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Brand Management

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Brand Management (MKT624)
VU
Lesson 25
DEVELOPING THE MODEL OF BRAND EXTENSION
Introduction
The discussion on strategic deliberations about what not to do continues from the previous
lecture as point 4. That explains most of the fundamentals that we take into consideration for
extensions. With that we move on to developing a model for brand extension.
Given the limitations of extensions, which you will learn in this lecture, the discussion will
move on to the need for multi-brands. Multi-brands basically stem from limitations of
extensions. Not all needs can be addressed by one brand and its extensions; multi-brands serve
the multi-purpose needs within a segment. This lecture also discusses how multi-brands come
into being and what should be the basis of deciding number of different brands within a
portfolio. But, before that let us get back to the topic of deliberations and connect it with the
previous lecture.
4. Expertise and know-how transferability
The brand must be believable in the new field. Customers should feel comfortable
with the level of know-how the company is known for1. Sony can be trusted to
undertake any electronics project, whereas a company in foods or fertilizers may not
be believed to undertake such a venture. You may not do it unless you have the
expertise and are perceived in the market for having the know-how to transfer to the
new field.
5. Perceived difficulty of manufacture
Consumers have a perception of how difficult or not difficult the manufacturing
process is relating an extension. If perceived difficult a strong brand will benefit. If
it is perceived not so difficult, a strong brand may not have that big an advantage2.
You may not get into extension unless your existing brand is very strong and
manufacturing of the new process is perceived difficult. Customers in that situation
give complements by saying that only a reputable company with strong expertise
could undertake such a challenging introduction.
6. The factor of "complementarity" or "fit"
This means how comfortable the new product with the old one is. If there are
emotional associations that run across same kind of customers, the effort may be
more fruitful3. An accurate example could be a fashion clothing company getting
into perfumes. Fashion clothing and perfumes have a lot of commonalities and
associations among the target market. In the absence of such a fit, you may consider
extendibility with apprehension.
The conclusion from all the factors that we have discussed is that extensions should strengthen
the brand and not weaken it. Incoherent and illogical extensions have the potential to diminish
brand's value.
Any company that may want to extend its brand must know where its brand stands vis-ŕ-vis
competition. It is the vision and the image parts coupled with the identification of customer
needs (customer model) that help a company pinpoint when and where to extend. It is this
strategic process that helps the company find the fit between the vision and the extension.
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Brand Management (MKT624)
VU
DEVELOPING THE MODEL
With the understanding of the two well explained concepts of extensions along with the
fundamentals that lay the ground for extensions, we are now all set to developing a model for
brand extension4.
1. Explore opportunity areas
This reflects looking into areas of unmet or not-well-met needs. You must identify the
reasons why are there gaps in the market? Do the gaps exist due to distribution difficulties
inherent in the product character? Or, most of the players have not had the requisite
technology. Or, they have been plagued by shortage/absence of the quality human
resource. If the company is able to address the unmet needs by outsmarting limitations of
competitors, then it can assume the role of a leader in the segment.
2. Generate brand-based product ideas and analysis
This step should not offer any difficulty in handling it, for you have identified the area of
opportunity. You must come up with a few ideas that have a fit with the situation and
your brand vision. Go through a process of screening, analyze the situation and select the
best one in light of the consumer needs.
A well-crafted concept must explain the features, attributes, and benefits of the product
and how is it envisioned to be different from the existing one and from the competition!
That will also address the positioning that you envisage for the product and the
purchasers. You will also know to what extent the new entry will enhance the value of the
brand.
3. Develop a brand extension strategy
It defines the role the brand extension is going to play toward filling the financial growth
gap in terms of revenues and other financial goals. It also explains the strategic marketing
role the extension is going to play and hence how it will strengthen the overall brand's
strength - the market share and position in the market.
You explain the new product in all its forms including packaging, its reason for being,
and the need it is going to satisfy. You must be very careful in deciding whether to go
upwards or downwards in price, for both have their implications.
You must take into account the differentiation factor in terms of distribution, if any.
Explain the extensive role extension is going to play.
Limitations
Despite all the favorable factors for extensions, the concept has limitations. Not all the time
extensions can fill all the gaps in the markets. In the words of a marketing expert, "there is a
tremendous opportunity cost that we pay by going through extensions; by not creating a new
brand; unfortunately, that cost is unquantifiable". By getting into the extension it was a strong
brand that was not created, says the author5.
Multi-brand portfolio
In other words, this expert calls for introduction of new brands whenever the company has the
right rationale to go for them. It is risky, more expensive, requires more time and energy, but
most certainly offers a strong and a bright future to the company.
The new brand can offer better coverage of the market and penetrate new, young, and emerging
markets that could bring meaningful growth to the company.
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Brand Management (MKT624)
VU
The question of portfolio size
This author also goes on to say that we should not get into a large portfolio of brands by being
too ambitious about brands' power and value6. He advocates having a few brands within a
portfolio for promotions to gain a significant market share.
Marketing people always are addressing the question of how many brands should there be in a
portfolio. There is no hard and fast rule to that. What is important to understand first is how
does a company own so many different brands?
Owing to growth
During periods of growth, companies like to introduce new brands each time they get into
new segments and distribution channels. This is done to multiply the effect of existing
and added channels and to make sure that there is no conflict between the new and the old
channels and the new and the old segments. They like to keep the conflict of interest
away. The concept of having two different brands in two different value pyramids applies
here. If you go back to the example of Toyota and Lexus, the concept becomes clear.
Owing to acquisitions
Another reason for the growth of portfolios has been acquisitions and mergers, which
brought more and more brands to companies ­ a discussion, that took place earlier in
relation to company's strategy to acquire strong brands. Although it was on purpose (an
assortment of powerful brands in markets across geographic boundaries), it did present
the senior marketing and other managers with a challenge they now have to face.
Need to have a small portfolio
Bringing all the brands into public limelight is difficult, for that can come only through
meaningful communication, which is expensive. Generally, the need is to manage a
portfolio with a few brands, which is manageable in line with a company's resources.
With competition increasing, there is a dire need to achieve productivity gains and cost
efficiencies. You cannot do that with a big portfolio.
Production and research facilities are being regrouped to save costs (pharmaceuticals in
particular). It is the same factories producing different brands with features different. But,
there should be a limit to variations coming from the same factories.
With brands becoming international and having international appeal, they are no longer
meant for certain territories within national borders. This leads one to believe that one
should be having a few in a portfolio thus making it manageable. The investment required
for a large international presence is massive to handle a large portfolio, and, hence, a
smaller one.
The question of how many brands should be retained in a portfolio is to be answered by
looking carefully into the strategic roles assigned to and played by different brands. This
implies that it must be linked to an analysis of the brands' functions in their respective
markets.
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Brand Management (MKT624)
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Bibliography:
1. Geoffrey Randall: "Branding ­ A Practical Guide to Planning Your Strategy";
Kogan Page (60)
2. Geoffrey Randall: "Branding ­ A Practical Guide to Planning Your Strategy";
Kogan Page (60)
3. Geoffrey Randall: "Branding ­ A Practical Guide to Planning Your Strategy";
Kogan Page (61)
4. Scot M. Davis: "Brand asset Management ­ Driving Profitable Growth through
Your Brands"; Jossey-Bass, a Wiley imprint (143-148)
5. Jean-Noel Kapferer: "Strategic Brand Management ­ Creating and Sustaining
Brand Equity Long Term"; Kogan Page (274)
6. Jean-Noel Kapferer: "Strategic Brand Management ­ Creating and Sustaining
Brand Equity Long Term"; Kogan Page (275)
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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