Does brand extension impact parent brand : a case of Johnson Submitted to:Sir Tariq Jalees

Group members:

•Irfan •M.ali shah •Sumaiya•Laiqa ahmed

Introduction This case study discusses the numerous

reasons why companies switch to brand extensions and why not a new brand category ?

Also it shows the impacts a brand extension can have on the parent brand which can be both positive and negative in nature and later affect it.

•According to aaker et.al., a lot of companies adopt the strategy of

brand extension to have benefits from the existing brand knowledge in the current markets.

•Like wise according to Keller ;When companies launch new products and

market them under the umbrella of a well known brand name then in return the failure as well as the marketing costs are reduced .

Why companies adopt brand extension?

1 ) Financial benefits

While developing a brand ,firms invest heavily to make it. Though it is a very costly process but one can have successful returns If the success is achieved.(Keller)

But firms always do not have the financial power to create new brand names for each product they develop from time to time, so they use a more Economical strategy to introduce a product under the name of a existing product.

•Here James ,recommends that companies should use their name of a known ,successful and well established brand when developing a product rather then creating a new product name.

•Amble suggested that introducing a product under brand extension has more chances of survival then products introduced with a new brand name.

Therefore firms are usually in favor of brand extensions as it helps them minimize their new product introduction cost as well as less risk as compared to the launch of new products in the market.

2) Parent brand image

•According to Keller More then 80 % of firms resort to brand

extensions as a way of marketing goods and services.

When firms develop brands under the name of the parent brand ,the marketers believe that the consumers evaluate brand extensions as favorable because the then the consumers transfer their positive attitudes or effects to the extension made.

•Though the this transfer of attitude may not always be automatically positive and may depend on the perception the consumers holds about the parent brand and its extension.

•Companies consider to use their successful parent brand when making a brand extension to gain possible positive attitudes from the consumers thus lowering the risk of brand awareness and recognition for the consumers and the consumers easily refer to the new brand extension as being familiar with the parent brand.

Literature review

Companies are thinking of new strategies day by day of how to reduce costs involved and adopt new successful methods . Currently brand extension is a new way of saving cost and making the launch of the new product successful in the market.

Therefore companies launch new products or have product line extensions in order to avoid the risks involved in introducing the new brand.

Attainment of economics scale factor• Many companies use the image of the existing

brands in new markets and launch new products such as Virgin group.

Though Virgin group is mainly regarded as a popular music retailer and publisher but by using its previous successful repute ,it is also found launching their existing brands in the new markets.

They were historically referred to the music business but now they have successfully entered into their own airlines, financial advisory and Cola production.(Randall).

Rational for brand extension ?According to Buday,

The companies rational behind extending brands is to attain economies of scale .

The companies main consideration while launching a new product is to capture the market share and improve their net profit margin by using the parent brand name.

The question arises how do companies do that ?

•Usually companies use the one brand name and introduce the product in different categories ,this in return will help them to reduce their communication (promotion) expenses as the new brand uses the name of the known parent brand.

•The customer in respect of the known parent brand , easily gains familiarity with the product due the customers awareness and attachment with the parent brand.

While making a brand extension…• According to Ambler and Styles ,It is important for companies to have knowledge of

brand ,its mechanism ,the extension techniques and their implementation in the market which makes a brand successful and easy positioning.

When launching new brand ,the risk of failure is maximized so there is no need to change the product development process and thus increasing the chances for all new initiated products to be successful in market. (brassington and pettitt )

Eight stages of new product development Brassington and pettitt have suggested eight stage

of new product development framework which describe the product development process.

• Idea generation• Idea screening• Concept development and testing• Business analysis• Product development • Test marketing• Commercialization and monitoring• Evaluation

Studies on customer brand evaluation

1. The first study was made by Aaker and Keller in 1990.

They started with two Research Designs to evaluate the customer brand evaluation .

1st study result was that the customer associations with any specific brand can either harm or improve the evaluation about brand extensions. if the parent brand is recognized and well positioned, the brand extension acceptability in the market will increase.

•Parent Brand becomes the basis for successful acceptance of its extensions. (Aaker and Keller).

2. The second study was conducted by Sundae and Brodie (1993).

• Adopted the same methodology and hypothesis tested by both Aaker and Keller.

• Some of their results were relevant with previous researchers studies while some results were different.

Conclusion of research

Conclusion of research 2• The relationship between how difficult it is to

make the product class of the extension was not significant

• If the parent brand perceived quality is high then the customer attitude towards acceptance of product extension is higher.

• They also supported the Aaker and Keller conclusion that the fit between the parents brand product class and the extensions product class has a positive association with the attitudes one has towards the extension.

3. Third study was conducted by Bottomley and Doyle in 1996.

• Both the authors were interested to test the results of both studies conducted previously conducted on customer brand evaluation.

Conclusion of research 3

• Perceived quality and perceived fit of the parent brands are the two factors which make brand extension association in customer mind.

• Study results did not support the Aaker and Keller notion that an easy to make extension is viewed as more favorable by the customer.