Product Code Database
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. The new product is called a spin-off.
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.
In the 1990s, 81 percent of new products used brand extension to introduce new brands and to create sales.Keller, K.L. (1998), "Strategic Brand Management: Building, Measuring, and Managing Brand Equity", Prentice-Hall International, Hemel Hempstead. Launching a new product is time-consuming but also needs a big budget to create brand awareness and to promote a product's benefits.Tauber, E.M. (1981), "Brand franchise extensions: new products benefit from existing brand names", Business Horizons, 24(2), pp. 36-41. 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.Muroma, M. and Saari, H (1996), "Fit as a determinant of success", in Beracs, J., Baure, A. and Simon, J. (Eds), Marketing for Expanding Europe, Proceedings of 25th Annual Conference of European Marketing Academy, pp. 1953-63.Chen, K. F., & Liu, C. M. (2004), "Positive brand extension trial and choice of parent brand." Journal of Product & Brand Management, 13(1), pp. 25-36.
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.Aaker, D.A.(1990), "Brand extensions: 'the good, the bad, the ugly'", Sloan Management Review, pp. 47-56.Martinez, E. & Pina, J.M. (2003), "The negative impact of brand extension on parent brand Image." Journal of Product & Brand Management, 12(7), pp. 432-448. 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.Loken and John, 1993Roedder-John, D., Loken, B. and Joiner, C. (1998), "The negative impact of extensions: can flagship products be diluted?", Journal of Marketing, 62 (1), pp. 19-32 In spite of the positive impact of brand extension, negative association and wrong communication strategy do harm to the parent brand even brand family.Aaker, 1990; Tauber, 1981; Tauber, 1988.
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 as .
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 Coca-Cola vs. Diet Coke in the same product category of . This tactic is undertaken due to the brand loyalty and brand awareness associated with an existing product. Consumers are more likely to buy a new product that has a reputable brand name on it than buy a similar product from a competitor without a reputable brand name. Consumers receive a product from a brand they trust, and the company offering the product can increase its product portfolio and potentially gain a larger share in the market in which it competes.
From the line extension to brand extension, however, there are many different types of extension such as "brand alliance",Rao, A.R. & Ruekert, R.W. (1994). "Brand Alliances as Signals of Product Quality," Sloan Management Review, 36(Fall), 87-97. co-brandingMilberg, S.J., Park, C.W. and McCarthy, M.S.(1997), "Managing negative feedback effects associated with brand extensions: the impact of alternative branding strategies", Journal of Consumer Psychology, 6(2), pp. 119–40.Kalafatis, S., Remizova, N., Riley, D. and Singh, J.(2012), "The Differential Impact of Brand Equity on B2B Co-branding", Journal of Business and Industrial Marketing, Vol. 27, Issue 8, pp. 623–63. or "brand franchise extension".Tauber, 1981, p.36. 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.Tauber, E.M. (1988), "Brand leverage: strategy for growth in a cost-controlled world", Journal of Advertising Research, 28, August–September, pp. 26-30. Another form of brand extension is a licensed brand extension. In this scenario, the brand-owner works with a partner (sometimes a competitor), who takes on the responsibility of manufacturing and sales of the new products, paying a royalty every time a product is sold.
Brand extension can also be done through marketing strategies such as guerrilla marketing, where brands can promote their goods or services through unconventional means such as emotional connections to the brand by tackling social problems/dilemmas. These emotional connections are generally done through social experiments where brands express their concern and offer small solutions thereby making the brand standout and seem righteous. Guerilla marketing is a very effective way of connecting with the target market and reaching out to different markets, this extension into the vast demographic while creating brand awareness is highly effective for brands
"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.Chen, C.H. Chen, S.K. (2000). "Brand dilution effect of extension failure - A Taiwan study." Journal of Product and Brand Management. 9 (4), p243-254. 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.Ries and Trout, 1981; Loken and Roedder-John, 1993.
In addition, Martinez and de Chernatony (2004)Martinez, Eva and de Chernatony, Leslie (2004), The effect of brand extension strategies upon brand image, Journal of Consumer Marketing, Vol. 21 Iss: 1, pp. 39–50. 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". Consequently, consumers may maintain their belief about the attributes and feelings about parent brand, however their study does show 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. Marketers spend time and money to maximise exposure and awareness of the product. In theory, a flagship product has the top sales and highest awareness in its product category. In spite of Aaker and Keller's (1990) research, which reports that prestigious brands are not harmed from failure of extensions, some evidence shows that the dilution effect has great and instant damage to the flagship product and brand family. Still, some studies suggest that even though overall parent belief is diluted; the flagship product would not be harmed. In addition, brand extension also "diminishes consumer's feelings and beliefs about brand name."Roedder-John et al., 1998, p.19 To establish a strong brand, it is necessary to build up a "brand ladder".Keller, K.L. (2001). "Building customer-based brand equity". Marketing Management, 10(2), 14-19.
Marketers may follow the order and model created by AakerAaker, D.A. (1991), Managing Brand Equity, Free Press, New York, NY. Aaker, D.A. (1996), Building Strong Brands, Free Press, New York, NY. and KellerKeller (1998; 2001). who are authorities on brand management, but branding does not always follow a rational line. One mistake can damage all brand equity. A classic extension failure example would be Coca-Cola launching "New Coke" in 1985.Greising, D. (1998). "I'd Like the World to Buy a Coke: The Life and Leadership of Roberto Goizueta," Wiley. Although it was initially accepted, a backlash against "New Coke" soon emerged among consumers. Not only did Coca-Cola not succeed in developing a new brand but sales of the original flavour also decreased. Coca-Cola had to make considerable efforts to regain customers who had turned to Pepsi cola.
Although there are few works about the failure of extensions, literature provides sufficient in-depth research into 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.Chen and Chen, 2000; Loken and Roedder-John, 1993, Martinez and Pina, 2003
Throughout the categorisation theory and associative network theory, a consumer has the ability to process information into useful knowledge for them. They would measure and compare the difference between core brand and extension product through quality of core brand, fit in category, former experience and knowledge, and difficulty of making. Consequently, in this article, we may conclude the following points about consumer evaluation of brand extension:
A successful brand message strategy relies on a congruent communication and a clear brand image.Sjodin, H and Torn, F. (2006), "When communication challenges brand associations: a framework for understanding consumer responses to brand image incongruity"Journal of Consumer Behaviour, 5(1), pp. 32-42. The negative impact of brand extension would cause a great damage to parent brand and brand family. From a manager and marketer's perspective, an operation of branding should maintain brand messages and associations within a consistency and continuum in the long way. Because the effects of negative impact from brand extension are tremendous and permanently. Every messages or brand extension can dilute the brand in nature.
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