The disadvantages of employing brand extension strategy
This work compeers and contrasts the merits and demerits of implementing brand extension a s a growth strategy by various firms. This is done by means of practical examples. In the end of the debate, the paper indicates why it is better to adopt the extension strategy as opposed to shunning it due to its numerous demerits. A discussion of the key points is presented and then a final conclusion to hammer out the reason for the need to implement the strategy
Brand extension, which entails the use of a given brand name which is established in a given product class in entering another product class is noted to be hugely beneficial to several organizations (Tauber,1988).Keller (2003) pointed out that the concept of brand extension is clearly defined whenever a given firm employs an established brand name in the introduction of a totally new product. This strategy is employed in order to leverage as well as increase brand equity (Pitta and Katsanis,1995). The strategy is often regarded as beneficial since it reduces the costs of introduction market research as well as advertisement while increasing the possibilities of success as a consequence of the higher rate of preference that is derived from the already existing brand equity (Chen and Liu,2004). Keller (1993) points out that all studies on the successful extension of a brand are based on the assumption that a given brand is a collection of associations. The parent association can therefore successfully influence the reactions of the consumers to the given brand extension as noted by Bhat & Reddy (2001). The antecedents of a successful brand extension are parent brand effect and parent brand. Despite all the advantages of employing brand extension as strategy, Taylor (2004) indicated that one in two brand extension initiatives often fail. Some critics denounce the concept of brand extension vigorously since they feel that it makes companies to lose focus as well as makes their customers confused. Other experts however maintain that the concept of brand extension is very critical to a company's growth strategy. In this paper we are we present these conflicting views and then chose one which best serves the interest of both the shareholder while leaving the customer both pleased and satisfied.
The Advantages of brand extension
The brand extension strategy is popular due to its nature of being less risky as well as cheaper in comparison to the creation of an entirely new brand (Taylor, 2004,p.1). De Chaternatony and McDonald (1998,p.135) indicated a similar economical advantage through indicating that the economics involved in the establishment of an entirely new brand are continuously pushing firms towards the stretching of their already existing brand name into the new markets. The main motivation for adopting the brand extension strategies is the high cost of R&D coupled with the existing statistics on the rate of failure of new brands.
According to Taylor (2004) several advantages are attributed to the use the brand extension strategy as opposed to the creation of new brands. These are as follows;
The strong brand is employed in the promotion of totally new product. The strong brand makes it less necessary to create imagery and awareness. The fact that the association with the main brand is already established mans that the remaining task is to communicate the specific benefits to be derived from the new innovation as pointed out by Taylor (2004,p.1).
The already existing and relatively well established brands are regarded as a promise of high quality as well as enhanced utility (usefulness) for the consumers. The extension would therefore benefits from the fame and the resulting excellent opinion in the creation of a compelling amount of value proposition in the newly created market segment (Taylor,2004,p.1)
The 2003 Brandygym survey for instance indicated that fifty three percent of consumers in the United Kingdom would be more inclined towards the trial of total new brand products which is associated with a brand that they already knew against three percent who would go for totally ne brand with no association with any known brand (Taylor,2004,p.1).
Viot (2007,p42) supported this notion by pointing out that the customer would be expecting to somehow transfer the information that they have from the extension of the brand. Should the general opinion of a given brand be favorable then the behavior of the consumers towards the particular extension would be positive. The successful brand extension can then result in brand loyalty. This is because a consumer who is satisfied by a given extension would be very willing to repurchase the given brand. In other words, purchase intention is created. For instance the Caterpillar Equipment customer is likely to buy their footwear as well.
When compared to the process and cost of launching a totally new brand, the brand extension strategy is generally less costly since the new product generally employs a similar name as the brand which is already known. As Taylor (2004,p.4) puts it, studies indicate that the cost for each unit trial is thirty six percent lower while the repurchase price is generally higher with the brand extension strategy.
This idea is confirmed by Smith & Park (1992,p.296) when they suggested that in regard to the effectiveness of advertisement for a given market share, the budget for advertisement for brand extension is generally smaller as compared for the case of new brands.
Aaker (2004,p.194) provided some advantages that are almost similar with the ones provided by Viot (2007).
The enhancement of the level of brand visibility
Whenever a brand appears in another category of products and services, the strategy can be more efficient and effective method of brand building as opposed to using money to launch rigorous advertisement campaigns.
Additionally, the relationship of the given brand with its customers in regard to customer loyalty is most likely to be strengthened.
Provision of an energy source for a given brand
Should a certain brand image be weak, the use of brand extension may give it anew lifeline. The extension may provide energy for a given brand since it would increase the frequency of brand association with excellent quality, large range of products as well as innovations. Additionally, the customer would be able to see the brand name at amore frequent pace and thus strengthening the idea that the brand is a good one. Viot (2007) therefore stated that a certain brand's presence on a number of products helps in improving the brand's popularity. The chances of coming into contact with a certain brand in the process of communication as well as on supermarkets shelves are increase which in turn improves the level of brand memorization.
A brand extension can effectively prevent competitors from acquiring or even exploiting a sizeable market share and foothold in a given market and can prove to be worth while as a growth strategy (Aaker,2004).
Brand extension and the level of perceived quality
Zeithaml (1988,p.20) pointed out that perceived quality is a global evaluation of the judgment of a consumer of the level of 'good' or 'bad' of a given product. It can also refer to a higher abstraction level as compared to the other product impression attributes. Aaker and Keller (1990,p.29) postulated that brands that possess a high quality association is extremely beneficial to the brand extension. However, if a brand is closely associated with an inferior quality, then the extension is likely to create more harm than good.
The work of Dacin and Smith (1994,p.232) indicated that the level of consistency of the level of perceived quality if various products that have an affiliation with a core brand can effectively influence the potency of brand extension. The implication of this is that the higher the level of evaluation of the perceived quality in terms of consistency, the higher the level of acceptance of the brand extension. This means that high level of perceived quality leads to more confidence towards a given brand.
The disadvantages of employing brand extension strategy
The concept of brand extension is pointed out by Viot (2007) to involve the use of the most critical asset5s of a company (its brand name). This therefore means that it represents a high level of risk for the already existing brand since the existing brand image is considerably diluted. Park, McCarthy & Milberg (1993,p.60) noted that the negative as well as the positive consequences of extension are best described by the reciprocity effects which is defined as the change in the level of initial consumer behavior about a certain brand after an extension has been initiated.
Viot (2007) went ahead to explain that the concept of brand extension can cause a lot of damage to a given brand. This is because a dilution of the brand capital may occur by the realization of certain undesirable associations as well as by the weakening of the already existing associations.