Brand extensions are one of the popular strategies for leveraging brand equity. By launching new products under popular brands, firms hope that consumers will respond extra favorably to the brand new offering, because of their knowledge of the parent brand, positive feelings toward the parent brand, and great attribute and non-attribute associations they contain with the mother or father brand.
A brand is the identity of a particular product, service, or organization. Brand extension denotes to the corporate activity in which companies bring in services, new merchandise variants or product improvements by leveraging the brand equity of the prevailing parent brand.
It is believed that compared to launching a fresh product under a new brand name, brand extensions can raise the efficiency of promotional initiatives, improve access to distribution channels, and reduce buyers’ perceived threat of purchasing a service or product (Keller, 2002). Another important factor for which Companies prefer to use manufacturer extension is lower cost. Introducing a fresh brand into consumer market can be relatively higher than introducing new merchandise or product variants under the same brand. This cost can range above millions of rupees and can not really guarantee of any victory. So instead of launching entirely a fresh product, most corporations prefer brand extension. Successful examples such as for example Diet Pepsi and Diet Coke benefited from the company franchise of their parent products. Coca-Cola introduced six extensions and captured a larger market share than the original brand. For instance, Coke’s extension, Cherry Coke, was good even without extensive advertisement.
On the other side, the potential of brand extension problems can ranger from inability of the brand or partial failure such as brand Dilution and company how to write an evaluation essay cannibalism. Instead of success, the failed extension might tarnish the picture and reduce the market show of the parent merchandise. Associations that are exclusive to the brand, strongly held, and favorably held, are vital for success. However, since the specific associations a client holds are reliant on personal values and person purchase situations, managers must find out what they are and when they operate. For example in case of brand-new Coke, Coca Cola did not focus on what the core brand meant to are a symbol of. It mainly focused on the taste and thought that the taste may be the only factor which individuals are looking for. This idea was incorrect. Coca cola was unable to distinguish the attachment of the consumer with the initial coke before launching New coke, even though Coca Cola spent a lot of cash on conducting exploration before launching New coke.
Brand dilution occurs when consumers loss the initial grasp of manufacturer perception on their minds and no longer associate the brand with a particular product. For instance, Sunsilk may experience brand dilution by loosing its good identity of hair health care and shampoo spectrum by running a number of different groups like mashed potatoes, powdered milk and soups. Also broad types of product groups run under same company can frustrate buyers in thinking which variations of products that actually fit with their perceptions. For Example, too many ranges of Sunsilk shampoo involve Sunsilk black, pink, white, yoghurt, dandruff can make customers confused in buying a suitable product that actually fit with their needs. Despite the fact that today’s consumers are selective within their buying practices and expect innovation, the truth of brand extension achievements is still low. The reason being most of new product extensions are not unique and do not satisfy consumer needs. There are several factors that cause company dilution. Among those involve perception in consumer minds comparing between parent company and product extension, degree of knowledge of parent brand, suit level transferred from parent brand to expansion and consumer’s perception to different product. Degree of brand loyalty displayed by a person can swap to radical degree for brand extension case. When loyalty and level of familiarity with parent brand is substantial, new product extension failure may drastically diminish trust level to complete brand portfolio. In turn, low familiarity to brand influences low dilution when merchandise failure occurs in different extension.
As per early study regarding brand extension contributes to model dilution, Aaker and Keller (1990) located insignificant evidence between unsuccessful brand extension leads to label dilution. Conversely, in a research Loken and Roedder-John (1993) pointed that inconsistency of merchandise and manufacturer beliefs may bring about brand dilution. Brand dilution and inability of brand may appear when consumer find it hard to associate the expansion with the parent manufacturer, too little similarity and familiarity and discrepancy between Integrated marketing communication messages.
Brand extension is a technique which most of the companies are using, to minimize risk associated with introducing a completely new brand and maximize their gains from the new brand. But in a number of the cases brand extension fails, and associated with the weak brand equity of the parent company that bear after the accomplishment of the brand extension. If the collateral of parent company is strong, brand extension can be successful and vice versa.
Both Functional and non functional attributes of a manufacturer can harm and eventually dilute the equity of a built-in oriented brand, which means due to the weak brand equity, manufacturer dilution can occur across the parent brand. Such kind of failures of extensions could make customers to produce a detrimental association with the mother or father brand as well as with the brand family members. These failures may also agitate and blur the original identity and meaning of a manufacturer even positioning as well.
Managers seem to be aware of the dangers and benefits of extending their brand franchise. Yet the number of failed extensions in the past few years shows that some refinement in our knowledge of the brand extension method is needed.
What factors determine whether or not a brand extension will be successful? The most crucial factor recognized by prior analysis is perceived fit. Buyers respond more favorably if they’re able to perceive a fit between the extension and the mother or father brand and this contributes to the success of the brand extension. Conversely, If individuals are unable to perceive a match between extension and the parent brand, the brand expansion might turn into a failure and may result in brand dilution.
According to Martinez and de Chernatony (2004) company impression has two types: the overall brand image and the product brand image. According to them there would be no negative effect on general brand image if the brand photograph is strong. For instance, Nike or Sony. Dilution effect would be more on product image rather than general brand image. Consequently, mostly the customers would adhere to their beliefs about the parent brand with respect to its attributes and feelings. Nevertheless their study shows that "brand image could be diluted by brand expansion, and beliefs and association with the mother or father brand can even be changed.
In developing countries like Pakistan it is even more convenient for multinationals to make an effort brand extensions. Associated with that most of the multinational companies result from developed countries like America, UK and Japan. Items from these countries appreciate confident country of origin impact at heart of consumers because of their previous track record with regards to customer satisfaction. This consequently lowers the money spend over consciousness creation and since they already enjoy good marketplace and media presence, therefore more affordable for them to launch company extensions in Pakistan.
For instance, Pakistan Tobacco Company Limited (PTC) which is a part of British American Tobacco who offers their brands to an incredible number of customers in 180 countries worldwide. These were the foremost brands entering Pakistan as early as 1947. Ever since then they have launched fresh reputed brand extensions such as for example Benson & Hedges, Embassy, Gold Flake, Gold Leaf and lately Capstan brand of cigarettes (Business recorder.com).
STATEMENT OF THE PROBLEM
The failure prices of new product over the last few decades have increased tremendously; therefore, firms have resorted to brand extensions, due to inherent advantages including its acceptability, low promotion expense and comparatively lesser amount of failures. Despite these positive aspects, the failure level of brand extension has remained significant in the last one decade. So, the researchers have been focusing in identifying the factors that consumers work with for "evaluating the company extension", or the elements that
are contributes towards the achievements or failure of brand extensions. The focus of the study is to recognize whether the brand expansion is favorable or lead to brand dilution.
Researches on manufacturer extensions have focused largely over consumer evaluation of brand extensions. Nevertheless as a matter of known fact consumers generally cannot assess brand extensions in undifferentiated manner (Aaker and Keller, 1990, Keller and Aaker, 1992; Dacin and Smith, 1994; Smith and Andres, 1995). Regardless of the intensive body of know-how on client evaluations of brand extensions, hardly any or negligible attention has been paid as to what is brand or advertising managers view point over brand extensions approach ( Nijssen and Agustin, 1999). Having less brand managers view point type in the literature is usually odd as their research of consumer and rivals reactions coupled with their personal preferences are a fairly very good indicator of success of a brand extension strategy. As a result along with customers’ perception about brand extension, viewpoint of company managers of handful of companies may also be deemed in this thesis.
Over the past couple of decades we have witnessed a lot of businesses both domestic and multinationals engaging in manufacturer extensions in Pakistan. For example some of the well known domestic brand extensions bargains in retailing and fashion (Chen One Pvt Ltd), health care products (Z-Jans Pvt Ltd), Medicam tooth paste and Sweetener (Medicam Pvt Ltd Pakistan), Rafhan pudding mixture and Custard (Rafhan Best Foodstuff Ltd), National Pickel, Salt and Spices (National food Ltd), Haleeb Milk Pack, Yogurt and Cream (Haleeb Foods Ltd Pakistan). So far as multinationals are concerned Nestle and Uniliver Pakistan include carried out most of the brand extensions. For instance, Nestle (Mineral Water, Milk Pack, Cream & Yogurt), Uniliver has brand extensions (Lifebuoy Shampoo & Soap, Express Surf, Colgate toothpaste, Walls Ice-cream). In this relation a report of company extensions from manufacturer manager’s perspective is important to discover successful practices which are prerequisites for a manufacturer extension in Pakistan.
SIGNIFICANCE OF THE STUDY
The significance of this thesis is certainly to explore the utilization of brand extension tactics in the Pakistan context. If the strategy of brand extension is favorable or not, or due to brand extension, makes gets diluted or cannibalized? Since brand extensions is among the most popular approaches for leveraging brand equity, this study will also give attention to brand extension effect on brand equity.
This thesis will focus on brand extension approaches of products from several companies such as Z-Jans Pvt Ltd, Haleeb Foods Ltd Pakistan, Servis Shoes, Lakson Group, and Chen one, Nestle, Sunsilk, Pakola and Fair & Lovely. Various companies’ insights regarding brand extension can help us to review favorability or unfavorability of company extension in a well manner.
We will try to do this purpose by answering the following research questions.
Brand extension is extra beneficial than launching new products regarding customers know how about the parent brand.
Brand extension is effective regarding Consumer Knowledge and Customer Trust about the quality and association of Parent company?
Brand extension is beneficial when it comes to refreshing Parent brand.
Brand extension can cause dilution of Parent Company.
Brand extension can decreased the credibility of Mother or father Brand.
Brand extension can cause cannibalization of Parent Manufacturer Sales
Brand extension could be a disaster and may bring about brand dilution if extension isn’t fit (Similarity and consistency) as per the idea of Parent brand.
Moderating factors like company quality, customer understand how, customer certainty and company equity affect brand extension?
By answering above dilemma, we will come to learn whether brand extension is usually favorable or it contributes to type dilution, and whether brand extension is favorable for all those companies who prefer extension and are involved with brand extension from handful of years. This thesis will come to be effective in indentifying the success rate or failure rate of brand extension of those companies which have been chosen because of this thesis.
SCOPE AND DELIMITATION
The study is carried out from a viewpoint of company extension inside our home country (Pakistan). The study conducted because of this thesis is based on limited and chosen merchandise category and Another constraint confronted during research was the fact that majority of multinationals (MNEs) formulate brand extension tactics at their brain quarters abroad. Finally, it had been learnt that because the concept of brand supervisor in Pakistan is definitely in infancy stages therefore normally it’s the marketing manager who bears out the tasks of brand manager when it comes to brand extensions.
According to (American Marketing Association 2007 manufacturer is: "A brand, term, sign, symbol, or style, or a combination of them, intended to identify the goods and services of 1 seller or band of sellers and to differentiate them from those of competition".
Using a recognised name of 1 product class for entering another item class (Aaker 1991). Using a successful brand for launching a new or modified merchandise or line is known as brand extension technique (Kotler 1991). An growth strategy in which organizations use previously established and successful brand for introducing a new or modified product (Kotler & Armstrong 1990). Applying an established brand name for introducing a new product into item category which is new to the company is called franchise strategy (Hartman & Price & Duncan 1990).
Product Line Extension
A products extension is the application of an established product’s brand for a fresh item in the same item category.
Line Extensions takes place when a company stretches its products and introduces extra items in the same merchandise category under the same brand name for instance new nips, forms, colours, added ingredients, package deal sizes. This is a little different from brand extension when a new product is introduced within an completely new category, While Range extension occurs when the business increases its products outside its current chain. Product line may also be stretched as down industry stretch or more market stretch.
Brand dilution may be the subverting of a manufacturer though its overutilization. This sometimes happens when brand expansion is done poorly. Price cut may also bring a brand down and may damage the brand, even though it increases the level of the product. Brand dilution can be quite a severe headache for companies that rely mostly on their strong brand for higher profits. Companies who have got strong brand image desires to leverage its collateral to market and earn as many profit as they can, however the same strategy to leverage a brand collateral can also cause damage a brand name and eventually cause brand dilution.
Brand cannibalization pertains to a decrease in volume, revenue of sales and diminution of industry share of something which results from the introduction of new products by the same maker. For example, when diet coke was unveiled by Coca Cola, product sales for primary coke diminished, but finally it led in expansion of diet soft drink market.
Brand collateral is a relationship between customers and brands, resulting in a income to be recognized at a future date (Timber 2000). Kotler and Armstrong (1996) were of the view that measuring brand collateral is a tedious work. Nevertheless, a powerful brand means high manufacturer collateral that helps in reaching ‘higher brand loyalty, brand awareness, perceived top quality, and strong brand associations’. Some of the major benefits associated with brand equity are manufacturer awareness and customer loyalty which facilitates in reducing marketing costs. Brand is an essential equity; therefore, it ought to be cautiously preserved by adopting strategies that would help in maintaining or enhancing brand awareness, perceived company quality and positive associations. (Kotler & Armstrong 1996)
Brand association refers to level by which a brand is acknowledged by a consumer in a deep method. If a brand is definitely deep seated in the mind of the buyer in a positive manner, it’ll be recognized positively. Company associations will be the properties of a manufacturer which customers recall whenever manufacturer is talked about. Consumer testmyprep.com relates a brand using its implicit or explicit meanings. Brand association may also be termed as the particular level to which a specific product/provider is acknowledged amongst its product or service family. When choosing a brand name, it’s important that the brand selected must reinforce an important sizes and specification or profit association that forms the positioning of something.