BRAND EXTENSION:Leveraging, Leveraging, Line Extension in detail, Positive side of line extension

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Brand Management (MKT624)

Lesson 21

BRAND EXTENSION

Introduction

With an understanding developed on positioning, this lecture takes us into the area of brand

extension. Although loosely used, the term brand extension comprises of two sub areas line

extension and brand extension. The latter is generally used in all situations of extensions,

diversifications, or stretch. We have to draw a distinction between the two for a clear

understanding of the concepts.

Concept of positioning clarifies that not one position can satisfy all the varying needs within

the category. Different needs have to be identified toward their fulfillment. To keep up with the

evolution you have to evolve new points of difference. Different needs refer to different

segments and every product has its variants to address to those segmental needs. This holds true

for consumer consumables as well as consumer durables. Regular and mild cigarettes, regular

and fruit yogurt, regular and high fiber cereals, regular and low cholesterol margarine, and

economy and executive models in cars are all examples of product variants in different

segments and categories.

To let the market know that you have something different to offer, you must differentiate

between the existing offering and the new entry. For the new entry meant to address a different

need, you must create a different image reflecting the new promise and must have an evolved

contract in place. You do that in either of the two ways:

A. Staying within the value framework of the original brand, meaning under the same brand

name. You do not go too far away from the core identity.

B. Create a different identity altogether, meaning a new stand-alone brand.

Brand extension

Brand extension is all about the existing brands. As the terminology suggests, we do something

with the existing names for the new offerings. Brand extension, therefore, is the study and

practice of deciding

1. What to do in situations that evolve with changing needs? Examples could be cited of

soups coming into different flavors, biscuits in different tastes and packs, and detergents

in powder and liquid forms.

2. What to do in situations that offer an opportunity to enter a new market altogether?

Examples could be furnished about manufacturers of juices getting into milk and yogurt,

tea getting into soups, chocolate getting into ice cream, and cameras into photocopying

machines etc.

Let's be clear that we are discussing both situations in relation to using our existing brand name

that is strong. One situation relates getting into variants of the existing product, while other

involves going across the existing business lines into new ones. Both have a common factor

and that is the same brand name. We use the same brand name because it is strong!

Leveraging

The opportunity of using the same brand name for variants or altogether new products takes us

into the domain of leveraging adding value to the company by capitalizing on the brand as an

asset. Temptation to do so is always huge. We keep the same brand name so that customers can

develop an immediate familiarity with the new introductions variants or new products. And

that is what leveraging is all about!

Managers feel the need to leverage their brands under the following two different sets of

circumstances:

Brand Management (MKT624)

When they are led into genuine situations of satisfying evolving needs, they feel rightly

driven to leverage the brand by introducing its variants light cigarettes and sugar-free

chewing gum fall under practice 1 of brand extension discussed above.

When it is attractive to go across category, managers do that with the confidence that their

existing brand name is going to add value to their new introduction and will become

popular immediately. This relates practice 2 of brand extension.

Leveraging without purpose

If managers attempt to leverage their brand only because it has high value but it does not really

have a specific need to satisfy, then the managers are wandering into the marketing no-man's

land and end up introducing something with no substantive difference. It is merely an exercise

toward brand proliferation!

This means that brands should be seriously treated as extremely valuable properties and not

subjected to meaningless extensions with minor differences. Over-proliferation is a serious

threat to a brand's future. Customers show resentment to brands with no real point of

difference1.

Rate of Survival after 3 Years

Figure 24

Why brand extension?

50%

Brand extension is on the rise. Most of the

new product launches take place with the

existing strong brand names. Cost of

30%

launching a new brand in three major

Existing Brands

markets (US, Europe, and Japan is about

New Brands

US$ 1 billion), whereas launching a product

under the same name is a fraction of that

cost. It is estimated to be one fifth2.

30% of new brands survive just about three

Brands

years, but the rate goes up to 50% if

launched under an existing brand name3. Brand extension, therefore, is cheaper and securer. It

looks like a sure way to gain market share and produce visible results.

Kinds of extensions

There are two kinds of extensions, namely line extension and brand diversification. Brand

diversification is in effect brand extension, but this terminology of brand extension somehow is

used generically for both types of extensions. You have to make an effort not to be confused by

this.

Line extension

Line extension is basically getting into different versions of the same base product on the same

market. A manufacturer of spices getting into more non-traditional spices or recipes and a

cheese manufacturer getting into different kinds of packing, portions, slices, and boxes to

appeal to different target audiences are examples of this phenomenon. The objective here is to

add more depth to your offerings within a definite market. Line extension corresponds to

practice 1 of brand extension discussed in the beginning of the lecture.

Brand diversification/extension/stretching

This refers to stretching your brand into new product fields. Your brand becomes an umbrella

covering very different segments and products. A few examples are Mitsubishi, Philips, and

GE. Mitsubishi includes shipyards, nuclear plants, cars, hi-fidelity systems, banks, and even

food; Philips includes electrical appliances to lighting to sophisticated systems; GE is into

Brand Management (MKT624)

aircraft engines, electrical appliances, energy and more4. They use one name because that is a

direct recognition of the fact that their name is the real capital of their company. Brand

diversification or extension or stretching corresponds to practice 2 of brand extension discussed

earlier. It is real diversification toward different product categories and, hence, is a highly

sensitive and strategic choice.

"Line extension" and "brand extension" therefore are two well differentiated concepts that

must be understood for the sake of knowing how and when each will have a perfect fit with the

situation. Both could be explained with the help of two graphic illustrations on the following

page.

Line Extension in detail

Extending the line is an evolutionary step in the life of a brand and occurs to address the

changing needs. In the words of Kapferer, just as human species survive by adapting to the

environment, brands that start as single products have to adapt to the marketing environment by

breaking into sub-species5. Toyota cars, Coca-Cola, National and Shan "Masalas", LU and

English Biscuit Manufacturers' biscuit brand variations are a few examples that clarify the

whole concept.

Forms of line extension

It takes on the following forms6:

· Multiplication of formats and sizes. It is typical in cars, soft drinks, cakes, and biscuits

etc.

· Multiplication of variety of tastes and flavors. Yogurt, juice, and milk are excellent

examples of this form.

· Multiplication of the type of ingredients. Caffeine-free coffee and sugar-free juice fall

into this form.

· Multiplication of generic forms of medicines. For headache, a pharmaceutical company

may introduce extra-strength, without drowsiness, no-allergy formulas etc.

· Multiplication of physical forms. Detergents in powder and liquid; deodorants in sticks,

spray, and roll-ons are perfect examples.

· Multiplication of product add-ons satisfying closely related needs of the same

consumer. Mascara, lipstick, skin-care creams by one company and deodorants, shave

cream, gel, and soothing balm by another are examples of this form.

· Multiplication of versions having a specific application. Shoe cream for regular leather,

powder or spray for suede leather polish for wooden furniture and polish for marble top

to give a few examples.

Brand Management (MKT624)

Figure 24

Figure 25

Brand Management (MKT624)

Positive side of line extension

As said earlier, each brand starts as a single product and with the passage of time becomes sub-

divided into variants that respond to differentiated expectations.

1. Increases Usage

Cola drink is an example, the multiplication of versions has increased its consumer base

in family size bottle, disposable bottle, can, and returnable bottles all are directed

toward increasing usage.

2. Reinforces Sales

With each version designed for one particular usage mode, the brand reinforces its sales

with a wider market base. With product variants in the categories of biscuits, cheeses,

butters and margarines, and packaged cakes, you extend the market by opening a

variety of eating occasions.

3. Friendly and Caring

It shows sensitivity to consumer's needs and the brand energizes itself by responding to

those. In doing so, it maintains an interesting, friendly, and caring character. A small

tub of jam or a sachet of powdered milk is an example.

4. Pushes Boundaries

It pushes the boundaries of the market and strengthens the brand's domination. It

increases brand's visibility through successive launches.

5. Revitalizes failing Brands

Line extension helps ailing and tired brands. It revitalizes many brands by way of

introduction of new offerings. Because of the resilience brands have, they bounce back

if they are introduced with a new fervor justified by a meaningful point of difference.

Brands fail because of price competition. It helps the company launch another version

with a lower price.

6. Maintain relationship between market share and shelf-space share

Knowing that customer involvement in consumer items is low, the number of impulse

buyers is increasing. Also knowing that shelf space at the retail outlet is limited, it is

always good to introduce something by the existing name and keep competition pushed

out.

Bibliography:

1. Geoffrey Randall: "Branding A Practical Guide to Planning Your Strategy"; Kogan

Page (55)

2. Geoffrey Randall: "Branding A Practical Guide to Planning Your Strategy"; Kogan

Page (56)

3. Geoffrey Randall: "Branding A Practical Guide to Planning Your Strategy"; Kogan

Page (56)

4. Geoffrey Randall: "Branding A Practical Guide to Planning Your Strategy"; Kogan

Page (57)

5. Jean-Noel Kapferer: "Strategic Brand Management Creating and Sustaining Brand

Equity Long Term"; Kogan Page (181)

6. Jean-Noel Kapferer: "Strategic Brand Management Creating and Sustaining Brand

Equity Long Term"; Kogan Page (181)

Suggested readings:

1. Jean-Noel Kapferer: "Strategic Brand Management Creating and Sustaining Brand

Equity Long Term"; Kogan Page (226-231)

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