Microsoft word - knowledgebox_jan07.doc

Strategy | Organization | Marketing | Operation | Finance | International Entry Brand extension can either be taking product to market faster or diluting the parent brand . called brand. A brand is created to foster long term Classical 4Ps (Marketing Mix: Product, Price, Promotion, Place) is in continuous use by marketing customers. As more alternative of products available practitioners and academicians to design an in market, customers take bigger trust on brand they can rely on, to products that offering values closely (Segmentation, Targeting and Positioning), marketing mix plays a major role for designing marketing roadmap starting from early stage of new product Brand is a powerful tool for marketing strategy. development until maintaining market share. Luxurious brands like Gucci and Prada are negatively Regardless what content inside the product, how affected on counterfeits sold by illegal vendors in much it is priced, how intensive the promotion takes, developing countries. Consumers who buy the and how large the coverage of distribution, a clear products know dissimilarity of quality. They, identity to distinguish the product to other products however, still make buying decisions as driven by that have existed in the market is crucial. In power of brand. The typical consumers won’t make marketing study, such identity labeled to a product is purchases when no brand is attached to the marketing expenses at the same level as spent by the parent brand, yet may gain similar level of success. A strong reputation of parent brand can minimize risk A series of programs to promote products relying on of new product launch by taking advantages on brand images is called branding. Branding is crucial to consumers’ knowledge and experiences of the increase perceived consumer value. Successful branding programs lead to brand loyalty and consequently transfer the loyalty to brand extension. In comparison, line extension strategy is sometimes Similar with humans, brand has an image as mixed up with brand extension. While taking accumulations of some attributes. Physical product completely different approach, line extension offers quality, the most tangible and easiest to detect, new products, under the same brand name, in the belongs to the collection of attributes. In the long same product category. Line extension can also by run, however, the product quality is perceived extending same product and same brand with separately from brand image. Some argues that different product features (e.g. introducing new brand image is more important that physical product flavors and selling different sizes of packaging). From quality. In executing brand extension, high profile risk management perspective, brand extension poses and well known brand image is more applicable than more risk than line extension. Poorly executed extension of brand to new product categories can jeopardize current image of parent brand. In less degree of risk encountered, line extension deals only Brand extension is a part of brand management to with the product itself with slight connections to the diversify and leveraging the existing brand by entering into new product category by new product development. Positive images and strengths of Entire processes of new product developments take existing brand / parent brand are leveraged to bring significant hours and efforts to bring about a success. another success story for new product. Brand Particularly for some type of products having short- extension is increasingly used by companies as a part term product life cycle, a marketing strategy that of strategy for product developments. It is viewed as leads to a shortcut of achievement is a preference for one of means to attain integrated brand architecture. a marketing program. Instead of working up from a The use of same brand on existing product (parent zero point, one would start from an established brand) for a new product in different category ground-base. From marketing view, brand extension (extension brand) increases rate of new acceptance strategy is a solid base and perceived for a main and purchase intention to consumer. The strategy choice to continue the legacy of a successful parent maintains efficiencies on advertising and promotion brand. Also, it optimizes economic scale of expenditures yet still can create new market company’s intellectual property. However, brand segment. Company is not in position to allocate extension strategy is not a risk-free and does not fully secure the results. It poses some risks since the the brand extension. Some products were in trial but brand associations of the parent brand must be resulted in little success. In branding strategy, appropriately transferred and linked to the new pharmacists show a significant role. They provide product. The failure of associating brand to new main stream on how label a product name. product can negatively affect not only to the new Pharmacists fear that extending brand to different product, but also does affect the parent brand. The active ingredients increase chances of dispensing image and financial figures of parent brand may be mistake. For instance, Panadol is the brand of generic endangered due to the failure of strategy paracetamol. Adding one or more active ingredients yet maintaining same brand of Panadol would be difficult for marketing and safety reasons. Unique BRAND EXTENSION IN FMCG AND PHARMACEUTICAL approaches experienced by pharmaceutical sectors For FMCG (Fast moving consumer goods) companies, and can be seen as a brand extension is by using two the use of brand extension is increasing for last few different brands for the exactly same product and for years. Very high cost required to launch a new treating two different treatments. The generic name product becomes a major factor for company to of Bupropion hydrochloride is manufactured and rethink and locate different marketing approaches. marketed by GSK (GlaxoSmithKline) as a brand name Marketers find that using the same brand (of course, Wellbutrin for treating depression and as Zyban for the established and reputable one) in the company’s portfolio to be used by new product in different category can be the answer to financial efficiencies. BIG NAMES WITH SUCCESSFUL BRAND EXTENSION As this approach becomes popular and widely Not many companies can be compared to Virgin leveraged by more companies, supplemental risks group in doing A-Z of brand extension. Virgin Group occur as brand concentration is focused to big brands flies high with brand extension. By simply attaching only. Too many products under a brand portfolio can name of “Virgin” in every product they market, Virgin rolls out so diverse categories. Virgin decisions to take this approach are tightly tied to the founder and Two FMCG companies P&G (Procter & Gamble) and CEO of the group, Richard Branson. With one single Unilever are concentrating on big brands that brand (Virgin), Branson and team have introduced generate sales of more than $1 billion. P&G recently and promoted so diverse product categories, from launched two new products using brand extension: cola drink to wedding service and further to budget new biodegradable wipes named Kandoo, launched airline. A few were not running as planned, yet not so under Pampers parent brand, and a new product for few can contribute cash inflows to the company. washing cars under Mr. Clean parent brand. Founded in 1970s as a mail order record company, Virgin has now more than 200 individual companies with total $5 billion in turnover. Recipe spread by pharmaceutical companies tend not to implement Branson on taking his company grown so rapidly is by a simple answer: brand extension. It is the strategy to Global 2000 for total market equity. History of bring new products and services in market faster company began in 1962 when a University of Oregon than ever. For Virgin, one mistake of product can accounting student who also a runner for the campus, Phil Knight, started to import Onitsuka Tiger sport shoes from Japan. He envisioned conquering Before deciding to launch a new product with completely different from parent brand, Yamaha had controlled U.S. athletic footwear market at that developed sound reputation in manufacturing moment by marketing low price and high-tech musical instruments. Perception to Yamaha musical athletic shoes. With $500 investment of each, the instruments referred to engineering quality and young Phil formed a partnership with Bill Bowerman, precision. The two value creation were successfully the track coach at the same university, to operate a transferred to new product and as the result, Yamaha newly formed business under name Blue Ribbon is now one of the world’s largest manufacturer of Sports. The very initial marketing operation was motor cycles under Yamaha Motor Company. marked by selling shoes from the back of a van at a high school track. Within 10 years of business A very bold brand extension was taken by Caterpillar. operations, company was gaining growing market Its move from a brand solely used for manufacturing share that soon affect to the modifications of on specialist construction and mining equipment into corporate name and brand logo. Nike, adopted after footwear market was highly perceived as a big the Greek goddess of victor, was chosen replace mistake. However, the trial has been a big success. previous name and a graduate student named Available in over 150 countries, unit sales exceeded 5 Carolyn Davidson designed the “swoosh” logo. million in 2001, making Cat Footwear one of the Design of new symbol costs $35. In 1972, Nike largest youth non athletic footwear brands in the approached some marathoners at Olympic trials to world. The perception tried to transfer from the wear the shoes. Soon the marketing program worked parent brand to footwear clearly demonstrate the well and Nike began an advertising debut promoting strengths and outdoor equipment. A line in to public that some marathoners wore Nike’s shoes. Caterpillar’s website points out that “At Caterpillar, To optimize it continuous market expansion, Nike we build the machines that help our customers build went public and took the company to IPO (Initial a better world. The boots and shoes we build are Public Offering). Targeting diverse markets from men and women to children, Nike also targets different sport categories. Product categories of running, Nike is an example on how a brand is extended to basketball, volleyball, golf, soccer, baseball and enter some different product categories and still recreational media are some of total categories set sustains to business competitions. With its 2004 by management. In 2000, Nike introduced a series of revenues of $12.3 billion, Nike was ranked 173 on US electronic gadgets. Ahead of time, Nike was already Fortune 500 and ranked 374 on Forbes magazine’s running in diverse product categories of athletic shoes, watches and apparel. The brand extension perception of parent brand is critical and need to be transferred by Nike mostly fit perceptions and image transferred correctly to new products. Bic, stationery manufacturer based in French, took failed step when extending its brand. Originally as a pen maker, Bic embraced successful brand extension into shaving The perception of parent brand transferred inside equipment and cigarette lighters. The success of prior consumer mind strongly influence acceptance of two products stimulated Bic to enter another entirely product extension associated with the brand. Images different product category by launching perfume. transferred to consumer minds are perceived and Sony, which is associated with strong quality of audio received positively if both, product transfer ability and visual devices, makes smooth transfer of the and company transfer ability, address value levels of perceptions when introducing a new category of parent brand. Product transfer ability indicates how features of products in parent brand portfolio are transferable to new product extension. Meanwhile, Level of value creation delivered by product environments (i.e. people, facilities and skills) in extension is a major influential to sustain long term making the product extension. For instance, assume result to the strategy. Creating values are applied Nike plans to extend its brand name by introducing a either through physical product or emotional new product extension in personal computer experiences; or at higher level can be both. In category. Consumers mind may be directed to how deciding which values put into the product, company transferable to making personal computer. customers. At retailers point, products offering value benefits of maximizing shelf space are likely to offer Perception inside consumer mind plays an important positive financial returns to retailers. Challenging role. As more alternatives available before purchase point of value created to retailers deal with offering decision is made, consumer without consciously broad variety of products with constrained space reconciling their experiences with other products of the same brand. The product, whose parent brand has been established and is triggered with immediate Brand management is responsible to manage entire perception and associations, is likely to have better processes of brand life cycle, from creation, chance for final selection rather choosing completely development to elimination of the brand. Consumer goods multinational company, Unilever, has recently taken a restructuring on the brand portfolio. By For instance, Volvo is perceived with luxury and reducing 1,600 to 400 brands, Unilever streamlines safety, while McDonald is associated with fast service its brand varieties in order to be ahead of global and standardization. This original and grand competition. The more number of products managed in a company brand portfolio increases level of risk consumer’s perception to new product. Level of faced due to unsuccessful programs of product brand loyalty shown by a customer can switch to extension. In greater impact, it can jeopardize a radical degree for brand extension case. When business unit or company existence. Correlation of 2 loyalty and level of familiarity with parent brand is functions, span of control and number of products in high, new product extension failure may greatly a brand, provides a framework to devise a brand diminish trust level to entire brand portfolio. In turn, extension strategy. More products handled by a low familiarity to brand affects low dilution when brand manager decrease the span of control. It brings product failure occurs in new extension. a linear correlation with brand risks. To lower risk, brand manager is likely to extend brand portfolio with a moderate number of extension, which also Brand dilution occurs when consumers loss the original grasp of brand perception on their minds and no longer associate the brand with a specific product. For instance, Cadbury may experience brand dilution by loosing its strong identity of chocolate and candy bar by running a number of different categories like mashed potatoes, powdered mill and soups. Too broad varieties of product categories run under same brand can frustrate consumers in thinking which variations of products that actually fit to their perceptions. Even though today's consumers are selective in their buying habits and expect innovation, the reality of brand extension success is still low. This is because most of new product extensions are not unique and do not satisfy There are some factors that lead to brand dilution. Among those include perception in consumer minds comparing between parent brand and product extension, level of familiarity with parent brand, fit level transferred from parent brand to extension and

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