Uses of Brand Extension Strategies
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1- PROBLEM AND ITS BACKGROUND
This chapter contains background of our study, statement of the problem, significance and delimitation of the study. Furthermore Definitions of the terms used in this dissertation are also explained in this chapter.
One of the most famous strategies to leverage brand equity is brand extension. It is believed that consumers will favor new extension if new products are under the label of already established brand name.Familiarity and trust with the parent brand is one of the factor due to which companies hope that their consumers will react in a favorable manner. It is beneficial for the companies because of the positive association which consumers already have with the parent brand.
A brand is the identity of a specific product, service, or business. (Kotler 1996). Brand extension denotes to the corporate activity in which companies bring in new products, new product variants or product improvements by leveraging the brand equity of the existing parent brand.
It is believed that instead of establishing an entirely a new brand, extension of brands can be favorable for companies in terms of promotional and awareness activities, distribution, customer perceived risk in buying any product of service. (Keller, 2002) stated that another major factor for which Companies prefer to use brand extension is lower cost. Introducing a new brand into consumer market can be relatively much higher than introducing new product or product variants under the same brand name. This cost can range above millions of rupees and can not guarantee of any success. So instead of launching entirely a new product, most companies prefer brand extension. Successful examples such as Diet Pepsi and Diet Coke benefited from the brand franchise of their parent products. Coca-Cola introduced six extensions and captured a larger market share than the original brand. For example, Coke's extension, Cherry Coke, was successful even without considerable advertisement.
Apart from benefits of brand extension there are some potential problems associated with brand extension, such as failure or semi failure of brands like brand dilution or brand cannibalization. Rather than success of brands, failed extension might maculate the parent brand name thus the result would be reduced market share of the parent brand. Brand association in terms of quality and consistency are crucial for any brand extension to be successful in the eyes of the consumers. Association with the brand is also dependent on consumers own values, preferences, taste, buying situation and manager should always focus on what these dependent variables are and when they come into action. Take an example of new Coke; Coca Cola did not pay attention to what the core brand meant to stand for. It mainly focused on the taste and thought that the taste is the only factor which consumers are looking for. This concept was wrong. Coca cola was unable to identify the attachment of the consumer with the original coke before launching New coke, even though Coca Cola spent a lot of money on conducting research before launching New coke.
Brand dilution occurs when consumers loss the original grasp of brand perception on their minds and no longer associate the brand with a specific product. For instance, Sunsilk may experience brand dilution by loosing its strong identity of hair care and shampoo range by running a number of different categories like mashed potatoes, powdered milk and soups. Too broad varieties of product categories run under same brand can frustrate consumers in thinking which variations of products that actually fit to their perceptions. For Example, too many ranges of Sunsilk shampoo include Sunsilk black, pink, white, yoghurt, dandruff can make customers confused in buying a suitable product which actually fit to their needs. Consumers these days have now become selective and demand innovative products. Those brands which are not unique or innovative in any means eventually got tarnished. Consumers do not prefer such extensions which do not offer any innovation or new features in extended brands. Consumers' perception about parent brand and extended brand is one of the factors which may lead to either success or dilution of brand. Success and failure of brand is also dependent on familiarity with the parent brand and concept of fit between parent brands and extended brand. Brand loyalty by a consumer can be changed in case of brand extension. If brand extension is favorable it may lead to more loyalty towards the parent brand and if brand extension in unfavorable then the effect would be opposite.
As per early research regarding brand extension leads to brand dilution, Aaker and Keller (1990) found insignificant evidence between unsuccessful brand extension leads to brand dilution. Conversely, in a research (Loken and Roedder-John 1993) pointed that inconsistency of product and brand beliefs may lead to brand dilution. Brand dilution and failure of brand can occur when consumer find it difficult to associate the extension with the parent brand, a lack of similarity and familiarity and discrepancy between Integrated marketing communication messages. Brand extension is a strategy which most of the companies are using to minimize risk associated with introducing an entirely new brand and to maximize their profits from the new brand. But in some of the cases brand extension fails, and the reason is the weak brand equity of the parent brand that bears upon the success of the brand extension. If the equity of parent brand is strong, brand extension can be successful and vice versa.
Both Functional and non functional attributes of a brand can harm and eventually dilute the equity of an integrated oriented brand, which means due to the weak brand equity, brand dilution can occur across the parent brand. Such kind of failures of extensions can make customers to create a negative association with the parent brand or even with the brand family. These failures can also agitate and blur the original identity and meaning of a brand even positioning as well. Brand managers already know that there are some advantages and disadvantages associated with brand extension. Nevertheless couple of unsuccessful brand extension in past years was noticed. To be successful in brand extension knowledge related to brand extension should be refined.
Brand extension is successful or not is decided by what factors? One of the most important factors is concept of fit. Fit with the parent brand in terms of quality and image. It is customer perceived fit which plays an important role in making consumers to decide whether extended products are favorable or unfavorable. If fit between parent brand and extended brand is as per consumers' perception then consumers will respond more favorably to that extension and if fit between parent brand and extended brand are not as per consumers' perception then consumer will respond to that extension unfavorable and it might lead to the failure or dilution of the brand.
According to Martinez and de Chernatony (2004) brand image has two types: the general brand image and the product brand image. According to them there would be no negative impact on general brand image if the brand image is strong for example, Nike or Sony. Dilution effect would be more on product image instead of general brand image. Therefore, mostly the customers would stick to their beliefs about the parent brand with respect to its attributes and feeling. Nevertheless their study shows that “brand image can be diluted by brand extension, and beliefs and association with the parent brand can also be changed.
In Pakistani environment companies especially MNCs prefer brand extension because they consider it more convenient. Top most cause for this is that products from multinationals already have an image of developed countries. Due to the past record of products from these developed countries, consumers give them positive response. Due to the image of product from these countries in the mind of the consumers, less cost is incurred by the companies on creating awareness and communicating about the product message with the target audience. These products already have good market share and media coverage; therefore it becomes easy to launch brand extension in Pakistan for such companies.
1.2 Statement of the Problem
Since last couple of years, new product failure has been observed quite a few times. As a result companies now are relying on brand extension instead of launching new products. There are couples of other reasons instead of new brand failures, which companies consider for brand extension, such as low promotion and awareness cost, acceptance and less chances of being failed. Though these advantages are considered by companies to use brand extension as a part of their branding strategy, but apart of these advantages there couple of failed extensions have also been observed in last couple of years. Researchers are now focusing to identify the factors which are useful in evaluating brand extension and factors which play a role in either failure or success of brand extension. In this Thesis we will also try to find about the favorability or unfavorability of brand extension.
Most of the researches which were conducted to know about the favorability or unfavorability of brand extension were focused on consumers' point of view about brand extension. But as a matter fact it is quite difficult for consumers to evaluate whether brand extension is favorable or unfavorable. They can not evaluate it in undifferentiated fashion (Aaker and Keller, 1990, Keller and Aaker, 1992; Dacin and Smith, 1994; Smith and Andres, 1995). Brand extension according to consumers' point of view was taken into consideration many a times, but very low attention was given to the managers' point of view about brand extension (Nijssen and Agustin, 1999).Managers' point of view regarding brand extension can give an extensive knowledge about brand extension because of their deep analysis about consumers and competitors and their personal experiences about the market and the brands. Hence in this thesis we will focus on managers' perspective about brand extension along with consumers' point of view.
Both local and multi nationals are into brand extension from a long time. Such as Nestle , Pakola (Pakola, bubble up, Applesidra, double cola, Pakola milk), Sunsilk (Sunsilk black, Sunsilk white, Sunsilk pink, Sunsilk yoghurt, Sunsilk egg), Haleeb food Pvt Ltd (Milk, Juices, Cream, yoghurt), National Food (Pickle, salt, spices), Shan Food(spices, pickle, food), Unilever Pakistan (Lifebuoy, Soaps, Shampoo, Ice creams, Washing powder), P&G (Soaps, Shampoo, Ice creams, Washing powder) Pakistan By keeping above relation in mind, it will be beneficial to have brand managers' point of view about the success or failure of brand extension.
1.3 Significance of the Study
The significance of this thesis is to explore the use of brand extension strategies in the Pakistan context. Whether the strategy of brand extension is favorable or not, or due to brand extension, brands gets diluted or cannibalized? Since brand extensions is one of the most popular strategies for leveraging brand equity, this study will also focus on brand extension effect on brand equity.
This thesis will focus on brand extension strategies of products from various companies which include Haleeb Foods Ltd Pakistan, Nestle, Pakola and Head & Shoulders. Various companies' insights regarding brand extension will help us to study favorability or unfavorability of brand extension in a well manner.
We will try to achieve this purpose by answering the following research questions.
RQ1. What are the reasons to choose brand extension as a part branding strategy?
RQ2. Is brand extension favorable or Unfavorable?
Above mentioned two research questions were divided further into a set of questions. Purpose was to gain a deep insight to answer these two research questions. By answering above question, we will come to know whether brand extension is favorable or it leads to brand dilution, and whether brand extension is favorable for those companies who prefer extension and are involved in brand extension from couple of decades. We will also come to know that for what reasons companies in Pakistan are using brand extension, and whether brand extension is in accordance with the successful brand extension concept or not. This thesis will be beneficial in indentifying the success rate or failure rate of brand extension of those companies which have been chosen for this thesis.
1.4 Scope and Delimitation
This thesis focused on brand managers of those companies which are operating here in Pakistan. Only four products have been chosen for which research is conducted to identify whether brand extension is favorable or unfavorable. So the product range is limited to four companies only. Another limitation faced during the course of this study was that brand extension strategy for most of the multi national companies are crafted in their home country and then implemented here in Pakistan. Furthermore, Interview process is chosen to know about brand managers' point of view about failure or success of brand extension. Out of 4 brand managers, 2 interviews were taken on telephone and 2 were taken face to face. Due to the limitation of telephonic interview, non verbal responses could not be gauged. Other limitation confronted during the course of research was the fact that majority of multinationals (MNEs) formulate brand extension strategies at their head quarters abroad. Lastly, we came to know that in Pakistan brand extension responsibilities is handled by marketing managers instead of brand managers in some companies.
According to (American Marketing Association 2007 brand is: "A name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition”.
1.5.2 Brand extension
According to (Aaker 1991) brand extension can be defined as utilizing an already established brand to enter from one class of product category to another class of product category. (Kotler 1991) defined brand extension strategy as exploiting a well known and successful brand name either to launch a new or modified product can be termed as brand extension process. As per (Kotler & Armstrong 1990) defined brand extension strategy as an expansion strategy, where companies try to further extend their already established and well known brands into either different other categories or in same category with some modification.
1.5.3 Product Line Extension
(Kotler & Armstrong 1990) defined product line extension as a process of using already established brand name to introduce new items with some extra innovation or modification in the same category. For example Pakola has extended its soft drink named “Pakola” into Pakola raspberry, Pakola leeche, Pakola orange, Pakola lemon. (Aaker 1991) elaborates product line as line extension occurs in the form of introducing new items under the same brand name in the same category with some modification in flavors, colors, specification, ingredients and package sizes. Product line extension is somehow differs with brand extension because brand extension is about using an established brand name to introduce new product and brand in different categories, while line extension leveraging and established brand to introduce new products in same category with some improvements, modification and enhancements.
1.5.4 Brand Dilution
According to (Aaker 1991) brand dilution is depraving of a brand via its overexploitation. This failure of brand occurs when extension is done in a poor manner, or when a brand with poor equity is leveraged to extend it into different other categories. This failure can also occur when an extension becomes unfavorable in the mind of consumers. As per (Kotler & Armstrong 1990), unfavorability of a brand in the mind of the consumers can be due to lack of quality, over pricing, lack of consistency with the parent brand, lack of innovative feature and lack of trust. Brand dilution can be a disaster for a company. Companies use their well known established brands to leverage their equity and image to further extend it for entering into different market segments, which gives them a chance to earn higher profits. This can be true when parent brand equity is strong. But if equity of any brand is weak, then consequences might include dilution or failure of a brand.
1.5.5 Brand Cannibalization
(Kotler 1991) defined brand cannibalization as reduction in sales revenue and diminishing of share of market resulted as the introduction of new products in the same category For example, when diet coke was introduced by Coca Cola, sales for original coke diminished, but eventually it led in expansion of diet soft drink market. In case of Haleeb food, introduction of tea whitener diminished the sales of UHT milk, because consumers previously were using milk for making tea, but with the introduction of tea whitener, some consumers started to prefer tea whitener instead of milk, which resulted in cannibalization of milk category.
1.5.6 Brand Equity
According to (Wood 2000) brand equity can be defined as a profitable relationship between a brand and its consumers. (Kotler and Armstrong 1996) reported that it is quite difficult to measure equity of a brand. Yet a strong brand results in strong brand equity which can be leverage to extend into different other categories. Conversely weaker brand means weak brand equity which can result in failure if extended into different other brands. Strong brand equity may lead to achieve brand loyalty, quality, brand association and awareness. These benefits help companies to incur less cost on communication and awareness.
1.5.7 Brand Association
(Kotler and Armstrong 1996) defined brand association as refers to a degree where consumers discern a brand in rich fashion. Positivity of any brand depends upon how deeply that brand is penetrated in the mind of the consumers in positive fashion. Brand associations are the properties of a brand which consumers recall whenever brand is talked about. Consumer relates a brand name with its implicit or explicit meanings. Brand association can also be termed as the level to which a specific product/service is acknowledged amongst its product or service family. When choosing a brand name, it is important that the name selected must reinforce an essential dimensions and specification or benefit association that forms the position of a product.
2- RESEARCH - METHODOLOGY & PROCEDURE
In this chapter we will discuss and justify methodological choices which we have made for our research. Below mentioned figure presents an overview of the research method which will be used in this chapter for our research.
Source: Adapted from Foster (1998), p.81
2.1 Research Purpose
(Yin 1994) and (Wiedersheim-Paul and Eriksson 1998) found in a research that there are basically three types of research:
According to (Wiedersheim-Paul & Eriksson, 1998) basis purpose of the explanatory research is to craft and specify the issues of the research. This type of research is beneficial when the problem is quite difficult to analyze. According to Patel and Tebelius (1987) explanatory research is used when researcher want to gain more and more information about any specific issue. Moreover, Reynolds (1971) said through explanatory research, researcher can get comprehensive information about research defined problem. (Saunders, Lewis & Thornhill, 2000) found that descriptive research is useful when the problem of research is properly defined and crafted in a well manner. For this purpose, researcher must have complete information about the problem defined in the research. Collection of data must be started after having a clear understanding about the problem defined form research. Furthermore, (Wiedersheim-Paul & Eriksonn 1998) described that the main objective of descriptive research is to identify the applicable facets of the problem of the research. For conducting descriptive research researcher has to deeply define these facets, and there must be a relation between and describe these aspects more thoroughly without researching connections between reasons and indications.
For our research we will initially try to define the reasons behind brand extension. Why do companies in Pakistan prefer engaging in brand and line extension activities? Furthermore, we will also try to identify the favorability and un-favorability of brand extension in Pakistani markets and company's perspective. For gaining deep understanding about the research question defined previously, we have considered exploratory research as a part of our research. The reason is that before this research no study has been taken into consideration to know about brand extension activities in Pakistan and we want to gain as much information as we can. Along with exploratory our research is explanatory as well. We will try to explain the result which we will get through our research. On the basis of our respondents responses we will try to draw a conclusion.
2.2 Research Approach
To gain a deep information about brand extension strategies in Pakistan and whether it is beneficial or not beneficial for Pakistani market we have to consider two approaches, First one Qualitative and second one is Quantitative research. (Ponteerotto, 2006) found that quantitative research approach is used when we have to gain lean descriptions and we use qualitative research when we have to gain comprehensive descriptions.
In our previous chapter, we explained our research question which includes the reasons behind brand extension in Pakistan and advantages and disadvantages of brand extension in Pakistani market's perspective. We will also try to know about the factors leading to the success and failure of brand extension. (Ponterotto 2006) found that to conduct qualitative research, most beneficial instrument can be in-depth interviews because in-depth interviews researcher can define the different facets of human experiences which results in having a deep understanding about the research topic.
(Holme and Solvang 1991) compared quantitative research as a conventional and integrated research approach. In quantitative research approach final results can be presented in the forms of facts and these results are also measureable. One of the main purposes of quantitative research approach is make the consequences of the research of few variables to higher numbers of entities. According to (ibid 2000) qualitative research approach uses qualitative data to draw a conclusion. It draws conclusion on the basis of factors like peoples' attitude, perception, values, likes and dislikes. By using qualitative research approach, results can be drawn by gather information through specific number of entities. This process can provide us the opportunity to gain a deep understanding of the research.
By keeping the above mentioned description in our consideration, our research focus would be qualitative. One reason for choosing qualitative research approach as our research approach is that we want to gain as much information regarding our topic as much we can. This research approach would give us deeper information regarding brand and line extension activities in Pakistani perspective. For conducting our research for brand and line extension activities in Pakistan and its favorability or un-favorability, initially we approached many companies, out of which four companies agreed to provide us information regarding our research topic. Before conducting our interviews with our respondents, we sent a questionnaire to our respondents.. These interviews were not recorded and average time for an interview was approximately thirty to fifty minutes. Finally, to clear some doubts regarding the first three telephone interviews the companies were re-contacted to clear the doubts in some questions.
2.3 Respondents of the study
Following companies were chosen to gain an insight about brand extension favorability or un-favorability from brand managers' perspective. Initially, we approached many seasoned companies, out of which four companies' brand manager agreed to give us time for interviews.
- Haleeb Foods Limited Pakistan
- Head & Shoulders (P&G)
2.3.1 Haleeb Foods Ltd Pakistan
Haleeb Foods Limited is one of the biggest Dairy company of Pakistan which is operating in many different categories such as Juices, UHT milk, Tea whitener, and other dairy products. Haleeb foods came into existence in 1986 Haleeb foods initially started to produce Haleeb Milk. Later on Haleeb foods entered into different other segments of the market and different other categories. Since from its establishment, Haleeb food came up with many of brand and product line extension which Haleeb foods did successfully.
Mr. Adil Suleman brand manager of Haleeb foods limited Pakistan was contacted via telephone to have this interview and to gain insight about brand extension of Haleeb in Pakistan.
Pakola is a beverage company which came into existence in 1950 by Haji Ali Muhammad. Initially Pakola focused on producing a soft drink which represented the drink of Pakistan. Later on as a part of brand and product line extension, Pakola introduced couple of other products which includes flavored soft drink and milk range, mineral water and juices.
Mr. Mubeen Munnawar Marketing Manager of Pakola was contacted to have an interview to gain information regarding brand extension activities of Pakola in Pakistan. It was a face to face interview, and during the course of this interview, we gained deep insight about brand extension activities, favorability and unfavorability of Pakola brand extension.
Nestle was founded in 1866 by Henry Nestle and today Nestle if one the world's largest beverage and food company. Nestle since from last couple of decades is into brand extension and product line extension. As a result of brand and product line extension Nestle has introduced couple of successful brands. Nestle has integrated innovation and renovation techniques in its principles. Nestle extend its brands through innovation and renovation.
Mr. Adnan Tariq, brand manager of Nestle was contacted via telephone to get an insight about Nestle brand extension activities in Pakistan. During this interview Mr. Adnan Tariq gave us some valuable information regarding brand extension activities of Nestle in Pakistan and favorability and unfavorability of Nestle brand extension in Pakistan.
2.3.4 Head & Shoulders
Head & Shoulders is an anti dandruff shampoo range introduced by P&G. After a thorough research a new anti dandruff formula was developed which they used in developing Head & Shoulders and it was first introduced in 1950. Head & Shoulders have got a ranges of shampoo which includes classic clean, citrus breeze, refresh, extra volume, dry scalp care.
Mr. Shaif Shafiq, who is associated with P&G from a long time, was contacted to gain valuable information about brand extension strategy of Head & Shoulders in Pakistan. Information the success or failure of Head & Shoulders was also gained. During the course of this interview questions related our topic were asked and responses were noted down for future consideration.
2.4 Research Instrument
As per (Breakwell 1995) interviews as a research instrument can be useful because it is considered as a very flexible tools and due to its numerosity of phase in the research work. According to (ibid 2000) it is easy to use interviews as a part of research instrument because of its multi faceted nature of the research design. Observations and questionnaire can be used as a part of interviews to collect data for our research approach. Using interviews as a part of our research, we first took our research framework into our consideration. By keeping our research framework in our mind we developed a questionnaire which consisted of series of questions regarding reasons for brand extension and its favorability or unfavorability. Some irrelevant questions were late on excluded from our questionnaire before conducting our interviews.
2.5 Sources of Data
(Wiedersheim-Paul and Erikson 1997) purposed two types of data collection method. First one is Primary data and second one Secondary data collection. Primary data is the first hand information which is collected for some specific purpose while second hand data is already published data which was collected for some other purpose or some other research. Moreover, (ibid 2000) shed some light on data collection methods as, there can be three different types of data collection method. First one is observation, second one is interviews and the last one is documentation. As per (Yin 1994) interviews can be one of the most reliable source for collecting data. Using interviews as a data collection method, interviewee and interviewer both can focus on the topic. Furthermore, (ibid, 2000) elaborated that interviews can be useful when it comes to gain insights of the interviewee about any specific topic.
2.5.1 Primary Data
In previous section we focused more on that secondary data collection method for research can not be ample to identify more accurate and reliable information about any specific topic of research. When it comes to identify about the reason behind brand and product line extension and its favorability or unfavorability, it is important to determine what companies and their brand managers think about brand extension and product line extension. For this purpose use of primary data collection can be beneficial. Thus interviews are selected as an instrument for primary data collection method. These interviews include face to face and telephonic interviews. According to (Churchill, Gilbert A., Iacobucci and JR. Dawn, 2005), “proper communication can be a reliable and beneficial instrument for data collection. The reason is that in communication method no one forces researchers to wait for a certain event to be occurred”. (p. 167). Nevertheless, communication techniques have some drawbacks. In communication techniques it is not confirmed whether the answer to the research question will be obtained in an accurate manner. Using communication has some weaknesses. One of a reason for this is that responses are dependent on interviewees' will to pass on the expected information.
2.5.2 Secondary Data
For our research regarding brand extension and product line extension in Pakistani perspective, we also focused on collecting some secondary data. As per (Churchill, Gilbert A., Iacobucci and JR. Dawn, 2005) “for conducting any research, we must begin with searching for secondary information”. (p, 167). Using secondary data collection for gaining information can be beneficial in terms of having an initial idea about what have already been researched about the topic. Some useful information about research topic, already published information can also be gained in a timely fashion. Apart from advantages of secondary data collection method, there are some drawbacks associated with secondary data collection method. Secondary data can not be sufficient to give complete information regarding specific question of research. Furthermore, already published information was collected for some other purpose which not necessarily answers the question which you have included in your thesis. Indeed, according to them first of all, the data had been “collected for someone else's purposes”, so it is unusual that they can answer your problem perfectly.
By keeping above mentioned literature about primary data and secondary data in our mind, we focused both on secondary data and primary data. For primary information, we chose interviews as a data collection method and for secondary data collection we considered various research papers of different profound authors. We also considered companies' websites, magazines and other sources.
2.6 Treatment of the data
(Miles and Huberman, 1994) purposed that basically to analyze any data collected for a specific purpose can be analyzed in three stages. First stage is reduction of data collected. Second is displaying data and third one is verification of data or drawing conclusion on the basis of collected data. Datareduction can be defined as a process of collecting data, making it simple and then transform it into well structured form so that on the basis of this data conclusion can be drawn in an effective manner. Datadisplaycan be termed as presenting collected data in an organized fashion so that a conclusion can be made on the basis on this presented data. Conclusion drawing/verification can be defined as the process of analyzing the collected data and then identify the importance of the findings by mentioning regularities, casual flows and prepositions.
By keeping above mentioned three stages of treatment of collected data in our mind, we firstly reduced the collected data as per the requirement of our research question. After refining the collected data, in presentation of data section, we presented the data in a well fashion. Lastly on the basis of collected data we try to find a conclusion in our final chapter.
3- REVIEW OF THE LITERATURE AND STUDIES
In this chapter, model of our thesis has been defined. Main areas related to brand extension were focused to be introduced in this chapter, which created a basis for our analysis, it also helped us to craft the way towards the main purpose of this thesis. Therefore, this chapter starts with a brief elaboration about what is the theory of brand, branding, brand extension, logic forextension of brands, and benefits and disadvantages related toextension of brands. Reasons which result in either the success or failure of brand extension will also be discussed in this chapter.
3.1 Related Literature
According to American Marketing Association a brand is: "A name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition," (American Marketing Association 2007). Kotler and Armstrong (2007) has defined brand as a name, term, sign, symbol, design or a combination of these attributes used by the firms for identifying their products and to differentiate the competitor's brands. Brand also helps customers to find the manufacturers, which is a very important element of brand.
As per (Daivs 2002), companies now have paid more attention towards brands because of the increasing importance of brand extension among consumers. Previously companies were paying more attention towards strengthening their assets which include capital and equipments. (Nilsen, 1998) found in a research that word band was deduced from a term named ‘branna' which means to burn. Therefore, branding since from a very long time has been used for the purpose of identification and to create differentiation of their belongings. Branding used to be a way in which owner used to place a type of mark to it belongings. (Ibid, 2000)elaborates that in early ages people used branding to make their belongings unique and identifiable as compare to the belongings of others. Mostly people of early ages used to place a mark or symbols on their cattle through burning stamps.This branding was adopted in early ages for making it easier for customer to identify their cattle.
As per (Saif & Awais 2007), to symbolize quality, brand name was used in previous ages, and even today it is used for the same purpose. In Egypt, branding was used to identify their animals, and in case of theft, animals could be identified easily. According to (Farghuhar 1990), Egyptians brick producers used to mark symbols even on bricks for the purpose making their bricks unique among customer as compare to the bricks of competitors. As per (Keller, 1999), some of the known advantages of brands include easy penetration in the market and credence by dealers. These advantages are very important because search cost is reduced for retailers and consumers due to these advantages.
(Czinkota & Ronkainen, 2001)found that creating awareness about any product is not limited these days, as the world has now become a global village, so creating awareness and communicating with customer is not a difficult task these days. Due to this new world which can be termed as ‘global village' has itself created a lot of awareness about international brands. Couples of international brands such as Mr. Burger, KFC, and McDonald were already famous even before they launched their franchises here in Pakistan. As per (Blois 2000), twentieth century continued the evolution of brands, and many of the recognizable brands were introduced in this era. By the mid of twentieth century, branding concept gained acceleration. Branding became an important strategic marketing activity for marketers. (Nijssen 1999) stated that since the nineties, branding became an important asset for the companies. Mostly all the powerful corporations have some strong brands, which proves the significance of brands.
(Kapoor 2005)said that identification of products is not the only reason form branding these days. Branding is used to reflect quality of the products, and to gain a competitive advantage over competitors. It also helps consumers to make their purchase decision in a well manner. Brands not only reflect quality but it helps in creating competitive advantage and helps customers in making purchase decisions Keller (1996) elaborates that one of a core purpose of branding is to create association and awareness about the brands, which should go with the accordance of company's strategic goals and objectives. (Ambler & Styles, 1996) stated that there are two basis views of branding, product and Holistic view. Product view states that brands are an addition to the product category while the holistic view states that brands are not limited to product only, but all the 4p's of marketing mix reflects in holistic view of brands. Brand posses some specific kind of attributes, which provides satisfaction to the consumers. It is beyond just offering a product or service. These attributes are not restricted to tangibility or rationality but are inclusive of intangible or invisible features
According to (Wells & Burnett & Moriarty 2000) branding is not just about making different identity of the product. Branding is also used to build a relationship with the customers and to create preferences and loyalties between customers and a brand. Therefore, brands are not only used for being distinguished by the customers but also to build positioning of brand in the eyes of the customers. Through brands, more value can be added to the products. So instead of creating an identity, brands are also about creating value in the mind of the consumers.
3.1.3 Brand Extension
As per Aaker (1991), "Brand extension is using an established name of one product category for entering another product category.” While according to Kotler (1991), "Brand extension is the strategy of using a successful brand name for introducing a new product." Another popular definition is which (Hartman & Price & Duncan 1990) defined as, " Utilizing a popular brand name to launch new products or services into a product class that is new for the company is called franchising strategy”
According to Kotler & Armstrong (2007) firms can follow many strategies for brand extensions such as new product launching, multi-branding and or launching a totally new brand. The concept of multi- branding infers launching extra brands under the same product in which the firm is already competing. The main advantage lies in this strategy as the firm can target a larger customer base through its additional value added services and features
(Kotler Philip, 2006) gave an example of P&G who is using same strategy by launching many brands of shampoo range, which capture different segments of customers. On the other hand, it follows a strategy of launching a completely new brand, when an existing brand (Cash Cow) turned into a dog as per growth share matrix, which also known as BCG matrix.
Concepts of brand extension and line extension are not alike. Brand extension and line extension both are different. Ambler & Styles (1997) describes line extension as when any company introduces a new product in the same category under the same brand name by improving or adding some extra components or flavors or new packaging and colors, this extension is known as line extension. While, introducing marginally changed product in a new product category under a successful brand name is know as brand extension.
3.1.4 Brand Equity
According to (Wood, 2000) Brand equity can be defined as a relationship between brands and customers, which result in a future profit. As per (Kotler and Armstrong, 1996)it is quite tiresome to measure equity of any brand.However powerful brand name leads to higher brand equity and it also helps companies to gain higher loyalty, awareness, association and quality perceived by the customers. Brand equity has some major advantage which includes brand awareness and loyalty of consumers. These benefits help in reducing cost incur in marketing of products. Through brand equity, companies can improve brand awareness, quality of the brand as perceived by the consumers and association of brand with the consumers. Thus Brands should be used diligently to achieve these objectives. (Kotler & Armstrong 1996) and (Ambler and Styles, 1997) purposes that there are two aspects through which equity of a brand can be measured. Financial evaluation approach and consumer based approach. Monetary value of a brand is associated with financial evaluation approach to measure the equity of any brand, and consumer based approach is measured through focusing on the brand. It is measured through how much value consumers give to a brand.
(Keller 1998)described that the function of brands is not only creating differentiation or competing for gaining higher market shares, but to gain competitive advantage over competitors through creating association with customers and building awareness about brand and making high quality image in the mind of the consumers. (Keller 1998) further stated that a strong brand name always go with a proper understanding about the needs, wants, demands and preferences of consumers which in return give a competitive advantage over competitors. While weak brand names do not comply with this strategy and consequently loose their share comparatively to strong brand images. Strong brand images always focuses on effective marketing programs which exceeds the customers' expectations and eventually creating a delightful effect for consumers. (Pitta & Katsanis, 1995) stated that Equity of a brand can play a vital role in attracting prospective customers and new segments of the market. According to (Ambler & Styles 1997) concept of brand equity from around last one decade has coincided with the concept of brand extension and product line extension. Brand extension and brand equity is a two way relation. Both can influence each other positively. Brand extension can be influenced by Brand equity positively and brand equity can also be influenced positively by brand extension. As a result of this relation highly valued brands gain higher success because of their high brand equity. Usually consumer prefer brand with higher brand equity. Positive image of brands also play a vital role for a brand position of a firm. Brand with strong image in the mind of the consumers have higher tendency to create differentiation and extension for a specific product category. (Pitta & Katsanis, 1995) further said that brands with strong image allows firms to make consumers to pay higher prices for their brands and such brands can make it difficult for the consumer to switch to any other brand. (Pitta & Katsanis 1995) added that Investment and brand equity both short period of time. Brand equity cycle is comprised of growth, reinforcement or decay, and is vulnerable to competitors. Organizational actions have a direct bearing on the brand equity. Strong brand equity also helps in reducing the introduction cost of new brands.
(Kapoor 2005) stated that definition of brand equity is based on two perspectives, strategic marketing and financial theory perspective. Aaker's definition is: "Brand equity is a set of assets / liabilities associated with a brand such as name awareness, loyal customers, perceived quality, and associations that are linked to the brand that add/subtract value to the product or service being offered" (Aaker 1996, p.7). Keller (1993) stated that equity of a brand is about perception of the consumers about brand equity, hence, could be associated as consumer based brand equity. (Keller, 1993) defined brand equity as "The differential effect of brand knowledge on consumer response to the marketing of the brand” (p. 2). Above mentioned definitions of brand equity could be used to craft a long term growth strategy. According to (Aaker, 1990) more influencing variable to influence “trial purchase” are brand name familiarity and promotional level of a brand. These influencing variables can influence trail purchase more strongly than other variables, such as, packaging, distribution, and awareness of brand which is achieved by advertising. (Aaker, 1990)further stated that established brand name is one of the most powerful factor to accelerate trial purchase.
As per (Aaker, 1990), at introduction stage of brands, cost of marketing is mostly higher because at introductory stage awareness of the brand is low. Those companies, who have strong equity of their brands, have two advantages at the introductory stage of brands. Firms with strong “brand equity” have two advantages at the introduction stage of new brand. Cost of marketing will be considerably low, because of leveraging already established brand name, and firms can charge higher prices, which ultimately result in higher profitability. Customer retention is more effective in terms of cost as compare to attract new customers. (Aaker, 1992) added that strong brands have more loyal customers than weak brand, therefore, customer retention for such strong brands is more easier than customer retention for weaker brands.
3.1.5 Reasons for Brand Extension
According to a research of (John T. Gourville, 2006), new products failure rate is around 45 to 85 percent. The failure rate with such percentage is striking. This failure rate depends upon category of the product. From the last couple of years failure rate is consistent. Brand managers are now focusing more on brand extension strategy now a day, due to the fact that new product launches mostly result in a failure. According to (Kapferer, 2001) brand extension strategy has some advantages for the companies due to which companies theses days are preferring brand and product line extension as a part of their branding strategy. Some of the main reasons for brand extension are as follow.
220.127.116.11 Growth for the firms
Through extending brands and into same category or into different categories, firms can grow vigorously. This is one of the core objectives of the firms. (Sharp, 1993) elaborated that by extending range of brands into same or different other categories, firms can grow rapidly while incurring less expenses. Comparatively to launching new brands, brand extension can attract large share of the market quickly and profoundly. Brand extension can also be useful in attracting new customers through penetrating into new segments of the market, fulfilling the needs and wants of new consumers. That's how firms can improve their coverage to markets, which ultimately results in improved sales and enhanced profits for the firm.
18.104.22.168 Changing consumers' preferences
(Ambler and Styles, 1997) purposed that research can play an important role in identifying industry trends. Mostly, to know about industry trends, firms conduct researches. Firms always seek to lead these industry trends and needs and wants of the consumers. According to (Weilbacher, 1995) most of the companies find it beneficial to extend their brands into same or different other categories to make their customers satisfied. To be successful in the market, companies must have an idea about their customers' preferences about their needs and tastes.
22.214.171.124 Reduced Investment
(Aaker, 1992) defined that one of the other main reasons to brand extension is related to advantages related to monetary terms. To launch entirely a new brand, firms have to conduct research, while in case of brand extension; firms don't have to conduct extensive researches. This saves a lot of cost and time as well. Brand extensions are also attractive in terms of economic benefits associated for companies. Apart of research, firms can also save cost related to the promotional activities. In case of brand extension, companies use the brand name which is already established and well imaged in the mind of the consumers, which save cost of creating awareness. This also save huge amount of investment for promotional activities
126.96.36.199 Economies of Scale
One of a main objective of firms is to achieve higher returns on their investments, which firms can achieve through reducing per unit cost of promotion as a result of brand and product line extension. When firm extend their brands, they can easily be benefited by this advantage. As a result of brand extension or product line extension, per unit cost, associated with the investment in promotional activities decreases. Moreover, (Sjodin, 2007) found that it becomes easier for the companies to make buyers know about the extended brands because customers are already mindful about the parent brand which makes consumer to respond more to the marketing activities of the extended brands. Apparently it seems that reduction in cost and increased profits are more or less same, but they are not. Due to the low cost of production and competition in terms of price, some of the market segments are more attracting for the firms because they are more profitable. In a study (Buday, 1989) found thatout of so many factors for the success of extended brands, most important factor is outward supply chain. Brands which are already established can be benefited in terms of charging higher or premium prices for extension of brands under such established brand names.
188.8.131.52 Product Tryouts
According to (Ambler and Styles, 1997) brand extension can be beneficial in terms of making consumers to tryout extended brands. In case of extension, it becomes easier because consumer already have an image about parent brand in their minds, this leads to put more trust in trying out extended products of established brands. (Amber and styles, 1997) said that quality association of consumer with parent brand leads to the success of extended brands as well, because of higher possibility of channelizing the same quality to the extended brands. (Pitta and Prevel Katsansis, 1995) found that strategies of promotion are useful to create knowingness about the parent brand, which in turn also reflects in its extended products as well.
184.108.40.206 Environmental Change
As per (Kapferer, 2001) to cope with the changing surrounding, companies also use brand and product line extension. Changes of industry environment can be of two types. First one is internal and second one is external. Due to theses changes in the industry environment, firms have to launch couple of new extension to meet the changing consumer preferences and needs. This strategy helps firms to either in maintain their current market share or increase their market share.
220.127.116.11 Intense competition
According to (Randall, 1997) brand extension and product line extension is useful for firms to compete with their competitors in an effective fashion. Through extension strategy firms can cater the needs of certain segments of markets, those segments which are based on consumers' different needs and preferences. Through extending product line, product range can also be increased which can be helpful in acquiring more space on retailers' shelves.
18.104.22.168 Transfer of Expertise and Knowledge
According to a study conducted by (Amble and Styles) through research and development, companies develop specialization for technology and knowledge when they engage with parent brand and same specialization can also be channelized in extended product range. But it will depend on the ultimate consumer who is going to decide whether the transferability is favorable or unfavorable and the extent and level of transferability.
On completion of acquiring detail knowledge about reasons for brand extension, we have now developed our bases for conducting our research to answer our research question one. In upcoming section we will discuss the benefits and risks associated with brand extension to develop an understanding about our research question 2.
3.1.6 Benefits of Brand Extension
22.214.171.124 Consumer Knowledge
As per (Taylor, 2004) consumers have considerable information about the parent brand quality and image due to the fact that consumers have used it before. Usage of the brand makes consumer to build a perception about the brand image and quality and reputation. This perception can either be favorable or unfavorable. Favorable perception about parent brand can also reflect in extended brands as well. In such case, firms have to put less effort in creating awareness for extended brands. It also requires less cost to communicate about extended products to the consumers.
126.96.36.199 Consumer Trust
(Taylor, 2004) found in a research that consumers seem to be more loyal to those brands which they put more trust to. Loyalty with the brands leads to the trust over the extended brands as well. This trust is a result of consumers' familiarity with the parent brands. These trusts of consumers make firms to extend their brand further.
188.8.131.52 Parent brand visibility
(Taylor, 2004) explained that one of the other pros of extension of core brand is to make parent brand more visible in the mind of the consumers. Extension strategy is more feasible in terms of cost as compare to launching new brands, because in extension of core brand or product line extension, previously demonstrated grace is used. Extension of brand and products line extension also plays an important role in improving the profile of parent brand.
184.108.40.206 Revival of parent brands
(Aaker, 2004) found that with a long period of time, core brands become fainted, which requires revitalization of core brand. Brand extension is one of the ways to make fainted brands revitalized again. Brand extension can play an important role for providing medium of vitality to the core brand. Brand extension can also play a vital role in safeguarding firm from its competitors.
3.1.7 Risks in Brand Extension
220.127.116.11 Dilution of Parent Brand
Apart from advantages of brand and product line strategy there are some disadvantages associated with brand extension and product line extension. (Deborah Reodder, 1993) elaborated that brand extension some of the times can lead to dilution or failure of core brands. Some of the factors can be taken into consideration which leads to the dilution of core brands. One of these factors is consumer evaluation of the extended brands which reflect on parent brand as making it diluted or failed. (Henrik Sjodin, 2007) found that if consumers evaluate any of the extension as favorable then it reflects positively on core brands, but if consumers evaluate any of extended brand as unfavorable then it will reflect as negatively on core brand, which can either maculate or destroy core brands.
18.104.22.168 Lowering Brand Credibility
(Aaker, 2004) said that one of the risks associated with brand extension or product line extension is that, sometimes it can make consumers mixed up with extensions, which ultimately makes it difficult for the consumers to evaluate the core brands in favorable fashion. This can lower the trust of consumers over extended and core brands. It must be in brand managers' consideration while adopting brand extension strategy. Extending core brands into too many products might also be unsuitable for firms.
22.214.171.124 Cannibalization Effect
(Aaker & Keller, 1990) found that cannibalization of brands is one of the other disadvantage associated with brand and product line extension. Cannibalization occurs as a result of introducing a new product to serve a purpose which could also be served by already existed product in the same category. For example as in case of Haleeb food, UHT milk was serving different purposes which also included tea making. But with the launch of tea whitener, which was launched in the same category, resulted as cannibalization of sales of UHT milk. (Sharp 1993; Farquhar, 1990) in a study found that core brands which have established name and equity can also be failed or cannibalized.
3.2 Company Literature
3.2.1 Head & Shoulders
Head & Shoulders is an anti dandruff shampoo range introduced by P&G. After a thorough research a new anti dandruff formula was developed which they used in developing Head & Shoulders and it was first introduced in 1950. Head & Shoulders have got ranges of shampoo which includes classic clean, citrus breeze, refresh, extra volume, dry scalp care.
Pakola is a beverage company which came into existence in 1950 by Haji Ali Muhammad. Initially Pakola focused on producing a soft drink which represented the drink of Pakistan. Later on as a part of brand and product line extension, Pakola introduced couple of other products which includes flavored soft drink and milk range, mineral water and juices.
Pakola is one of the most popular brands in Pakistan. The brand was created on 14th August, 1950. As per our slogan, “DIL BOLA Pakola”, we believe that Pakola is the heart beat of the
nation and with its amazing taste holds the potential to ride the taste buds of the consumers at home and abroad. Although the green drink “Pakola Ice Cream Soda” is anonyms with the name Pakola, but that's not all, Pakola gives sensation by bottling other fruity flavors namely Pakola Orange, Pakola Lychee, Pakola Raspberry, Pakola Fresh Lime and Pakola Vino.
Headquarters in Lahore, the company operates five production facilities. Two of its factories in Sheikhupura and Kabirwala are multi product factories. One factory in Islamabad and two in Karachi produce bottled water. Through its effective marketing and a vast sales and distribution
network thought out the country, it ensures that its products are made available to consumers whenever, wherever and however. Nestlé Company is registered in Pakistan under the company ordinance 1984. As it's a public company but still not registered in any Stock Exchange in PAKISTAN Over all company market share is 67%. Nestlé share as compared to nrpur, Haleeb and other are moves around 20to 30%. Total turnover: - 13.5 Billion Rupee
3.2.4 Haleeb Foods Ltd Pakistan
Haleeb Foods Limited is the largest Dairy Processing Company in Pakistan mainly dealing in Dairy products, Juices, and Ultra Heat Treatment milk (UHT). The company was established in
the year 1986. The first product of the company was Haleeb Milk. Ever since then, the company has continued to come up with several successful brands and line extensions for customers mainly through product and package innovations. Today Haleeb holds market leader position in many food categories with strong brand portfolio composing of national and international brand such as Haleeb, Candia, Dairy Queen, Tea Max, Skimz, Tropico and Good Day.
3.3 Areas of further studies
Since last several years, topic of brand extension was considered for academic and professional purposes. Our research for brand and line extension has more significance because of its uniqueness in Pakistan. Very little attention has been paid to conduct research on brand and line extension activities in Pakistan. Nevertheless, we in our research have focused on brand managers' perspective about brand and line extension activities in Pakistan. Therefore, in future research regarding brand extension can be conducted for consumers, wholesalers or retailers perspective. In our research we have paid attention to the brand and line extension strategies of only four companies named ‘Pakola', ‘Nestle', ‘Haleeb Foods', and ‘Head & Shoulders'. In future research on brand and line extension strategies for different companies can also be conducted. It would give more facts for this type of research. Future research can also take into consideration the cultural differences in various countries by comparing and contrasting brand extensions activities in different geographical territories.
4- PRESENTATION ANALYSIS
Our literature review shows that the core objective of companies behind brand extension is achieving growth objectives for the company in terms of increased market share quickly and profoundly. Apart of growth for the company, there are many other related advantages of brand extension which companies can not ignore. According to (Kapferer, 2001)one of the main objective of companies is to maintain and enhanced their current market share. Firms also look for success in those market segments as well which have got good potential for growth.Furthermore, (Kim and Lavack, 1996)stated that firms can leverage their well known brand names to acquire higher sales and profits through entering new market segments which were previously not taken into consideration.
4.1 Presentation of Data
4.1.1 Reasons for Brand Extension
126.96.36.199 Growth for the firms
Answering to a question related to growth of Pakola through brand extension Mr. Mubeen Munnawar, Marketing Manager Pakola said,
Yes our company achieved growth in terms of increased market share and profitability through brand extension and line extension. We seemed growth opportunities in different categories, thus extended our brands into different other brands to capture those market segments and we performed well. Since year 2000, we have extended our brands into categories like flavored Milk and Drinking water because we seemed growth opportunities in these segments. Therefore we decided to enter into these segments which resulted in increased market share as a whole in beverage industry. Eventually as a result of extension our profitability increased which indicated our increased growth in beverage industry.
Same question was asked from Adil Suleman, Brand manager, HFL and he said,
"Definitely, our company benefited through brand and line extension and this is clearly evident as a matter of fact that HFL is growing rapidly as a leading packaged food company. One of the core reasons for this growth is our brand extension and line extension strategy as a part of branding strategy. We extended our brand as brand extension such Juices, UHT Milk, Food and Dairy products. As a part of line extension we extended on the basis of different flavors, sizes and packages".
Nestle brand manager, Adnan Tariq responded to the above question as follow,
“Yes, we definitely achieved growth objectives in multiple industries. Though, growth for the company through brand extensio
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