Why do Brand Extension Strategies Fail - Literature review Example

?BRAND EXTENSION STRATEGY: Different strategies and techniques are being used by the organisations in order to manage the brands and increase the brand value and worth (Mzungu, Merrilees, and Miller, 2010). One of the important strategies in this regard is of the brand extension. The strategy of brand extension is being used by the organisations in order to cope up with different challenging situations and overcome the competitive pressure in the industry. According to the Han (1998), the brand extension of strategy have been beneficial for the companies in the process of reaping additional benefits from the already established brand. The main reason or rationale behind the introduction of new product under the name of well known and established brand is to make sure that the customers and market is familiar with the brand and the new product category can capture market on the basis of the positive and main characteristics of the parent brand (Buil, Chernatony, and Hem, 2009). Different options available to the brand managers in the process of brand extension are: 1. Horizontal Extension: the horizontal extension is further divided into line extension and category extension. In the line extension a whole new product, within the same category as that of the parent brand, is introduced in order to target and capture a new and different segment of the market. On the other hand, in the category extension the same brand is extended into a whole new product category. 2. Vertical Extension: In vertical extension the organisations come up with the new product or brand within the same product category in which they are currently competing. The strategy of brand extension is highly risky for the organisation because it have both positive and negative implications on the brand and organisation. The research study of Han (1998) and Buil, Chernatony, and Hem, (2009) have also been supported by several other research works like that of Wood (2000), and Reddy, Holak, and Bhat, (1994). All of these research studies have been able to identify the main driver behind the brand extension strategy. The research studies have well established their points that the main aim behind the brand extension strategy is to capitalize on the existing brand equity and image of the parent brand. IMPACT OF BRAND EXTENSION STRATEGY ON THE BRAND IMAGE AND BUSINESS: In order to make sure that the brand extension strategy proves to be beneficial and helpful for the organisation and increase the competitiveness of the organisation it is important to identify and understand the implications of the brand extension strategy on the brand image and overall business of the organisation (Serrao and Botelho, 2008). There are several factors which directly influence the impact of the brand extensions on the brand image. According to the research study of Martinez and Chernatony (2004), the perceived brand quality by the consumers and the attitudes and behaviours of the consumers towards the overall extension strategy have positive impact on the general brand image and product brand image. The research study also concluded that the fact that consumers are familiar and aware of the brand only have impact on the general brand image and have no impact on the product brand image. On the other hand the consumers’ perceived degree of fit between the parent brand and new brand only influence the product brand image. The research study of Martinez and Chernatony (2004), have created a difference between the general brand image and the product brand image. They have correctly identified the impact of the consumers attitudes on the general brand image and product brand image. However, their stance about the impact of familiarity and awareness on the GBI and PBI is somewhat shaky. If the customers are aware and familiar with the brand it will definitely affect the PBI also, because the customers will relate the product with the overall brand image and will associate same image with it. The research study by Park, McCarthy, and Milberg (1993), concluded that the direct brand extension can results in negative impact on the parent brand and the strategy of associative brand extension can overcome the negative impact of the brand extension and generate positive implications on the overall brand image. Park, McCarthy, and Milberg (1993), have been able to support the theory of perceived fit between the parent brand association and the extended brand. REASONS AND FACTORS BEHIND THE SUCCESS AND FAILURE OF THE BRAND EXTENSION STRATEGY: It is important to acknowledge here that there are several factors and elements which have direct impact on the success or failure of the brand extension strategy (Jun-ying, Ping, Yan, 2007). It is important for the management of the organisation to understand and comprehend these factors in order to make sure that the strategy of brand extension is beneficial for them (Reddy, Holak, and Bhat, 1994). One of the most impact factors in this regard is identified by Batra, Lenk, and Wedel (2010), in their research study i.e. the fit between the previous brand associations and image and the new product category. According to this research study, the organisations should select those product categories for the extension of the brand which are linked and related with the existing associations and image of the brand. It is important for the organisations to keep in consideration the consumers’ attitudes and behaviours towards the existing brand and the new brand extension (Bhat and Reddy, 2001). All of these research studies are also supporting the stance of Park, McCarthy, and Milberg (1993). Thus it can be concluded that it is highly important that the extended brand can be related with the parent brand associations. Apart from this there have been several cases in which the new brand have cannibalised or taken over the parent brand. This is because of the fact that organisation have been not able to understand the different consumer preferences and behaviour towards the both brands. It is important to make sure that the brand management team and top management of organisation make sure that the new extended brand does not have any negative impact on the brand image of the parent brand. This stance have been proved right by Martinez and Chernatony (2004), in their research study. They are right in concluded that the brand extensions with different associations result in diluting the brand image of the parent brand. The most important element which should be considered while devising the brand extension strategy is the consumer behaviour and attitude. There are several other factors which directly influence the brand extension strategy. These factors have been broadly divided into three categories which are: factors related to market, factors related to the company, and the factors related to the brand (Franzen and Moriarty, 2009). Volckner and Sattler (2006), have presented ten factors or elements which can make sure that the brand extension is successful. According to them the most important of all of these is the fit among the parent brand and the newly introduced brand. This is followed by the support from the marketing, the conviction of the parent brand, the acceptance from the retailers, and experience of the parent brand. Other important factors are the innovativeness of the customers, the parent brand quality, the history of the organisation regarding other brand extensions, the risks from other brands in the market, and the link between the attributes and features of the product to the parent brand utility. Again, the research study of Volckner and Sattler (2006) have also placed high emphasis on the fit between the parent brand association and the extended brand. Other factors highlighted in this research study will have dual impact on the success or failure of the brand extension. As, all these factors are related with parent brand associations and the perceptions of the consumers about the parent brand. So, the main element is the consumers’ perception and attitudes about the parent brand and the related associations. BENEFITS OF SUCCESSFUL BRAND EXTENSION STRATEGY: The successful brand extension strategy can lead to several benefits and advantages for the organisation. The most important benefit in this regard is of increasing brand equity and customer base for the organisation, which in turn results in increasing the competitiveness and profits of the organisation. The brand extension strategy is mostly used by the organisations because it is more cost effective and economical in comparison to the creation or development of a whole new brand (Taylor, 2004). Same benefit of brand extension strategy has been presented by Chernatony and McDonald (1998). According to Taylor (2004), some of the advantages or benefits of successful brand extension strategy are: 1. Consumer Knowledge: the existing brand image and knowledge makes it easy for the organisation to create awareness for the new product or brand. 2. Consumer Trust: there is high possibility of the increasing trust from the customers for the brand extension on the basis of the brand image of the parent brand. A successful and well executed brand extension can result in increasing the consumer loyalty and satisfaction. 3. Reduce Cost: the brand extension is relatively cost effective as also acknowledged by Smith and Park (1992) and Aaker (2004). 4. Enhancing the Brand Visibility: a well executed brand extension results in increasing and enhancing the overall brand visibility. 5. Source of energy for the brand: the successful brand extension serves as a source of energy for the growth and development of the brand and increasing the brand loyalty and equity in turn. 6. Defensive Strategy: a well planned and successful brand extension can increase the competitiveness of the organisation in the market and in turn stop the competitors from exploiting the market position of the organisation. All of these benefits have been proved to be accurate by the research studies of Reddy, Holak, and Bhat (1994) and Serrao and Botelho (2008). If the organisation is able to successfully lunch the extended brand it will be highly beneficial for the overall brand image and equity. IMPLICATIONS AND EFFECTS OF FAILED BRAND EXTENSION STRATEGY: Despite of all benefits and advantages of the brand extension, if the brand extension is not well planned and failed it results in severe negative implications for the organisation. some of the disadvantages or negative implications of the brand extension strategy are: 1. Diluting the parent brand image: if the brand extension strategy is not well executed it results in diluting the overall brand image of the parent brand. The brand associations of the extended brand can be negative or can result in weakening the pervious brand association. This has been proved by the research study of Martinez and Chernatony (2004). 2. Cannibalisation: the brand extension can results in cannibalising and over shadowing the parent brand. This situation mostly occurs if the new brand is positioned in the market or category which is closely related with the parent brand and the customers give more preferences to the new brand. 3. Reduce the overall brand value: there is also high possibility that the brand extension can results in creating confusion among the customers if it is not well executed. As a result this will negatively affect the overall brand value and equity. The research study of Reddy, Holak, and Bhat (1994), has critically analyse the brand extension strategies which lead to diluting the parent brand image, cannibalising the sales of parent brand, and reduce the overall brand value. One of the main reason of all these factors is highly related brand extension. IMPACT OF BRAND EXTENSION ON THE PARENT BRAND: Different research studies have shown the impact of the parent brand on the overall strategy or brand extension. However, it is important to consider the impact and influence of the brand extension on the parent brand. According to Larry, Thamer, and Ursula, (2009), the brand extension have direct impact on the parent band relationship quality. Also, the brand extensions directly influence the parent brand memory structure and retrieval process (Morrin, 1999). Both research studies have proved that the brand extension directly influence the brand image of the parent brand and also changes the consumers’ attitude towards the parent brand. There is high possibility that the successful brand extension can result in cannibalising the sales and performance of the actual parent brand. According to the research study of Martinez and Pina (2003), the successful brand extension can also have negative influence on the image and sales of the parent brand image. The research study has also identified the situations in which the highly related brand extension has resulted in negatively affecting the parent brand. Hence, there is high possibility that the extended brand is successful but it results in cannibalising the sales of the parent brand. Also, the successful brand extensions can result in diluting the parent brand and hurt the overall image of the parent brand, as also concluded by the research study of Martinez and Chernatony (2004). List of References Aaker, D. (2004). Brand Portfolio Strategy: creating relevance, differentiation, energy, leverage, and clarity. New York: Free Press. Batra, R., Lenk, P., and Wedel, M. (2010). ‘Brand Extension Strategy Planning: empirical estimation of brand category personality fit and atypicality,’ Journal of Marketing Research, vol. 47, no. 2. Bhat, S., and Reddy, S. (2001). ‘The Impact of Parent Brand Attribute Associations and Affect on Brand Extension Evaluation,’ Journal of Business Research, vol. 53, no. 3, pp. 111-122. Buil, I., Chernatony, L., and Hem, L. (2009). ‘Brand extension strategies: perceived fit, brand type, and culture influences,’ European Journal of Marketing, vol. 43, no. 11, pp. 1300 – 1324. Chaternatony, L., and McDonald, M. (1998). Creating Powerful Brands in Consumer, Service, and Industrial Markets. 2nd ed. Oxford: Butterworth-Heinemann. Franzen, G., and Moriarty, S. (2009). The Science and Art of Branding. New York: M.E. Sharpe, Inc. Han, J. (1998). ‘Brand Extensions in a Competitive Context: effects of competitive targets and product attribute typicality on perceived quality,’ Academy of Marketing Science Review, no. 1. Jun-ying, Y., Ping, C., Yan, C. (2007). ‘Brand Extension Strategy Evaluations Based on Consumer Perception,’ Management Sciences and Engineering, ICMSE 2007, Harbin. Larry, N., Thamer, B., and Ursula, B. (2009). ‘The Effect of Brand Extensions on Parent Brand Relationship Quality,’ In Proceedings of Australian and New Zealand Marketing Academy Conference, 2009, ANZMAC, Melbourne: Monash University. Martinez, E., and Chernatony, L. (2004). ‘The Effect of Brand Extension Strategies upon Brand Image,’ Journal of Consumer Marketing, vol. 21, no. 1, pp. 39-50. Martinez, E., and Pina, J. (2003). ‘The Negative Impact of Brand Extensions on Parent Brand Image,’ Journal of Product and Brand Management, vol. 12, no. 7, pp. 432-448. Morrin, M. (1999). ‘The Impact of Brand Extensions on Parent Brand Memory Structure and Retrieval Process,’ Journal of Marketing Research, vol. 36, no. 4, pp. 517-525. Mzungu, S., Merrilees, B., and Miller, D. (2010). ‘Brand Management to Protect Brand Equity: a conceptual model,’ Journal of Brand Management, vol. 17, pp. 605-617. Park, C., McCarthy, M., and Milberg, S. (1993). ‘The Effects of Direct and Associative Brand Extension Strategies on Consumer Response to Brand Extensions,’ Advances in Consumer Research, vol. 20, pp. 28-33. Reddy, S., Holak, S., and Bhat, S. (1994). ‘To Extend or Not to Extend: success determinants of line extensions,’ Journal of Marketing Research, vol. 31, no. 2, pp. 243-262. Serrao, P., and Botelho, D. (2008). ‘Effect of Brand Extension on Brand Image: A study in the Brazilian Context,’ Latin American Advances in Consumer Research, vol. 2, pp. 22-27. Smith, D., and Park, C. (1992). ‘The Effects of Brands Extensions on Market Share and Advertising Efficiency,’ Journal of Market Research, vol. 29, pp. 296-313. Taylor, D. (2004). Brand Stretch: Why 1 in 2 extensions fail and how to beat the odds: a Brandgym workout. NJ: John Wiley & Sons. Volckner, F., and Sattler, H. (2006). ‘Drivers of Brand Extension Success,’ Journal of Marketing, vol. 70, pp. 18-34. Wood, L. (2000). ‘Brands and Brand Equity: definition and management,’ Management Decision, vol. 38, no. 9, pp. 662-669. Read More