Posted: May 25th, 2022

Disadvantages of employing brand extension

Brand Extension

The disadvantages of employing brand extension strategy

This work compeers and contrasts the merits and demerits of implementing brand extension a s a growth strategy by various firms. This is done by means of practical examples. In the end of the debate, the paper indicates why it is better to adopt the extension strategy as opposed to shunning it due to its numerous demerits. A discussion of the key points is presented and then a final conclusion to hammer out the reason for the need to implement the strategy

Brand extension, which entails the use of a given brand name which is established in a given product class in entering another product class is noted to be hugely beneficial to several organizations (Tauber,1988).Keller (2003) pointed out that the concept of brand extension is clearly defined whenever a given firm employs an established brand name in the introduction of a totally new product. This strategy is employed in order to leverage as well as increase brand equity (Pitta and Katsanis,1995). The strategy is often regarded as beneficial since it reduces the costs of introduction market research as well as advertisement while increasing the possibilities of success as a consequence of the higher rate of preference that is derived from the already existing brand equity (Chen and Liu,2004). Keller (1993) points out that all studies on the successful extension of a brand are based on the assumption that a given brand is a collection of associations. The parent association can therefore successfully influence the reactions of the consumers to the given brand extension as noted by Bhat & Reddy (2001). The antecedents of a successful brand extension are parent brand effect and parent brand. Despite all the advantages of employing brand extension as strategy, Taylor (2004) indicated that one in two brand extension initiatives often fail. Some critics denounce the concept of brand extension vigorously since they feel that it makes companies to lose focus as well as makes their customers confused. Other experts however maintain that the concept of brand extension is very critical to a company’s growth strategy. In this paper we are we present these conflicting views and then chose one which best serves the interest of both the shareholder while leaving the customer both pleased and satisfied.

The Advantages of brand extension

The brand extension strategy is popular due to its nature of being less risky as well as cheaper in comparison to the creation of an entirely new brand (Taylor, 2004,p.1). De Chaternatony and McDonald (1998,p.135) indicated a similar economical advantage through indicating that the economics involved in the establishment of an entirely new brand are continuously pushing firms towards the stretching of their already existing brand name into the new markets. The main motivation for adopting the brand extension strategies is the high cost of R&D coupled with the existing statistics on the rate of failure of new brands.

According to Taylor (2004) several advantages are attributed to the use the brand extension strategy as opposed to the creation of new brands. These are as follows;

Consumer knowledge

The strong brand is employed in the promotion of totally new product. The strong brand makes it less necessary to create imagery and awareness. The fact that the association with the main brand is already established mans that the remaining task is to communicate the specific benefits to be derived from the new innovation as pointed out by Taylor (2004,p.1).

Customer trust

The already existing and relatively well established brands are regarded as a promise of high quality as well as enhanced utility (usefulness) for the consumers. The extension would therefore benefits from the fame and the resulting excellent opinion in the creation of a compelling amount of value proposition in the newly created market segment (Taylor,2004,p.1)

The 2003 Brandygym survey for instance indicated that fifty three percent of consumers in the United Kingdom would be more inclined towards the trial of total new brand products which is associated with a brand that they already knew against three percent who would go for totally ne brand with no association with any known brand (Taylor,2004,p.1).

Viot (2007,p42) supported this notion by pointing out that the customer would be expecting to somehow transfer the information that they have from the extension of the brand. Should the general opinion of a given brand be favorable then the behavior of the consumers towards the particular extension would be positive. The successful brand extension can then result in brand loyalty. This is because a consumer who is satisfied by a given extension would be very willing to repurchase the given brand. In other words, purchase intention is created. For instance the Caterpillar Equipment customer is likely to buy their footwear as well.

Cost reduction

When compared to the process and cost of launching a totally new brand, the brand extension strategy is generally less costly since the new product generally employs a similar name as the brand which is already known. As Taylor (2004,p.4) puts it, studies indicate that the cost for each unit trial is thirty six percent lower while the repurchase price is generally higher with the brand extension strategy.

This idea is confirmed by Smith & Park (1992,p.296) when they suggested that in regard to the effectiveness of advertisement for a given market share, the budget for advertisement for brand extension is generally smaller as compared for the case of new brands.

Aaker (2004,p.194) provided some advantages that are almost similar with the ones provided by Viot (2007).

The enhancement of the level of brand visibility

Whenever a brand appears in another category of products and services, the strategy can be more efficient and effective method of brand building as opposed to using money to launch rigorous advertisement campaigns.

Additionally, the relationship of the given brand with its customers in regard to customer loyalty is most likely to be strengthened.

Provision of an energy source for a given brand

Should a certain brand image be weak, the use of brand extension may give it anew lifeline. The extension may provide energy for a given brand since it would increase the frequency of brand association with excellent quality, large range of products as well as innovations. Additionally, the customer would be able to see the brand name at amore frequent pace and thus strengthening the idea that the brand is a good one. Viot (2007) therefore stated that a certain brand’s presence on a number of products helps in improving the brand’s popularity. The chances of coming into contact with a certain brand in the process of communication as well as on supermarkets shelves are increase which in turn improves the level of brand memorization.

Defensive strategy

A brand extension can effectively prevent competitors from acquiring or even exploiting a sizeable market share and foothold in a given market and can prove to be worth while as a growth strategy (Aaker,2004).

Brand extension and the level of perceived quality

Zeithaml (1988,p.20) pointed out that perceived quality is a global evaluation of the judgment of a consumer of the level of ‘good’ or ‘bad’ of a given product. It can also refer to a higher abstraction level as compared to the other product impression attributes. Aaker and Keller (1990,p.29) postulated that brands that possess a high quality association is extremely beneficial to the brand extension. However, if a brand is closely associated with an inferior quality, then the extension is likely to create more harm than good.

The work of Dacin and Smith (1994,p.232) indicated that the level of consistency of the level of perceived quality if various products that have an affiliation with a core brand can effectively influence the potency of brand extension. The implication of this is that the higher the level of evaluation of the perceived quality in terms of consistency, the higher the level of acceptance of the brand extension. This means that high level of perceived quality leads to more confidence towards a given brand.

The disadvantages of employing brand extension strategy

Brand dilution

The concept of brand extension is pointed out by Viot (2007) to involve the use of the most critical asset5s of a company (its brand name). This therefore means that it represents a high level of risk for the already existing brand since the existing brand image is considerably diluted. Park, McCarthy & Milberg (1993,p.60) noted that the negative as well as the positive consequences of extension are best described by the reciprocity effects which is defined as the change in the level of initial consumer behavior about a certain brand after an extension has been initiated.

Viot (2007) went ahead to explain that the concept of brand extension can cause a lot of damage to a given brand. This is because a dilution of the brand capital may occur by the realization of certain undesirable associations as well as by the weakening of the already existing associations.

It is worth noting that an accident caused by a certain product may as well lead to the tarnishing of the entire brand. Additionally, it is often difficult to successfully associate a certain brand to two or more products and then go without weakening of the brand image and postion that is already imprinted on the mind of a customer.

Aaker (2004,p.211) indicated that this problem is common by saying that the associations’ that are created through an extension can spoil a previously sharp image that is an integral asset while at the same time reducing the level of brand credibility.

Cannibalization

The work of Aaker (2004,p.214) indicated that the concept of brand extension can lead to the cannibalization of the already existing products of a given brand depending on their positions in the market. This means that the sales of the extensions may increase while the sales of the original/existing brand may follow an opposite trend. Aaker (2004) indicated that the good sales of the extensions can never compensate for the level of damage that is produced on the initial brand equity. His argument is that this form of a situation is preferable that seeing the brand of a competitor cannibalized your own due to competition.

The work of Taylor (2004) indicates that this risk is real and concurred with Aaker’s (2004) opinion that the situation can be observed when a wide range of extensions in the name of ‘brand clones’ appear. This leads to a general lack of ability to differentiate the new products from the existing ones.

The occurrence of an unprecedented disaster

Aaker (2004,p.212) pointed out categorically that a disaster can never be averted or controlled by a given firm. A disaster may interfere with brand extension initiatives

Discussions

As pointed out earlier, certain critics denounce the concept of brand extensions since they have a feeling that it may lead to a loss of focus by the company as well as the confusion of the customer base.

Brand extension nevertheless can be used as a crucial growth strategy as well as a revenue source by a given firms. The second group of thought holds that the concept of brand extension can considerably endanger the brands against the brand extensions as integral elements of growth strategy.

Discussions

In summary, the concept of brand extension is noted to have advantages and disadvantages. Marketers who have possess very string and reputable brand identities as well as positions can aid consumers in narrowing down their choices by means of brand extension. The strategy of brand extension can assist managers in the quick gaining of a high retailer acceptance of the relatively new products that they introduce in the market while providing them with the needed confidence as well as familiarity with the original core brand. This is evident in the production of the brand, its distribution, product manufacturing as well as marketing communications processes. The concept of brand extensions therefore allows marketers to help the core brand benefits by using the fame of the core product to leverage the ideal features of the brand in capturing new market share, new users. The cost of brand development in regard to money and time is also reduced. On the contrary, the use of brand e3xtensions has been shown to lead to a general loss of brand identity as well as individuality loss with the various customers thereby eroding the level of brand equity for the core/parent brand in the long run.

The failure of brand extension has also been indicated to have devastating impact on the parent brand by virtue of association. For instance the cannibalization of the core/parent brand by the extension if not pre-empted could lead to losses since customers may be forced to switch to other less profitable extension lines. The markets have also been show to lose the opportunity of rebuilding the brand with a completely new image as well as equity via the use of brand extensions. It is therefore clear that even though the process of developing a new brand can have huge payoff in the long run for both the firm and the consumer, the use of extension if regulated van lead to even better returns.

According to my analysis, it is better to engage in a regulated market extension practices in targeted market areas. This is because the advantages of brand extension far exceed its disadvantages. What should therefore be done is to regulate the negative impacts of the process by a systematic implementation and control mechanism.

Conclusion

The concept of brand extension is advantageous for already established brands. This is however true if proper care is taken in order to prevent the spill over of its demerits into the actual implementation and operation of the strategy. After all, engaging in business have often been shown to involve the taking of risks.

References

Aaker, D.A. (2004). Brand Portfolio Strategy. New York: Free Press.

Aaker, D.A.; Keller, K.L. (1990) Consumer Evaluations of Brand Extensions, Journal of Marketing, Vol. 54, No. 1, pp. 27-41.

Bhat, S., & Reddy, S.K. (2001). The impact of parent brand attribute associations and affect on brand extension evaluation. Journal of Business Research, 53, 111-22

Chen, K.F., & Lue, C.M. (2004). Positive Brand extension trial and choice of parent brand. Journal of Product and Brand Management, 13(1), 25-36.

Dacin, P.A.,Smith, D.C., 1994. The Effect of Brand Portfolio Characteristics on Consumer

Evaluations of Brand Extensions. Journal of Marketing Research 31 (2), 229-242.

de Chaternatony, L and McDonald, M (1998) Creating powerful brands in Consumer, Service and Industrial Markets, 2nd edition

Keller, K.L., 2003. Strategic Brand Management: Building, Measuring and Managing Brand Equity, second edition. New Jersey: Prentice Hall.

Smith, DC. And Park, CW (1992), “The Effects of Brand Extensions on Market Share and Advertising Efficiency,” Journal of Marketing Research 29 (August): 296-313.

Tauber, Edward M. (1988), “Brand Leverage: Strategy for Growth in a Cost-Control World,”

Journal of Advertising Research, 28, (August-September), 26-30.

Taylor, D (2004).Brand Stretch: Why 1 in 2 extensions fail, and how to beat the odds: A brandgym workout

Park, C.W., McCarthy, M., & Milberg, S. (1993). The effects associated with direct and associative brand extension strategies on consumer response to brand extensions.

Advances in Consumer Research, 20, 28-33.

Pitta, DA and Katsanis, LP (2005).Understanding brand equity for successful brand extension. JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4, 1995

Viot, C (2007) Le capital-marque: concept, mesure et valorisation, 2007.

Zeithaml, V. (1988). Consumer perception of price, quality, and value: A means-end model and synthesis of evidence. Journal of Marketing, 52(July), 2-22.

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