HBR CASE STUDY

An Overview of the case Chateau de vallois , is a family owned wine producing estate in the Bordeaux region of france . It has a long term track record in quality and reputation . Gaspard de Sauveterre , owner of the company , comes in dilemma by the proposal of her grand daughter ,Clare de Valhubert. She wanted the company to enter the “ affordable luxury “ market by producing a new wine which could be sold directly to the consumers .The CEO & the Estate Manager of the company were traditionalists by thoughts and thus didn’t support her idea because they feared about :

• Loss of Brand reputation and degradation of Brand equity by bringing out another wine .•Production of the new wine would cost them much operating expenses .•Loss of contracts/relationships with the distributors .

Moreover they did not have more grapes to produce a third wine , so they would need to grow them some where else or buy them . But Clare was all looking at the positive side and believed that with this wine they could attract the Younger people to drink their wine and thus expand the brand reach .

These conflicting thoughts puts the owner Gaspard in dilemma .

Thus the case represents two sides of Brand Extension

POSITIVE SIDE OF BRAND EXTENSIONS

1) Leveraging Brand Equity /Value by introducing logical & complimentary new product categories

2) Product innovation to surpass Consumer expectations

3)Increases awareness of the Brand name .

4)Increases profitability from offerings in more than one product category

5)A great way to create a BUZZ among people

NEGATIVE SIDE OF BRAND EXTENSIONS

1) Can Confuse or frustrate consumers

2) Can encounter resistance from retailers .

3) Can increase too much operational expenses .

4)Can succeed but cannibalize sales of parent brand or as mentioned in the case ‘eat up’ the parent brand .

Some examples of Brand Extensions from Indian origin

Here we will present small case studies on the following Indian companies & their brands :

NESTLE MAGGIBPCL SPEED HLL

RECKITT BENCKISER DETTOL COCA COLA COCA-COLA

1Maggi is an over 100 years old Nestle brand of instant soups , stocks , bouillons , ketchups , sauces, seasonings and instant noodles . Maggi comes to India : Maggi noodles was launched in early 1980s.At that time there was no competition to the brand . But , Maggi had to fight hard to be accepted by Indian consumers with their hard-to-change eating habits .Thus , in initial years , Nestle promotional activities for Maggi included schemes offerings gifts in return for empty noodles pack .Gradually sales promotions like these became a crutch for Maggi noodles sales .Maggi associated itself with the mainstream television program and advertised heavily on kids programs and channels

MAGGI

MAGGI ‘s Brand Extension In order to stretch Maggi’s Brand to include Indian Ethnic foods , the company tied up with a pune based “ chordia foods “ to launch pickels under the year 1995.The company saw a lot of untapped potential in the market for ready to use south Indian food .So the company tied up with a chennai based food company to market popular south Indian food preparation . In 1996, products from these two ventures received lukewarm response from the market .Analysis showed that the reason for the failure was Nestle seemed to be particularly bad at dealing with traditional product categories . Maggi noodledperformed badly in 1996 .Adding to the failures list was the failure of MAGGI Tonight’s special , a range of cooking sauces aimed at providing ‘restaurant like taste ‘ in the food cooked at home . Maggi launched ‘ Maggi Macroni ‘ in July 1997 .According to the analysts, it was launched partly to deal with the growing popularity of competing noodles brand Top Ramen . The company expected to repeat the success of Maggi noodles & Maggi Macaroni . Maggi Macaroni’s launch was baked by a multi-media advertising campaign including radio, television, outdoors and print media with the tagline ‘ Tum Roz Baby ‘. Due to failure , Nestle had to withdraw MaggiMacaroni completely from the market .

MAGGI ‘s Brand Extension

Nestle had not recovered completely from the Macaroni’s dismal performance when it realized that Knorr had dethroned Maggi as a leader in the soup segment . The only saving grace to Maggi were its ketchups and sauces which seemed as ‘rare successful extensions ‘ for Maggi . These products were supported by a popular advertisement campaign for the Maggi hot & sweet sauce brand . The humorous advertisements featuring actors Pankaj Kapoor & Javed Jafri used the tagline ‘ Its different ‘. However during mid 1997 , HUL began advertising its Kissanrange of sauces exclusively . Nestle responded with a higher weight on advertising and differential pricing . Maggi was able to hold on its own market share but the operational expenses increased considerably .

Learning from Maggi’s case

1) Positive effect : Brand Extension has favored MAGGI to move ahead of its competitors

and increase its share in the consumer market .

2) Positive effect : Brand Extension has favored MAGGI to come up with more innovative

solutions for its products and their positioning .

3) Negative effect : Brand extension led to over-increased operational expenses on the

company and also affected the relationship with the supply chain .

4) Negative effect : Due to excess focus on Brand extension, it had to completely withdraw

some of its products like Maggi Macaroni from the market , due to the fear of Brand

erosion due to this failing category .

5)Positive effect : Brand extension gave MAGGI the exposure to enter various markets and

evolving new strategies and bringing various kinds on firms to be working with the brand .

2 SPEED The launch of Speed-Bharat Petroleum Corporation Limited’s “ high-performance petrol “ with multi functional additives that promised to improve engine performance and fuel efficiency , and to reduce emission and maintenance costs –in 2002 ushered in an era of value-added , branded fuels in India .Prior to this , petrol was essentially a commodity product in India . It was sold at a higher price than regular price . That it was sold through the regular BPCL petrol pumps was heavily promoted during the launch phase . The success of Speed prompted other public sector oil majors including the Indian Oil Corporation & Hindustan Petroleum Corporation to launch their own branded premium fuels . The demand for premium branded fuels has been sustained by the growing population of modern cars . Although the branded premium fuel segment has come of age in India , BPCL-the pioneer in this segment –has maintained its brand reputation in this category .

Learning from Speed ’s case

•Its an example of Brand Extension by BPCL

•It was heavily promoted during the launch phase which says that a

successful Brand extension requires heavy promotions to let the

market acknowledge the features/benefits of the product .

• Success of a Brand extension induces competition like the one

induced by Speed prompting other public sector oil majors .

•BPCL followed a strategic plan while extending its brand and thus

was able to maintain its brand reputation in its sector .

3 HINDUSTAN LEVER LIMITED In 2005, Hindustan Lever Limited (HLL), the Indian subsidiary of Unilever, was the country's largest fast moving consumer goods (FMCG) company. HLL's portfolio of brands included Lux, Lifebuoy, Liril, Surf, Ponds Vaseline, Vim, Clinic All Clear and Axe. Most of these brands had been market leaders for several years in their respective product categories. Over the years, HLL had extended many of its popular brands with varying degree of success. Some extensions like Clinic All Clear anti-dandruff shampoo to hair oil category had been successful, while others like Ponds Toothpaste had

been a dismal failure. M S Banga , Chairman HLL explained: "I believe that each extension must strengthen the core and the core must remain unchanged. When the core of the equity is in one direction and the product extension is in another and you graft the two, you are unlikely to succeed. The set of peripheral or extended values can be changed over time.

In the early 2000s, as HLL struggled to generate growth, brand extension became an important strategic option. HLL extended its popular brands into the premium segment to increase its profits. By early 2003, HLL had launched a number of brand extensions with varying degrees of success.In 2003, in what seemed to be in response to intensifying competition in several segments, HLL decided to strengthen its already overwhelming presence in the talcum powder category where its brand, Ponds Dreamflower, was already the market leader. HLL also extended Lifebuoy, Vaseline and Fair& Lovely to Talc category.

Q1: Was HLL really able to manage its Brand extensions ?

Q2: What kind of view is required to let the company dare to extend its lines despite the fear of getting its core value disrupted due to this ?

Answer to Q1 : 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 . HLL believed in Brand extension in such a way that its core value doesn’t get harmed and in fact, the extension should strengthen the core . Many of their product line and category extensions were successful in the market ,earning advantage to the company’s shares & position in the market .

While some other saw a dismal future like Ponds toothpaste

Answer to Q2 : There exists 2 kinds of views :

INNOVATIVE VIEW TRADITIONAL VIEW #)Allowing the brand to extend its line/categories by giving innovative solutions and believing that it would help the company to attain greater market values .

#)Innovators are technology enthusiasts ; they are venturesome & enjoy tinkering with products & mastering their intricacies. In return for low prices, they are happy to conduct alpha & beta testing and report on early weaknesses.

#)Reluctant to take risks of extending the brand due to fear of damage of existing Brand equity .

#)Traditionalists are always concerned about the increased operational expenses , fear of consumers’ aggression towards a failed extension , extra load of managing the supply chain and other such problems which they might face if they want to successfully extend their brand .

CATEGORIZATION

THEORY Let me explain you

Researchers tend to use “categorization theory” as their fundamental theory to explore the effects of brand extension. When consumers are faced with thousands of products to choose amongst, they are not only initially confused, but try to categorise by brand association or image given their knowledge and previous experience. A consumer can judge or evaluate the extension product with his or her category memory. Consumers categorise new information into specific brand or product class label and store it.This process is not only related to consumer’s experience and knowledge, but also involvement and choice of brand.Ifthe brand association is highly related to extension, consumer can perceive the fit among brand extension. Some studies suggest that consumer may ignore or overcome the dissonance from extension i.e. perceived misfit with parent brand is ignored, and does not cause dilution of parent's brand equity

MANAGING BRAND EXTENSIONS

Managing Brand Extension is all about

doing right moves at the right time . It

requires strategic & creative thinking of

the management team of the company .

It also requires the co-operation of the

distributors and retailers . And most

importantly , company needs to ensure

Consumer satisfaction .

DETTOL :MANAGING BRAND EXTENSIONS

Dettol’s target market :The target market for Dettol Soaps is all households (primarily mothers) who can afford buying soap and want to fulfill everyday need , that provides them and their family 100% anti-bacterial solution –complete protection from all germs/bacteria and cleanliness from dirt/grim .

Why the Brand was not acceptedas strongly ?

Consumers are open to the idea of using Dettol soap when they faced extreme dirt conditions . Hence, it was felt that Dettol soap needs to be positioned for occasions that are special , but not rare in everyday life. These could be based on the exposure to dirt, germs , pollution ,heat , sweat , etc .

FAILING BRAND EQUITY If major product has certain core properties , then consumers develop a certain expectation from its products as well.

Since consumers associate the brand Dettol so strongly with its Antiseptic properties , its extension into the Skin care segment has not been very well received .

Dettol Antiseptic liquid is also popular as a floor disinfectant & for washing clothes, hence associating soap & body wash with the same brand name discourages customers from using these products .

DETTOL’S REPOSTIONING

“Dettol, a Power brand from the portfolio of Reckitt Benckiser has come up with new DettolRe-energize soap with the freshness of orange and Dettol’strusted germ protection. The unique formulation not only protects you against germs but also leaves you feeling healthy, fresh and re-energized.”

Consumers are always looking for a unique aspect within their daily regime, some special freshness that brings a special energy in everyday life. Mr. Chander Mohan Sethi, Senior Vice President– South East Asia, Reckitt Benckiser, adds “Innovation is key at Reckitt Benckiser, and our aim is to provide the consumer new formulations and new products every single time. Dettol Re-energize is another offering from Dettol that I am confident would not only provide the Dettol’s trusted protection from germs to its users but also keep them refreshed and energized everyday.”

This change and such promises by the Brand Managers helped Dettol put its strong hold in Indian maket yet again.

DETTOL’S PORTFOLIO

CONCLUSIONS FROM DETTOL’S CASE

1)To capitalize on Brand equity of Dettol , it should position its Brand extensions well & manage them , also working on time to time innovations .

2)Dettol’s benefits & features are very well received among the customers , now it should move up towards the values & emotions in the Brand value pyramid .

INNOVATION IMPERATIVE

A company who is motivated to create new innovations time to time

and is focused on operational management simultaneously is said to

have Innovation Imperative .

A case on the Innovative Imperative : W.L.GoreBest known for its GORE-TEX high-performance fabrics, W.L. Gore has introduced breakthrough products as diverse as guitar strings , dental floss, medical devices, & fuel cells. Several principles guide its new-product development . First , it works with potential customers . Second , it lets employees choose projects and appoints few product leaders and teams .Gore likes to nurture ‘passionate champions ‘ who convince others a project is worth time & commitment . The development of fuel cell rallied more than 100 of Gore’s 9,000 research associates . Third , Gore gives employees “ Dabble team “ . All research associates spend 10 percent of their work hours developing their own ideas .Fourth , Gore knows when to let go , through dead ends in one area can spark innovation in another : Elixir acoustic guitar strings were the result of a failed venture into bike cables .Even successful ventures may need to move on .

Basic understanding from this case :1 A company should give more focus on internal

management and higher bench should make their work transparent before the lower bench

2 Working with Potential customers

3 Maintaining a research atmosphere in the company and allowing open discussions with the employees

COCA COLA ‘S case on Brand Extension

Coca-Cola, one of the world's largest soft drink manufacturers became famous for its flagship product Coca-Cola. Coca-Cola adopted different marketing strategies and built a strong brand among the consumers. But the company was faced with stagnating sales in the 1980s due to shift in consumer preferences from carbonated drinks to healthy drinks like juices and green tea. With an aim to attract health conscious consumers Coca-Cola introduced fortified carbonated drinks terming them as 'sparking beverages'. To strengthen its efforts to gain competitive advantage in this emerging segment, Coca-Cola initiated a new marketing campaign for its new product 'Coke Zero' and simultaneously launched 'Diet Coke Plus'.

AN OVERVIEW

1886

Coca-Cola got invented by Colonel John Pemberton. Coca-Cola then became

widely available, sold as a medicine at soda fountains across the US, with

Pemberton claiming it could cure ailments including impotence, headaches and

dyspepsia.

1982

Coca-Cola creates its first brand extension after nearly a century of existence.

Diet Coke is born - a sugar-free version of its flagship product, launching in

the US in August, and created using sweeteners aspartame and saccharin.

Diet Coke’s advertising uses slogans that include its most famous, "Just for the

taste of it!", with TV ads featuring the "Diet Coke hunk".

After 1982, several Diet Coke variants are rolled out, including lime, cherry and

vanilla flavour.

1983Caffeine Free Coca-Cola launches, but only in the US.

1985

Coke causes controversy in 1985 and beyond when it changes the formula of its

core Coca-Cola product and rebadges it "New! Coke", referring to the product

as the "new taste of Coca-Cola". This remains in place until 1992, when it is

renamed Coca Cola II.2001

Coca-Cola Lemon becomes available in various markets, including the

UK, until 2005.

2002

Coca-Cola Vanilla is launched in the US and UK, among other markets, before

being discontinued in 2005. However, it is brought back by popular demand in

2007, and renamed Vanilla Coke.

2005 Coke Zero - a no-calorie variation of Coca-Cola - goes on sale.

2007

Diet Coke Plus is unleashed on the public - a Diet Coke formulation laden

with vitamins and minerals.

2013

Coca-Cola Life is launched in Chile and Argentina, as a trial ahead of a

wider global roll-out.

2014

BRAND PYRAMID of the company

RELATING TO THE CASE Claire’s innovative proposals

Running advertisement campaigns and doing marketing research

, to adapt quickly to the changing tastes by changing the flavors

they offer

1

2 Setting up websites to allow consumers to order directly

Attracting Younger consumers by a branded wine 3

But what about the bad times ?When the harvest is not good and the production capacity can not meet the requirements of a THIRD wine ………

But Claire had the solutions for that

1. We would produce atleast one

million bottles for which we’d have

to buy grapes .

2. Capitalizing on the brand by

buying land overseas & making

wine for the younger people

somewhere else

3.Managing our distribution

channels effectively by choosing

innovative ways like setting up

websites

BRAND EXTENSION SCENARIO IN INDIA

"These slides were created by Jalaj Garg(IIT-Guwahati), as part of an internship done under the guidance of Prof. Sameer Mathur(www.IIMInternship.com)"