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

Virgin and its enormous offer of Brand Extensions

Most of the people know Virgin as a plane society . For many of them, it is suprising that this company is a lot more than that. Virgin Group, founded by the successful businessman Richard Branson, includes more than 400 companies. Virgin drinks, Virgin Mobile, Virgin Ware and Virgin Radio are just a few examples of what the name Virgin stands for.

But is this wide variety of products related to one name a positive thing in business?

Despite the large offer, Virgin didn't make it to market leader in any of its businesses. The core business of Virgin is entertainment, travelling and lifestyle, but in these economic areas a company can produce a lot of different products. The problem with Virgin is, according to my opinion, that people in the end will forget which kind of company Virgin really is. Being not innovative just to get lower prices doesn't make a product very popular. 

Sometimes it's better for a company to follow the rules of specialisation in order to approve the quality of its products and its reputation.

Laura Christiaens

http://www.brandchannel.com/features_profile.asp?pr_id=215

Consumer attitudes towards brand extensions

Firms are using brand extensions (for example: Ferrari) to decrease the cost of launching a product into a new market. That cost has risen enormously the last few years. By connecting the new product to a well-known brand name, companies can reduce the financial risk of introducing a product in a new market by providing consumers the familiarity of and knowledge about an established brand.

According to studies of a marketing company there is a positive link between high quality of the original brand and the interest of the consumer in the new product. Their attitude against the brand extension was also positive when the extension was not regarded as too easy to make. These findings show us that more and more companies will use brand extensions because it's an easy and less expensive way to enter a product in a new market.  

Melanie Ciers

http://www.jstor.org/pss/1252171

Kinect system that could revolutionise gaming launched by Microsoft

Could you imagine playing a video game without hand controllers? Microsoft revolutionises the world of video games by launching the Kinect System. This Computer system can recognize gestures and body movements, made by players. 

Microsoft is the multinational corporation that is well known for its computer software such as Microsoft Windows and Microsoft Office, but also for others products like the Windows Phone. Nowadays, it shows a lot of interest for the entertainment industry. After introducing the XBox, it's now time for a new dimension. Microsoft knew a hard time facing the popularity of Nintendo's Wii, but heads now to a topyear with its newest invention in the video games industry.

Critics are very excited concerning the system, but there's one little practical problem: it is recommended that players are six to eight feet removed from the television, so they need a lot of space. Does everyone have a large livingroom?

People who are interested will have to be fast, because retail and pre-orders are going up quickly.


Laura Christiaens

source: http://www.guardian.co.uk/technology/2010/nov/08/kinect-system-launched-microsoft

BMW extends again

BMW is one of the big players in the motor industry; it has made his name in the upper category for almost a century. This enormous success mainly comes from their big role in the automobile industry, but a lot of knowledge has also been put into their motorcycle division.

Their consistency in development and innovation has caught the world’s attention for years. Just like other big Corporations e.g. Apple, Porsche, they tend to extend their "cool" brand. BMW has already had some ideas for the scooter sector, but last week they announced a brand new premium scooter (concept c) in their latest press release. Will the concept be a big hit? I don’t know. But I do know for a fact that at the rate they release these new and ecological concepts, they will definitely keep broadening their margins in the near future.

Stephan Cammaert

http://www.bmwblog.com/2010/11/02/world-premiere-bmw-concept-c/

Apple is everywhere

Apple is one of those companies that are expanding continuously. They started by making computers, then launched themselves into the mp3 market and a bit later also introduced a new kind of cell phone. Their latest brand extension, the iPad is a great thing for all who loves technical pinches. Now they are thinking about opening an online store to sell Mac apps.

A rising question here is if you can call all these different products, that Apple makes, brand extensions? Or are they  actually line extensions? As to my opinion, they are line extensions, because all products are still related to the original product, the computer. Apple doesn't have to enter new markets, their target group remains the same.

Melanie Ciers

http://www.guardian.co.uk/technology/2010/nov/07/apple-steve-jobs-mac-apps