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Brand Management

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Brand Management (MKT624)
Lesson 22
The discussion in this lecture moves on to the negative sides of extension. Having known those
we shall be in a better position to realistically manage extensions and that precisely is going to
be an important part of this lecture.
Negative side of line extension
1. Retailer power
When all managers like to extend with similar objectives, the obvious results are
bottlenecks at the retail level. This clutter leads to selective attitude on part of retailers
who obviously are more receptive toward more powerful brands. Those that get
discriminated try to react by getting into promotions, thereby making retailers and
consumers happy at the same time. What ensues is obviously the price wars and erosion
of brand loyalty. Not good for the brand!
2. Lack of scale economies
As against a mono product, handling and managing a variety of products is cumbersome
from production, logistics, inventory, and costing points of view. Smaller runs deprive the
company of scale economies. They are more expensive. According to one study,
compared with an index of 100 as the cost of production for a mono product, the
Cost Index ­ Mono vs. Differentiated Products
differentiated products is shown on the
Economies of scale take on added
importance if the brand sells in high
Figure 26
volumes across a huge geographic area
positioned on consumer friendly pricing.
3. Non-controlled extension weakens range
Extensions without strong rationale can
become  counter-productive,  because
creating meaningful positioning for a
variety of products within the same line
becomes challenging. All positions have
to be created with subtle yet distinct
differences, products tend to eat into
each  other's  volume  and  cause
Reaction to negative side of extensions
There has been lately a tendency on part of the companies to de-segment or counter-segment
their markets. Proctor and Gamble reduced their line by about 15 to 25 percent in 1992 only
because those entries were not turning in requisite volumes and profitability1. It also leads to
consumer frustration and that's what we learnt in terms of consumer revolt. The factor of scale
economies takes a turn for better under the circumstances of de-segmentation. Lesser number
of offerings leads to higher volumes, which result in lower costs of producing.
Brand Management (MKT624)
Immediate actions for better managing line extensions
1. Improve cost accounting systems
Management experts lay a lot of emphasis on improving cost accounting systems.
Experience shows that many companies are system-deficient in this regard. You must
have accurate figures to charge every range item that you produce. The objective is to
determine which items are more profitable than others.
2. Allocate resources more to high-margin items
As brand managers and good businesspeople, you must allocate marketing resources to
different items in line with their contribution to the overall profitability. The extensions
that give higher margins must get priority over those that attract occasional buyers.
3. Salespeople must define the role of each extension
Each extension has to be seen in the context of its sales value. The salespersons
responsible for each must produce figurative evidence of what they sell is worth its
existence. Salespeople must understand the costing angle and then produce results out of
the extensions that account for most of the profitable business.
They must be able to relate profitability with high volume items. Their education as part
of AUDIENCE is of significance, for mostly salespeople go after volumes no matter how
high is the cost. They must understand the actual positioning of the product along with the
strategic goals of financial growth. Volumes just for the sake of a high market share with
low profitability may not be the company's priority at all times.
Small volumes adding up to a certain total volume cost a lot more than the same total
arrived at by less number of products. Economies!
4. Encourage product withdrawal
Implement this philosophy and withdraw low volume items in a phased way so that your
existing customers do not turn away to competition; they should rather switch over to
another attractive offering within your range.
1. Jean-Noel Kapferer: "Strategic Brand Management ­ Creating and Sustaining
Brand Equity Long Term"; Kogan Page (184)
Suggested readings:
1. Jean-Noel Kapferer: "Strategic Brand Management ­ Creating and Sustaining
Brand Equity Long Term"; Kogan Page (181-186)
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