1990).
Besides, it might also reduce the market share and number of customers. Take the
example of Scott Company, Kleenex was the strongest brand of toilet paper in American
during that time. But the Scott introduced Kleenex facial tissue to the market what made
customers feel strange when using the tissue. Famous American advertisement science
expert, Al Ries, even commented on the product as: Kleenex toilet paper and Kleenex
tissue, which one is for nose? Later on, Procter & Gamble’s product, Charmin toilet
paper took place of Scott in the toilet paper.
Another risk is changing the position of the brand. For a new product, there will be a
strong restriction regarding the positioning. The positioning of the new product should be
close to the parent brand to realize synergy effects, otherwise, risks might appear
(Carolin, 2007). GOLDLION is a famous Chinese clothing brand for men, which was
popular for a time. Its slogan is “Goldlion, men’s world”. With the development of
Chinese clothing market especially for women’s clothes, Goldlion started to promote its
own brand for women’s clothes, but somehow ended up with a fuzzy image to the
original brand. Indeed, Goldlion’s women collection is not as popular as men’s. The
positioning of Goldlion is men’s clothing and has been well known among customers for
years. Once the new collection for women came out, customers changed the image of the
brand and in return they got confused about the product (MBA library).
From all the literatures listed above, it is expected that a company might confront both
challenges and opportunities when implementing brand extension strategy. However,
category extension has not been discussed independently as a type of brand extension.
Neither have specific cases and examples been further implied to related theory.
Brand equity
Branding is all about creating differences (Keller, 2003). Consequently, the brand equity
concept is about the importance of the role of the brand in marketing strategies. Brand
equity provides a common concept for interpreting marketing strategies. Brand equity is
defined as the incremental contribution per year obtainedby the brand in comparison to
the underlying product (or service) with no brand-building efforts.The incremental
contribution is driven by the individual customer’s incremental choice probability for the
brand in comparison to his or her choice probability for the underlying product with
nobrand-building efforts. The approach takes into account three sources of brand equity –
brand awareness, attribute perception biases, and non-attribute preference - and reveals
how much each of the three sources contributes to brand equity. This is done by taking
into account not only the direct effects of these three sources on choice probabilities, but
also the indirect effects through enhancing the brand’s availability. The method provides
what-if analysis capabilities to predict the likely impacts of alternative strategies to
enhance a brand’s equity. Brand equity can be defined differently by different
approaches: consumer based view and company based view. Consumer based brand
equity is the most widespread nowadays due to the importance markets given to the brand
evaluation from the consumer’s point of view (Ilias & Anastassios, 2010).
Aaker (1991) defines brand equity as a set of brand assets and liabilities linked to a
brand, its name and symbol, which add to or subtract from the value provided by a 8
product or service to a firm and/or that firm’s customer. By the other words, the
differential effect that brand has on the customer’s response to the marketing of that
brand. Therefore, the brand equity that a company enjoys is the essential piece that
reflects the performance of the company and is the guide towards future strategies and
decisions.
Keller (1993) refers brand equity as the differential effect of brand knowledge on
customers’ response to the marketing of a brand. Keller (2003) stresses that in order to
understand the brand equity, it should be realized that the power of a brand lies in
what resides in the minds of customers. In Keller’s consumer-based brand equity
theory, brand awareness and brand image are used as two components.
Many more scholars have explained and developed the definition of brand equity:
Based on Aaker's (1991) and Keller's (1993) conceptualizations of brand equity, Yoo
BRAND EQUITYDIMENSIONS OF BRAND EQUITY
Consumer Perception Developed by direct Marketing efforts
Consumer Perception developed by Indirect Marketing effort
Value to Firm
Value Perceived by Consumers
and Donthu (2001) developed and validated the multi-dimensional consumer based
brand equity (MBE) model. In their study, there is a comparatively high positive
relationship between brand equity and purchase intention as well as between brand
equity and brand attitude across all consumer groups. Solomon and Stuart (2002) put
brand equity as the value that a brand has for a particular organization or company.
They explain that brand equity provides a competitive advantage because it gives the
brand the power to capture and hold onto a larger share of the market and to sell at
prices with higher profit margins. Moreover, Brady, Cronin, Gavin and Roehm (2008)
state that brand equity implies a way of superiority. It is a perception of belief that
extends beyond mere familiarity to an extent of superiority that is not necessarily tied
to specific action. Nam, Ekinci and Whyatt (2011) study a sample of 378 customers in
hotel and restaurant industry by testing a model of five dimensions which as a result
further develops Aaker’s brand equity theory
Modified Aaker’s brand equity model
The theoretical framework of this paper explains the challenges and opportunities of
brand extension based on modified Aaker's brand equity model. There are five