The Indian market and the Indian consumer are evolving. India is currently on its growth path, and India, currently the worlds twelfth-largest consumer market today is expected to become the fifth-largest consumer market by 2025 (Zachariah, 2012).The Indian consumer has become aware and is moving from need based to ‘kind’ of need based, thanks to the upbeat mood of the economy and population’s increasing integration with globalised lifestyle and consumption patterns (Gupta,2011).The Indian consumer market, primarily dominated by the younger generation, is also becoming increasingly sophisticated and brand conscious. The Indian consumer today prefers to carry out a research and compare various brands and product features, prices etc before making a purchase decision. In most cases their evaluation and the purchase decision is based on their previous experience with a brand or a friend’s suggestion. These changes in the Indian market and the Indian consumer have created opportunities as well as challenges for the Indian and the multinational companies operating in India, and these challenges have called for innovative and pragmatic responses from the marketers (winning with the Indian consumer, 2012 )(Zainulbhai, 2009).Thus, various companies, in order, to respond to the constantly changing consumers needs and to understand what they truly value, are trying to build their brands and businesses around this new Indian consumer. To keep at pace with the evolving market and to claim success in this rapidly changing marketplace, companies are innovating with increasing speed, efficiency, and quality and launching new products to satisfy constantly changing consumer demands. New product and brand development has thus, become one of the most powerful business activities (Gupta,2011). But one of the challenges of brand management in today’s over-cluttered world of information is to generate strong and positive feelings towards a specific brand and build brand equity. The new products, brands thus, easily become prone to failures because building brand equity is difficult due to many factors like the high level of advertisement costs and the increasing competition (Zachariah,2012). Therefore, in an effort to reduce new product and brand failure rates and to maximize the returns for their stakeholders, more and more companies with strong brand equity are opting for brand extensions, as they believe that innovating products within established brands that consumers trust is a powerful strategy(Gupta, 2011)
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1.1.2 Brand extension, an important marketing strategy
Brand extension is a marketing strategy, in which a firm marketing a product with a well developed image uses the existing brand name, in the same or a different product category. Organizations use this strategy to increase and leverage brand equity. It increases awareness of the brand name and increases profitability from offerings in more than one product category. A brand’s “extendibility” depends on how strong consumer’s associations are to the brand’s values and goals (Jonathan Ablett, 2007).Brand extension is, thus one of the, “new product development “strategies to introduce new products, create awareness and promote new product’s benefits and to create sales, since launching a new brand is risky, time consuming and also requires a big budget. But like everything else there are various advantages as well as disadvantages of brand extensions. Some of the benefits being that it makes acceptance of new product easy and also has feedback benefits for the parent brand and the organization. Whereas, on the other hand, if the brand is extended into an unrelated market or is extended too far, then it might lose its reliability, and also, the new product might generate implications that in turn might damage the image of the core brand. Therefore, poor choices for brand extension may dilute and deteriorate the core brand and damage the brand equity, and result in a diluted or severely damaged brand image. In the past, along with many successful brand extensions there have also been many failures. The failure of extension may come from difficulty of connecting with parent brand, a lack of similarity and familiarity and inconsistent messages conveyed to the consumer(Ashok Gopal,2006).In case of brand extension failures, the equity of a brand can be significantly affected, and they can also disturb and confuse the original brand image and meaning in the mind of the consumer. Thus the marketers need to pay close attention to brand extension strategy, because one small mistake can be of considerable damage to the brand equity. A number of elements related to the existing brands, in a company’s portfolio need to be considered. The current equity of the brand should be transferrable to the extended product/category and it is also essential that the effect a brand’s current equity will have in the branding strategy is well understood. So basically while evaluating a brand extension opportunity, some fundamental questions need to be considered by the brand managers, i.e. if it makes sense strategically, for the brand and the company in terms of its product and brand portfolio ; further, if it makes sense strategically, then will the change ‘fit’ in terms of brand’s equity ; and lastly, if the change makes sense strategically and the brand logically fits into the new market, then will it be profitable for the company.
1.1.3 Role of consumer in evaluation of brand extension
Another important factor to be closely studied by the marketers when considering brand extension is consumer. In fact, consumers’ evaluation of brand extension plays a major role in determining success or failure of an extension, with consumer playing a moderating role in the evaluation process. It is the consumer, who has the ability to process information into useful knowledge by measuring and comparing the difference between core brand and extension product on the basis of former experience and knowledge. Consumers’ evaluation is a part of consumers’ buying behavior process, which often takes place over a period of time. The consumers’ buying behavior process consists of, searching for, evaluating, purchasing and using of products and services that the consumers’ expect will satisfy their needs. The overall goal during this decision process is to evaluate various alternatives and choose the product that satisfies them in an optimal way. Therefore the brand managers and the marketers, considering brand extensions are required to study the consumer buying behavior for better understanding of the consumer.
1.1.4 Brand extensions in the world of fashion
In the world of brand extensions, fashion brands have a relatively easy path from clothing to fashion accessories. It is not uncommon, for example, to see brand names that may have started their lives associated with fine clothing become equally known for handbags, footwear, jewelry and other accessories. In fashion industry, brands from the luxury segment also get into extensions, through brand diffusion, wherein they mix haute couture with lower priced range of ready to wear, at the same time there are some luxury brands refuse to go in for the same, because they feel that this would just confuse the existing customers of the brand. But a perfect example of a fashion brand, which has successfully got into various line and category extensions, is Armani. The brand has successfully extended itself by sticking to the core values of the brand i.e. by been consistent in its strategy of launching exclusive products to a high end category of customers. Similarly, many fashion brands have successfully evolved and extended themselves into various lines and categories. For instance, Ralph Lauren, a brand that began almost 40 years ago with a collection of ties has today grown into an entire world, redefining American style. The brand includes children’s wear, eyewear, underwear, jeans wear, shoes, accessories, house wares, furs, luggage, and a range of many other products, and over the years the brand has not suffered from brand image dilution due to rapid expansion and instead has only strengthened with time is because, it has been able to maintain its “American Aristocrat” image all along, i.e. the brand has always stood for providing quality products, creating worlds and inviting people to take part in his in dream, and has been able to maintain it across the extensions. But not all brand extensions are accepted by the consumers, like in case of levi’s. In the early 1980, when the brand had attempted to introduce a tailored classics line of men’s suits, the extension was not well accepted by the consumers due to the lack of fit between the brand’s informal, rugged, outdoor image and the image the company sought from its suits.
1.2 Problem Identification
Consumers play a major role in determining the success and the failure of the brand extension. Consumers’ evaluation of brand-extensions is in turn influenced by various factors. Most of the existing literature on the same focuses on the western countries, thus limiting the validity of the findings to our country. This study aims to fill this gap by studying consumer’s evaluation of brand extensions in the Indian context, for the fashion and lifestyle brands in India.
1.3 Project Objective
To define the role of brand equity in shaping consumers’ attitude about a brand extension.
To determine the various factors that influence Indian consumers’ evaluations of brand extensions, especially of premium fashion and lifestyle brands based in Delhi, NCR.
1.4 Research Approach
Literature Review: The approach to writing this paper included literature review to understand the context of consumers’ decision making, brand extension (branding strategy), and consumers’ attitude towards brands extensions. For a good understanding of the same, various case studies of brand extensions in the west and in India were explored. Studying various success and failure stories, helped in determining how consumers’ evaluate brand extensions and the various steps a brand needs to adopt when considering a brand extension.
Methodology: Primary and secondary research methods were used for the study. Primary research method was used to ascertain the learning and reflections from the literature review for the Indian market and consumer. It was done with the help of quantitative research by conducting structured surveys, with the help of self administered questionnaires, with close ended questions. Secondary research method was used to study the premium fashion and lifestyle brands in India already into or working towards brand extensions.
The research has helped in establishing the role and importance of various factors in shaping consumers’ attitude about brand extension and also the significance of consumers’ evaluation of brand extension in making it a success or a failure.
1.6 Significance and Value Since, India has heterogeneous consumer segments, and every segment has different needs, this study will be of great help for fashion and lifestyle brands in taking insightful decisions within consumers’ decision making/consumers’ evaluation parameters regarding brand extension in India. Moreover, a lot of fashion and lifestyle brands in India are diversifying into new segments due to many reasons like in order to increase their shop productivity, to make shoppers spend more time in their shops and buy more, etc, but at the same time there is also a lot of risk involved in extending into new segment. This study will help them to understand consumer’s evaluation criteria, which will in turn help them create a connection with their consumers.
The limitation of the study is that the research could not explore the entire Indian market due to geographical constraints.
Chapter 2: Literature Review
Principles of Marketing, by Philip Kotler and Gary Armstrong and the American Marketing Association (2008) defined brand as “a name, term, sign / symbol or a combination of these that identifies the maker or seller of the product and differentiates them from those of the competition.” Aaker’s (1991) widely accepted definition of a brand is “to identify the goods or services of whether one seller or a group of sellers, and to differentiate those goods or services from those of competitors.” Brands are thus, valuable assets and tools influencing consumer behavior which includes awareness, choice, use, satisfaction, recommendation, trust and loyalty. They reduce information search costs and risk for consumers and deliver quality, values, promises, and lifestyle enhancement (Czellar, 2010) .According to Keller (2002) the benefits of a strong brand can be categorized under 4 different categories, namely, product-related effects, price-related effects, communication-related effects and channel related effects. Product-related effects of brand include consumer product evaluations, consumer confidence, perceptions of quality, and purchase rate positively related to a brand name. If consumers are well aware of a brand, their attitude and their purchase intention toward the brand are increased. Price-related effects refer to the fact that brand leaders have higher priced positions and consumers have a lower level of price sensitivity toward those leaders. Communication-related effects refer to how the evaluation of brand advertising can be positively biased when consumers have positive feelings toward a brand which is a well known and well-liked brand and the effect of the well-known brand, which is most likely to have competitive advantage in marketing activities, is the channel-related effect.
2.2 Fashion and Branding
According to Solomon and Rabolt (2004), fashion is defined as a style that is accepted by a large group of people at a given time. Generally people use the term fashion and style interchangeably. In the fashion context, consumers choose a certain fashion brand over others because they are associated with a certain style (Ferney et al.2005).The way individuals have their own distinctive personalities and styles in the manner of living, speaking as well as dressing, the brands too can be associated with a particular personality, because branding has the propensity to distinguish a brand from others by creating an individual brand personality, by using different brand elements like name, logo, symbol, and package design(Newman and Patel ,2002).Branding is important in fashion retailing as the brand can project a specific image like personality, sex, lifestyle and age, to the target consumers. Like in case of a sports brand, the attribute of “sporty “feeling would be formed in consumers’ mind whereas a casual fashion brand would be associated with the “casual” attribute (Keller 2002). The brand image allows fashion merchandise to communicate a distinct symbolic meaning, through merchandise, store atmosphere, sales associate attraction with customers, and marketing campaign, between the retailers and the consumers (Ferney et al, 2005). Newman and Patel discovered that brand image is crucial in this intensely competitive fashion retail sector. As different types of fashion consumers are matched with particular clothing styles, brand image can create a point of difference and assist consumers in selecting a suitable fashion brand. A successful fashion brand can capture the market share and maintain a positive relationship with its customers, therefore creating an appropriate fashion brand is one of the primary ways for the marketers to differentiate the products from the competitors. In brief, fashion and branding are closely related (Solomon and Rabolt 2004; Newman and Patel, 2002).
2.3 Brand Equity
In Building Strong Brands, David Aaker defined “brand equity” as a set of brand assets and liabilities linked to the brand-its name and symbols-that add value to, or subtract value from, a product or service. The major asset categories are brand loyalty, brand name awareness, perceived quality and brand associations.
http://www.tvonlinesurveys.com/enquete/Brand%20equity%20model%20Aaker.bmp(Aaker’s Brand Equity Model)
The model mainly talks about how brand equity is formed of five components and how each has a role to play in the performance of the brand and indicates that how the brand equity will rise with the increase in brand loyalty, brand name awareness, and perceived quality and with stronger and positive brand associations and also with the increase in the number of brand related proprietary assets. This model can thus be used to get to grips with a brand’s equity and gain insight into the relation between the different brand equity components and the future performance of the brand. Apart from the five components, the model also reflects indicators or the consequences of the pursued branding policy. (Aaker, 1991)
The five components and the factors having an influence on these components are:
Brand loyalty: Aaker (1991) defines brand loyalty as ‘the attachment that a customer has to a brand’. Two different levels of loyalty are classified: behavioral and cognitive loyalty (Keller, 1998). Behavioral loyalty can be indicated by a number of repeated purchases (Keller, 1998) or commitment to buy the brand as a primary choice .Cognitive loyalty refers to the consumers’ intention to buy the brand as the first choice .Another indicator of loyalty is the customer’s willingness to pay higher price for a brand in comparison with another brand offering similar benefits. The extent to which people are loyal to a brand is expressed in the following factors:
Reduced marketing costs, as hanging on to loyal customers is way cheaper than charming potential new customers.
Trade leverage, as loyal customers represent a stable source of revenue for the distributive level.
Attracting new customers, as current customers can help boost name awareness and hence bring in new customers
Time to respond to competitive threats, as loyal customers that are not quick to switch brands give a company more time to respond to competitive threats. (Aaker, 1991)
Brand awareness: It is a key determinant of brand equity. It is defined as an individual’s ability to recall and recognize a brand. Top-of-mind and brand dominance is other levels of awareness included by Aaker (1996) in measuring awareness. Awareness can affect customers’ perceptions, which lead to different brand choice and even loyalty (Aaker, 1996). A brand with strong brand recall (unaided awareness) and top of mind can affect customers’ perceptions, which lead to different customer choice inside a product category. The extent to which a brand is known among the public ,can be measured using the following parameters:
Anchor to which associations can be attached (depending on the strength of the brand name, more or fewer associations can be attached to it, which will, in turn ,eventually influence brand awareness)
Familiarity and liking (consumers with a positive attitude towards a brand ,will talk about it more and spread brand awareness)
Signal of substance/commitment to a brand.
Brand to be considered during the purchasing process (to what extent does the brand form part of the evoked set of brands in a consumer’s mind) (Aaker, 1991)
Perceived quality: It is defined as the customer’s judgment about a product’s overall excellence or superiority in comparison to alternative’s brand and overall superiority that ultimately motivates the customer to purchase the product (Aaker and Jacobson, 1994). It is difficult for customers to make a rational judgment of the quality. They are likely using quality attributes like color, flavor, form, and appearance of the product and the availability of production information to ‘infer’ quality. The extent to which a brand is considered to provide good quality products can be measured on the basis of the following criteria:
The quality offered by the product / brand is a reason to buy it.
Level of differentiation/position in relation to competing brands.
Price, as the product becomes more complex to assess and status is at play, consumers tend to take price as a quality indicator.
Availability in different sales channels, i.e. consumers have a higher quality perception of brands that are widely available.
The number of brand extensions (this can tell the consumer the brand stands for a certain quality guarantee that is applicable on a wide scale) (Aaker, 1991)
Brand associations: Consumer must first be aware of the brand in order to develop a set of associations. Brand association contains the meaning of the brand for consumers; it is anything linked in memory to a brand (Aaker, 1991). Brand associations are mostly grouped into a product-related attribute like brand performance and non product related attributes like brand personality and organizational associations. Customers evaluate a product not merely by whether the product can perform the functions for which it is designed for but the reasons to buy this brand over the competitors. Brand personalities include symbolic attributes (Aaker, 1996; Keller, 1993) which are the intangible features that meet consumers’ needs for social approval, personal expression or self-esteem. The associations triggered by a brand can be assessed on the basis of the following indicators:
The extent to which a brand name is able to retrieve associations from the consumer’s brain, such as information from TV advertising.
The extent to which association contribute to brand differentiation in relation to the competition (these can be abstract association or associations with concrete product benefits)
The extent to which brand associations play a role in the buying process (the greater this extent ,the higher the total brand equity)
The extent to which brand associations create positive attitude/feelings(the greater this extent, the higher the total brand equity)
The number of brand extensions in the market (the greater this number, the greater the opportunity to add brand associations) (Aaker, 1991)
Other proprietary assets: Some of the examples are patent and intellectual property rights, relations with trade partners, etc. (the more the proprietary rights a brand has accumulated, the greater the brand’s competitive edge in those fields) (Aaker, 1991)
The model also provides an insight into the criteria that indicate to what degree actual value is created with both consumer and company due to pursued branding policy. However, this model does not make a clear distinction between added value brand can have for the consumer /customer and added value it can have for the brand owner/company and does not even discuss the process that goes into building strong brands, and is only useful to gain insight into the various brand equity components and the relation between them. (Wood, 2000)
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2.4 Keller’s Customer-based Brand equity model
This model depicts the process that goes into building strong brands. It is set in the realm of brand added value, i.e. the focus of this model is on the added value a brand offers its customers/consumers. Kevin Lane Keller introduced this customer-based brand equity model, and has defined it as “the differential effect that consumers’ brand knowledge has on their response to the marketing of that brand” (Keller 1993).Differential consumer response is mainly based on consumers’ knowledge of the brand as well as the favorability of associations. The model is made up of various steps, which should be taken in a fixed order. The model talks about the six dimensions of brand equity, namely, brand salience, brand performance, brand imagery, consumer judgments, consumer feelings and brand resonance. According to Keller, the highest level of brand equity is realized when the top of the pyramid is attained. In his view, the resonance comes about when the consumer has a high level of awareness of and familiarity with the brand and holds some strong, favorable and unique associations in memory. (Keller, Strategic brand management, 2002)
(Keller’s customer based brand equity model)
The six dimensions and the process that goes into building of strong brands, as identified by Keller are:
Brand Salience: The first step in the development of a strong brand involves describing its identity, and revolves around the question: “Who am I? “.To achieve this, the brand managers need to ensure that the customers should be able to identify with the brand. A clear associative link between the brand and a specific product class/category has to be established in the mind of the consumer, this also further helps in creating a solid footing for the building of brand awareness and knowledge. Salience basically refers to how familiar consumers are with a brand and whether the brand is actively considered when consumers find themselves in purchase or consumption situations. A high level of salience means that a consumer has knowledge of both the depth and the width of a brand, (depth here refers to the ease with which a brand can be activated in the consumer’s brain, while width refers to the extent to which happens when the consumer is making a purchase decision.)Brand Salience is thus a precondition for moving up on the brand pyramid. (Keller, 2002) (Keller, Strategic Brand Management: a european perspective, 2008)
Brand performance and brand imagery: when brand salience has been realized, the process moves on to the next steps in the development of brand meaning. The second step basically answers the question: “What am I?”This question is answered by using intrinsic (tangible) and extrinsic (intangible) characteristics of a brand.(Intrinsic characteristics refer to the degree to which a product/service is seen to perform by consumers, and extrinsic characteristics refers to how consumers think about a brand. In order to boost overall brand equity the focus needs to be on both brand performance and brand imagery, since they together add on to the brand associations. Raising brand performance starts by delivering a product/service that fulfills current customers’ needs, followed by attempts to surpass the triggered customer expectations. Brand imagery on the other hand can be increased by tailoring to consumers’pshyco-social needs. Imagery refers to what people think about a brand (in terms of value and meaning) and not so much about what exactly the product does or can do (in terms of functionality).It can be raised directly by creating brand experience or indirectly through advertisement. In the end, these two dimensions together need to bring about certain brand associations that are strong, positive and unique. These dimensions also play an important role in creating brand loyalty. (Keller, 2002)
Brand judgments and brand feelings: After realizing strong, positive and unique brand associations, the third step deals with the way consumers think and feel about a brand. This step basically contains the responses to the efforts from step 2(performance and imagery).the brand is evaluated and judged at this stage, formulating a certain attitude towards the brand. The two dimensions at play here are: brand judgments (rational) and brand feelings (emotional).the former denotes the opinion consumers have of a brand, and how they evaluate the brand. The opinion in this case is formed rationally and based on three criteria, quality, reliability and superiority. Brand feelings on the other hand are the emotional reactions by consumers to brands and their marketing efforts. What feelings does the brand evoke in the consumer, and in the social environment? Are these feelings intense or not, positive or negative? These feelings can very strong and can have an affect on brand observation during actual use of the product. These feelings are based on various factors, namely, warmth, pleasure, tension, security, social acceptance and self respect. (Keller, 2002)
Brand resonance: once when the consumer has acquired a positive idea of the brand in both a rational and an emotional sense, a solid base is created to further jump on to the last stage. This stage answers the question whether the consumer is willing to enter into a (lasting) relationship with a brand. If this stage is attained, then it’s considered as the brand has achieved true brand loyalty, where the consumer identifies him/herself with the values of the brand to a considerable degree and is willing to invest in a relationship. Brand resonance is an ultimate relationship between a brand and a consumer. The closeness of the bond can be measured using factors like loyalty, emotional bond, being a member of a brand community and active brand involvement. (Keller, 2002)
Brand equity if used appropriately, possesses a huge potential to create advantages and benefits for the firm, the trade and the consumer. Some of the benefits of strong brand equity being, improved perceptions of product performance, greater loyalty, less vulnerability to competitive marketing actions and marketing crises, larger margins , more inelastic consumer response to price increases and more elastic consumer response to price decreases ,greater trade cooperation and support ,increased marketing communication effectiveness along with licensing opportunities and additional brand extension opportunities.(Wood ,2000 ; Feldwick, 1996)
2.5 Brand equity and brand extension
Brand equity can be leveraged by building it, borrowing it, or by buying it. Building brand equity is not an easy task due to the rapid increase in the number of brands and the intense competition that is prevalent in many industries. Thus, the brands generally prefer to opt for the alternatives to building brand equity i.e. by borrowing it or buying it. (Moisescu, 2005; Tuominen, 1999) Since the study focuses on the role of brand equity in brand extensions, leveraging brand equity by borrowing it, will be discussed.
Borrowing brand equity: According to Tuominen (1999), many firms borrow on the brand equity in their brand names by extending existing brand names to other products, which is referred to as brand extension. There are two types of brand extensions namely, a line and a category extension. A line extension is when a current brand name is used to enter new market segment in the existing product class, whereas, a category extension is when the current brand name is used to enter a different product class. A line extension occurs when a company introduces additional items in the same product category under the same brand name. A line extension often involves a different size, color, flavor or ingredient, a different form or a different application for the brand (Richard Elliot, 2006). Products in line extensions are technically congruent, i.e., similar in many attributes. They belong to the same product category or subclass. The vast majority of new-product activity consists of line extensions. Excess manufacturing capacity often drives a company to introduce additional items. The company might want to meet the consumers’ desire for variety. The company may recognize a latent consumer want and try to capitalize on it (Moisescu, 2005). The company may want to match a competitor’s successful line extension. Many companies introduce line extensions primarily to command more shelf space from resellers. Line extensions involve risks. There is a chance that the brand name will lose its specific meaning. This is called the line-extension trap (Eun Young Kim, 2000) .The other risk is that many line extensions will not sell enough to cover their deve
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