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Brand extension

Brand extension or brand stretching is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category. Organizations use this strategy to increase and leverage brand equity (definition: the net worth and long-term sustainability just from the renowned name). An example of a brand extension is Jello-gelatin creating Jello pudding pops. It increases awareness of the brand name and increases profitability from offerings in more than one product category.

A brand's "extendibility" depends on how strong consumer's associations are to the brand's values and goals. Ralph Lauren's Polo brand successfully extended from clothing to home furnishings such as bedding and towels. Both clothing and bedding are made of linen and fulfill a similar consumer function of comfort and hominess. Arm & Hammer leveraged its brand equity from basic baking soda into the oral care and laundry care categories. By emphasizing its key attributes, the cleaning and deodorizing properties of its core product, Arm & Hammer was able to leverage those attributes into new categories with success. Another example is Virgin Group, which was initially a record label that has extended its brand successfully many times; from transportation (aeroplanes, trains) to games stores and video stores such a Virgin Megastores.

In 1990s, 81% of new products used brand extension to introduce new brands and to create sales.[1] Launching a new product, is not only time consuming but also needs a big budget to create awareness and to promote a product's benefits.[2] Brand extension is one of the new product development strategies which can reduce financial risk by using the parent brand name to enhance consumers' perception due to the core brand equity.[3][4]

While there can be significant benefits in brand extension strategies, there can also be significant risks, resulting in a diluted or severely damaged brand image. Poor choices for brand extension may dilute and deteriorate the core brand and damage the brand equity.[5][6] Most of the literature focuses on the consumer evaluation and positive impact on parent brand. In practical cases, the failures of brand extension are at higher rate than the successes. Some studies show that negative impact may dilute brand image and equity.[7][8] In spite of the positive impact of brand extension, negative association and wrong communication strategy do harm to the parent brand even brand family.[9]

Product extensions are versions of the same parent product that serve a segment of the target market and increase the variety of an offering. An example of a product extension is Coke vs. Diet Coke in same product category of soft drinks. This tactic is undertaken due to the brand loyalty and brand awareness they enjoy consumers are more likely to buy a new product that has a tried and trusted brand name on it. This means the market is catered for as they are receiving a product from a brand they trust and Coca Cola is catered for as they can increase their product portfolio and they have a larger hold over the market in which they are performing in.

Types of product extension

Brand extension research mainly focuses on the consumer evaluation of extension and attitude of the parent brand. Following the Aaker and Keller’s (1990) model, they provide a sufficient depth and breadth proposition to examine consumer behaviour and conceptual framework. They use three dimensions to measure the fit of extension. First of all, the “Complement” is that consumer takes two product (extension and parent brand product) classes as complement to satisfy their specific needs.[10] Secondly, the “Substitute” indicates two products have same user situation and satisfy their same needs which means the products class is very similar so that can replace each other. At last, the “Transfer” is the relationship between extension product and manufacturer which “reflects the perceived ability of any firm operating in the first product class to make a product in the second class”.[11] The first two measures focus on the consumer’s demand and the last one focuses on firm’s ability.

From the line extension to brand extension, however, there are many different way of extension such as "brand alliance",[12] co-branding[13] or “brand franchise extension”.[14]Tauber (1988) suggests seven strategies to identify extension cases such as product with parent brand’s benefit, same product with different price or quality, etc. In his suggestion, it can be classified into two category of extension; extension of product-related association and non-product related association.[15] Another form of brand extension, is a licensed brand extension. Where the brand-owner partners (sometimes with a competitor) who takes on the responsibility of manufacturer and sales of the new products, paying a royalty every time a product is sold.

Researchers tend to use “categorisation theory” as their fundamental theory to explore the links about the brand extension.[16][17] When consumers face thousands of products, they not only are initially confused and disorderly in mind, but also try to categorise the brand association or image with their existing memory. When two or more products exit in front of consumers, they might reposition memories to frame a brand image and concept toward new introduction. A consumer can judge or evaluate the extension by their category memory. They categorise new information into specific brand or product class label and store it.[18][19] This process is not only related to consumer’s experience and knowledge, but also involvement and choice of brand.[20] If the brand association is highly related to extension, consumer can perceive the fit among brand extension. Some studies suggest that consumer may ignore or overcome the dissonance from extension especially flagship product which means the low perceived of fit does not dilute the flagship’s equity.[21][22]

Literature related to negative effect of brand extension is limited and the findings are revealed as incongruent. The early works of Aaker and Keller (1990) find no significant evidence that brand name can be diluted by unsuccessful brand extensions.[23] Conversely, Loken and Roedder-John (1993) indicate that dilution effect do occur when the extension across inconsistency of product category and brand beliefs. The failure of extension may come from difficulty of connecting with parent brand, a lack of similarity and familiarity and inconsistent IMC messages.

“Equity of an integrated oriented brand can be diluted significantly from both functional and non-functional attributes-base variables”, which means dilution does occur across the brand extension to the parent brand.[24] These failures of extension make consumers create a negative or new association relate to parent brand even brand family or to disturb and confuse the original brand identity and meaning.[25]

In addition, Martinez and de Chernatony (2004)[26] classify the brand image in two types: the general brand image and the product brand image. They suggest that if the brand name is strong enough as Nike or Sony, the negative impact has no specific damage on general brand image and “the dilution effect is greater on product brand image than on general brand image”. In consequence, consumer may maintain their belief about the attributes and feelings from parent brand. On the other hand, their study shows that “brand extension dilutes the brand image, changing the beliefs and association in consumers’ mind”.

The flagship product is a money-spinner to a firm. Marketer spends budget and time to create maximum exposure and awareness for the product. Theoretically speaking, flagship product is usually had the top sales and highest awareness in its product category. In spite of Aaker and Keller’s (1990) research reported that the prestige brand do no harm from failure of extension. Evidence shows that the dilution effect has great and instant damage to the flagship product and brand family. But in some findings, even overall parent belief is diluted; the flagship product would not be harmed. In addition, brand extension is also “diminish consumer’s feelings and beliefs about brand name.”[27] To establish a strong brand, it is necessary to build up a “brand ladder”.[28]

Marketers may go behind the order and model created by Aaker[29] and Keller[30] which they are authorities on brand management. But branding is not following a rational line. One mistake can damage all brand equity. In practical issue, a classic extension failure example, such as huge company like Coke Cola launching the “New Coke” in 1985, has conflict the consumer’s perception.[31] Although the early acceptance pervades in the beverage market, the backlash of “New Coke” sooner emerges among consumer. Then the extension strategy creates a negative impact to parent brand. Not only did not success in developing new brand but also decrease the original flavour’s sales. The Coke Cola pay a lot effort to regain the customer back who turns to Pepsi cola. This is a classic example of negative effect on extension failure.

Although there are few works about the failure of extensions, literature still provides sufficient in depth research around this issue. Studies also suggest that brand extension is a risky strategy to increase sales or brand equity. It should consider the damage of parent brand no matter what types of extension are used.[32] Example. BIC Pens tried to produce BIC pantyhose. You can read some more here [33]