Brand extension or stretching?

We have been talking about some interesting cases of brand extension and if they could be successful in the future or not. It was also a good point from Melanie and Laura to look for which particular brands it would be a good or a bad thing to make use of brand extensions because of the consumer’s needs.

But the question we haven’t asked yet is whether we are talking about a brand extension or a brand stretching?

Brand Extension as we talked about it, refers to the use of a successful brand name to launch a new or modified product in the same market. For example; The Lucozade brand one of the Energy water market leaders in the US, they started out with baby juices and are now most famous for their energy drinks.
Brand Stretching on the other hand refers to the use of a famous brand name for products in unrelated markets; basically it is building whole new businesses under one big name. For example; the Virgin brand, this emporium of Sir Richard Brandson, also “ The Stretch King” has created over 200 different businesses each under the name “ Virgin …”.

Stephan Cammaert

http://brandchannel.com/features_effect.asp?pf_id=198

Brand extensions and its advantages

All these examples we have given about specific brand extensions are all different cases. Will they really break through? And if they will, how long will it take? The only thing you can do is speculate, but what we know for a fact from proven cases are some advantages and disadvantages from brand extension.

If a famous brand extends, the acceptance for new products is easier, this is because of the quality the brand has brought to the consumers with their previous products. This is, as Melanie and Laura told before, if there is a need for those new goods. If the market is hot the advantages for the brand are big, it increases the brand image to a higher level, but also the costs of developing a new product will be much lower and production will much more efficient.

But there are also some possible disadvantages for the brand such as loss of reliability; damage to the image of the core business of the brand and in case of failure the brand would also receive a big hit.

Stephan Cammaert

http://www.managementstudyguide.com/brand-extension.htm

Don't forget your customer's needs

To make brand extensions succeed, it's not only important to link the new product to the familiar brand name, it's also of utmost importance to take the customer into account. Unlike what I said in my previous article, it's not always enough to have a link to the previous product, but there also is a necessity of a similar target group.

Brand extensions are more likely to be successfull if the customers are similar, even if the products are not. A lot of examples can confirm this. As seen in class, Volkswagen made a big mistake by making a car of a higher standard than they used to. They forgot that their customers can't afford that luxury. And those who can, will automatically buy a more luxurious brand, such as Audi, BMW or Mercedes. Volkswagen's marketing management didn't consider their customer's needs.

Clearly, it makes no sense to try to extend a brand to a dissimilar product with dissimilar customers. If you want to launch a dissimilar product, you should at least maintain your customers.

Melanie Ciers

Source: Harvard Business Review: Customer-Centered Brand Management

Making a decision: Brand extension, do or don't?

After we've been studying the popular concept of brand extension, it's time to make a few conclusions. There are several forms of brand extension and not every company is predestined to produce a successful extension. According to the article, the company has to answer two questions, before starting to think about applying the concept.

The first question is about making sure that the companies specific brand equity can be extended to others sectors in the market. One thing we can notice here, is the fact that in brand extending, a company cannot diversify and be successful in too many sectors at the same time.

The second question deals with the most crucial thing in bussiness: is there money to make with this concept in our company? Some companies think: the more different extensions we produce, the more money we can earn. However, in most cases, specialisation is very appreciated by customers.

There's one point I'm very sure of: the success of a brand extension has a lot to do with the name and reputation of the company. Finally, brand extension should all be about maximising the advantages for customers, the company and its stakeholders.

Laura Christiaens

source: http://www.brandingstrategyinsider.com/2008/12/when-brand-power-threatens-brand-extension.html#more

Starbucks Extension Tempts Failure

There aren't many people who haven't heard about Starbucks. Starbucks is a phenomenon of the 21st century: you go to work but in stead of drinking a cup of coffee at home, you stop at Starbucks Café and get your first flavoured coffee of the day. Now, this successful brand has launched a new coffee, Starbucks Via.

This kind of instant coffee can also be made by consumers at home. A big success you think?

In contrast to the success of Starbucks Coffee, this product doesn't seem to become very popular.

The reasons for this faillure, in my opinion, are very obvious. Starbucks isn't just about the coffee, but certainly also about the pleasure of getting your fresh take-away coffee or enjoing your coffee and a moment away from the rush of daily life in the comfortable seats. It is an experience. The instant coffee just doesn't give the satisfaction that consumers expect of a Starbucks product.

Laura Christiaens

source: http://www.brandingstrategyinsider.com/2009/05/starbucks-extension-tempts-failure.html#more

TV meets web, web meets TV

The worlds leading search tool, “Google” has announced another possible game changer. We all know Google as our daily helper through the web and its absence has almost become unthinkable. Throughout the last few years Google has brought us its own browser “Chrome” which has been really successful, but is also fully developing its own Smartphone/Mobile phone.

A while back Google revealed a brand new product, “Google TV; where the web meets TV and TV meets the web”, a much more efficient and advanced digital TV tuner. If Google TV will be able to compete with a leading player such as TiVo is a good question, but Google TV has also the advantage of having the biggest library of movies in its pocket; “YouTube”. So the launch of this brand new concept is something the keep your eyes on, because this could also mean a big deal for YouTube if they start cooping together! 

Stephan Cammaert.

http://digitaldaily.allthingsd.com/20100520/google-announces-google-tv/

Diluting brand beliefs

Until now I associated brand extension with a positive thing, but using this technique of marketing can also have a negative impact on costumers and their believe in the brand. As you can read in Laura's blog, it's possible that brands are extending too much. Connecting a lot af different products to the same brand name confuses people. Few companies are good at everything, so I think it's better to specialize. This makes it easier to improve product knowledge.

According to the source brand extensions can cause two negative consequences. First of all, there is a possibility that repeated brand extensions will take down the reputation of the original brand. Otherwise an unsuccessful brand extension will dilute the equity associated with a well-established brand name.

Despite these concerns, companies still keep using brand extensions as an easy way to launch a product into a new market.

Melanie Ciers

http://www.jstor.org/pss/1251855