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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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  • Number of pages: 2

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An evaluation of Brand Extension Strategies in large Conglomerates

Abstract

Over the decades, brand extension has sustained to be a core marketing strategy for many companies. Brand extension relishes a good reputation as for getting advantages to companies which are practical in nature whilst at the same time it faces disputation because of having a relatively great failure percentage. Aaker's brand equity model when used as the theoretical framework, the comparative case study is undertaken by authors to analyze the challenges and opportunities a company may face in the use of brand extension strategy, particularly in category of brand extension: Yamaha Corporation stands to be a successful example, and Virgin Group to be a failure. This analysis focuses mainly on the 4 elements in the modified Aaker's brand equity model: brand awareness, brand loyalty, brand associations and perceived quality. The findings of this analysis reflect that a company acquires opportunities in brand extension as long as a strong brand loyalty and a related connection between the parent brand and the extended brand exist. On the contrary, a company faces challenges when consumers have a more solid loyalty towards the competitor's brand and when consumers are confused about brand associations.

Objectives

• To know About Brand extension

• To evaluate the various strategies of brand Extension used by Yamaha Corporation and Virgin Group

• To find whether use of Brand Extension Strategies results in Growth of Profit/ Revenue generations.

• To Analyze the challenges and opportunities a company faces when implementing Brand Extensions strategy

Literature Review

Brand extension is the “... use of an established brand name to enter a new product category” Aaker and Keller, 1990. Leveraging existing brand equity into new product categories attempts to avoid the risk associated with establishing a new brand, through convincing consumers that the positive attributes associated with the original brand are relevant to the new product and/or simply benefiting from the awareness of the original brand.

The role of brand extension in managing brand equity. Brand extension occurs when a firm uses an established name to introduce a new product. we can distinguish them by whether the new product being introduced in the category of the product being served by the parent brand currently(line extension) or in completely different product category ( A category extension).Brand extension can come in all forms. They offer many potential benefits but also can pose many problems.

The basic assumptions regarding brand extension are that consumers have to some awareness of and positive associations about the parent brand in memory and that the brand extension will evoke at least some of these. Moreover marketer assume that negative association will not transferred from parent brand or created by the brand extension. the ability of the extension to establish its own equity will depend on the salience of parent brand associations in the minds of consumer in the extension context an the resulting favorably and uniqueness of any inferred association.

Brand extension has been discussed by lots of researchers (Aaker, 1991; Keller, 1993; Peter, 1989), some hold the opinion that a broad classification of brand extension can be provided into two general categories: horizontal extension and vertical extension. Horizontal extension includes line extension and category extension (Peter, 1989).

Horizontal extension includes line extension and category extension (Peter, 1989). Having studied 276 brand extensions cases, Tauber (1990) uses 7 types of categories to understand different ways of brand extension, trying to show the numbers of possibilities in brand extension depending on company's products and customer franchise. Other researchers classify brand extensions into 3 types: range extension, line extension and brand extension (Hamish and Peter, 2008).Well-implemented extensions can offer a number of advantages to companies: in reducing the cost to develop new brand, increase efficiency of promotional expenditures, allow for packaging and labeling efficiencies and so on (Kevin 2003). The successful sectors in brand extensions have been widely discussed by many scholars. Successful brand extension depends on many considerations, including the company's appropriateness of its corporate culture, personnel ability in the new market, and also requires a favorable prior attitude toward transferred from current branded products to a new product (Boush & Loken, 1991; Reddy, Holak & Bhat, 1994). Keller (2003) tells that many companies are more concerned about when, where and how the brand should be extended instead of whether it should be extended. Several advantages for a brand extension strategy: increase efficiency of promotional expenditures, reduction of the cost of following-up marketing programs and introductory and so on (Keller & Aaker, 1992; Keller, 2003; Kim & Sullivan, 1998).

In practice, therefore, brand extension has become a widely accepted growth strategy for many companies. The best case which can be considered would be of Virgin, it extended its original brand to many other businesses like: jeans, airline, vodka, mobile and etc.. Other famous brands, like Coca-Cola, it is classified under categories such as, classical, diet and regular. Sports brand, Nike and Adidas, both extended their reach to all kinds of sport related clothing. Additionally, the well-known piano producer, Yamaha, also stretches its brand and enters into motorbike industry

Introduction

Brand extension as a growth strategy has been employed in many companies and has increased its popularity in the recent decades. A lot of attention has also been gained by brand extension in academic field.  The purpose of this paper is to describe the challenges and opportunities in brand extension. The factors that help a company to fulfill successful brand extension will be analyzed. While, the reasons why a company fail in brand extension will also be discussed. Thus, to get a better understanding of knowledge in brand extension, particularly in the cases of category brand extension.  

Research Methodology

Research design: Cross Sectional, Descriptive Research design

Sampling Technique: Judgmental Sampling

 Sample Size: 2

Technique of Data Collection: Factor Analysis

Factor analysis is a statistical method used to describe variability among observed, correlated variables in consisting of a potentially less number of unobserved variables called factor For example, it is possible that variations in four observed variables mainly reflect the variations in two unobserved variables.

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