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Brand Management

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Brand Management (MKT624)
VU
Lesson 21
BRAND EXTENSION
Introduction
With an understanding developed on positioning, this lecture takes us into the area of brand
extension. Although loosely used, the term brand extension comprises of two sub areas ­ line
extension and brand extension. The latter is generally used in all situations of extensions,
diversifications, or stretch. We have to draw a distinction between the two for a clear
understanding of the concepts.
Concept of positioning clarifies that not one position can satisfy all the varying needs within
the category. Different needs have to be identified toward their fulfillment. To keep up with the
evolution you have to evolve new points of difference. Different needs refer to different
segments and every product has its variants to address to those segmental needs. This holds true
for consumer consumables as well as consumer durables. Regular and mild cigarettes, regular
and fruit yogurt, regular and high fiber cereals, regular and low cholesterol margarine, and
economy and executive models in cars are all examples of product variants in different
segments and categories.
To let the market know that you have something different to offer, you must differentiate
between the existing offering and the new entry. For the new entry meant to address a different
need, you must create a different image reflecting the new promise and must have an evolved
contract in place. You do that in either of the two ways:
A. Staying within the value framework of the original brand, meaning under the same brand
name. You do not go too far away from the core identity.
B. Create a different identity altogether, meaning a new stand-alone brand.
Brand extension
Brand extension is all about the existing brands. As the terminology suggests, we do something
with the existing names for the new offerings. Brand extension, therefore, is the study and
practice of deciding
1. What to do in situations that evolve with changing needs? Examples could be cited of
soups coming into different flavors, biscuits in different tastes and packs, and detergents
in powder and liquid forms.
2. What to do in situations that offer an opportunity to enter a new market altogether?
Examples could be furnished about manufacturers of juices getting into milk and yogurt,
tea getting into soups, chocolate getting into ice cream, and cameras into photocopying
machines etc.
Let's be clear that we are discussing both situations in relation to using our existing brand name
that is strong. One situation relates getting into variants of the existing product, while other
involves going across the existing business lines into new ones. Both have a common factor
and that is the same brand name. We use the same brand name because it is strong!
Leveraging
The opportunity of using the same brand name for variants or altogether new products takes us
into the domain of leveraging ­ adding value to the company by capitalizing on the brand as an
asset. Temptation to do so is always huge. We keep the same brand name so that customers can
develop an immediate familiarity with the new introductions ­ variants or new products. And
that is what leveraging is all about!
Managers feel the need to leverage their brands under the following two different sets of
circumstances:
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Brand Management (MKT624)
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·
When they are led into genuine situations of satisfying evolving needs, they feel rightly
driven to leverage the brand by introducing its variants ­ light cigarettes and sugar-free
chewing gum fall under practice 1 of brand extension discussed above.
·
When it is attractive to go across category, managers do that with the confidence that their
existing brand name is going to add value to their new introduction and will become
popular immediately. This relates practice 2 of brand extension.
Leveraging without purpose
If managers attempt to leverage their brand only because it has high value but it does not really
have a specific need to satisfy, then the managers are wandering into the marketing no-man's
land and end up introducing something with no substantive difference. It is merely an exercise
toward brand proliferation!
This means that brands should be seriously treated as extremely valuable properties and not
subjected to meaningless extensions with minor differences. Over-proliferation is a serious
threat to a brand's future. Customers show resentment to brands with no real point of
difference1.
Rate of Survival after 3 Years
Figure 24
Why brand extension?
50%
Brand extension is on the rise. Most of the
new product launches take place with the
existing strong brand names. Cost of
30%
launching a new brand in three major
Existing Brands
markets (US, Europe, and Japan is about
New Brands
US$ 1 billion), whereas launching a product
under the same name is a fraction of that
cost. It is estimated to be one fifth2.
30% of new brands survive just about three
Brands
years, but the rate goes up to 50% if
launched under an existing brand name3. Brand extension, therefore, is cheaper and securer. It
looks like a sure way to gain market share and produce visible results.
Kinds of extensions
There are two kinds of extensions, namely line extension and brand diversification. Brand
diversification is in effect brand extension, but this terminology of brand extension somehow is
used generically for both types of extensions. You have to make an effort not to be confused by
this.
Line extension
Line extension is basically getting into different versions of the same base product on the same
market. A manufacturer of spices getting into more non-traditional spices or recipes and a
cheese manufacturer getting into different kinds of packing, portions, slices, and boxes to
appeal to different target audiences are examples of this phenomenon. The objective here is to
add more depth to your offerings within a definite market. Line extension corresponds to
practice 1 of brand extension discussed in the beginning of the lecture.
Brand diversification/extension/stretching
This refers to stretching your brand into new product fields. Your brand becomes an umbrella
covering very different segments and products. A few examples are Mitsubishi, Philips, and
GE. Mitsubishi includes shipyards, nuclear plants, cars, hi-fidelity systems, banks, and even
food; Philips includes electrical appliances to lighting to sophisticated systems; GE is into
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Brand Management (MKT624)
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aircraft engines, electrical appliances, energy and more4. They use one name because that is a
direct recognition of the fact that their name is the real capital of their company. Brand
diversification or extension or stretching corresponds to practice 2 of brand extension discussed
earlier. It is real diversification toward different product categories and, hence, is a highly
sensitive and strategic choice.
"Line extension" and "brand extension" therefore are two well differentiated concepts that
must be understood for the sake of knowing how and when each will have a perfect fit with the
situation. Both could be explained with the help of two graphic illustrations on the following
page.
Line Extension in detail
Extending the line is an evolutionary step in the life of a brand and occurs to address the
changing needs. In the words of Kapferer, just as human species survive by adapting to the
environment, brands that start as single products have to adapt to the marketing environment by
breaking into sub-species5. Toyota cars, Coca-Cola, National and Shan "Masalas", LU and
English Biscuit Manufacturers' biscuit brand variations are a few examples that clarify the
whole concept.
Forms of line extension
It takes on the following forms6:
·  Multiplication of formats and sizes. It is typical in cars, soft drinks, cakes, and biscuits
etc.
·  Multiplication of variety of tastes and flavors. Yogurt, juice, and milk are excellent
examples of this form.
·  Multiplication of the type of ingredients. Caffeine-free coffee and sugar-free juice fall
into this form.
·  Multiplication of generic forms of medicines. For headache, a pharmaceutical company
may introduce extra-strength, without drowsiness, no-allergy formulas etc.
·  Multiplication of physical forms. Detergents in powder and liquid; deodorants in sticks,
spray, and roll-ons are perfect examples.
·  Multiplication of product add-ons satisfying closely related needs of the same
consumer. Mascara, lipstick, skin-care creams by one company and deodorants, shave
cream, gel, and soothing balm by another are examples of this form.
·  Multiplication of versions having a specific application. Shoe cream for regular leather,
powder or spray for suede leather ­ polish for wooden furniture and polish for marble top
to give a few examples.
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Figure 24
Figure 25
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Positive side of line extension
As said earlier, each brand starts as a single product and with the passage of time becomes sub-
divided into variants that respond to differentiated expectations.
1. Increases Usage
Cola drink is an example, the multiplication of versions has increased its consumer base
­ in family size bottle, disposable bottle, can, and returnable bottles all are directed
toward increasing usage.
2. Reinforces Sales
With each version designed for one particular usage mode, the brand reinforces its sales
with a wider market base. With product variants in the categories of biscuits, cheeses,
butters and margarines, and packaged cakes, you extend the market by opening a
variety of eating occasions.
3. Friendly and Caring
It shows sensitivity to consumer's needs and the brand energizes itself by responding to
those. In doing so, it maintains an interesting, friendly, and caring character. A small
tub of jam or a sachet of powdered milk is an example.
4. Pushes Boundaries
It pushes the boundaries of the market and strengthens the brand's domination. It
increases brand's visibility through successive launches.
5. Revitalizes failing Brands
Line extension helps ailing and tired brands. It revitalizes many brands by way of
introduction of new offerings. Because of the resilience brands have, they bounce back
if they are introduced with a new fervor justified by a meaningful point of difference.
Brands fail because of price competition. It helps the company launch another version
with a lower price.
6.  Maintain relationship between market share and shelf-space share
Knowing that customer involvement in consumer items is low, the number of impulse
buyers is increasing. Also knowing that shelf space at the retail outlet is limited, it is
always good to introduce something by the existing name and keep competition pushed
out.
Bibliography:
1. Geoffrey Randall: "Branding ­ A Practical Guide to Planning Your Strategy"; Kogan
Page (55)
2. Geoffrey Randall: "Branding ­ A Practical Guide to Planning Your Strategy"; Kogan
Page (56)
3. Geoffrey Randall: "Branding ­ A Practical Guide to Planning Your Strategy"; Kogan
Page (56)
4. Geoffrey Randall: "Branding ­ A Practical Guide to Planning Your Strategy"; Kogan
Page (57)
5. Jean-Noel Kapferer: "Strategic Brand Management ­ Creating and Sustaining Brand
Equity Long Term"; Kogan Page (181)
6. Jean-Noel Kapferer: "Strategic Brand Management ­ Creating and Sustaining Brand
Equity Long Term"; Kogan Page (181)
Suggested readings:
1. Jean-Noel Kapferer: "Strategic Brand Management ­ Creating and Sustaining Brand
Equity Long Term"; Kogan Page (226-231)
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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