Rationale For Brand Extension Marketing Essay
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 2463 words||✅ Published: 1st Jan 2015|
Brand extension is beneficial in enhancing new and already existing segments. Through brand extension companies can target those segments which antecedently were not explored or inactive.
Brand extension can be beneficial in terms of fulfilling consumers’ changing preferences and needs, wants and demands of the consumers. This would ultimately result in increased loyalty for the brand and the cost associated with switching brand is avoided.
Brand extension is also useful in terms of creating consumer trials. Comparatively to launching new brands, cost associated with consumer trial in extended brand is less. This can be more beneficial if companies in Pakistan focus on improving their distribution network as well.
Brand extension is also useful when recognition, awareness and refreshment come into consideration. It can improve recognition of parent brand as well as awareness cost can also decrease. Moreover, in Pakistani market, it was observed than comparatively to parent brands, extended brands avails more awareness and recall.
Utility of a brand can also be improved as a result of brand extension.
Companies can become more powerful by using brand extension which can give companies more bargaining power with their retailers. Brand extension can strengthen company’s position for bargaining with its retailers.
To some extent brand extension is considered as a revitalizing process of any brand. It is considered as a strategy of re launching and refreshing a brand in the mind of the target consumers. It also helps in re positioning a brand in the eyes of consumers.
Using brand extension strategy as a part of branding strategy, companies can also gain a competitive advantage over its competitors. It can be achieved by focusing on a market niche.
Brand extension can also be beneficial in terms of shifting parent brand technological expertise to extended brand in terms of production, and research and development (R&D).
Advantages & Disadvantages of Brand Extension
Consumer knowledge about parent brand reputation and image always gives an advantage to companies. To communicate about extended brand benefits to the consumers, it is always beneficial for the companies if consumers already know about parent brand quality and image. Use of parent brand to extend the brands plays a role of attention getting process for extended brands. Consumer knowledge about parent brand image and quality make companies to communicate precisely the benefits of extended brands.
Trustworthiness of consumers about a brand is useful for the companies to brand extension strategy. Trustworthiness of consumers tempts them to try new products originating from a brand which consumers already trust on. Consumers already have an implicit accord with already proven brands, thus consumers feel free to try extended brand even in other market segments too.
Revitalization and refreshment of parent brand can definitely be achieved through brand extension strategies. Even in Pakistan brand extension is considered a source of refreshment and repositioning of parent brand. It is also useful to reposition the image of parent brand in the mind of the consumers.
Though, In Pakistan brand extension strategy is at its initial stages, but brand managers always focus to overcome the disadvantages associated with brand extension such as dilution of parent brand. There are couple of brands which got diluted as a brand extension strategy but most of the extended brand got success in the eyes of the consumers. The number of diluted brand are far and few.
Brand extension caused cannibalization of sales in Pakistani market. Companies in Pakistan like Nestle and Haleeb did face cannibalization of sales as a part of brand extension strategy.
Success of Brand Extension
Fit between extended brand and the parent brand in terms of similarity and consistency of quality and image is foremost important for the success of brand extension. Extended brands can be successful in the mind of the consumers, if consumers find the same quality and performance, which they found in the parent brand. Conversely extended brands can be a disaster for the company.
Favorable appreciation by the consumers for the extended brand may lead to the success of the extended brand and the parent brand, while unfavorable appreciation may result in tarnishing the parent brand image.
Moderating variable such as quality of the parent brand, consumer knowledge about the parent brand play a life-sustaining role for extended brands. In Pakistan, companies delineate quality as meeting the international standards of quality.
Sound brand equity may result in brand loyalty, reduced cost and improved image. It also helps in improving the positioning of a parent brand in the mind of the consumers.
Rationale For Brand Extension
As per our research, couple of factor work as a driving force behind successful brand extension. One of the most striking forces for successful brand extension is growth for the companies. Using brand extension, growth can be achieved either by maintaining current market share or by entering into new market segments which are not yet explored by the competitors. This can be achieved through leveraging or improvising favorable core brand into extended brands. Those companies which are operating in multiple categories or industries try to extend their brands not because of gaining growth but as a case of trend of brand extension. Such actions might spoil the core brands and essence of brand extension.
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To be successful in brand extension, steadfastness is a prerequisite. Meeting customers need, wants, and demand is one of the other important reason for brand extension. Customer retention is always gained if companies are satisfying customers need, wants and demands. For this purpose companies are using brand extension as a part of their branding strategy. Using this strategy companies can make their customer more loyal to the brands. This research also shows that brand extension is also used to introduce new brands for the purpose of fulfilling changing customers’ preferences, their needs, wants, and demands. By doing so companies on one hand try to capture the all possible market segments which eventually result in higher profit and market share.
One of the other motivational factors for brand extension is to gain economic advantages. Mostly companies use brand extension because they want to gain higher net profit and want to save cost associated with creating awareness and communication with their customers. A part from saving cost related to promotional activities, companies also gain economic advantage through catering different other segments of consumer by extending their brand into different market segments. As in case of Haleeb foods limited, chosen for our research, brand extension is done to employ unused capacity due to the seasonal nature of its business. Apart from utilizing unused capacity, other reasons include, effective promotional activities, (ROI) return on investment, and higher net profits.
Our research also indicates that brand extension strategy is also useful to take advantage of consumer trials in a cost effective manner. Cost associated with consumer trials in case of extended brands is comparatively lower than launching entirely a new brand and creating trials for these brands. It was also found that lower cost for promotion and communication is incurred in case of extended brands comparatively to a newer brand. New brand extension can target new customers segments without incurring higher promotional and advertisement cost.
Our research also discovered that gaining advantage from economies of scale is also considered as a promising factor of brand extension. Economies of scale related to production, research and development and communication is a motivational factor for brand extension. Gaining advantage of economies of scale from brand extension may ultimately lead to higher net profits. Efficiency of supplier in providing goods is also count. It was also found that in food (perishable) processing companies’ economies of scale may be dependent on supplier’s capability to serve demand.
We also found during the course of this research that brand extension can also be beneficial as far as recall and recognition of parent brand is concerned. In such case, comparatively weaker brands can gain profound benefits in terms of recall and recognition, thus their bargain power with the retailers can also be enhanced. Moreover, to grapple the varying business environment, brand extension plays an important role in terms of revitalizing, re-launching the parent brand. Through this process of revitalization and re-launching of parent brand, parent brand becomes more captivating.
Our research concluded that increased competition with the competitors along with the other factors also lead to the brand extension strategy as a part of branding. To compete with competitors, companies have to launch extended product, which can cater the needs of the consumer either in the current market segment or in different other market segments, where competitors are performing well. To stay a head of competition, it has now become vital to launch new brands under the parent brand name. One more important factor which motivates companies to use brand extension is to gain advantage of the technological expertise in parent brand. Using technological expertise gained in parent brand, companies try to enter into new market segment by using the same technology which they used in parent brand. Technological might include superior packaging technology or outclass promotional activities, which companies use in their extended brands as well.
Advantages and disadvantages of brand extension
This research concluded that advantages and disadvantages of extended brands are also recognized by managers. As per brand managers, consumer know-how about the parent brand is vital in the success of extended brands, but it is also important to convey the important characteristics of the extended brands, so that consumer would have an idea about how extended brand differs in terms of specification than the parent brand but not in terms of quality. Brand extension is usually considered more beneficial by brand managers due to the fact the comparatively to launching new brands, extended brands use pull strategy instead of using push strategy. In Pakistan, brand managers use the parent brand name to portray an appealing brand name for the extended brands which might help consumers to realize the parent brand doctrine and eventually accept the extended brands.
Consumer trust can also be beneficial for brand extension. During the course of this study, it was found that consumer trust on parent brand may lead to the acceptance of the extended brands easily and in a cost effective manner. Companies have to incur less cost for promotional activities and to create awareness about the extended brands. Due to consumer trust, companies can penetrate into new market segments easily and quickly due to the acceptance of the parent brand among the consumers. Consumer trust can also be beneficial when it comes to retailers. Retailers accept the extended brands easily due to the acceptance of the extended product among customers.
Consumer trial becomes easy as well due to the image of the parent brand, which results in quick penetration of the extended brand in the market and among the consumers. But it can be opposite if the parent brand name is not much familiar among consumers. It will become difficult to extend the brand under a brand name which is not accepted by the customers. It might lead to failure of that brand.
In Pakistan one of the advantages which we came to know is refreshment and revitalization of brands. Brand extension can also be useful when it comes to repositioning of the brands. Every brand has a life cycle as eventually brands become mature. At such time brand extension is a useful strategy to reposition the parent brand, thus giving it a new life.
Apart from advantages of brand extension, there are couples of disadvantages associated with brand extension. One of these disadvantages includes dilution of parent brand. From our research we came to know that in Pakistan, according to managers, they didn’t face brand dilution as a result of brand extension. They agree that brand extension if done in a wrong manner can actually tarnish or dilute parent brand name, but in Pakistani context, it is not the case.
Another disadvantage of brand extension is cannibalization of sale, which as per manager, companies faced in couple of extended brands. In case of Haleeb food, company faced cannibalization of sales in UHT milk and tea whitener. Changing trend led company to introduce tea whitener, which eventually cannibalized sales of UHT milk. Same case is with Nestle.
Success of brand extension
We found in our research that, a successful brand extension should fulfill the requirement of Fit in terms of consistency and similarity with the parent brand. Similarity and consistency does not mean exactly the same, but extended brand should maintain the quality and image of the parent brand. If extended brand would not follow the same perception which consumers have in their mind about parent brand, then there is a possibility that extended brand might not get the same response which parent brand got from its consumers. As a result extended brand might be a failure. We also found that failure of extended brands as a result of not maintaining the concept of fit does not necessarily harm the parent brand. Brand managers of all four brands which were chosen for this study, always make sure to follow the concept of fit between extended brand and parent brand. They always try their utmost to maintain the same image and quality in extended brands, which they promised with their customer in parent brand.
We also found that concept of fit between parent brand and extended brands make consumers to evaluate extended brand as favorable or unfavorable. Their decision about extended brands for favorability or un-favorability decides the future of the extended brands. If consumers do not find a fit between parent brand and extended brand then extension might become unfavorable, and if consumers find fit between parent brand and extended brand, then extension might become favorable.
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