brand extension success

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Brand Extension SuccessNew Profit Growth

Giorgio Armani is one of the biggest brands in the global fashion industry. Leveraging its strong

brand equity in the fashion apparel market, Giorgio Armani has ventured into other related

categories like eye wear, watches, and cosmetics. These are made available in each of the

above-mentioned brand categories to ensure that the brand is experienced in different

segments of the market. It is usually reasoned by fashion houses such as Giorgio Armani that

eye wear, perfumes, watches, and cosmetics are strongly related to fashion and luxury and thus

it is natural for such fashion houses to extend their brands into these categories.

Giorgio Armani is a good example that proves this point. By leveraging its expert knowledge of

the fashion and luxury industry, Armani has been able to come up with winning concepts in the

other product lines of cosmetics, watches, jewelry, and eye wear. But Armani has not stopped

at just these product categories: Armani has extended the brand into multiple other categories

such as Armani Casa (up-market furniture), Armani-branded Dolci (confectionary), and Armani-

branded Fiori (Flowers). And to add to this wide portfolio of brands, Armani very recently strucka deal with a Dubai-based property group Emaar to come up with a chain of 14 Armani branded

hotels and resorts by 2011 investing more than US$1 billion (6.95 billion yuan). As is the trend

in the fashion industry to operate in the entire spectrum from apparel, jewellery, cosmetics,

watches, perfumes, and luxury hotels, Armani has been able to leverage its brand equity to be

present in most of these lucrative sectors.

This example demonstrates one of the very important corporate phenomenonsbrand

extensions. With success rate for new products less than 35%, more and more companies are

resorting to extending their existing products and product lines. Even though this seems simple

and straight forward, facts paint a different picturefailure rates of brand extensions in many

of the fast moving consumer goods product categories are approximately 80%.

This article looks into this highly popular corporate activity and offers some guidelines to

companies that aspire to extend their brand and ensure success of such brand extensions.

Brand Extension A Brief Introduction

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. 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. As such, brand extension is a type of short 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

companies usually tend to overlook the fact that the equity of the parent brand is just 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


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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.

Dynamics of Brand Extensions

Brand extensions become inevitable because of companies chosen strategy path. As has been

proven with in strategy, companies would benefit from adopting either of the two dominantstrategic paths low cost competitor or the differentiator. Low cost players usually formulate

their value propositions in a way that would appeal to their target segmentbudget customers

who are primarily cost conscious and prefer buying products at lower price points. Similarly,

differentiators are those companies that prefer offering higher quality and at often times highly

differentiated (branded) products at comparatively higher prices to segments of customers that

are affluent or that prefer paying for high quality products. As a result of such focus, low cost

players leave out the premium market and the differentiators leave out the budget market. But

as has been seen in industry after industry, companies always are eager to expand to segments

that were left out initially. As a result low cost players seek to enter the premium market and

differentiators seek to enter the budget segment of the market. Such a corporate intention

gives rise to brand extensions.

The automobile industry is a classic case for brand extensions. When Toyota entered the US

market, it introduced Corolla and Camry brands that were targeted at the masses. But as the

car brand gained credibility and popularity, Toyota wanted to leverage that very brand equity

and expand into the lucrative luxury/premium car segment. Toyota introduced the Lexus as an

altogether new brand in the luxury market.

Such an extension is referred to as an upward brand extension. Similar is the case with

Mercedes Benz. When Mercedes, which is the quintessential luxury car, realized that it was

losing out on the budget segment, it brought out the Mercedes C class, at a lower price pointand targeted at young professionals. Such an entry into the budget segment is referred to as a

downward brand extension.

But in both of these examples, the parent brands (Toyota and Mercedes) extended their brands

in the same product categorycars. But many times companies will extend their brands into

different product categories with a hope that the equity of the parent brand will ensure the

success of the brand extensions. The following section of the article discusses the main factors

that impact the success of brand extensions.

Essential Factors That Impact Brand Extension Success

Fit between parent brand and brand extension: The fit between the parent brand and thebrand 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 to the parent brands product category,

the compatibility of the brand extensions product attributes to the parent brands product

attributes, and the compatibility of brand extensions associations with the parent brands

associations. Greater the fit between the parent brand and the brand extensions, higher is the


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probability of the success of the brand extension as there is a higher chance for the transfer of

the brand equity from the parent brand to the brand extension.

Parent brand conviction and parent brand experience: The other important factor that

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 theproduct, 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

success of the brand extension.

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

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

stranglehold on distribution. As such, the success 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 suchproducts are limited.

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 the

market, it is only natural that the company that invests highly in promoting its brand extension

eventually ends up in a better position. However, marketing support does not mean just

increased advertising or higher promotions in retail stores. It also includes the commitment of

the organizationinternally in terms of corporate management support and externally in terms

of financial, technological, marketing, and managerial resources. Such support will help achieve

two objectivesone, it will facilitate a very aggressive push and pull demand for the brandextension and two, it will help create positive perceptions about the company in the minds of

the consumers.

Conclusion

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. But brand extensions done without due diligence can be equally detrimental to

companies. One of the critical consequences of wrong brand extension is the dilution of the

parent brands equity. The examples of Calvin Klein and Pierre Cardin are cases in point that

demonstrate that when a parent brand extends its products into multiple categories and

multiple segments, the equity gets diluted and there is a high risk of the brand becoming acommodity as the exclusivity is lost. But if companies carefully study the brand extensions and

follow the general guidelines offered in this article, brand extension success could indeed

become a corporate reality and drive shareholder value.


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Failure

PETA vs. Armani: The Gloves (and Clothes) Come OffWritten by PETA

08-26-2009, 3:14 PMRecently, members of PETA Asia-Pacific and Animosa stripped down to their daisies and took to their coffins

outside the Giorgio Armani store in Taipei.

In 2007,Armani vowed to stop using fur, but several months later,his collection was full of rabbit fur.

PETA Asia-Pacific wanted to remind the designer that the pelts, ripped from the bodies of rabbits who kick

and scream before they arehung upside down and decapitated, are indeed furand that fur is dead.

Bunnies aux BarricadesWritten by PETA

02-20-2009, 8:57 AMAs all you fashionistas out there are probably aware (and everybody else probably isn't),GiorgioArmaniopened a boutique in New York City this week. Paris Hilton andKanye West(the man who has an

employee whosesolepun intendedjob is wrangling the rapper's400-and-some-odd shoes) werethrilled.Bunnies on fur farms?Not so much.

Of course, we couldn't let Armani's little shindig go off without a hitch, so we sent a veritable brigade of

bunnies to fight for theirlibert and egalit. As you'll note in the photos below, they were an oddly cheerfulbunch, even though they had to stand outside in the cold for upwards of four hoursuntil the last scrap of red

carpet was rolled up. At that point, they lined up in formation and marched down the street waving their signs,
http://www.peta.org/b/thepetafiles/archive/2009/08/26/PETA-vs-Armani-The-Gloves-and-Clothes-Come-Off.aspxhttp://www.time.com/time/arts/article/0,8599,1640080,00.htmlhttp://www.time.com/time/arts/article/0,8599,1640080,00.htmlhttp://www.time.com/time/arts/article/0,8599,1640080,00.htmlhttp://blog.peta.org/archives/2008/10/liar_liar_arman.phphttp://blog.peta.org/archives/2008/10/liar_liar_arman.phphttp://blog.peta.org/archives/2008/10/liar_liar_arman.phphttps://secure.peta.org/site/Advocacy?cmd=display&page=UserAction&id=1137https://secure.peta.org/site/Advocacy?cmd=display&page=UserAction&id=1137https://secure.peta.org/site/Advocacy?cmd=display&page=UserAction&id=1137http://www.peta.org/b/thepetafiles/archive/2009/02/20/Bunnies-aux-Barricades.aspxhttp://getactive.peta.org/campaign/armani_oscarshttp://getactive.peta.org/campaign/armani_oscarshttp://getactive.peta.org/campaign/armani_oscarshttp://getactive.peta.org/campaign/armani_oscarshttp://www.furisdead.com/feat-worst-dressed-09.asphttp://www.furisdead.com/feat-worst-dressed-09.asphttp://www.furisdead.com/feat-worst-dressed-09.asphttp://www.hollyscoop.com/kanye-west/kanye-west-hires-a-personal-shoe-cleaner_19146.aspxhttp://www.hollyscoop.com/kanye-west/kanye-west-hires-a-personal-shoe-cleaner_19146.aspxhttp://www.hollyscoop.com/kanye-west/kanye-west-hires-a-personal-shoe-cleaner_19146.aspxhttp://getactive.peta.org/campaign/armani_oscarshttp://getactive.peta.org/campaign/armani_oscarshttp://getactive.peta.org/campaign/armani_oscarshttp://blog.peta.org/archives/DSC02928.jpghttp://getactive.peta.org/campaign/armani_oscarshttp://www.hollyscoop.com/kanye-west/kanye-west-hires-a-personal-shoe-cleaner_19146.aspxhttp://www.furisdead.com/feat-worst-dressed-09.asphttp://getactive.peta.org/campaign/armani_oscarshttp://getactive.peta.org/campaign/armani_oscarshttp://www.peta.org/b/thepetafiles/archive/2009/02/20/Bunnies-aux-Barricades.aspxhttps://secure.peta.org/site/Advocacy?cmd=display&page=UserAction&id=1137http://blog.peta.org/archives/2008/10/liar_liar_arman.phphttp://www.time.com/time/arts/article/0,8599,1640080,00.htmlhttp://www.peta.org/b/thepetafiles/archive/2009/08/26/PETA-vs-Armani-The-Gloves-and-Clothes-Come-Off.aspx


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followed by a contingent of photographers who must have thought they'd died and gone to Easter Bunny

heaven.

I wonderif 16 giant white bunnies show up on a Manhattan sidewalk, does that mean that spring is only acouple of weeks away ?

Armani Gets StonedWritten by PETA02-11-2009, 12:00 PMAt the risk of incensing theGEICO caveman, we rounded up some "Neanderthals" to protest outside bunny

butcherGiorgio Armani'sChicago boutique earlier this week. As you'll note in the photos below, they carried

signs reading "Only Cavepeople Wear Fur," but I think even cavepeople would balk at supportingthedisgusting rabbit fur industry, as Armani does. We've revved up our campaign against the cold-hearted
http://www.peta.org/b/thepetafiles/archive/2009/02/11/Armani-Gets-Stoned.aspxhttp://www.peta.org/b/thepetafiles/archive/2009/02/11/Armani-Gets-Stoned.aspxhttp://www.awfulcommercials.com/stills/caveman_2.jpghttp://www.awfulcommercials.com/stills/caveman_2.jpghttp://www.awfulcommercials.com/stills/caveman_2.jpghttp://blog.peta.org/archives/2009/01/anti-fur_protes.phphttp://blog.peta.org/archives/2009/01/anti-fur_protes.phphttp://blog.peta.org/archives/2009/01/anti-fur_protes.phphttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://blog.peta.org/archives/2009/01/anti-fur_protes.phphttp://www.awfulcommercials.com/stills/caveman_2.jpghttp://www.peta.org/b/thepetafiles/archive/2009/02/11/Armani-Gets-Stoned.aspx


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designer after hebroke his pledgeto remain fur-free and started using rabbit fur trim on skirts, jackets, and

even toddlers' snowsuits, of all things.

Our cavepeople got a warm reception in chilly Chicago. The staff of the Park Hyatt Hotel, which shares the

same building as Armani's boutique, assured us that the hotel is fur-free.
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If you're fed up with Armani's support of an industry that rips the skin off the backs of rabbits, usethis formto

tell Armani to drop fur now!

Anti-Fur Protesters Rock Sin CityWritten by PETA01-28-2009, 12:45 PMAfter once-fur-hag Donna Karanstopped designing fur, we decided to shine the spotlight on someone who

hadn't got the message: Giorgio Armani. After he said he had been convinced to stop using fur but

thenreneged on his promise, we've started runningPinocchio Armanicampaign tours to point out his lies and,

more importantly, the blood that he still has on his hands.

Our campaigners and local members lined the sidewalk outside the famous Bellagio Hotel this week with

traffic-stopping signs reading "Fur Is Dead" and "Pinocchio Armani." Check it out:
http://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://www.peta.org/b/thepetafiles/archive/2009/01/28/AntiFur-Protesters-Rock-Sin-City.aspxhttp://www.peta.org/b/thepetafiles/archive/2009/01/28/AntiFur-Protesters-Rock-Sin-City.aspxhttp://blog.peta.org/archives/2008/12/donna_karan.phphttp://blog.peta.org/archives/2008/12/donna_karan.phphttp://blog.peta.org/archives/2008/12/donna_karan.phphttp://blog.peta.org/archives/2008/09/peta_to_tomkat.phphttp://blog.peta.org/archives/2008/09/peta_to_tomkat.phphttp://blog.peta.org/archives/2008/09/peta_to_tomkat.phphttp://blog.peta.org/archives/2008/10/liar_liar_arman.phphttp://blog.peta.org/archives/2008/10/liar_liar_arman.phphttp://blog.peta.org/archives/2008/10/liar_liar_arman.phphttp://www.furisdead.com/http://www.furisdead.com/http://www.furisdead.com/http://www.furisdead.com/http://blog.peta.org/archives/2008/10/liar_liar_arman.phphttp://blog.peta.org/archives/2008/09/peta_to_tomkat.phphttp://blog.peta.org/archives/2008/12/donna_karan.phphttp://www.peta.org/b/thepetafiles/archive/2009/01/28/AntiFur-Protesters-Rock-Sin-City.aspxhttp://getactive.peta.org/campaign/armani_fur_investigation


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Paul McCartney Urges Armani to Break His Rabbit

HabitWritten by PETA

10-13-2008, 3:49 PMWe're not the only ones who are severely frustrated about Giorgio Armani's failure to keep his word andremain fur-free!Sir Paul McCartneypictured here with Giorgio at one of Stella McCartney's fashion

showsis the latest to respond toPETA's action alert.Sir Paul is adding his voice to a chorus of celebrities who are upset over Armani'spenchant for rabbit pelts

celebrities such as the Andersons (Gillian and Pamela, no relation). These lovely ladies kicked off PETA's

"Get Armani off Fur" campaignPam hosted a PETA launch event during Fashion Week in Italy, andGillian

narratedPETA's horrificrabbit fur farm expos.

We hope that Sir Paul, Gillian, and Pam won't be the only famous voices to speak up against Armani's fur

fixation. PETA Vice President Dan Mathews has written to many Armani-wearing stars, includingTom Cruise
http://www.peta.org/b/thepetafiles/archive/2008/10/13/Paul-McCartney-Urges-Armani-to-Break-His-Rabbit-Habit.aspxhttp://www.peta.org/b/thepetafiles/archive/2008/10/13/Paul-McCartney-Urges-Armani-to-Break-His-Rabbit-Habit.aspxhttp://veggietestimonial.peta.org/psa.aspx?CID=11bdc370-ff5f-46c2-a206-ed3b0b2241d2http://veggietestimonial.peta.org/psa.aspx?CID=11bdc370-ff5f-46c2-a206-ed3b0b2241d2http://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://blog.peta.org/archives/2008/10/gillian_anderso.phphttp://blog.peta.org/archives/2008/10/gillian_anderso.phphttp://blog.peta.org/archives/2008/10/gillian_anderso.phphttp://blog.peta.org/archives/2008/10/gillian_anderso.phphttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://blog.peta.org/archives/2008/09/peta_to_tomkat.phphttp://blog.peta.org/archives/2008/09/peta_to_tomkat.phphttp://blog.peta.org/archives/2008/09/peta_to_tomkat.phphttp://getactive.peta.org/campaign/armani_fur_investigationhttp://blog.peta.org/archives/2008/10/gillian_anderso.phphttp://blog.peta.org/archives/2008/10/gillian_anderso.phphttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://veggietestimonial.peta.org/psa.aspx?CID=11bdc370-ff5f-46c2-a206-ed3b0b2241d2http://www.peta.org/b/thepetafiles/archive/2008/10/13/Paul-McCartney-Urges-Armani-to-Break-His-Rabbit-Habit.aspxhttp://www.peta.org/b/thepetafiles/archive/2008/10/13/Paul-McCartney-Urges-Armani-to-Break-His-Rabbit-Habit.aspx


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and Katie Holmes,Glenn Close, and Cate Blanchett, urging them to use their influence with the designer to get

him to keep his fur-free pledge.

Oh yeah, and one other thing Dan didremember that "Pinocchio Armani" ad? Well, Dan unveiled the new

posters outside Armani's flagship store in Milan this week. Here he is with a local activist therecheck out

those giant rabbits!

Those big bunnies are just two blocks from Armani's storeI guess they'll be keeping an eye on him and so

will we! Stay tuned for more Armani newsand don't forget totake action!
http://blog.peta.org/archives/2008/09/peta_to_tomkat.phphttp://blog.peta.org/archives/2008/09/peta_to_tomkat.phphttp://blog.peta.org/archives/2008/09/petas_fatal_att.phphttp://blog.peta.org/archives/2008/09/petas_fatal_att.phphttp://blog.peta.org/archives/2008/09/petas_fatal_att.phphttp://blog.peta.org/archives/2008/10/liar_liar_arman.phphttp://blog.peta.org/archives/2008/10/liar_liar_arman.phphttp://blog.peta.org/archives/2008/10/liar_liar_arman.phphttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://getactive.peta.org/campaign/armani_fur_investigationhttp://blog.peta.org/archives/2008/10/liar_liar_arman.phphttp://blog.peta.org/archives/2008/09/petas_fatal_att.phphttp://blog.peta.org/archives/2008/09/peta_to_tomkat.php


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Marketing Failure - Giorgio Armani

At the South Bound 2/5/1 Tram stop in Leidensplein Amsterdam, the geniuses at Giorgio Armani have

created an intrusive, pollutive, annoying, nuisance. The tram stop is not on fire, no, it is belching an

obnoxious cloud of Armani fragrance. Perhaps they like to refer to it as "viral marketing" or "push

marketing" or "in your face advertising", but I call it "unacceptable". Every 30 seconds or so, the top of

the tram stop shelter spews forth "Acoua di Goa" or as Armani calls it: "The new fragrance for women". It

looks like the tram stop is on fire, or that someone has thrown a smoke bomb on top of it. The fragrance

is weak, and hardly noticeable above the 2nd hand cannabis smoke that occasionally drifts through the

square from time to time. But who was the brain dead moron who thought that spewing out clouds of

fragrance could move product off shelves or 'create awareness' of the new product introduction? The

asshole should be drawn & quartered, or at least publicly flogged with a cat of nine tales. Did I mention

Amsterdam has a "Torture Museum"?
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