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Brand Management

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Brand Management (MKT624)
Lesson 23
The discussion on line extension in the previous chapter gives rise to the next level of
discussion on brand extension or diversification. The lecture tends to discuss the positive sides
of brand extension. With powerful arguments and evidence, we shall see why brand extensions
(diversifications) have become preference of brand and business managers.
Brand extension is dealing with brands that make their place in different fields or categories.
These could be called a collection of different branded products having a common name.
Mitsubishi and Philips have already been cited as examples. In the context of our local market,
Guard brand of products are as diverse as oil filters and packaged rice. Sufi brand originally
known for soaps has diversified into edible oil and mineral water. Why companies prefer to go
across categories using their established brand names is an interesting exercise to carry and
educate ourselves about!
Why extend/diversify the brand
1. Remaining modern and up to date
It has become necessary. Branding is the name of the game in which brands try to
surpass themselves and consumers' tastes and expectations by being responsive. Cars,
electronics, and many food items are perfect examples of tangible products, while
banking and courier services are convincing service areas in which services have been
rationally defined and delivered, on daily basis, to consumers as products of ever-
increasing standards.
Brands that try to stick to a single product relying on communication alone to update
their image do not do well. To stay modern and responsive in present day's world,
brands have to stay in tune with developments in consumers' habits and practices1. As
habits change, brands also change. A salt brand extends into an iodized offering; a spice
brand offers a curry recipe, while a yogurt brand extends by offering hi-calcium yogurt
for kids and young ones. Brands respond out of the energy they muster from the market.
They pay back to the market by trying to
Rate of Success
fulfill emerging needs.
New Brands vs. Brand Extensions
If companies do not get into such
practices, they run the risk of being left
Figure 27
behind. Possible set back in one area can
be compensated by prompt developments
in another. So, the resourceful companies
do follow this practice.
2. Higher chances of success
Brand  extensions,  owing  to  high
awareness of established brand names
and other related factors, have higher
chances of success at lower costs. This
has been confirmed through a study by
OC&C consulting firm in 19902.
Retailers are more receptive to an
existing brand and offer space more
Source: Brand Management by Jean-Noel Kapferer
Brand Management (MKT624)
readily to extensions
Impact of Brand Extension
on the
than to new brands.
Consumer Adoption Process
They always suspect
new brands.
Secondly, it also has
an  impact  on  the
analysis by the same
consulting firm have
Conversion rate
Repeat purchase
Rate of trial
·  Higher  rate  of
New Brand
Figure 28
Brand Extension
·  Higher  rate  of
Source: Brand Management by Jean-Noel Kapferer
known brands.
·  Higher rate of developing loyalty for known brands.
The two factors of retailers' and consumers' patronage generate a higher level of trial,
conversion and loyalty3.
3. Cost of advertising
Supporting a family of different brands through advertising is very expensive.
Companies seem to be putting an end to the practice of introducing new brands every
time they introduce a new product. Knowing that the modern business practices and the
brand logic are based on competition, it must be the objective of every company to save
Working all the time to look for a new point of difference and surpassing their own
benchmarks, companies have to invest and reinvest. To recover costs, volumes have to
be increased (regardless of which category you are in) to achieve high productivity and
economies of scale. Costs, therefore, have to be cut wherever and whenever possible.
Cost-cutting is possible in the area of advertising by selecting a few branded products
bearing the same name to give mileage to all in various categories.
4. Defends a brand at risk in its basic market
There are situations in competitive environment where an established branded product
starts facing serious threats due either to:
·  Stiff competition, or
·  Shrinking category as a whole, or
·  The need to catch up with new technologies
The best course of action for brand managers is to develop something new on the basis
of brand awareness, loyalty, quality image, and also sympathy. As an example, a
bicycle manufacturer may get into the market of motorbikes due to one or a
combination of the above factors. Sohrab brand of bicycles and motorbikes is a case in
5. Defines new segments
It helps define new segments. This may sound like remaining in the same market. But
the fact is if a manufacturer of safety matches decides to get into the area of disposable
Brand Management (MKT624)
lighters, the manufacturer is venturing into an industry that is totally different from
match making. What is common is the target market that cuts across two industries
(match lights and lighter lights) and hence leads to creating two segments of the same
market of "lights".
In actuality, it is a function of so many diverse efforts like making investment into the
new plant and creating an appeal for a sub-segment of smokers from within the overall
segment of users of lights. While it is extension of an existing brand into a new
industry, it also is an effort to define new segments within a market.
The need to do so may arise due to one of the factors discussed under the preceding
point, that is, stiff competition or shrinking category of match lights.
Brand extension, therefore, also has the ability to draw fine lines within the segments
and define those by taking the lead.
6. Brand extension gives access to an accumulated image capital
Part of the high prices negotiated during takeovers of companies with established
brands is the intention of the acquirer to extend the brand immediately after the take
over, extend it and reap the profits from the image capital of the brand. That is why
many companies internationally are known as good acquisition targets because they
have established brands.
Some brands have such a high awareness that those are perceived by customers to be in
categories where they are not present. As an example, a famous maker of jams may be
perceived to be in the market of chutneys and pickles. Realizing such a perception on
part of the consumers, companies feel obliged to get into those categories. Situations
that drive brand extension make it mandatory for the management to capitalize on those.
Such situations reinforce the accumulated brand image. It is an interesting phenomenon;
on the one hand it motivates managers to acquire from the image capital of the acquired
brand and on the other it lets extensions add to the cumulative image. The graphics
further illustrate the concept.
Accumulated Image Capital
7. Essential for brand survival
Brand extension
It is absolutely essential to
Figure 29
having access to
break away from the mono
image capital
product in order to survive.
All products have a life-
cycle and are bound to
Accumulated Image
decline one day.
Before  a  product  is
implications of the law of
obsolescence,  we  must
introduce  another  as  a
Reinforced Image Capital
strategic  move  into  a
product gains from the
Existing Image Capital
brand name and yet it is
independent having its own
Brand reinforcing the
accumulated image
Brand Management (MKT624)
1. Jean-Noel Kapferer: "Strategic Brand Management ­ Creating and Sustaining Brand
Equity Long Term"; Kogan Page (228)
2. Jean-Noel Kapferer: "Strategic Brand Management ­ Creating and Sustaining Brand
Equity Long Term"; Kogan Page (236)
3. Jean-Noel Kapferer: "Strategic Brand Management ­ Creating and Sustaining Brand
Equity Long Term"; Kogan Page (237)
Suggested readings:
1. Jean-Noel Kapferer: "Strategic Brand Management ­ Creating and Sustaining Brand
Equity Long Term"; Kogan Page (226-231)
Table of Contents:
  1. UNDERSTANDING BRANDS – INTRODUCTION:Functions of Brand Management, Sales forecast, Brand plan
  2. INTRODUCTION:Brand Value and Power, Generate Profits and Build Brand Equity
  3. BRAND MANIFESTATIONS/ FUNDAMENTALS:Brand identity, Communication, Differentiation
  4. BRAND MANIFESTATIONS/ FUNDAMENTALS:Layers/levels of brands, Commitment of top management
  5. BRAND CHALLENGES:Consumer Revolt, Media Cost and Fragmentation, Vision
  6. STRATEGIC BRAND MANAGEMENT:Setting Objectives, Crafting a Strategy, The Brand Mission
  7. BRAND VISION:Consensus among management, Vision Statement of a Fast Food Company, Glossary of terms
  8. BUILDING BRAND VISION:Seek senior management’s input, Determine the financial contribution gap
  9. BUILDING BRAND VISION:Collect industry data and create a brand vision starter, BRAND PICTURE,
  10. BRAND PICTURE:Brand Value Pyramid, Importance of being at pinnacle, From pinnacle to bottom
  11. BRAND PERSONA:Need-based segmentation research, Personality traits through research
  12. BRAND CONTRACT:The need to stay contemporary, Summary
  13. BRAND CONTRACT:How to create a brand contract?, Brand contract principles, Understand customers’ perspective
  14. BRAND CONTRACT:Translate into standards, Fulfill Good Promises, Uncover Bad Promises
  15. BRAND BASED CUSTOMER MODEL:Identify your competitors, Compare your brand with competition
  16. BRAND BASED CUSTOMER MODEL:POSITIONING, Product era, Image Era, An important factor
  17. POSITIONING:Strong Positioning, Understanding of components through an example
  18. POSITIONING:Clarity about target market, Clarity about point of difference
  19. POSITIONING – GUIDING PRINCIPLES:Uniqueness, Credibility, Fit
  20. POSITIONING – GUIDING PRINCIPLES:Communicating the actual positioning, Evaluation criteria, Coining the message
  21. BRAND EXTENSION:Leveraging, Leveraging, Line Extension in detail, Positive side of line extension
  22. LINE EXTENSION:Reaction to negative side of extensions, Immediate actions for better managing line extensions
  23. BRAND EXTENSION/ DIVERSIFICATION:Why extend/diversify the brand,
  24. POSITIONING – THE BASE OF EXTENSION:Extending your target market, Consistency with brand vision
  25. DEVELOPING THE MODEL OF BRAND EXTENSION:Limitations, Multi-brand portfolio, The question of portfolio size
  26. BRAND PORTFOLIO:Segment variance, Constraints, Developing the model – multi-brand portfolio
  27. BRAND ARCHITECTURE:Branding strategies, Drawbacks of the product brand strategy, The umbrella brand strategy
  28. BRAND ARCHITECTURE:Source brand strategy, Endorsing brand strategy, What strategy to choose?
  29. CHANNELS OF DISTRIBUTION:Components of channel performance, Value thru product benefits
  30. CREATING VALUE:Value thru cost-efficiency, Members’ relationship with brand, Power defined
  31. CO BRANDING:Bundling, Forms of communications, Advertising and Promotions
  32. CUSTOMER RESPONSE HIERARCHY:Brand-based strategy, Methods of appropriations
  33. ADVERTISING:Developing advertising, Major responsibilities
  34. ADVERTISING:Message Frequency and Customer Awareness, Message Reinforcement
  35. SALES PROMOTIONS:Involvement of sales staff, Effects of promotions, Duration should be short
  36. OTHER COMMUNICATION TOOLS:Public relations, Event marketing, Foundations of one-to-one relationship
  37. PRICING:Strong umbrella lets you charge premium, Factors that drive loyalty
  38. PRICING:Market-based pricing, Cost-based pricing
  39. RETURN ON BRAND INVESTMENT – ROBI:Brand dynamics, On the relevance dimension
  40. BRAND DYNAMICS:On the dimension of knowledge, The importance of measures
  41. BRAND – BASED ORGANIZATION:Benefits, Not just marketing but whole culture, Tools to effective communication
  42. SERVICE BRANDS:The difference, Hard side of service selling, Solutions
  43. BRAND PLANNING:Corporate strategy and brands, Brand chartering, Brand planning process
  44. BRAND PLANNING PROCESS:Driver for change (continued), Brand analysis
  45. BRAND PLAN:Objectives, Need, Source of volume, Media strategy, Management strategy