This chapter intends to set the theoretical frame of the thesis by introducing the main areas needed to create the basis of our analysis, shaping the ways towards our own main purpose. Thus, it begins with the roots of brand extension and starts of with the concepts of brand, brand identity and brand hierarchy and then leads into brand extension and explains it as a ‘means of growth’ for a brand. Narrowing down the scope, it goes into the typology of brand extension and identifies the successful and unsuccessful factors of brand extension. Finally it identifies certain rules for the success of brand extension and looks at different models used for the effectiveness of brand extension.
In today’s world of increased competition and consumer awareness, the marketing of new products has become ever more complex. We have moved into a time where consumers are literate enough to choose their own products on the basis of their judgment and where competition among products and services gives them an opportunity to select the best product that would suit their need. Branding has become one of the most important issues in the launch of a new product. Having functional and emotional attributes attached to it, branding has gained popularity as consumer relates more and more to it. Historically examples of branding can be found as early as 9000 years ago when owners or manufacturers used to give distinctive and distinguishing symbol or name to their property or product. However it was the 19thcentury that arguably saw the dawn of the modern branding era and it was the industrial revolution that caused its birth. It was the industrial revolution that created the mass production that meant an ever- increasing proportion of people worked for a manufacturer and not themselves. They no longer needed to mark the products that they produced as their own; rather what they produced was collectively produced for one company. Before we proceed further, let’s look more deeply into branding and then link that to the concept of brand extension.
2.1.1 DEFINITION AND EXPLANATION
Different scholars have defined the word brand differently as different meaning or contexts have been attached to them. Balmer and Greyser (2003) have given the most explanatory definition of branding explaining both the traditional and their own perspective about branding. They have stepped forward from the traditional definitions of branding and have defined branding on the corporate level having corporate implications. According to them three type of definitions have been identified. The first two are traditional whereas the third one is the advanced version of branding which incorporates their point of view about branding. They are:
Erstwhile. ‘In its simplest sense a brand denotes a name, logotype, or trademark and was originally used to signify ownership as with branding of live stock. These are, increasingly, seen to be points of entry to the essence of a brand rather than the essence of branding per se’. (Definition similar to the one given in Oxford Concise Dictionary)
Established. ‘This refers to the added values that a brand brings to a product. Products may or may not have brand values. Product brand values are superimposed by the organization by its marketing and communication experts and advisers. They are made memorable. In the main, such values are fashioned in the mind; not on the production floor. They are, essentially, synthetic. Whereas products are made in a factory, brand values exist in the mind. Brands can be timeless in a way that products may not be.’
However Balmer and Greyser(2003) have identified a new understanding about brands. They call this aspect of branding as emergent Emergent. ‘While the category most certainly is established, the fundamental differences between this category and the other two are only beginning to be appreciated. This category refers to brands at the corporate level. Corporate brand values are not contrived; they need to be bona fide. The role of personnel and of ‘culture’ in establishing and maintaining and understanding corporate brand values is of essence’.
In the words of Sir Michael Perry, a former Chairman of Unilever, brand is much more than a symbol to differentiate goods and services:
‘In the modern world, brands are a key part of how individuals define themselves and their relationships with one another…. More and more we are simply consumers… We are what we wear, what we eat, what we drive.’
This description of brand explains that brand is much more than the physical and functional value that it holds. It’s a bundle of attributes both functional and emotional. Thus brands not only meet our physical needs but also address our emotional needs. A blind test was conducted on Pepsi and Coca Cola. It was found that Pepsi was preferred over Coke in regards to its taste. Yet the sales of Coke are much higher than Pepsi that shows that despite being functionally better, people are emotionally attached to coke. Stephen King was Director of planning at one of the largest advertising agencies, J Walter Thompson, when he described brand as:
‘People choose their brand as they choose their friends. You choose your friends not usually because of specific skills or physical attributes (though of course these come into it) but simply because you like them as people. It is the total person you choose, not a compendium of virtues and vices’.
2.2 BRAND IDENTITY
Brand identity refers to the public image of a product, line or service in the eyes of a consumer. McClendon (2003) considers that brand identity is something that exists in the minds and hearts of the consumers when they hear the name of the brand. He further adds that it is the identity of the brand that provides the real strength to the business. It is the visual link between the company and the consumer. Brand identity includes brand names, logos, positioning, brand associations and brand personality. Upshaw (1995) has identified brand identity as a brand’s DNA configuration. He supposes that the particular set of brand elements is blended in a unique way to establish how the brand will be perceived in the market place. According to Kapferer (2001), it is critical for each business to understand that the attributes of a brand represent the indispensable elements. Not all brand managers are aware of this. Yet in order to find out which of the extended brand elements is needed to mediate with the market, pre testing is done and this is considered to be the best method to avoid trails and errors.
In his book, Aaker (2000) argues that a brand is more than a product. Creating an extension can benefit the parent brand by helping it ‘break out of the box’. According to him, there are several reasons for building a rich extended brand identity, reasons that are going to be illustrated in the following figure and explained underneath it.
“A richer brand identity is a more accurate reflection of the brand. Just as a person cannot be described in one or two words, neither can a brand. Three word taglines or an identity limited to attributes will simply not be accurate” (Aaker, 2000, p. 54).
Aaker (2000) considers that the identity of a brand represents what the brand stands for. Taking into consideration that the brand identity is inspirational, it must comprise and reflect the values and cultures of the entire organization. Moreover, customer concern should dominate the strategy of the business. And lastly, Aaker emphasizes in his picture that “the extended identity provides a home for constructs that help the brand move beyond attributes. In particular, brand personality and symbols normally fail to make the cut when a terse brand position is developed, yet both are often extremely helpful strategically as well as tactically” (Aaker, 2000, p.54).
Balmer (2003) has emphasized on the concept of corporate identity and in his historiography model, we are currently in stage 4 in which the emphasis would be on organizational identity, corporate identity, corporate communication, corporate reputation and finally but most importantly corporate branding.
2.3 BRAND HIEARCHY TREE
Brand structure can be illustrated logically by using the brand family tree together with all the related sub-brand branches. The figure below can be viewed as an organizational chart. The horizontal and vertical dimensions are grouped after numerous factors such as segment, product, quality and design (Aaker, 2000).
The horizontal dimension shows the scope of the brand in terms of the sub brands that lie under the brand umbrella in the box visualized “Colgate” as a parent brand. The vertical dimension represents the brands and sub-brands that exist for an individual product- market entry (Aaker, 2000).
The visualized overview of the whole brand guides the brand managers to keep an eye on its entire brand and to analyze if there are too many or too few. The question is how these brands can be reinforced, what message they deliver to the consumer and what improvements to the particular message can be done (Aaker, 2000).
Keeping an eye on this hierarchy is quite important as it enables a company to identify the fit for new extension and also helps to maintain a clear vision of each product keeping in view the rest of the brands in the hierarchy. Thus it’s easy to maintain fit and leverage in brand extension with the help of this brand hierarchy.
Every company would like to see its brand growing and prospering. Brands grow through two principle means. The first mean is called organic growth whereas the second one is called growth through extension.
2.4 ORGANIC GROWTH FOR BRANDS
In this case making a brand or product frequently available or adding incentives to the brand makes it more popular. Sales of any one brand increase because what they have to offer becomes attractive to somebody, somewhere. Brands can be made more attractive by improving either the functional or emotional attributes of the brand. Thus in functional attributes we can improve any of the four P’s whereas in emotional one can improve the personality or image of the brand. A good example would be of Coca Cola and their distribution. Not only have they made it available from Atlanta to Zanzibar, from Moscow to Melbourne but also you can buy it from supermarkets, newsagents, cinema, restaurants, street corners, café, football stadium, pop concert and even at car parks where you have vending machine1.
Whilst there are numerous marketing tools to achieve organic growth, this type of growth stems from three things: getting that brand used by more people, getting it used by the same people more often or getting people to use more of it on any of the occasions they use it in the first place.
2.5 GROWTH THROUGH EXTENSION
The second and relatively newer way of growing brand is through extension, which is the core focus of this study. Before going into detail about how brands grow through extension, I will firstly define extension and try to differentiate the various types of extensions.
Due to the relative immaturity of the concept, there is no standard definition of brand extension and various marketing scholars have given different definition to the same terminology. From the readings that I have conducted of books and research papers, it’s obvious that around a decade back scholars used to give a more generalized definition of brand extension. The generalization of the definition can be observed from the fact that brand extension was used for extension into both related and non-related products. The following definition will clarify my point of view.
‘In a typical brand extension situation, an established brand name is applied to a new product in a category either related or unrelated, in order to capitalize on the equity of the core brand name (DeGraba and Sullivan, 1995; Pitta and Katsanis, 1995)’.
Also certain research papers indicated that brand extension being generalized was then differentiated into two types as indicated by this piece of research work.
‘Brand extensions come in two primary forms: horizontal and vertical. In a horizontal brand extension situation, an existing brand name is applied to a new product introduction in either a related product class, or in a product category completely new to the firm (Sheinin and Schmitt, 1994). A vertical brand extension, on the other hand, involves introducing a brand extension in the same product category as the core brand, but at a different price point and quality level (Keller and Aaker, 1992; Sullivan, 1990). In a vertical brand extension situation, a second brand name or descriptor is usually introduced alongside the core brand name, in order to demonstrate the link between the brand extension and the core brand name (e.g. Marriott Hotels, Courtyard Inn by Marriott)’.
Most recently the word ‘line extension’ has been given to extension done in the same product category whereas ‘brand extension’ would refer to extension in unrelated products and in this study I will undertake this understanding of extension. Taylor (2003) has referred to them as direct and indirect stretch. Jobber (2003) has given the term brand extension to line extension whereas brand extension has been referred to as brand stretch.
The current emphasis on the subject has been due to its enormous success. Consumers being the end users have become friendlier to the concept and are now accepting it as illustrated on the next page.
It’s obvious from this graph that consumers are becoming much friendlier to the concept then they were a decade ago and this shows the popularity of the concept and the frequency at which it has been used in the past decade. Let’s get an insight into the various types of extension.
2.5.1 LINE EXTENSION OR DIRECT STRETCH
‘Line extension is defined as being a variant of the same basic product. It might be a new flavor or a new size’. Basically it’s a slight variation to the original product. Examples would be of Colgate. We used to have Colgate regular but now we have Colgate total, Colgate Max fresh Gel, my first Colgate for kids, Platinum, Deep clean etc. The basic purpose of this strategy is to encourage more people to use a brand. It can also be considered as a first step towards brand extension. But the only bad thing about too many variations in the products or having too many line extension is that it may confuse the user in regards to which product should he/she use. Also it may cause a cannibalization affect within the product range.
2.5.2 BRAND EXTENSION OR INDIRECT STRETCH
Brand extension on the other hand would refer to extending your product range into a product category that wouldn’t be commonly associated with it. A simple definition described below will illustrate my point of view.
“Brand extension is using the leverage of a well known brand name in one category to launch a new product in a different category.” (Brandextension.org)
Giles Lury in his book about ‘Brand Watching’ has defined brand extension as:
‘Brand extension is the use (and occasional misuse) of an existing brand name and equity to launch a product or service into a category or market not normally associated with that brand.’ (Lury, 1998)
Thus in contrast to earlier scholars, who had generalized the concept of brand extension, new researchers have distinguished the concept well from line extension.
2.6 RATIONALE BEHIND USING BRAND EXTENSION
Brand extension has gained a lot of popularity and is considered to be the key tool for launching new innovations. A survey was conducted by Brand gym in 2003 in which marketing directors were asked about brand extension. The following graph illustrates the response.
The results indicated that 83% of the marketing directors thought that brand extension would be the main way of launching new innovation in the next two to three years. Yet research has also shown that only 50 percent of brand extension survives after the first three years.
Firstly brand extension differs from line extension because where line extension offers customers more varieties or styles of the original brand in its original market, a brand extension takes an existing brand to pasture new ones. Taking Mars as an example we see that the original chocolate bar has been line extended into different styles including Mars Kingsize, Mars miniature and for a limited period Dark chocolate Mars. However when Mars launched the Mars ice cream, it entered a new market for the brand and as such had extended the brand franchise. Mars also extended into flavored milk drinks market with Mars in a bottle.
The rationale behind brand extension’s popularity is that it’s difficult and expensive to launch a completely new brand. The most often quoted statistic being that ‘nine out of every ten new brands fail’. New brands are therefore seen as a high, though sometimes high return strategy. On the other hand, brand extension is a cheaper and more reliable method of building on what already exists. Not surprisingly companies who have already invested a lot of money in creating a brand are keen to maximize its full potential. Finally it can be concluded that companies would like to leverage and thus give initial success to the new brand by exploiting the equity that has been established by the parent brand.
2.7 KELLER AND AAKER’S WORK ON BRAND EXTENSION
Keller and Aaker (1998) extending on their typology of product range extension and corporate brand extension have examined the impact of corporate marketing on a company’s brand extension. In their research paper they have described how consumers evaluate brand extension in general and then concentrating on corporate brand extension, they have studied the impact of corporate marketing on consumer evaluation of corporate brand extension in the presence and absence of supporting product advertising. The initial research work describing product brand extension is as follows:
‘Research on consumer responses to extensions of product brands, suggest that two key factors influence consumer evaluation.
– the types of association that make up the parent brand image
– the relationship between the parent brand and the extension product
These factors affect the consumer belief about whether the new product fits as a member of the product line. In sum, the record therefore suggests that a variety of different associations for the parent brand can be transferred to an extension, assuming a basis of fit exists.’
Now an extension that they made in regards to brand extension was that they applied this concept to corporate brand extension. But before going further it’s important to know Aaker’s three dimensions of corporate credibility. They are:
1. Corporate expertise is the extent to which a company is thought able to competently make and sell its products and services.
2. Corporate trustworthiness is the extent to which a company is thought to be honest, dependable, and sensitive to consumer needs.
3. Corporate likability is the extent to which a company is thought likable, prestigious and interesting.
This results gathered from this study have strategic implication both to the benefits/risks associated with brand extension and also to the effectiveness of brand extension. Thus a summary of the results are as follows.
Firstly by showing that corporate marketing related to product innovation enhances perceptions of corporate credibility and extension fit, and thus much favorable extension evaluations, this study showed benefits for brands with reputation of high quality products.
Secondly this study provided a more detailed account of particular dimensions of corporate credibility, namely corporate expertise, trust worthiness and likeability. Thus this study concluded that corporate expertise appeared to play a more influential role in evaluation of corporate brand extension than either corporate trustworthiness or likeability.
Thirdly this study suggested the merits of leveraging a strong brand to introduce a new product. One advantage of using a brand extension strategy to name a new product is that a less concerted advertising effort may be necessary. To the extent that brands extensions are able to leverage existing parent brand associations in consumer memory, a company should find it easier to achieve brand image with an extension branding strategy instead of giving a new product a new name. The fact that corporate marketing activity impacted consumer evaluations of a corporate brand extension in the absence of any product specific advertising is further an empirical support for the benefit of adopting a brand extension strategy.
Fourthly this study suggested that corporate marketing activity significantly influenced extension evaluations even when the extension was advertised on the basis of another image dimension point. Thus corporate image associations are more likely to transfer to an extension on the basis of the branding strategy.
Lastly this study also suggested that where a company is in a situation of having a trade off between various strategies like reinforcing a strong association, strengthening a weak association or creating a new association, then it wholly depends on the situation of each of the elements to decide which strategy to choose. For example: In some cases, existing associations may be so strong that they may be better off emphasizing other information to fortify a weak or supply a missing association.
2.8 TYPES OF BRAND EXTENSION
Limited work has been done on the typology of brand extension. From various research papers, books and websites that I have consulted regarding brand extension, very few have distributed brand extension into different types. (Brandextension.org) have generated the following typology of brand extension taking functional and emotional attributes of the brand into consideration.
1. Similar product in a different form from the original parent product. This is where a company changes the form of the product from the original parent product. An example is (frozen) Snickers Ice Cream Bars. The original Snickers bar is a shelf stable candy. The brand extension is a similar product, but in a different form. Jell-O Portable Pudding and Pudding Cups is Jell-O pudding in a different form and section of the store.
2. Distinctive flavor/ingredient/component in the new item. When a brand “owns” a flavor, ingredient or component, there may be other categories where consumers want that property. E.g. Peanut butter is a characteristic ingredient in Reese’s Peanut Butter Cups candy. Chocolate is a characteristic ingredient of Hershey. Brand Extension Research identified Reese’s Peanut Butter as a logical extension that capitalizes on this association.
3. Benefit/attribute/feature owned. Many brands “own” a benefit, attribute or feature that can be extended. E.g. Brand Extension Research showed Armor All brand was defined by automotive surface protection – which can go beyond vinyl dressing. Paint needs protecting also. Arm & Hammer “owns” a benefit of deodorizing. Their baking soda product has claimed that it removes odors from refrigerators, etc. As a result, they extended the brand into other products such as Arm & Hammer underarm deodorant and cat litter deodorizer.
4. Expertise. Over time, certain brands may gain a reputation for having an expertise in a given area. Leverage can be achieved when extending into areas where this special expertise is deemed important. E.g. Honda’s expertise in reliable engines led to lawn mowers, gas powered generators and a variety of other gasoline engine powered devices. What brand comes to mind when we think of baby products? – Gerber. As a result of this acceptance of their expertise, they successfully launched Gerber Baby Powder, Gerber Baby Bottles, etc. Sara Lee is known for baked desserts, so why not other baked goods like bread.
5. Companion products. Some brand extensions are a “natural” companion to the products the company already makes. E.g. Contadina was a tomato paste and sauce brand. In brand extension research, consumers thought Contadina pasta was a logical companion product that would have the leverage of the Italian heritage of the parent. Aunt Jemima (the pancake mix brand) launched pancake syrup, as a companion to compete with Log Cabin syrup.
6. Vertical extensions. Some brand extensions are vertical extensions of what they currently offer. A brand can use their “ingredient/component” heritage to launch products in a more (or sometimes less) finished form. E.g. Nestlé’s Toll House chocolate refrigerated cookies is an example. Most Toll House chocolate chips are used in cookies, so why not make a brand of Toll House chocolate chip cookies. Mrs. Fields Cookies were ready-to-eat. They offered frozen cookie dough, moving backwards as a vertical extension. Rice Krispies has always been used in kids’ treats. Kellogg offered Rice Krispies Treats ready-to-eat.
7. Same customer base. Many brand extensions represent a marketer’s effort to sell something else to its customer base. This works particularly well when that customer base is large and to some extent captive. E.g. VISA launched travelers checks directed to its credit card customers.
8. Designer image/status. Certain brands convey status and hence create an image for the user. E.g. Designer clothing labels have been extended to furniture, jewellery, perfume, cosmetics and a host of other items. Some brands promote a lifestyle and can extend to items that people “wear,” as a badge of identifying themselves with that lifestyle.
The above-mentioned typology is quite useful as it indicate the key areas where extension is done along with the methodology used to extend the product line. Yet it must be said that not all research work would agree with this typology as it is felt that certain types confuses line and brand extension or in ways generalizes it more to extension rather than brand extension. For example: Adding attribute to the products in the same product line would be line extension and not brand extension. Still it is a good base for my research work and also for further research into the typology of brand extension.
Aaker (1998) has described two types brand extension differentiating the concept on a corporate level. The first type described by him is product brand extension. ‘A company makes a product brand extension when it uses an existing brand name distinct from its corporate name to introduce a new product outside its current product offering’. With product brand extension consumers are often completely unaware of the company involved. The second type described by him is corporate brand extension. ‘A corporate brand extension is one which relies on the corporate name to launch a new product ‘. A corporate brand extension clearly identifies an organization with a product, and so evokes different reactions from consumers than a product brand extension. A corporate brand may create associations in consumer’s minds that reflect the values, program, and activities of the firm.
2.9 SEQUENTIAL STRETCHING AND UMBRELLA BRANDING
Extension to parent brand is usually a sequential process in which brands are initially line extended and then brand extended. This sequential stretching of brands leads to the formation of a whole family of brands thus giving rise to the concept of ‘Umbrella branding’. As the name indicates, umbrella branding refers to extension of a parent brand into a variety of products such that a whole range of products would come under the same brand. Taylor (2003) has divided the sequential extension into three main steps namely core brand extension, direct stretch and indirect stretch.
I will illustrate the concept using Dove as an example. Brand extension was a key driver of Dove’s explosive growth during the 1990’s. Coupled with geographic expansion, it helped grow sales fivefold, to almost $1 billion. The brand continues to grow at 20 percent per year and is well on its way to hitting the $ 2 billion mark in the next few years. Let go through the sequential process and apply it to Dove.
The first and most crucial step to be noted is that Dove didn’t extend its product line until it had achieved the following two things.
• A strong bar business had been built
• The brand had satisfactory scores on attributes rating for mildness and moisturizing.
An important thing to be noted is that extension took place only after Dove had secured its soap bar business and had improved it. Thus once there was strength in the brand, it extending it to other products. Stretching went through the following stages.
Stage One: Core Range extensions: Dove remained a product brand with a single format at this stage. It extended (line extension) its product range by adding new versions such as sensitive skin that now accounts for up to a third of sales. Further growth of the bar through product and pack innovation, remains a key source of profitable growth. Diagrammatic illustration of this step would indicate the extension into the two types.
Stage Two: Direct stretch: In this stage extension is done into markets that are quite relevant to the product line. In the case of dove, it extended its product range into bath and shower products. Yet till now dove is focused on personal washing. The key reasons of dove extension at this stage were strong product delivery and innovative packing that differentiated them from other products in the range. The following diagram illustrates their stretch in to shower and bath products.
Stage three: Indirect stretch: Capitalizing on their skin care outlook, Dove decided to be ambitious and to move beyond the washing and bathing market. Although they started off selectively, they introduced products like deodorants and hair gels etc. that were once again a big success. This process of broadening a product range is referred to as ‘Umbrella Branding’ as illustrated by the diagram given below.
The dove success has been due to consistent marketing and a consistent communication campaign. Consistency has been a key part of building brand identity and has been an additional ‘glue’ to tie together the extension.
2.10 BENEFITS AND DRAWBACKS ASSOCIATED WITH BRAND EXTENSION
Brand extension being the most popular mean of brand growth has some surprising statistics. Success rate of brand extension is hard to find, especially as what constitutes a success varies enormously. Yet a survey conducted by OC&C using a simple and effective definition of success (still being on shelf after six years after launch) found out that 50 percent of all brand extension fails. This figure is certainly an eye opener for most companies as half of the product fails using brand extension. Taylor (2003) has associated this huge failure figure due to ‘Brand ego tripping’ and also gives effective steps to avoid it. But before we go into the detail of this concept, let’s look into the benefits and drawbacks of brand extension.
2.10.1 BENEFITS ASSOCIATED WITH BRAND EXTENSION
The remarkable popularity of the concept over the last decade is a confirmation of the fact that there are marked benefits that can be associated with brand extension. Taylor (2003) has described the consumer benefits of brand extension in which he has identified consumer knowledge, consumer trust and lower cost as the major benefits of brand extension. Tauber (1988) has differentiated the benefits on the basis of efficiency and effectiveness emphasizing more on the cost benefits.
An existing strong brand promotes a new product or service as there is less need to create awareness and imagery. Thus in a way awareness is already present and the only thing left is