42302871 brand extension and opportunities of ponds

8/2/2019 42302871 Brand Extension and Opportunities of Ponds

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TERM PAPER

OF

PRODUCT AND BRAND

MANAGEMENTTOPIC: BRAND EXTENSION OPPORTUNITIES AND

EXPLORATION INCLUDING MARKETING PAROGRAM AND

ITS EFFECT ON PARENT BRAND EQUITY OF PONDS

Submitted to:

(LOVELY INSTITUTE OF MANAGEMENT)

(Session 2009-2011)

Date- 12 Nov 2010

Submitted to: Submitted By:

Mr. Krishan Gopal Suman Tiwari

Roll No. RT1902A-

22

Reg. No.10904478

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ContentsContents ..................................................................................................................... 2

ACKNOWLEDGEMENT ................................................................................................. 3

INTRODUCTION TO THE BRAND: ................................................................................ 4

GROWTH STRATEGY ................................................................................................... 6

COMPETITORS ............................................................................................................ 7

BRAND EXTENSION ..................................................................................................... 8

ESSENTIAL FACTORS THAT IMPACT BRAND EXTENSION SUCCESS ...........................10

10 PRINCIPLES OF BRAND EXTENSIONS ................................................................... 11

TYPES OF BRAND EXTENSIONS ................................................................................. 12ADVANTAGES AND DISADVANTAGES OF BRAND EXTENSION STRATEGY .................14

LINE EXTENSION ....................................................................................................... 18

BRAND EXTENSION OPPORTUNITIES FOR PONDS .................................................... 19

MARKETING PROGRAM PROCESS FOR EXTENSION ................................................... 20

EFFECTS OF BRAND EXTENSION ON PARENT BRAND ............................................... 27

CONCLUSION

................................................................................................................................. 28

REFERENCES ............................................................................................................ 29

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ACKNOWLEDGEMENT

I would like to confer my heartiest thanks to my coordinator of

Product and Brand Management Mr. Krishan Gopal for giving me the

opportunity to excel and work in the field of Product and Brand, and

especially its practical applications like Brand Extension. While

preparing my term paper I got to have an in depth knowledge of

practical applications of the theoretical concepts and definitely the

things which I have learned will undoubtedly help me in future, to

analyze many processes going on in our economy.

I would also like to thank all those people who directly or indirectly

helped me in accomplishing this project.

Suman Tiwari

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INTRODUCTION TO THE BRAND:

HISTORY OF PONDS

Pond's Cream is a brand of beauty and health care products that is produced by the multinational

company Unilever.

Pond's Cream was invented in the U.S.A as a medicine by scientist Thereon T. Pond (1852) in

1846. He discovered he could heal small cuts and other ailments. Soon after, the product would

be known as Pond's Extract.

In 1849, the "T.T. Pond Company" was formed, with Pond and other business people as

investors. Theron Pond's health was failing, however, so he sold his portion of the company soon

after, and he died in 1852.

The company then moved to Connecticut and later to New York City.

In 1886, Pond's began to advertise nationally. They would, however, advertise under the name of

Pond's Healing until 1910.

By the twentieth century, the company's main strategy was geared towards selling cosmetics

products, and so the "Pond's Vanishing Cream" and the "Pond's Cold Cream" were created,

marking the entrance of Pond's products into the facial care industry. Today Ponds is sold around

the world. Its strengths are in Spain, Japan and Thailand.

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PORTFOLIO OF PRODUCTS OF THE BRAND

Original Clean

Micro dermabrasion

Cold cream

Dry skin cream

Fresh start

Pinkish-White Glow - Lightening Cream

Pinkish-White Glow Lightening Lotion

Ponds White Beauty Skin Lightening Facial Foam

Ponds white Beauty detox Toner

Anti - Spot Intensive Whitening Serum

Ponds Flawless White Anti-Spot Intensive Whitening Serum

Ponds Flawless White Visible Lightening Daily Cream

Ponds Flawless White Vitamin Soak Lightening Mask

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Ponds Flawless White Visible Lightening Daily Lotion

GROWTH STRATEGY

The Company is operating in premium product segment so it is targeting particularlypremium customers who are ready to pay for quality.

The Company is widening its product range under Ponds brand.

The Company has been engaging in building brand loyalty by various promotional

programmes.

The company has good research and development centre in place which is constantly

trying to innovate new products.

The company has developed new products under the brand for anti-ageing, moisturizing,

and skin lightning.

MARKET SHARE

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From the above graph, it is clearly visible that ponds Market share is considerably higher than

its nearest competitors.brand commands market leadership which is an advantage for company

in Fixing price of the different product under this brand.

COMPETITORS

PARTICULAR PONDS LOREAL AMWAY

BRAND

LOYALITY

Very high high High

PRODUCTLINE Broad broad Broad

TARGET

CUSTOMERS

Vast concentrated concentrated

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PRESENCE Vast concentrated concentrated

BRAND

SEGAMENT

Premium premium Premium

SATISFACTION Very high Moderate to high moderate

BRAND EXTENSION

INTRODUCTION TO BRAND EXTENSION

Brand extension strategies are used largely by companies because they believed that the brand

extension strengthens the brand positioning improves the brand awareness and enhances the

quality associations and increases the trial rate by reducing the perceived risk involved in the

new product. In India it is reported that more than 80% of new products additions are usingbrand extensions strategies. A brand extension into same product and new product category

enhances and improves their market share and brand equity in the long run (Lane Jacobson

1995). New products are getting relatively easy acceptance among the target audience. A goodbrand association reduces the chances of failure of new product launch.

Though, brand extension strategies tasted success in the past, still brand extension success isuncertain. According to a research carried out by Ernest &Young and Nielsen (1999) in the field

of FMCG brand extensions in European countries, reveal that there is a failure rate of around

80%. Moreover, unsuccessful brand extensions can harm the parent brand, which can result in

substantial, loses of brand equity.

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The success or failure of brand extensions is vastly dependent on how the customers evaluate the

brand extensions (Klink and Smith 2001). Companies are taking hard steps to improve thesuccess rate of brand extensions. Theoretical and managerial understanding of how a consumer

evaluates the brand extensions is given substantial importance. In order to improve the success

rate of brand extensions it is imperative to understand the parameters or factors affecting thebrand extensions evaluations. Moreover, companies need to understand the significance of these

factors and their relative importance to develop a right brand extensions strategy.

Product extensions are versions of the same parent product that serve a segment of the target

market and increase the variety of an offering. An example of a product extension is Coke vs.Diet Coke in same product category of soft drinks. This tactic is undertaken due to the brand

loyalty and brand awareness they enjoy consumers are more likely to buy a new product that has

a tried and trusted brand name on it. This means the market is catered for as they are receiving aproduct from a brand they trust and Coca Cola is catered for as they can increase their product

portfolio and they have a larger hold over the market in which they are performing in.

MEANING OF BRAND EXTENSION

Brand extension is using the leverage of a well known brand name in one category to

launch a new product in a different category.

Brand extension is a marketing strategy in which a firm that markets a product with a well-

developed image uses the same brand name but in a different product category. Brands use this

as a strategy to increase and leverage equity.

o It is a new product.

o

It should use a well known brand.o The brand should have leverage with customers of the new category.

A successful brand helps a company enter new product categories more easily.

Brand extension refers to the corporate activity whereby companies introduce new products,

new product variants or product improvements by leveraging the brand equity of the existing

parent brand.

Brand extension or brand stretching is a marketing strategy in which a firm marketing a product

with a well-developed image uses the same brand name in a different product category.

FOR EXAMPLE

When Starbucks decided to launch its line of bottled cold coffee called Frappucino (a mixture

of coffee, water, milk and different syrups), the logic used was to leverage the very strong equity

of the Starbucks brand in gaining wide spread acceptance for the new product line.

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As such, brand extension is a type ofshort cut that companies resort to, to minimize risk and

maximize their investment in the brand. But more often than not, brand extensions fail. The

simple reason for such failure is that the equity of the parent brand is one of the many factors

that impact the success of brand extensions. Much has been researched on the success factors of

brand extensions in the industry and in academia. Knowledge from the collective wisdom of the

industry, best practices of some of the biggest brands and empirical evidence from research is

used to present some guidelines on brand extensions to companies.

There are several aspects of considering brand extensions:

1. Product line extension without a sub-brand as (Rasna) has various variants.

2. Extending the brand with sub-brands (junior horlicks).

3. Extending the brand to related categories (Liril to Liril talcum powder).

4. Extending the brand to more related categories (Wipro in computers, finance, edible oil,medical equipments, soaps and baby powder).

ESSENTIAL FACTORS THAT IMPACT BRAND

EXTENSION SUCCESS

1. Fit between parent brand and brand extension The fit between the parent brand and the

brand extension is probably the most important factor that impacts the success of the brand

extension. Fit can be analyzed from multiple perspectives. But generally fit refers to the

compatibility of the brand extensions product category, product attributes and associations to

the parent brands product category, product attributes and associations. Greater the fit between

the parent brand and the brand extensions, higher is the probability of the success of the brand

extension.

2. Parent brand conviction and parent-brand experience The other important factor the

influences the success of the brand extension is the quality of experience that consumers would

have had with the parent brand. Such brand experience can include the physical quality of the

product, the service encounters, the price and value perceptions, the post purchase service, the

retail atmosphere and such. Also, the parent brand conviction, which refers to the extent of

support and commitment the parent brand has towards the brand extension, also impacts the

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success of the brand extension.

3. Retailer experience In spite of the ever increasing influence of the Internet on shopping of

even the branded products, retail spaces in the physical world still continues to have a

stranglehold on distribution. As such, the successful- Brand Extension Success New profit

growth Martin cess of many brands is contingent on securing shelf space and the marketing push

provided by the retail establishment.

Similar is the case with brand extensions. If companies that extend their brands are not

welcomed by retail stores and are not offered marketing support and push by the retail stores,

then the success of such products are limited.

4. Marketing support This is one of the important factors that determine the success of brand

extension that is under the control of the company. Given the proliferation of brands in themarket, it is only natural that the company that invests highly in promoting its brand extension

eventually ends up in a better position. Such support will help achieve two objectives one, it

will facilitate a very aggressive push and pull demand for the brand extension and two, it will

help create positive perceptions about the company in the minds of the consumers.

10 PRINCIPLES OF BRAND EXTENSIONS

1. Brands should not be extended unless they are well-known, have high awareness and a good

reputation among the new target market.

2. Brand extensions must be a logical fit with consumers expectations.

3. Brand extensions must have leverage in the new category a transfer to the new product of a

distinctive property associated with the parent brand that gives the brand extension an edge in the

new category.

The test: Just knowing the brand name, customers of the new category should be able to identify

a reason why they might prefer the new brand extension to existing competition.

4. Brand extensions that could create confusion or a negative image for the parent should not be

undertaken.

5. Brands that consumers use synonymously with a category (generic) should not be extended to

other categories

6. Brands should not be stretched to too many diverse categories risking dilution in the long run.

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7. Brand extensions that will not create positive synergy for the parent brand should not be pursued.

8. Brand extensions must make business sense.

9. Every brand extension should open a category for the firm. The whole point of brand extension isto efficiently and successfully enter a new category.

10. A critical part of every brand extension research study is developing a brand plan. Short and long

term possibilities should be identified up-front.

TYPES OF BRAND EXTENSIONS

1. Similar product in a different form from the original parent product: This is where acompany changes the form of the product from the original parent product.

An example is (frozen) Snickers Ice Cream Bars. The original Snickers bar is a shelf stable

candy. The brand extension is a similar product, but in a different form. Jell-O Portable Puddingand Pudding Cups is Jell-O pudding in a different form and section of the store.

2. Distinctive flavor/ingredient/component in the new item: When a brand ownsa flavor,ingredient or component, there may be other categories where consumers want that property.

3. Benefit/attribute/feature owned: Many brands own a benefit, attribute or feature that can

be extended.

Brand Extension Research showed Armor All that that brand was defined by automotive surfaceprotection which can go beyond vinyl dressing. Paint needs protecting also. Arm & Hammer

owns a benefit of deodorizing. Their baking soda product has claimed that it removes odors

from refrigerators, etc. As a result, they extended the brand into other products such as Arm &

Hammer underarm deodorant and cat litter deodorizer.

4. Expertise: Over time, certain brands may gain a reputation for having an expertise in a given

area. Leverage can be achieved when extending into areas where this special expertise is deemedimportant.

Hondas expertise in reliable engines led to lawn mowers, gas powered generators and a varietyof other gasoline engine powered devices.

5. Companion product: Some brand extensions are a naturalcompanion to the products the

company already makes.

Colgate Dental Cream and Colgate Tooth Brush.

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Gillette Razors, Shave Foams, after shaves.

6. Vertical extension: Some brand extensions are vertical extensions of what they currently

offer. A brand can use their ingredient/component heritage to launch products in a more (orsometimes less) finished form.

7. Same customer base: Many brand extensions represent a marketers effort to sell something

else to its customer base.

This works particularly well when that customer base is large and to some extent captive. VISA

launched travelers checks directed to its credit card customers.

8. Designer image/status: Certain brands convey status and hence create an image for the user.

A notable success is Harley Davidson. Their extensive collection of licensed lifestyle items goes

way beyond any expertise inherent in the brand.

BRAND EXTENSION BENEFITS:

Brand extensions let a marketer take a brand with well-known quality perceptions and

associations and put it on a brand in a new category.

Consumers who favorably evaluate a parent brand are more willing to try and adopt the

brand extension than an unfamiliar brand in the same category.

Identify logical new product possibilities.

Capitalize on the paid-for equity in established brand names.

Enable a company to enter new categories at significantly lower cost.

Reduce the risk of failure given the already established awareness and trust

Create a positive synergistic effect with the efficiencies of umbrella branding andadvertising.

Reinforce the consumers perceptions of the parent brand name.

Bring news to existing brands when there is otherwise nothing new to say about them.

Brand extensions can also help consumers understand the core meaning of the brandname.

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ADVANTAGES AND DISADVANTAGES OF BRAND

EXTENSION STRATEGYAccording to David Taylor, this strategy of brand extension is popular because it is less risky

and cheapercompared to the creation of a new brand (Leslie de Chaternatony and Malcolm

McDonald point the same economical advantage by indicating that .The economics of

establishing new brands are pushing companies more towards stretching their existing name into

new markets.

ADVANTAGES OF BRAND EXTENSION STRATEGY ARE:-

1. Consumer knowledge: The remaining strong brand used to promote a new product makes

it less critical to create awareness and imagery. The association with the main brand is

already done and the main task is communicating the specific benefits of the new Innovation

Taylor.

2. Consumer trust: The existing well-known-strong brands represent a promise of quality,

useful features etc. - for the consumer. Thus, the extension will benefit from this fame and this

good opinion about the brand to create a compelling value proposition in a new segment or

markets Taylor. A satisfied customer by an extension will be more willing to repurchase the

same brand.

For example in the sport field, a customer will more likely prefer a brand offering a complete

equipment-shoes, outfit and accessories.

3. Lower cost : compared to launching a new brand, brand extension strategy is cheaper

especially because the new product use the name of an already well-known brand, the

advertisement budget for brand extension are smaller than for new brands.

4. Enhancement of brand visibility: when a brand appears in another field it can be a more

effective and efficient brand-building approach than spending money on advertising. The

relationship with loyal customers will be strengthen because they will use the brand in another

context and it is expected as well that they will prefer this brand to the competitors one.

5. Provide a source of energy for a brand : The brand image-especially when the brand is a bit

tired- is expected to be reinforced by the extension. Indeed, this latter gives energy to the brand

because it increases the frequency with which the brand is associated with good quality,innovations and large range of products. In addition, the customer sees the brand name more

often and it can strengthen his idea that it is a good one.

6. Defensive strategy: An extension can prevent competitors from gaining or exploiting a

foothold in the market and can be worthwhile even though it might struggle.

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For e.g. - Microsoft for instance has decided to operate in different areas with the aim of limiting

the ability of competitors to encroach on core business areas.

DISADVANTAGES OF BRAND EXTENSION STRATEGY ARE:-

1. Dilution of the existing brand image: The extensions are using the most important asset of

the company that i.e. its brand name. It can be a major advantage for the extension but it

represents as well a huge risk for the existing brand because the brand image can be diluted.

Park, McCarthy & Milberg, that those positive and negative consequences are reciprocity

effects and defined as a change in the initial customers behaviour regarding the brand,

after an extension.

A brand extension can damage the brand. A dilution of the brand capital can happen by the

occurrence of undesirable associations or by the weakening of the existing associations.

Indeed, an accident occurring with a product can lead to tarnish the image of the brand. In

addition, it is sometimes difficult to associate one brand to two products without weakening the

brand position in the customers mind. Aaker said that when a brand benefits are ensure by the

fact that it is not for or available to everyone, doing too much extensions could reduce this

image of brand selectivity. He takes the example of the overuse of the name Gucci at one

moment there were 14,000 products Gucci- was a part of the factors leading to the fall of that

brand.

2. Cannibalization : Aaker states that the extensions can cannibalize the existing products of the

brand when there are positioned in a close market. It means the extensions sales are increasingwhile those of the existing brands products are following the Opposite curved.

Aaker underlines that these good sales figures for the extensions cannot compensate the damage

produced to the original brands equity.

How to pick the Right Brand Extensions:

A 4 Step Process

Step 1: Develop the Brand Extension Strategy

Step 2: Explore the Problem and Opportunity Areas

Step 3: Generate Brand Based New Product Ideas

Step 4: Develop Brand-Based Concepts and conduct Business Analysis

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STRESS ON THE BRAND THROUGH EXTENSIONS

1. Type of the brand and ability to extend.

2. Under and over exploitation of a brand capital.

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3. Perimeters of the brand extension using Ponds example

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LINE EXTENSION

Line Extension is the simplest form of Brand Extension. The idea is to make some addition to

the line and cater to the different segments of users of the product. In Line Extension the key

criteria are whether the core strengths of the parent brands can be leveraged for the new items.

Advantages of Line Extension

Line Extension helps strengthen brand power and keep the brand live, modern and

contemporary.

Changing consumer tastes can be accommodated through Line Extensions.

Reduces risk associated with new product introduction.

Line extensions provide a convenient route for infusing new values into an ongoing

brand and gaining presence in new market.

CATEGORY EXTENSION

Here, the brand name is extended over different products, but the products are related in some

way. In other words they belong to a category. The Maggi example cited earlier fits this

description. Dettol can be cited as another example.

LINE AND CATEGORY EXTENSION BY PONDS

Ponds dream flower talc

Ponds dream flower talc magic

Ponds sandal talc

Ponds cold wash

Ponds face wash

Ponds cold cream

Ponds moisturizing lotion

Ponds dream flower moisturizing body lotion.

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BRAND EXTENSION OPPORTUNITIES FOR PONDS

Started off with creams

The evolution of skin care market gave them an opportunity to stretch into:

Talcum powder

Lotion

Face wash

Black head remover strips

All in line with USP- skin care

Fair and Lovely could not so easily extend the brand

EXTENSIONS

Lotion greatest potential with 15-20% growth

Face wash 40% penetration

Talcum Powder- high growth because of climate

Black head removing strips

FUTURE BRAND EXTENSION OPPORTUNITIES OF PONDS

1. Beauty Soaps: Ponds as an established skin care brand have an opportunity to expand

itself in the field of beauty soaps. Many other established brands like Dove, Emami, have

been successful with such extension in their product portfolio. Ponds also have a benefit

of its umbrella brand of Hindustan Unilever Limited for marketing their products.

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2. Perfumes/ Deodorants: Ponds can also enter into the category of body sprays like

perfumes and deodorants. Pond products are well known for its fragrance. They have a

nice opportunity to establish as a brand through extension into the category of body

sprays.

3. Hair Care : Brands like Emami, godrej; Bajaj, Dove, LOreal, Lakme, etc are someexamples of brands that have been successful in extension of their brand in the category

of hair care products.

4. Mens Skin Care: Brands like Emami, Fair and Lovely, Zirh, Neveia, garnier, etc are

some examples of brands that have succeeded in extension of their brand in the category

of mens skin care. It is a new concept in the market with limited number of established

competitors. So, Ponds have a great opportunity to target this new segment of market by

focusing on mens skin care products.

MARKETING PROGRAM PROCESS FOR EXTENSION

The marketing strategy analysis, planning, implementation and management process is described

in Figure 1.1. The strategic situation analysis considers market and competitor analysis, market

segmentation, and continuous learning about markets.

Designing marketing strategy examines customer targeting and positioning strategies, marketing

relationship strategies and planning for new products.

Marketing program development consists of product, distribution, price, and promotion

strategies designed and implemented to meet the value requirements of targeted buyers.

Strategy implementation and management consider organizational design and marketing strategy

implementation and control.

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Figure 1.1 Marketing Strategy Process

STRATEGIC SITUATION ANALYSIS

Marketing management uses the information provided by the situation analysis to guide the

design of a new strategy or change an existing strategy. The situation analysis is conducted on a

regular basis after the strategy is under way to evaluate strategy performance and identify needed

strategy changes.

Market Vision, Structure, and Analysis:Markets need to be defined so thatbuyers and competition can be analyzed.

For a market to exist there must be

(1) People with particular needs and wants and one or more products that can satisfy

buyers needs, and

(2) Buyers willing and able to purchase a product that satisfies their needs and wants.

A product-market consists of a specific product (or line of related products) that can

satisfy a set of needs and wants for the people (or organizations) willing and able to

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Strategic

situation

analysis

Designing

marketing

strategy

Marketing

program

developme

nt

Implementing

and managing

marketing

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purchase it. The termproductis used to indicate either a physical good or an intangible

service.

Analyzing product-markets and forecasting how they will change in the future are vital to

business and marketing planning. Decisions to enter new product-markets, how to serve existing

product-markets, and when to exist in unattractive product-markets are critical strategic choices.The objective is to identify and describe the buyers, understand their preferences for products,

estimate the size and rate of growth of the market, and find out what companies and products are

competing in the market.

Evaluation of competitors strategies, strengths, limitations and plans is also a key aspect

of the situation analysis. It is important to identify both existing and potential competitors.

Competitor analysis includes evaluating each key competitor. The analyses highlight the

competitions important strengths and weaknesses. A key issue is trying to figure out what each

competitor is likely to do in future.

Segmenting Markets:Market segmentation looks at the nature and extent of diversity

of buyers needs and wants in a market. It offers an opportunity for an organization to

focus in business capabilities on the requirements of one or more groups of buyers. The

objective of segmentation is to examine differences in needs and wants and to identify

the segments (sub-groups) within the product-market of interest. Each segment contains

buyers with similar needs and wants for the product category of interest to management.

The segments are described using the various characteristics of people, the reasons that

they buy or use certain products, and their preferences for certain brands of products.Likewise, segments of industrial product-markets may be formed according to the type of

industry, the uses for the product, frequency of product purchase, and various other

factors.

Each segment may vary quite a bit from the average characteristics of the entire product-

market. The similarities of buyers needs within a segment enable better targeting of the

organizations capabilities to buyers with corresponding value requirements.

Continuous Learning about Markets: One of the major realities of achievingbusiness success today is the necessity of understanding markets and competition.

Sensing what is happening and is likely to occur in the future is complicated by

competitive threats that may exist beyond traditional industry boundaries. For example,

CD-ROMs compete with books.

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DESIGNING MARKET- DRIVEN STRATEGIES

The strategic situation analysis phase of the marketing strategy process identifies market

opportunities, defines market segments, evaluates competition, and assesses the organizations

strengths and weaknesses. Market sensing information plays a key role in designing marketing

strategy, which includes market targeting and positioning strategies, building marketing

relationships, and developing and introducing new products.

Market Targeting and Strategic Positioning: Marketing advantage is

influenced by several situational factors including industry characteristics, type of firm

(e.g., size), extent of differentiation in buyers needs, and the specific competitive

advantage(s) of the company designing the marketing strategy. The core issue is deciding

how, when, and where to compete, given a firms market and competitive environment.

The purpose of the marketing targeting strategy is to select the people (or organizations) that

management wishes to serve in the product-market. When buyers needs and wants vary, the

market target is usually one or more segments of the product-market. Once the segments are

identified and their relative importance to the firm determined, the targeting strategy is selected.

The objective is to find the best match between the value requirements of each segment and the

organizations distinctive capabilities. The targeting decision is the focal point of marketing

strategy since targeting guides the setting of objectives and developing a positioning strategy.

The options range from targeting most of the segments to targeting one or few segments in a

product-market. The targeting strategy may be influenced by the markets maturity , the diversity

of buyers needs and preferences, the firms size compared to competition, corporate resourcesand priorities, and the volume of sales required to achieve favorable financial results. Deciding

the objectives for each market target spells out the results expected by management. Examples of

market target objectives are desired levels of sales, market share, customer retention, profit

contribution, and customer satisfaction. Marketing objectives may also be set for the entire

business unit and for specific marketing activities such as advertising.

The marketing program positioning strategy is the combination of product, value-chain,

price, and promotion strategies a firm uses to position itself against its key competitors in

meeting the needs and wants of the market target, the strategies and tactics used to gain a

favorable position are called the marketing mix or the marketing program.

Marketing Relationship Strategies: Marketing relationship partners may include

end user customers, marketing channel members, suppliers, competitor alliances, and

internal teams. The driving force underlying these relationships is that a company may

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enhance its ability to satisfy customers and cope with a rapidly changing business

environment through collaboration of the parties involved. Relationship strategies gained

new importance in the last decade as customers became more demanding and

competition became more intense. Building long-term relationships with customers and

value-chain partners offers companies a way to provide superior customer value.

Although building collaborative relationships may not always be the best course of

action, this avenue for gaining a competitive edge is increasing in popularity.

Strategic partnering has become an important strategic initiative for many well known

companies and brands. Many firms outsource the manufacturing of their products. Examples

include Motorola cell phones, Calvin Klein jeans, Pepsi beverages, and Nike footwear. Strong

relationships with outsourcing partners are vital to the success of these powerful brands. The

trend of the 21st century is partnering rather than vertical integration.

Planning for New Products:New products are needed to replace old products

because of declining sales and profits. Strategies for developing and positioning new

market entries involve all functions of the business. Closely coordinated new-product

planning is essential to satisfy customer requirements and produce products with high

quality at competitive prices. New-product decisions include finding and evaluating

ideas, selecting the most promising for development, designing the products, developing

marketing programs, use and market testing the products, and introducing them to the

market.

The new-product planning process starts by identifying gaps in customer satisfaction.The differences between existing product attributes and those desired by customers offer

opportunities for new and improved products.

MARKET PROGRAM DEVELOPMENT

Market targeting and positioning strategies for new and existing products guide the choice of

strategies for the marketing program components. Product, distribution, price, and promotion

strategies are combined to form the positioning strategy selected for each market target. The

relationship of the positioning components to the market target is shown in Figure 1.2.

The marketing program (mix) strategies implement the positioning strategy. The

objective is to achieve favorable positioning while allocating financial, human, and production

resources to markets, customers, and products as effectively and efficiently as possible.

Product

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Strategy

Promotion MarketDistribution

Strategy Target Strategy

Price

Strategy

Figure 1.2Positioning Strategy Development

Strategic Brand Management:Products (goods and services) often are the focal

point of positioning strategy, particularly when companies or business adopt organizational

approaches emphasizing product or brand management. Product strategy includes: (1)developing plans for new products, (2) managing programs for successful products, and (3)

deciding what to do about problem products (e.g., reduce costs or improve the product).

Strategic brand management consists of building brand value (equity) and managing the

organizations portfolio for overall performance.

Value-Chain, Price, and Promotion Strategies:One of the major issues in

managing program is deciding how to integrate the components of the mix. Product,

distribution, price, and promotion strategies are shaped into a coordinated plan of action.

Each component helps to influence buyers in their positioning of products. If the activities of

these mix components are not coordinated, the actions may conflict and resources may be

wasted. For example, if the advertising messages for a companys brand stress quality and

performance, but salesperson emphasize low price, buyers will be confused and brand

damage may occur.

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Market target buyers may be contacted on a direct basis using the firms sales force or by

direct marketing contact (e.g., Internet), or instead, through a value-added chain (distribution

channel) of marketing intermediaries (e.g., wholesalers, retailers, or dealers). Distribution

channels are often used in linking procedures with end user household and business markets.

Price also plays an important role in positioning a product or service. Customer reactionto alternative prices, the cost of the product, the prices of the competition and various legal and

ethical factors establish the extent of flexibility management has in setting prices. Price strategy

involves choosing the role of price in the positioning strategy, including the desired positioning

of the product or brand as well as the margins necessary to satisfy and motivate distribution

channel participants. Price may be used as an active (visible) component of marketing strategy,

or, instead, marketing emphasis may be on other marketing mix components (e.g., product

quality).

Advertising, sales promotion, the sales force, direct marketing, and public relations help

the organization to communicate with its customers, value-chain partners, the public, and othertarget audiences. These activities make up the promotion strategy, which performs an essential

role in communicating the positioning strategy to buyers and other relevant influences.

Promotion informs, reminds, and persuades buyers and others who influence the purchasing

process.

IMPLEMENTING AND MANAGING MARKET STRATEGY

Selecting customers to target and the positioning strategy for each target moves marketing

strategy development to the action stage. This stage considers designing the marketing

organization and implementing and managing the strategy.

Designing Effective Market-Driven Organizations: An effective organization

design matches people and work responsibilities in a way that is best for accomplishing the

firms marketing strategy. Deciding how to assemble people into organizational units and

assign responsibility to the various mix components that make up the marketing strategy areimportant influences on performance. Organizational structures and processes must be

matched to the business and marketing strategies that are developed and implemented.

Organizational design needs to be evaluated on a regular basis to assess its adequacy and to

identify necessary changes.

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Strategy Implementation and Control: Marketing strategy implementation and

control consist of: (1) preparing the marketing plan and budget; (2) implementing the plan;

and (3) using the plan in managing and controlling the strategy on an ongoing basis. The

marketing plan includes details concerning targeting, positioning, and marketing mix

activities. The plan spells out what is going to happen over the planning period, which is

responsible, how much it will cost, and the expected results (e.g., sales forecasts).

The marketing plan includes action guidelines for the activities to be implemented, who

does what, the dates and location of implementation, and how implementation will be

accomplished. Several factors contribute to implementation effectiveness including the skills and

commitment of the people involved, organizational design, incentives, and the effectiveness of

communication within the organization and externally.

Marketing strategy is an ongoing process of making decisions, implementing them, and

tracking their effectiveness over time. In terms of its time requirements, strategic evaluation is

far more demanding than planning. Evaluation and control are concerned with tracking

performance and, when necessary, altering plans to keep performance on track. Evaluation also

includes looking for new opportunities and potential threats in the future. It is the concerning

link in the strategic marketing planning process as shown in Figure 1.2. By serving as both the

last stage and the first stage (evaluation before taking action) in the planning process, strategic

evaluation assures that strategy is an ongoing activity.

EFFECTS OF BRAND EXTENSION ON PARENTBRAND

Parent brand equity after the extension is significantly and positively influenced by initial parent

brand equity and consumers attitude toward the extension. Therefore, it is important for firms to

have strong and well-known brands to leverage their value through brand extensions. A similarpattern is found when consumers positively evaluate brand extensions.

Some managerial implications can also be drawn from the results. Companies should be carefulwhen deciding to launch an extension, because results show a dilution effect in the parent brand

equity. Although a strong brand name does not guarantee the extension success, the type of

brand used to launch the extension can play an important role in the result. If a company wants

to launch a brand extension, it will be less risky when the brand has strong brand equity. Theparent brands initial equity may help to provide a defense against failed brand extensions, thus

avoiding brand equity dilution or, at least, diminishing potential negative effects.

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Because consumers prefer extensions that are close to the parent brands core market, launchingextensions perceived as similar to the parent brands category will help to improve consumers

attitude toward the ex-tension and the final parent brand equity. Although the similarity between

the new category and other products from the original brand is important, the similarity betweenthe image of the parent brand and the extension appears to play a critical role when consumers

assess brand extensions. Companies can use marketing mix variables, such as the product designor advertising campaigns, to increase this perceived fit. For instance, advertising campaigns usedfor the extension could emphasize the main parent brand associations, as this would help transfer

the positive brand associations from the original brand to the extension. Such campaigns could

also lead to a greater exposure to the brand extension, helping consumers to recognize more

shared attributes between the original brand and the extension and thus increase the perceived fit.

One of the most fundamental concerns of marketers in many companies is whether the

marketing strategies can be used in different international markets. The results from thecategories and countries investigated in this study indicate that consumers respond similarly to

brand ex-tensions. Therefore, managers should pay attention to the same factors when they are

launching extensions into different markets or countries. However, they should recognize thatthe relative importance of the determinants of brand extension success could be different.

When brand managers decide to grow their brands using brand extension strategies, they are

advised to consider the potential effects of unrelated brand extensions. Overall, unrelated brandextensions negatively affect parent brand relationship quality. Brand managers are wise to

evaluate their brands from the perspective of the level of relationship quality with customers

which considers emotions and feelings and not based just on consumers cognitive evaluationof the brand.

CONCLUSION

As such, brand extension is a type ofshort cut that companies resort to, to minimize risk and

maximize their investment in the brand. But more often than not, brand extensions fail. The

simple reason for such failure is that the equity of the parent brand is one of the many factors

that impact the success of brand extensions. Much has been researched on the success factors of

brand extensions in the industry and in academia. Knowledge from the collective wisdom of the

industry, best practices of some of the biggest brands and empirical evidence from research isused to present some guidelines on brand extensions to companies

In the light of very high rates of new product failures, brand extension seems very attractive.

After all, all companies seek to extract the maximum possible returns from the investment in

their brands. Brand extensions done without due diligence can be equally detrimental to

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companies. But if companies carefully study the brand extensions and follow the general

guidelines, brand extension success could indeed become a corporate reality.

A brand can be, cannot be, can do and cannot do things against its identity. While extensions are

the most popular method of growth, extending them wisely with a proper market analysis is very

important. Especially today, when the most important agenda for any business is growth -- notjust organic growth, but leapfrog growth. Globally, brand extensions and expansions are the

most used strategy for growth. Extensions are when a brand or business extends its equity within

the same category; while expansion happens when a brand or business ventures outside its core

category by extending its core values.

In closing, Id like to state that brand extensions are certainly a valid strategic option for a brand

manager. Brand extensions are flourishing for a number of reasons. Companies are finding that

in many cases, their most valuable asset is not their technology or other tangible assets, but

rather their brands, including all the loyalty, emotion, and associative power that they command

in the market place. With the right basis of extension, they can offer advantages in terms ofgetting trade support, reducing barriers to trial, improved media-spend multiplier effects, and so

on.

REFERENCES

1. Aaker, David A., Brand Extensions: The Good, the Bad, the Ugly, Sloan Management

Review, summer 1990, p. 42.

2. Sullivan, Mary W., Brand Extensions: When to use them?,Management Science, June

1992.

3. Aaker, David A. and Kevin Lane Keller, Customer Evaluations of Brand Extensions,

Journal of Marketing, Jain 1990, pp. 27-41.

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4. Sunde, Lorraine and Brodie, Roderick J. (1993), Consumer Evaluations of BrandExtensions: Further empirical results, International Journal of Marketing Research in

Marketing, 10, pp.47-53.

5. Swaminathan, V., R,J. Fox, and S.K, Reddy (2001): The Impact of Brand ExtensionIntroduction on Choice, in: Journal of Marketing, 65 ( October), pp.1-15.

6. Ruyter, Ko de and Wetzels, Martin (2000), The Role of Corporate Image and Extension

Similarity in Service Brand Extensions,Journal of Economic Psychology, 21, pp. 639-659.

7. Smith, Daniel C. and Park, C. Whan (1992), The effects of Brand Extensions on Market

Share and Advertising Efficiency, Journal of Business Research, 29, pp.296-313.

8. Park, C. Whan, Milberg, Sandra and Lawson, Robert (1991), Evaluation of BrandExtensions: The Role of Product Feature Similarity and Brand Concept Consistency,

Journal of Consumer Research, 18 (September), pp. 185-193.

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