Brand Extension: A Literature Review

Benefits of Brand Extension

Discuss about the Consumer evaluation of technology-based vertical.

Brand management is the process of evaluation and determination of the techniques in order to observe the position and significance of brand in the market. It is necessary to develop and maintain good relations with target market in order to attain effective outcomes from brand management process. Brand management includes tangible and intangible elements, under which tangible elements are price, packaging, and all those things which are essential for promoting a product and service effectively in the target market. Intangible elements are relationship developed by the company with consumer and the experience which consumer had with the brand. Thus, it is the duty of a brand manager to look into all aspects which could affect the reputation of the brand in the target market. Apart from this, brand manager is also responsible for managing all these aspects in an effective manner so that desired outcomes could be acquired. While executing brand management, there are several other aspects which need to be considered as those are the part of brand management technique only. These attributes are brand extension, brand revitalisation, managing brand reputation, etc. (Dwivedi, Merrilees & Sweeney, 2010).

Under this report, literature review will be conducted in relevance with the brand extension which plays crucial role in introducing new products under the same brand name in the target market. It is a marketing strategy and used by firms in order to utilise the reputation and good image of the brand in order to introduce the products and services of different category under the same brand name. In this literature review, certain components and aspects of the brand extension will be discussed. In addition to this, opinion of various authors and philosophers will be observed and discussed in relation with the brand extension.

According to Kushwaha (2012), primary factor which is responsible for the success of a product depends upon its positioning strategy and it is directly linked with the brand name. According to him, definition of brand name describes name, sign, symbol and design or it can be combination of all these elements which describes the identity of manufacturer and seller. All these elements plays essential role in order to differentiate one brand’s product from its primary competitor’s product. Author has also described various benefits of brand extension. It is majorly used for launching a new product or modified product in the target market in a totally new product category using the successful brand name. Following are certain requirements for executing brand extension strategy:

• Primary usage of brand extension is done to influence customers’ brand choices. It helps the companies to promote their new products in the existing as well as in new markets with the objective to gain success. As per Völckner & Sattler (2006), using the successful brand name helps the organization to attain its desired goals and the objectives which are correlated with the introduction of new and modified products in different category.
• Hussain & Rashid (2016) has recognised that brand acts as the powerhouse and it has the sufficient power and energy which is required to brighten other territories. In the same manner, organization could use the effectiveness and efficiency of its brand name in order to successfully launch company’s new products and services in the market.
• Using the acquaintance with the consumers in relation with the brad for introducing the new products in the market increases the chances of acceptance by them. Hence, it can be observed that the risk related to the introduction of new product in the market will be reduced through using e successful brand name.
• It has been observed that customers generally prefer to adopt the products and services of well-known brands. This is because, there is an assurance related with the product’s quality behind the successful brand name.
• Organizations need to adopt various unique and advanced measures in order to promote the new products manufactured by them in the target market. This is necessary as per Monga & John (2010) in order to develop a significant image amongst the target and potential audience. But using existing brand name for promotion of new products and services in the target market is much easier and effective strategy.
• Organization could utilise the benefit of ‘Spillover of advertising’ for the products which are associated with the brand. In the scenario, where promotions are being done for a newly launched product under the same brand name, it will also help the organization to promote the existing products affiliated with the same brand (Batra, Lenk & Wedel, 2010).
• Visibility of brand enhances with the help of brand extension.

Requirements for Executing Brand Extension

According to Dwivedi, Merrilees & Sweeney (2010), there are two types of brand extension which are:

• Extension into unrelated category
• Extension into related category

Apart from the types of extension, there are few extension dimensions which describe the ways to extend the brand. In addition to the fact that brand extension could be done in both ways i.e. in the same product category as well as in the different product category. Hence, it could also be said that horizontal and vertical extension (Spiggle, Nguyen & Caravella, 2012).

According to Sattler, Völckner, Riediger & Ringle (2010), it has been observed that the brand extension is implemented in order to influence the existing potential customers of the organization towards the new product or service introduced by the same company affiliated with the same brand name. This helps the customers to easily trust upon the quality and other measures of the product. Basic concerns of a consumer while consuming a newly launched product are its quality, efficiency to fulfil needs and wants of consumers and its prices related with the other products of the same category.  When the same product is launched under a brand name, chances of product’s success increases as well as it extracts relatively better outcomes for organization. It has been observed from market research that consumers’ trust level is much high on the new products launched by any well-known existing brand in relation with the new products launched by the new companies (Sattler, Völckner, Riediger & Ringle, 2010).

For instance, Zara is apparels manufacturing multinational company and they are deciding to produce perfumes and deodorants and a newly established company is also planning for entering into the same target market and they are also launching perfumes and deodorants. After one year of their launching, when results were analysed, it was observed that Zara has acquired a big portion of the market share while the newly established organization is still struggling for developing the appropriate image in the customer’s mind-set’s in relation with their products. Thus, the fact cannot be denied that well-known brand name plays crucial role in the success of newly launched product irrespective of the product category, hence, brand extension is an important aspect for business. On the basis of Sood & Keller (2012), brand extension should be executed after successful implementation and execution of market research in relevance with the introduction of new products. Primary reason behind this is conducting evaluation regarding whether the new product launched in the market will be successful or not using name of the brand and that too without affecting the existing brand equity.

Types and Dimensions of Brand Extension

Apart from this, cost of launching has also been considered an important aspect in introduction of new product. Launching of new product requires huge cost while a large part of cost could be saved by introducing the new product under existing brand name. While examining consumer reactions towards introduction of new products under existing and reputed brands, it was observed that if consumers finds appropriate connection amongst the produced introduced by the company with the company’s core functionalities. Success of new product is highly dependent over this factor and thus, it is necessary for an organization to consider this on priority basis. For instance, Zara enters into food and consumable goods industry and launches coffee under their brand name. No matter, Zara has a high reputation in apparel industry, consumers will think many times before choosing their new product i.e. coffee over existing and reputed brands of the same product category (Song, et. al., 2010).

Thus, it has been observed by Anwar, et. al., (2011), that consumers look for a certain level of fit degree between the core functionality of the brand and the newly launched product before choosing the particular product. It is the duty of the marketing managers to analyse the marketing environment and the demand of the particular product which is will be soon produced by the organization in order to expand its business. In relation to this, managers are required to analyse the perfect launching category of the product as well as the risk of cannibalisation should also be considered so that the performance of the brand could not be affected in negative manner. Apart from these factors and scenarios related to brand extension, Chen & Chen (2002), had examined certain negative impacts which are directly linked with the brand extension. Primary negative impact which could affect brand’s goodwill due to brand extension is the failure of new product launched in the market and because new product is linked with the brand name, demand and success of its existing products will also be affected. Sichtmann & Diamantopoulos (2013) has conducted a research under which impact over evaluations of brand extension has been discussed through brand reputation, perceived similarity, consumer innovativeness, perceived risk and other factors. Result obtained from study describes that the perceived similarity is a crucial factor which affect the evaluation of services brand extension. Apart from this, brand’s reputation plays crucial role in the success of brand extension and while executing brand extension, organization must consider the price of the competitor’ product. While entering into new product category with the existing brand name, prices plays crucial role in the success of the new product. For instance, Zara is planning to enter into food and consumable goods category and they had planned to introduce their coffee in the market. But before introduction of coffee, it is necessary for the organization to understand the factors related with the product launching such as competitors in the market, prices of the competitors’ products, primary competitive products, etc. From this evaluation, organization will be able to execute brand extension in an effective manner along with attaining success in the target market. Pricing model for the new product and the quality measures must be adopted in relevance with the nature of the product and on the basis of marketing conditions. Consideration of these factors will help the organization to promote its products in the market along with attaining desired goals and the objectives (Stankeviciute & Hoffmann, 2010).

Success Factors of Brand Extension

Magnoni & Roux (2012) has also conducted research for evaluating the perceptions of different consumers with relevance to the brand extension. Companies divide the big market into small segments on certain basis in order to target the appropriate market for promoting their products and services efficiently. Organization will identify a particular market before promoting its products and services and it will also help the organization to gain its goals and the objectives along with gaining appropriate image in the target market. In relation to the introduction of new product in the market under the existing brand name, the same strategy needs to be applied with the objective of acquiring desired goals and the objectives. With the research conducted by He & Li (2010), it has been analysed that consumers generally does not prefer to switch brands until they face any challenge or dissatisfaction from their current brand. In these scenarios, companies who are planning to introduce new product in the same or different product category using brand’s goodwill needs to showcase their products more advantageous from its competitors’ in every possible aspect. For instance, Zara has planned to introduce coffee in the market while certain reputed brands already exist in the market such as Nescafe, Maxwell House, etc. They are old manufacturers and distributors of coffee and performing their functionalities in international market. Hence, it is necessary for Zara to analyse certain weak points of the companies who are already exists in the market with the objective to work upon them and provide most appropriate coffee to the target audience. This will help the organization to attain its desired goals and the objectives in an effective manner along with gaining an adequate competitive advantage in the target market (Joji, 2011).

According to a study done by Müge Arslan & Korkut Altuna (2010), they have analysed certain factors which will affect the brand extension strategy. Tastes and preferences, brand loyalty, habit of consuming, satisfaction and the customer centric approach adopted by the companies. Apart from these, there are numerous factors which could affect consumer’s choices. In this study, author realised that there are certain factors linked with the brand extension and all these factors should be considered before executing this step. Almost eighteen factors have analysed which plays crucial role in the success of brand extension. All these factors are clubbed in seven groups which are as follows:

• Certain level of fit degree should be found between the core brand and the brand extension product.
• Quality measures adopted by core brand
• Past performance of the core brand
• Product category should be categorised to the extent to which core brand is extended
• Measures adopted by the core brand in terms of spreading awareness in the target audience
• Firm’s characteristics which are also implemented on the brand extension
• Promotional and advertisement strategies implemented for brand extension (Dwivedi & Merrilees, 2013).

Along with the impact of above factors over brand extension, Ma, et. al., (2010) has also analysed various stages which will affect the brand’s image in the market after extension. Primary factor which affects the image of brand is strategies used and implemented for brand extension. Apart from these factors, variables such as brand’s goodwill before extension, perceived quality of the extension and the correlation amongst the parent brand and the newly launched product also affects the brand’s image. Consumer’s perception towards the brand also plays crucial role in the success of brand extension. Brand reliability and its past performance should be considered as significant factors which could directly affect core brand’s image along with the introduction of new product in the market. While evaluating the success of brand extension from the previous research, it was observed that brand extension could also lead to brand dilution. On the other hand, author also reviewed that due to large number of products associated with the core brand, chances for the brand extension increases. For instance, Nestle Company was initially engaged in production of chocolates but slowly and gradually they adopted brand extension strategy under which Maggi, cereals, coffee, dairy products, etc. products were launched. This is the perfect example for the success of brand extension strategy due to large number of products is associated with the brand. With the help of large number of products, organization’s goodwill in the market increases as well as it also increases opportunities for attaining success and growth in relevance with the introduction of new products in the target market (Mariadoss, et. al., 2010).

Negative Impacts of Brand Extension

Choi, et. al., (2010) has also analysed certain limitations and benefits attached with use of brand extension strategy which helps to determine the success and failure of this strategy and one can reach to the decision in relevance with the usage of the strategy. Following are those advantages and disadvantages related to the implementation of brand extension:

• Brand extension increases the acceptance chances by the target customers for new product.
• Brand image increases
• Using existing brand image for promoting the new products reduces promotional and advertisement costs.
• Development of new brand is a risky and costly procedure and this could easily be saved with brand extension (Walsh & Lee, 2012).
• Due to brand image, success for new products increases.
• Brand extension also increases core brand value.
• Success of new product ultimately affect the goodwill of parent brand
• Brand extension revives the parent brand
• Subsequent extensions are allowed
• Market share for the parent brand increases along with the increase in the brand reliability
• Customer base also increases due to introduction of new product

• If brand will be extended in unrelated markets, it will decrease the chances of attaining success for the new product as well as it will also affect the parent brand’s image
• With the introduction of new product, risk exists which generates inferences through which parent brand’s image may get damaged
• Brand extension should be done in the areas where chances are high to acquire the market share through beating the existing companies in the market (Dwivedi & Merrilees, 2013).

Thus, it can be evaluated from the above discussion and from every aspect discussed with regards to the brand extension which is a marketing strategy used for expansion and diversification is effective if it is applied in the related markets with the parent brand otherwise it will lead to negative outcomes. In order to realise the significance of brand extension, perception regarding various authors and scholars have been reviewed in this report. It is a marketing strategy which is used for the company’s expansion and diversification. Diversification is the nature of business and it helps the management to adopt innovative and advanced measures for expand the business in the market. In relevance to brand extension, various objectives have been discussed under this literature review. The final outcomes which have originated from a long review over various author’s thinking related with the brand extension is that it is effective but certain conditions must be considered.

Apart from this, it has also been observed that brand extension strategy should be followed after analysing the marketing conditions related to the particular product. Along with this, it is also essential with the objective of determining the factors which will play crucial role in organizational success and expansion. In relevance to these points, it is necessary for the organization in order to attain desired goals and the objectives in relevance with the introduction of new product under existing brand name.

References

Anwar, A., Gulzar, A., Sohail, F.B. and Akram, S.N., 2011. Impact of brand image, trust and affect on consumer brand extension attitude: the mediating role of brand loyalty. International Journal of Economics and Management Sciences, 1(5), pp.73-79.

Batra, R., Lenk, P. and Wedel, M., 2010. Brand extension strategy planning: Empirical estimation of brand–category personality fit and atypicality. Journal of marketing research, 47(2), pp.335-347.

Chen, H. A. C. & Chen, S. K., 2002. Brand Dilution Effect of Extension Failure – A Taiwan Study. Journal of Product and Brand Management, Vol. 9(4). pp.243 – 254.

Choi, T.M., Liu, N., Liu, S.C., Mak, J. and To, Y.T., 2010. Fast fashion brand extensions: An empirical study of consumer preferences. Journal of Brand Management, 17(7), pp.472-487.

Consumer Perceptions of Brand Extension

Dwivedi, A. and Merrilees, B., 2013. Brand-extension feedback effects: an Asian branding perspective. Asia Pacific Journal of Marketing and Logistics, 25(2), pp.321-340.

Dwivedi, A. and Merrilees, B., 2013. Retail brand extensions: Unpacking the link between brand extension attitude and change in parent brand equity. Australasian Marketing Journal (AMJ), 21(2), pp.75-84.

Dwivedi, A., Merrilees, B. and Sweeney, A., 2010. Brand extension feedback effects: A holistic framework. Journal of Brand Management, 17(5), pp.328-342.

He, H. and Li, Y., 2010. Consumer evaluation of technology-based vertical brand extension. European Journal of Marketing, 44(9/10), pp.1366-1383.

Hussain, S. and Rashid, Y., 2016. Brand Extension Success Elements: A Conceptual Framework. Journal of Business Administration and Education, 8(1).

Joji, A.N., 2011. Consumer Evaluations of Product Line Brand Extension. IUP Journal of Brand Management, 8(1).

Kushwaha, T., 2012. Brand extension: a strategy for competitive advantage. Samvad, 5, pp.18-27.

Ma, Q., Wang, K., Wang, X., Wang, C. and Wang, L., 2010. The influence of negative emotion on brand extension as reflected by the change of N2: a preliminary study. Neuroscience letters, 485(3), pp.237-240.

Magnoni, F. and Roux, E., 2012. The impact of step-down line extension on consumer-brand relationships: A risky strategy for luxury brands. Journal of Brand Management, 19(7), pp.595-608.

Mariadoss, B.J., Echambadi, R., Arnold, M.J. and Bindroo, V., 2010. An examination of the effects of perceived difficulty of manufacturing the extension product on brand extension attitudes. Journal of the Academy of Marketing Science, 38(6), pp.704-719.

Monga, A.B. and John, D.R., 2010. What makes brands elastic? The influence of brand concept and styles of thinking on brand extension evaluation. Journal of Marketing, 74(3), pp.80-92.

Müge Arslan, F. and Korkut Altuna, O., 2010. The effect of brand extensions on product brand image. Journal of Product & Brand Management, 19(3), pp.170-180.

Sattler, H., Völckner, F., Riediger, C. and Ringle, C.M., 2010. The impact of brand extension success drivers on brand extension price premiums. International Journal of Research in Marketing, 27(4), pp.319-328.

Sichtmann, C. and Diamantopoulos, A., 2013. The impact of perceived brand globalness, brand origin image, and brand origin–extension fit on brand extension success. Journal of the Academy of Marketing Science, 41(5), pp.567-585.

Song, P., Zhang, C., Xu, Y.C. and Huang, L., 2010. Brand extension of online technology products: Evidence from search engine to virtual communities and online news. Decision support systems, 49(1), pp.91-99.

Sood, S. and Keller, K.L., 2012. The effects of brand name structure on brand extension evaluations and parent brand dilution. Journal of Marketing Research, 49(3), pp.373-382.

Spiggle, S., Nguyen, H.T. and Caravella, M., 2012. More than fit: Brand extension authenticity. Journal of Marketing Research, 49(6), pp.967-983.

Stankeviciute, R. and Hoffmann, J., 2010. The impact of brand extension on the parent luxury fashion brand: The cases of Giorgio Armani, Calvin Klein and Jimmy Choo. Journal of Global Fashion Marketing, 1(2), pp.119-128.

Völckner, F. and Sattler, H., 2006. Drivers of brand extension success. Journal of marketing, 70(2), pp.18-34.

Walsh, P. and Lee, S., 2012. Development of a brand extension decision-making model for professional sport teams. Sport Marketing Quarterly, 21(4), p.232.