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.
This type is classified into four subcategories which are based on the adjustments made for the extended brands :
FOR PRODUCTS:
FOR THE ORGANISATION AND PARENT BRAND:
Organizations use this strategy to increase and leverage brand equity.
A common method of launching a new product by using an existing brand name on a new product in a different category. A company using brand extension hopes to leverage its existing customer base and brand loyalty to increase its profits with a new product offering.
For brand extension to be successful, there usually must be some logical association between the original product and the new one. A weak or nonexistent association can result in brand dilution. Also, if a brand extension is unsuccessful, it can harm the parent brand.
TYPES OF BRAND EXTENSION
1. Brand alliances
Brand alliances is a branding strategy used in a business alliance.
A business alliance is an agreement between businesses, usually motivated by cost reduction and improved service for the customer.
Alliances are often bounded by a single agreement with equitable risk and opportunity share for all parties involved and are typically managed by an integrated project team. An example of this is code sharing in airline alliances.
Brand alliances are divided into three types:
Brand alliances is a branding strategy used in a business alliance.
A business alliance is an agreement between businesses, usually motivated by cost reduction and improved service for the customer.
Alliances are often bounded by a single agreement with equitable risk and opportunity share for all parties involved and are typically managed by an integrated project team. An example of this is code sharing in airline alliances.
Brand alliances are divided into three types:
- Cobrands are the usage of two or more brands on one certain product. For example, Dell computers carries three brands on their packages and cases: Dell, Microsoft Windows, and Intel. A visible example of cobranding is combining two or more of their restaurants under one roof. In many places it is not unusual to see a Taco Bell and KFC or a Pizza Hut and WingStreet combined.
- Brand licenses are a contractual agreement where a company lets another organisation use its brand on other products in exchange for a licensing fee. An example of brand licensing is seen in the Walt Disney Company's relationship to Tokyo Disneyland. The theme park is owned by The Oriental Land Company, which licenses the theme from The Walt Disney Company.
- Cross Marketing is an agreement for mutual promotion between two companies. One company for instance will include coupons for another company in its parcels to its clients if the other company will agree to include a promotion from the other company in its direct mails to its client base.
2. Licensed brand extension
- 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 Licensing utilizes the brand’s innate qualities to inform consumers in the creation of new products.
3. Adjustment brand extension
According to the adjustments that the original apparel brands made for their brand extensions :
1) Brand extensions for target adjustment
This type of brand extension is found when a brand is extended to target and encompass more diverse groups of consumers.
This type is classified into four subcategories which are based on the adjustments made for the extended brands :
1. Adjustment of fashion image: From the adult target group to a more trendy youthful target group.
2. Adjustment of target generation: Target age from that of adults to the younger generation, for example, the introduction of children’s wear from a men’s or women’s wear brand.
3. Adjustment of target gender: A brand is extended to attract consumers of the opposite gender to the new product.
4. Adjustment for special needs: Consumers may have special needs related to health problems or body types which deviate from the average consumer’s.
2) Brand extensions for usage adjustment
These brand extensions, are done on the basis of the fact that consumers need various kinds of different products for various types of social and physical activities.
The extension is intended to cover a wider range of adjusting the target profiles.
EXAMPLE-
This type of extension is easily found in apparel brand extensions.
Apparel products from the extended brand are designed to be worn in obviously different situations (i.e., time, place, occasion) than products from the parent brand.
When a normal women’s wear brand is extended to a sportswear brand (e.g., Kenzo to Kenzo Golf, Elle to Elle Sports) or an outerwear brand is extended to an innerwear or vice versa (e.g., Fila to Fila Intimo).
3) Brand extensions for product class adjustment
Brands are often extended to cover other product classes such as leather goods, accessories, perfumes, or home furnishings.
The products from these different classes can be used to compliment the products of the parent brand. These products, though, most have characteristics that the consumer associates with fashionability.
EXAMPLE -Ssamzi (leather goods) to Ssamzi sports (sport wear).
4) Brand extensions for distribution channel adjustment
Brands are extended in order to utilize new distribution channels such as discount stores, direct mail, or on-line shopping.
When a firm wants to open up a new channel such as a discount store and avoid conflicts between channels (e.g., department stores and discount stores), a newly introduced brand should be priced lower than its parent brand but still maintain its image of good quality.
Furthermore, changes in consumers’ shopping behavior relevant to store selection have caused apparel companies to consider diversifying their distribution channels.
EXAMPLES OF BRAND EXTENSION
1. Jello-gelatin creating Jello pudding pops. It increases awareness of the brand name and increases profitability from offerings in more than one product category.
2. Starbucks coffee company creating Starbucks ice cream, to be sold not at Starbucks retail stores but in grocery stores. The ice cream flavors were based on the flavors of frappucinos Starbucks sold in its coffee shops.
3. Quaker, a popular oatmeal producer, creating Quaker granola bars, also made with oatmeal.
4. Celebrity homemaker Martha Stewart creating the Martha Stewart Home Collection of products such as bathroom accessories and bedding.
4. Celebrity homemaker Martha Stewart creating the Martha Stewart Home Collection of products such as bathroom accessories and bedding.
BRAND EXTENSION : MEASURE
Brand extension research mainly focuses on consumer evaluation of extension and attitude toward the parent brand.
In their 1990 model, Aaker and Keller provide a sufficient depth and breadth proposition to examine consumer behaviour and a conceptual framework.
The authors use three dimensions to measure the fit of extension.
- The “Complement” refers to consumers taking two product classes (extension and parent brand product) as complementary in satisfying their specific needs.
- The “Substitute” indicates two products have the same user situation and satisfy the same needs, which means the product classes are very similar and that the products can act to replace each other.
- The “Transfer” describes 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”
- The first two measures focus on the consumer’s demand and the last one focuses on the firm’s perceived ability.
ADVANTAGES OF BRAND EXTENSION
FOR PRODUCTS:
1. It increases brand image.
2. The risk perceived by the customers reduces.
3. The likelihood of gaining distribution and trial increases. An established brand name increases consumers’ interest and willingness to try new products having the established brand name.
4. The efficiency of promotional expenditure increases. Advertising, selling and promotional costs are reduced. There are economies of scale as advertising for core brand and its extension reinforces each other.
5. Cost of developing new brands is saved.
6. Consumers can seek for a variety.
7. There are packaging and labeling efficiencies.
8. The expense of introductory and follow-up marketing programmes is reduced.
FOR THE ORGANISATION AND PARENT BRAND:
1. The image of the parent brand is enhanced.
2. It revives the brand.
3. It allows subsequent extension.
4. Brand meaning is clarified.
5. It increases market coverage as it brings new customers into brand franchise.
6. Customers associate the original/core brand to new products; hence, they also have quality associations.
DISADVANTAGES:
- Brand extension in unrelated markets may lead to loss of reliability if a brand name is extended too far. An organization must research the product categories in which the established brand name will work.
- There is a risk that the new product may generate implications that damage the image of the core/original brand.
- There are chances of less awareness and trial because the management may not provide enough investment for the introduction of new product assuming that the spin-off effects from the original brand name will compensate.
- If the brand extensions have no advantage over competitive brands in the new category, then it will fail.
