Identifying the Potential for Brand Extensions

Identifying the Potential for Brand Extensions

Brand extension strategy is an innovative method that adds value to the brand image by strategically positioning the new products and creating new market boundaries. A successful brand helps an organisation to launch products in new categories more easily and provide benefits to the customers. Many organisations use brand extensions to influence consumers’ brand choices.

The basic elements needed for the success of brand extension are:

• Image of the parent brand
• Parent brand fit
• Strength of parent brand
• Marketing support
• Quality of parent brand

The reaction of consumers towards brand extensions is associated with several beliefs and opinions when consumers perceive the extension as fitting into a specific brand category. The new product is analysed on its suitability and benefits that are identified with a set of products and that has an identifiable brand name.

Aaker and Keller (Erudite Marketing Professors) analysed the target market and the way consumers formed their attitudes towards the brand extensions. They identified different factors on which the new products complemented the category of original and extension products.

The factors included were:

• The degree to which the extensions and existing products share the same aspects
• The possibility that one product can replace the other for satisfying the same need
• The manufacturing skill needed for the extension overlaps with the product that is already existing

The steps involved in identifying the potential for brand extensions are:

• Measuring the brand equity to evaluate the chances of a successful launch
• Identifying the positive and negative impacts and measuring the potential risks
• Creating partnerships where required and leverage the core competencies
• Assessing the market potential of the new category and make investments in marketing research
• Developing a logical brand extension to fit into the existing brand
• Developing a strong marketing strategy for connecting with customers

A successful brand extension can help with achieving market efficien- cies between various categories, help with business diversification, increase brand equity and enhance brand associations.

The advantages associated with successful brand extension are:

• Improves brand image
• Reduces the risk perceived by customers
• An established brand name increases consumer interest and willingness to try a new product with an established brand name
• Increase the efficiency of promotional expenditure increases with a reduction in advertising, selling and promotional costs
• Saves the costs involved with developing a new brand
• Consumers can look for a variety
• Improves packaging and labelling efficiencies
• Reduces the expense of introductory and follow up marketing programmes

Brand Equity

The value of a brand is represented by brand equity which is thought-fully created for influencing the minds of the customers. The foundation of creating long-term success for the organisation involves building strong brand equity and the marketers can reinforce brand equity by investing consistently in the components of brand equity. It is a term that is used for the value of a product or brand through the perception of the customers and their experiences with using the brand.

In the words of Professor of Marketing, David Aacker, brand equity is defined as “a set of assets or liabilities in the form of brand visibility, brand associations and customer loyalty that add or subtract from the value of a current or potential product or service driven by the brand.”

The key components of brand equity are:

• Brand awareness
• Brand association
• Perceived quality
• Brand loyalty
• Other proprietary assets

Building strong brand equity is the foundation of an organisation’s long-term success. The companies can earn more money and spend lesser on production and marketing activities than their competitors due to their established brand equity.

Customers are willing to pay higher prices when they have confidence in the brand and believe in the values presented by the brand and the quality of their products. This makes it easier for the organisation to add new products and market them under the same brand which helps the new product to market well due to the established brand in way of brand extension. The companies need to manage their brand equity over time for achieving several competitive benefits leading to the profitable growth of the company.

For example, Nike is a strong brand as it fulfils the pillars of brand equity. With its slogan and logo, users see Nike products as something that can help better their lives, both in and outside the gym.

Market Dynamics

Market dynamics are factors that change supply and demand in a market. It refers to the forces that have a major impact on the prices and behaviour of producers and consumers. The changes in the demand and supply of a given product or service result in price fluctuation and it has an impact on the economy, government policies and business models.

Market dynamics form the basis of several economic theories and models and there are two main factors for uplifting the economy:

• Demand-side market dynamics
• Supply-side market dynamics

The market forces play a significant role in the changing market dynamics over time and they make a difference in the purchasing power of the product. Once the demand for the product is created the goods are sold and production is increased increasing employment and consumption. Demand is also created due to the changes in taxes, increases in government expenses, or due to low-interest rates that lead to increased expenditure.

The supply-side market dynamics are involved with creating the flow of goods in the market and are also used for creating additional demand for the products in the market. When the employment level goes up it increases demand for products and services.

For example, India’s food regulator had banned Maggi in 2015 after tests showed it contained excessive lead and for alleged mislabelling over flavour enhancer MSG. The product returned to stores after a court lifted the restriction. Nestlé has since then removed the claim “No added MSG.”

Loyal Customers

Customer loyalty refers to an emotional relationship between the business and the customers which reflects the willingness of the customer to do repeat business with a company or brand. This is due to positive customer experiences resulting in customer satisfaction with the overall value of the goods or services they receive from the business.

Loyal customers are not swayed or influenced by pricing or availability of the products and they remain loyal to a specific brand. They are willing to pay more as long as they get the same quality product or services they love. Loyal customers help the business to grow faster and spend more time and money with the brands to which they are loyal and word-of-mouth marketing is the most important and powerful tool of marketing.

For example, A well-known paid membership program that completely changed the game is Amazon Prime. By paying an annual fee, Prime members get access to free two-day shipping on millions of products as well as access to their video streaming service.

The characteristics of a loyal customer are:

• They make repeated purchases and are not actively searching for other suppliers
  
  
• They are happy with what they purchase and are more willing to refer a brand to their family and friends
  
  
• They interact with brands through different channels and are not open to pitches from other competing companies
  
  
• They provide regular positive feedback and also offer suggestions on how the brand can improve its products and services
  
  
• They are understanding when issues occur and trust the company to fix them
  
  
• Loyal customers will keep purchasing from a business as long as there is a need

Economic Viability

Economic viability refers to the potential of a market and it measures the commercial potential in terms of sufficient demand and its economic effects which helps the decision-makers to decide on the market viability of the product. That is essential to understand the market size and capability and know the target audience.

The business organisation should have enough knowledge regarding their competitors and their strengths and weaknesses. The potential of product viability can be evaluated by analysing if there is enough demand for the product to be marketed and whether the product can be sold at a price that is competitive and can generate enough profits.

For developing an effective marketing strategy it is important to conduct a product and market viability analysis which helps with reducing the potential risks associated with the marketing of the product or services.

It is essential to study the business potential and economic viability of the brand or product by:

• Doing market research to understand the market depth and competitiveness by doing a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis
  
  
• Complete a competitive market analysis by identifying the competitors and the established player in the market and understanding their market strategies
  
  
• Determining the target audience through various methods of analysing them and getting factual information regarding them
  
  
• Decide on an effective marketing strategy for marketing the product according to the tar

For example, Tata Group’s future growth strategy will be based on four themes: digital, new energy, supply chain resilience, and health.

Advantage Over Competitors

Organisations look towards gaining a competitive advantage over their competitors by offering consumers greater value by producing goods or services better than their rivals. Business organisations need to find ways of achieving a sustainable advantage over the products and services competing in the market by providing more benefits and services at cost-effective prices for the consumers. Lakme Lever runs over 120 Lakme Salons across the country, has restructured its business model to take on aggressive competitors vying to capture the growing spends of Indian consumers on personal grooming. It may also opt for a joint venture with a mall developer or a real estate major.

The factors behind gaining a competitive advantage are:

• Effective cost structure
• Brand image
• Quality of product offerings and location
• Efficient distribution network
• Intellectual property
• Enhanced customer service
• Distribution network
• Economies of scale
• Corporate management

The term competitive advantage is used for organisations that have a competitive advantage over their competitors through attributes that allow the firm to succeed over its competitors. It happens when the consumers find their products or service more desirable than the competitors.

The competitive advantage can be categorised as:

• Comparative advantages: The advantage has the company produces goods more efficiently than the competitors which results in greater profits
  
  
• Differential advantages: The company has the advantage of having unique products of higher quality than those of the competitors