Brand Extension. How Sub-Branding can be used to stretch a Brand effectively

An analysis of the German Sportswear Retailer Adidas


Term Paper, 2016

34 Pages, Grade: 2,0

Lina Seil (Author)


Excerpt

Table of Contents

List of Figures

List of Abbreviations

1. Introduction
1.1. Problems and Aims
1.2. Structure

2. Conceptual Fundamentals
2.1. Definition Brand
2.2. Definition Brand Management
2.3. Definition Brand Policy

3. Brand Extension
3.1. Concept of Brand Extension
3.2. Types of Brand Extensions
3.3. Opportunities of Brand Extensions
3.4. Risks of Brand Extensions

4. Brand Extension through Sub-Branding
4.1. Classification of Sub-Branding
4.2. Aims of Sub-Branding
4.3. Requirements for the Implementation of Sub-Branding
4.4. Opportunities of Sub-Branding
4.5. Risks of Sub-Branding

5. Adidas – Brand Extension in Practice
5.1. Adidas Company Profile
5.2. Adidas Brand Portfolio
5.3. Brand Extension through Sub-Branding in Practice
5.3.1. Adidas Sport Performance
5.3.2. Adidas Originals
5.3.3. Adidas Neo
5.3.4. Adidas Collaborations
5.4. Evaluation of the Brand Extension

6. Conclusion

List of References

List of Figures

Figure 1: Design Dimensions of Brand Architectures

Figure 2: Brand Portfolio of the Adidas Group

List of Abbreviations

illustration not visible in this excerpt

1. Introduction

1.1. Problems and Aims

Of late, the development of brands has become a preference strategic approach in all industries. This is caused by the fact that a differentiation towards the competition and an enhancement of trade and consumers relations should be achieved. This can also be observed in the fashion industry. In the fashion related clothing market, which is characte-rized by an oversupply of goods and a tough national and international competition, the number of brands and also the competition is steadily increasing.[1] Moreover, the conditions for successful management of branded products have continuously tightened due to the dynamic changes in the environment in the recent past. Thereby, the central challenge for suppliers of branded goods is to meet the customer’s needs by a demand-oriented extension of the product range, while ensuring the efficiency of the market cultivation.[2]

Because of this growing problem, to successfully launch new products in the market, many companies pursue the concept of Brand Extension for expanding their product range in the course of realization of product development strategies and/or diversification strategies. There, the new products will be introduced into the market under the umbrella brand of an already successful brand.[3] With the help of such widely used Brand Extensions it is possible to supplement the product range of established brands and to enter new market segments. However, Brand Extensions often lead to a dilution of the clearly profiled master brands and thus to a growing confusion of the consumers.[4]

Due to these risks related to an expansion of the product range, this academic paper focuses on the question, how Brand Extensions can be carried out effectively. One type of Brand Extension is Sub-Branding, which will be primarily discussed in this academic paper.

Moreover, the purpose of this academic paper is to identify how Sub-Branding can be used to stretch a brand effectively. Thereby, the essence of the Brand Extension should be clarified and especially Sub-Branding should be classified and represented. In addition, an overview of the Adidas Group is given. Furthermore, it is closely examined, how Sub-Branding works in practice on the basis of the brand Adidas.

1.2. Structure

First of all the focus of this academic paper lies on the conceptual fundamentals. This chapter will define and discuss the terms Brand, Brand Management and Brand Policy. Secondly, Brand Extension will be analysed in detail. Here, the types of Brand Extension - which are Category Extension and Line Extension - and its opportunities and risks will be displayed. Then the Brand Extension strategy Sub-Branding - and in particular, its objectives, requirements, as well as opportunities and risks - will be explained in detail.

Following this, a case study of the German sportswear retailer Adidas is presented to illustrate how Brand Extension and especially Sub-Branding work in practice. Thereby, this chapter is aimed at recognizing how Sub-Branding can be used to extend a brand effectively. At the beginning, the company Adidas and its Brand Portfolio will be intro-duced. Afterwards, a closer look is taken at how Sub-Branding works in practice based on the example of Adidas using several sub-brands. Following that, a critical evaluation of the company’s brand extension strategy finalizes the chapter.

Finally, the knowledge gained from this academic paper will be summarized in a con-clusion.

2. Conceptual Fundamentals

2.1. Definition Brand

The term Brand can be defined from various perspectives.

From the legal view, brand or trademark is a broadly defined term. According to the trademark law, brands are “alle Zeichen, insbesondere Wörter einschließlich Personen-namen, Abbildungen, Buchstaben, Zahlen, Hörzeichen, dreidimensionale Gestaltungen einschließlich der Form einer Ware oder ihre Verpackung sowie sonstiger Aufmachungen einschließlich Farben und Farbzusammenstellungen, die geeignet sind, Waren und Dienstleistungen eines Unternehmens von denjenigen anderer Unternehmungen zu unterscheiden” (§ 3 Abs. 1 MarkenG.). The protection, identification and differentiation of trademarks are the central aspects of this view.

According to the classical brand understanding, a branded product has to meet certain characteristics.[5] Referred to this feature-related conception, a brand is understood as a marked finished product that is ubiquitously offered in a constant or improved quality, with the same appearance and quantity and with strong consumer advertising.[6] Nowadays, this close feature-related definition of the term brand is no longer up to date,[7] since besides finished goods, also services and primary products as well as ideas and people can attain brand status.[8]

Therefore, the effect-based definition of the brand concept is widely accepted these days. This view focuses on the influences that emanate from brands on the perceptions and preferences of consumers and that largely determine their buying behaviour.[9] Thus, all products - in the broader sense - are brands, if they have built and will build up a clear, distinctive image among consumers: „Marken sind Vorstellungsbilder in den Köpfen der Anspruchsgruppen, die eine Identifikations- und Differenzierungsfunktion übernehmen und das Wahlverhalten prägen.“ (Scharf 2012, p. 261)

2.2. Definition Brand Management

Brand Management is viewed as an integrated, cross-functional element of corporate governance, which should be anchored to the hierarchically highest management level in a company.[10]

The management process is conduced to the planning, coordination and control of all activities that are aimed at building strong brands for all relevant target groups.[11] Brand Management addresses all marketing tasks and decisions that are related to the product or the brand.[12] Thus, Brand Management stands for the elaboration of marketing tools for branded products.[13] In contrast to the function-oriented organization, Brand Management is not limited to several specific tasks such as market research or advertising. It rather coordinates all activities - from ideation and concept development to launch and control of products on the market - related to the process of innovation and Brand Management.[14]

The management process consists of three sub-processes: Strategic Brand Management, Operational Brand Management and Brand Controlling.[15] In the Strategic Brand Manage-ment, the fundamental decisions on the concrete objectives and subjects of the brands as well as the basic plans to achieve these objectives are defined based on an initial analysis. Further, the Operational Brand Management has the task of carrying out the elaboration of the Brand Management instruments and their legal protection in the context of detail decisions. The elaboration is derived from the requirements of the Strategic Brand Management and is mainly based on the known marketing instruments. The third sub-process is Brand Controlling. Its task is to provide information for all persons involved in the Brand Management and to evaluate all Brand Management activities with regard to their effectiveness and efficiency.

Moreover, Brand Management is aimed at building long-term stable and high-value brand-customer relationships by a functional and cross-company integration of all with Brand Management related decisions and activities.[16] Therefore, a number of sub-objectives as complexity reduction, customer loyalty, price stabilization and more are associated with Brand Management.[17] Nevertheless, maximizing the customer equity[18] - by achieving positive effects on the volume and/or price maximum through the brand[19] - is referred to as the overall objective.[20]

2.3. Definition Brand Policy

The strategic area of Brand Policy includes basic decisions on the Brand Strategy as well as the design of the Brand System. These terms will be discussed below. But due to limited scope, Brand Policy and its strategies and systems will not be a central theme in this academic paper.

Brand Strategy

Many different strategies exist for building and maintaining brands. Various fundamental decisions about, how many different products to be offered under a trademark, have to be taken. Here it can be differentiated between three strategic options: Single Brand Strate-gies, Family Brand Strategies and Umbrella Brand Strategies.[21]

The principle of Single Brand Strategies is that every product of a provider constitutes a separate brand. The creation of Single Brand Systems makes sense especially when a company offers a heterogeneous range of products for different customer groups.[22] Moreover, the main advantage of Single Brand Strategies is that you can respond very precisely to the needs and wishes of the consumers. In contrast, a major disadvantage is that the marketing expenses must be amortized with a single brand. This represents an enormous risk considering the shorter product life cycles.[23]

In contrast, Family Brand Strategies have multiple products under one single brand name. Thus, all products offered under this Family Brand benefit from the brand image built up. The Family Brand occupies a position between the Single Brand and Umbrella Brand Strategies.[24] Hence, it combines both the advantages of the Single Brand Strategy, such as a similar profiling, and of the Umbrella Brand Strategy, like synergies. Besides the advantages, there are also numerous disadvantages, such as the risk of overstretching or only limited potential competition-related restructuring measures.[25]

In addition, the Umbrella Brand Strategy is characterized in that all a company's products are sold under a brand. This kind of Brand Strategy is particularly advantageous when the product range is very large and when the customers have almostidentical needs or when the product category is exposed to fashion fluctuations.[26] On the one hand, the main a dvantage of this strategy is that all products of the supplier bear the cost of the brand together. On the other hand, it is very disadvantageous, that a brand can be profiled less clear and specific.[27]

In practice, the illustrated Brand Strategies are rare in their pure form. There are mainly combinations forms of these strategies that can be found.[28]

Brand System

In connection with the implementation of growth strategies, essential decisions about the structure of trademark systems have to be made.[29] Aaker uses the term Brand System to emphasize that "the portfolio brands must work together to form a coherent whole" (Aaker 2004, p. XV).

Among others, Brand Systems include decisions about how a company performs multiple brands in a market (Multi-Brand Strategies) and about how trademarks can be stretched throughout their life cycles. Brand Extension may take the form of Line Extension or Cate-gory Extension. While Line Extension means expansion within the product category, Cate-gory Extension is about extension in a new product category. An inter-firm cooperation, so called Brand Alliances, is a further strategic option in Brand Policy and Brand Systems. This strategy is increasingly occurring in recent years.[30] Brand Systems can, however, also relate to how many brands are combined in a company. In the literature this strategic system is called Brand Architecture.[31]

But due to limited scope, only the aspect of Brand Extension is considered more detailed in the following.

3. Brand Extension

3.1. Concept of Brand Extension

Basically, a company can choose between several product-brand-options[32] with regard to the establishment and maintenance of strategic success potentials. Thus, a company can penetrate in existing product categories either with existing or new brands. If existing trademarks are used for the launch of new products, one speaks of Brand Extension or Stretching Brand.[33]

„Die Markenausdehnung kennzeichnet einen Managementprozess, bei welchem die Werte einer etablierten Marke für neue Produkte durch Verwendung eines gemeinsamen Namens und einer gemeinsamen Ausstattung mit dem Ziel der Übertragung positiver Imagebestandteile genutzt werden.“[34]

Thus, Brand Extension describes the process of transferring an existing brand on new products.[35] Therefore, it represents an important growth option for companies.[36] Further-more, Brand Stretching is one of the two basic strategies for launching new products and services. Unlike the New Brand Strategy, which creates a new brand for new products and services, Brand Stretching transmits an already established brand name or sign on the new product or the new service.[37] In addition to that, Brand Stretching can be realized less expensive than building a new brand.[38]

Usually, two classic types of Brand Extension are differentiated: Line Extension and Category Extension. In addition, a brand can be also extended in new geographical markets or distribution channels. But this will not be explored in this academic paper.[39]

The aim of the Brand Stretching is to capitalize investments in the brand through the transfer of constructed mental images and related preferences to new products as well as to reduce the risk of entrance into new markets.[40]

3.2. Types of Brand Extensions

As mentioned before, one can stretch a brand using one of two extension strategies: Line Extension or Category Extension.[41] These will be explained in more detail in the following.

Line Extension

Line Extension describes the expansion of an existing brand in a related or the same pro-duct category.[42]

This strategy is very common in practice and aims at increasing the market coverage of a company.[43] Thereby, strategic starting points can be the intensification of sales of existing customers, attracting customers from the competition or winning previous non-users.

In most instances, the expansion of the product lines is implemented by product varia-tions. Using food and beverage products as an example, these variations may be new flavours, new packaging or additional benefit components. Hence, an existing product is changed to fit the needs of individual target groups. However, the target groups have to be sufficiently clear delineable and large enough to ensure that the launch of a new product variant also offers an economical reasonable sale potential.[44]

There is the possibility of the knowledge - which the customers have gained about the established brand in the form of brand awareness and brand image - to be transferred to the new product.[45] This is the main advantage of this extension strategy - the possibility for a quick and cost-effective development of an image for the new product.[46] None-theless, the brand image has to fit the extension product to generate purchase relevance for the customer.

In addition, the main objective of the Line Extension strategy is to cover the market as completely as possible - thus also to prevent the processing of niches by competitors.[47] Furthermore, Line Extension also targets and addresses the needs of less satisfied con-sumers.

Moreover, several basic rules must be taken into account when implementing the Line Extension strategy. Firstly, the self-similarity has to be maintained, which means that the integration of offers within a product line have to be ensured. Secondly, the differentiation between the offers a trademark have to be guaranteed. Finally, attention should be paid to the mental convenience, which means that the product line has to be revealed easily with-out much effort to the consumers.[48]

Category Extension

The development of new brands - whether in an old or new product category - is always associated with high marketing expenses, until the brand reaches the set level of aware-ness and attracts the customers, until the brand is counted among the perceived and accepted alternatives. Reasons for this are the growing information overload and the high communication pressure, which the customers are exposed to. In addition, more and more brands are fighting for the attention of the consumers. Furthermore, listing costs of new brands have to be considered in order to ensure an appropriate distribution. There-fore, it is difficult to place new brands in the consumers’ minds.[49]

A Category Extension should bypass all these barriers.[50] Currently, Category Extensions constitute of the most common strategies for launching new products, which helps com-panies realize their growth objectives in new markets. The reason for this is, that the costs are lower in relation to the New Brand Strategy. With a Category Extension, launch costs in connections with building brand awareness can be saved. Furthermore, a new product as part of a Category Extension does not or only to a small extent experience acceptance problems among consumers and the trade.[51]

Category Extension describes the expansion of an existing brand in a new product category. A distinction is made between Direct and Indirect Category extension.[52] Using the direct form of this strategy, the previous brand remains unchanged. In contrast, the Indirect Category Extension carries out an addition to the master brand. This is either possible through an additional brand name or by adding a second brand while adding an additional brand name is called Sub-Branding, adding a second brand is called Co-Branding. In the context of Brand Alliances - which describe joint marketing activities of several brands - Co-Branding is becoming increasingly important.[53] But in the course of this academic paper, the focus is on the Sub-Branding.

Moreover, in the process of Category Extensions positive image components of an estab-lished brand are supposed to be transferred to an extension product. In turn, the extension product should contribute with its image to a strengthening of the master brand. Through a successful Category Extension, the master brand can be revitalized and rejuvenated. In addition, the extension product benefits from the name recognition, image and trust transfer.[54]

In order to stretch a brand effectively with the help of Category Extension, certain require-ments have to be met:[55]

1. Similarities between the master brand and the new product have to exist. This is also referred to as the necessary "fit" between the new product and the master brand.[56]
2. Marketing support for the new product has to be constituted by the existing brand.
3. Commercial acceptance has to be available.
4. The buyers have to have an involvement towards the master brand.[57]

3.3. Opportunities of Brand Extensions

The great relevance of the Brand Stretching in practice is based on the multitude of opportunities that are associated with this strategy.[58] The opportunities of Brand Extension can be classified according to whether they relate to the consumers, the trade, the master brand or the company itself. These aspects are discussed below.[59]

Opportunities on the Costumer Level

On the consumer level, the transfer of an established brand image should support the immediate brand awareness and presence of the new product and reduce the learning curve for the consumers.[60] The use of established brand name leads to a better mental processing and retention of the extension product. Here, the well-known brand name should serve as a memory aid and reduce our risks on purchasing the extension product. Nonetheless, this results from the name recognition and confidence of consumers who mostly appeal to the longstanding market presence and positive associations of the established brand.[61] By doing so, established brands can reduce information costs for the customers. Under certain circumstances, relationship benefits exist for the customer in the form of personalized and customized solutions. This is possible, if providers can fall back on already accumulated experience and customer-specific information from existing channels and use it for a corresponding offer.[62] Often, a simple recognition of the brand is sufficient for a test purchase, because the brand name guarantees a certain level of quality. Thereby, an increase in the willingness to buy and in the initial purchase rate can be obtained.[63]

Opportunities on Retail Level

Relating to trade, the established brand is intended to help penetrate any trade barriers for the launch of new products. Another positive effect results from the stronger presence of the brand at the point of sale. Furthermore, it is intended to improve the securing and widening of shelf space.[64] This imposes a greater listing willingness of retail. Hence, the acquisition cost of the manufacturer in retail is assessed correspondingly lower. It should be emphasized that the higher acceptance of trade at launching new products under an established brand is of great importance.[65] Recent studies have also shown that trade acceptance toward a new product can be significantly increased by Brand Extension if the Brand Extension is supported by certain marketing activities.

Opportunities on the Corporate Level

For the company, the positive effects on consumer and retail level result in the fact that the marketing effectiveness and efficiency can be increased through the use of the established master brand. From a market perspective, an increase in the willingness to buy and initial purchase rate as well as an implementation of a price premium can thus be achieved.[66] Moreover, new target groups can be tapped and the semantic field of the brand can also be extended through Brand Stretching. Thereby, a strategic growth in new markets is possible.[67] Moreover, the reduction of market entry barriers[68] and the circum-vention of restrictions on the competition are possible.[69] Furthermore, from the company’s point of view a new product with a known brand is far less risky than a new product with a newly created brand. By increasing marketing effectiveness and efficiency also an overall reduction of the risk of a non-seller is sought.[70] Furthermore, for the company Brand Stretching provides cost savings that can be attributed to the expected synergies - for example through the realization of economies of scale - in the marketing mix.[71] In particular, this concerns the communication expenses, as with the advertising of the expansion product all products with this brand are promoted equally. This affects the increase in the awareness of the entire brand and normally also leads to an increase in sales of products of the master brand.[72]

Opportunities for the Master Brand

Brand Extension can have a positive effect on the master brand. Therefore, Brand Exten-sion, for example, can support the revitalization. Moreover, an extension of the brand life cycle thus is possible.[73] Here, the brand life cycle is decoupled from product life cycles. Through the transfer of brand awareness and brand image of products, that are at the end of their product life cycle, to successor products, it becomes possible to use the capital invested in the brand beyond a single product life cycle.[74] Without Brand Extensions brands can quickly reach the limits of growth. The trademarks might become obsolete and get a dusty image without such extensions. Besides, repositioning of established brands is also easier through Brand Extensions.[75] Finally, strengthening the brand value of established brands is possible through spill-over effects of Brand Stretching. In the process, the master brand is strengthened by the backflow of positive image components of the extension product and reputation in a larger group of consumers.[76] This effect can also be referred to as goodwill transfer.[77] However, such an image backflow can only be achieved if a strong correlation between the established brand and the extension product is identified or made by the consumers.[78]

[...]


[1] Cf. Hermanns 1994, p. 96

[2] Cf. Meffert 2005, p. 214

[3] Cf. Scharf 2012, p. 271

[4] Cf. Meffert 2005, p. 214

[5] Cf. Scharf 2012, p. 261

[6] Cf. Domizlaff 2005, p. 37 ff.

[7] Cf. Scharf 2012, p. 261

[8] Cf. Esch 2012, p. 18

[9] Cf. Scharf 2012, p. 261

[10] Cf. Meffert 2005, p. 8

[11] Cf. Meffert 2005, p. 75

[12] Cf. Scharf, p. 45

[13] Cf. Göttgens 2003, p. 11

[14] Cf. Scharf 2012, p. 45

[15] For further Information: Cf. Meffert 2005, Figure 2, p. 76

[16] Cf. Meffert 2005, p. 75

[17] For further Information: Cf. Gabler Wirtschaftslexikon (N.D.), Markenmanagement, p. 1

[18] For further Information: Cf. Meffert 2005, p. 147 ff.

[19] Cf. Esch 2012, p. 55

[20] Cf. Meffert 2005, p. 75

[21] Cf. Scharf 2012, p. 267

[22] Cf. Esch 2011, p. 207

[23] For further Information: Cf. Esch 2001, Table 3, p. 303

[24] Cf. Esch 2001, p. 304

[25] For further Information: Cf. Esch 2011, Table 9, p. 210

[26] Cf. Scharf 2012, p. 270

[27] For further Information: Cf. Scharf 2012, Table 6-27, p. 270

[28] For further Information: Cf. Esch 2001, p. 308 ff.

[29] Cf. Esch 2011, p. 210

[30] Cf. Scharf 2012, p. 267

[31] Cf. Esch 2011, p. 210

[32] For further Information: Cf. Scharf 2012, p. 271 ff

[33] Cf. Scharf 2012, p. ff

[34] Alisch 2004, Gabler Wirtschaftslexikon, p. 1975

[35] Cf. Gelbrich 2008, p. 92

[36] Cf. Esch 2011, p. 210

[37] Cf. Esch 2001, p. 367

[38] Cf. Esch 2001, p. 211

[39] For further Information: Cf. Esch 2001, p. 374 f.

[40] Cf. Esch 2011, p. 210

[41] For further Information: Cf. Esch 2001, p. 374 f.

[42] Cf. Keller 2003, p. 578

[43] Cf. Esch 2001, p. 758

[44] Cf. Scharf 2012, p. 271 f.

[45] Cf. Sattler 2001, p. 70

[46] Cf. Meffert 2005, p. 200

[47] Cf. Esch 2001, p. 758

[48] Cf. Esch 2011, p. 212

[49] Cf. Esch 2001, p. 759

[50] Cf. Scharf 2012, p. 274

[51] Cf. Esch 2012, p. 375

[52] Cf. Esch 2007, p. 201

[53] Cf. Scharf 2012, p. 274

[54] Cf. Esch 2011, p. 214

[55] For further Information: Cf. Meffert 2005, Figure 5, p. 198

[56] For further Information: Cf. Esch 2011, p. 214

[57] Cf. Meffert 2005, p. 197

[58] Cf. Esch 2012, p. 406

[59] Cf. Esch 2001, p. 763

[60] Cf. Meffert 2005, p. 250

[61] Cf. Esch 2001, p. 764 f.

[62] Cf. Meffert 2005, p. 250

[63] Cf. Esch 2001, p. 764 f.

[64] Cf. Meffert 2005, p. 250

[65] Cf. Scharf 2012, p. 275

[66] Cf. Meffert 2005, p. 250

[67] Cf. Esch 2001, p. 765

[68] For further Information: Cf. Scharf 2012, p. 275

[69] Cf. Esch 2001, p. 765

[70] Cf. Meffert 2002, p. 237

[71] Cf. Esch 2001, p. 765

[72] Cf. Scharf 2012, p. 275

[73] Cf. Meffert 2005, p. 250

[74] Cf. Sattler 2001, p. 145

[75] Cf. Esch 2001, p. 765

[76] Cf. Meffert 2005, p. 250

[77] For further Information: Cf. Scharf 2012, p. 274

[78] Cf. Esch 2012, p. 403

Excerpt out of 34 pages

Details

Title
Brand Extension. How Sub-Branding can be used to stretch a Brand effectively
Subtitle
An analysis of the German Sportswear Retailer Adidas
College
University of Applied Sciences Hannover
Grade
2,0
Author
Year
2016
Pages
34
Catalog Number
V342673
ISBN (eBook)
9783668323964
ISBN (Book)
9783668323971
File size
970 KB
Language
English
Notes
This text is mainly written in English. However, it entails German quotations.
Tags
brand, extension, sub-branding, german, sportswear, retailer, adidas
Quote paper
Lina Seil (Author), 2016, Brand Extension. How Sub-Branding can be used to stretch a Brand effectively, Munich, GRIN Verlag, https://www.grin.com/document/342673

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