Over the last decades, an increasing number of companies have begun to recognize that their brands are the most real and marketable assets they have developed and thus are a source of competitive advantage (e.g. Aaker 1990, p. 47; Kapferer 2004, p. 233). Through the establishment of brands and brand images, the positioning and diversification of own products towards competitors’ products is supported and an additional value which goes beyond the mere technical-physical characteristics is created (e.g. Keller 1993, p. 2).
The capitalization of this brand value through a brand extension strategy defined as “the use of established brand names to enter new product categories or classes” (Keller & Aaker 1992, p. 35) has become the preferred alternative for growth and a guiding strategy for product planners (e.g. Tauber 1988). Thereby, a company uses the equity built up in the names of existing brands, for example to improve the likelihood of new product success or to enhance marketing productivity (Rangaswamy & Burke & Oliva 1993, p. 61). The latter has especially gained importance due to a dramatic rise in costs for introducing new products. Especially advertising expenses have exploded due to the information overflow of consumers and the increasing number of products struggling for their attention.
In practice, brand extensions have therefore been the core of strategic growth for a variety of companies. Especially in the last two decades, a strong tendency towards the brand extension strategy has shown compared to the new brand strategy. Whereas in the USA until 1984, the share of extension products in total new product introductions in the fast-moving consumers goods segment was only 40% (Aaker & Keller 1990, p. 27), the share amounted to 90% in 1991 (Rangaswamy & Burke & Oliva 1993).
Some brand-owners likeProcter & Gambleeven launched their new products exclusively under established brand names in a period of time (from 1992-1994) (Zatloukal 2002, p. 3). While there have been several successful examples such as the extension of Boss(clothing) to Bossperfumes orCamel(cigarettes) to outdoor clothing, there have also been significant marketplace failures such asHarley Davidsonwine coolers (Aaker 1990; Keller 1998) orLevistailored suits. According to a study by Ernst & Young and Nielsen (1999), there has been an astounding 84% failure rate among brand extensions in some categories.
Table of Contents
1 INTRODUCTION
1.1 PROBLEM DEFINITION AND OBJECTIVE
1.2 STRUCTURE OF THE PAPER
2 BRAND EXTENSIONS: TACKLING THE CHALLENGE OF GROWTH IN INTERNATIONAL MARKETS
2.1 BASIC ISSUED RELATED TO BRANDS
2.1.1 The Notion of a (Global) Brand
2.1.2 The Concept of Brand Equity
2.1.2.1 Sources of Brand Equity
2.1.2.1.1 Brand Awareness
2.1.2.1.2 Brand Image
2.1.2.2 The Advantages of Strong Brands
2.1.3 Brand Core Values, Competence and Positioning
2.1.4 Specific Issues of Brand Globalisation
2.2 BRAND EXTENSION AS A STRATEGIC GROWTH OPTION
2.2.1 Integration into the Context of Brand Management and Growth Strategies
2.2.2 The Preconditions and Main Drivers of Brand Extensions
2.2.3 Benefits and Risks of a Brand Extension Strategy
2.3 A CONCEPTUAL MODEL OF EXTENSION SUCCESS
2.4 PRIOR RESEARCH ON BRAND EXTENSION AND ITS LIMITS
3 KEYS TO SUCCESSFUL BRAND EXTENSIONS
3.1 INTERNAL SUCCESS FACTORS
3.1.1 Characteristics of the Parent Brand
3.1.1.1 Strength of the Parent Brand
3.1.1.2 History of Previous Brand Extensions
3.1.1.2.1 The Number of Previous Brand Extensions
3.1.1.2.2 The Breadth of the Product Portfolio of a Brand
3.1.1.2.3 Portfolio Quality Variance
3.1.1.2.4 The Success of Previous Brand Extensions
3.1.1.2.5 The Positioning of Previous Brand Extensions
3.1.1.3 Competence of the Parent Brand
3.1.1.3.1 Symbolic Value of the Parent Brand
3.1.1.3.2 Linkage of the Utility of the Parent Brand and Specific Product Attributes
3.1.1.4 Characteristics of the Company
3.1.1.4.1 Size of the Company
3.1.1.4.2 Marketing Competence
3.1.2 Characteristics of the Extension Product
3.1.2.1 Naming of the Extension Product
3.1.2.2 Communicative Support of the Brand Extension
3.1.2.3 Retailer Acceptance
3.1.3 Relationship Between Parent Brand and Extension Product
3.1.3.1 Fit Between Parent Brand and Extension Product
3.1.3.2 Kind of Information Transferred from the Parent Brand to the Extension Product
3.1.3.2.1 Relevance of Transferred Information for the Extension Product
3.1.3.2.2 Symbolic Value of Transferred Information
3.1.3.2.3 Linkage of the Utility of the Parent Brand and Specific Product Attributes
3.2 EXTERNAL SUCCESS FACTORS
3.2.1 Characteristics of the Extension Market
3.2.1.1 Characteristics of the Extension Product Category
3.2.1.1.1 Difficulty of Producing a Product of the Extension Category
3.2.1.1.2 Experience Versus Search Goods
3.2.1.1.3 Quality Variance in the Extension Product Category
3.2.1.2 Intensity of Competition
3.2.2 Characteristics of the Consumers
3.2.2.1 Consumers’ Knowledge of the Product Category of the Extension
3.2.2.2 Consumers’ Involvement Towards the Extension
3.2.2.3 Attitude Towards Innovation
3.2.2.4 Mood of the Consumers
3.3 RELATIONSHIPS BETWEEN THE SUCCESS FACTORS
3.4 FURTHER FINDINGS
4 IMPLICATIONS FOR THE PREPARATION OF A BRAND EXTENSION STRATEGY
5 BRAND EXTENSIONS IN PRACTICE
5.1 BRAND EXTENSIONS IN THE FASHION INDUSTRY: HUGO BOSS
5.2 AN EXTENSION-BASED BUSINESS MODEL: THE VIRGIN GROUP
6 CONCLUSION
Objective and Research Focus
This thesis examines the critical success factors for brand extensions within international marketing. The central objective is to identify and analyze determinants that influence the potential success or failure of a brand extension strategy, providing theoretical and practical guidance for brand managers to navigate the risks and opportunities of leveraging existing brand equity in new markets.
- Theoretical foundations of brand equity and brand core values.
- Classification of internal and external success factors affecting extension outcomes.
- Empirical analysis of the impact of parent brand strength and brand fit.
- Comparative case studies of real-world brand extension models (Hugo Boss, Virgin Group).
- Strategic implications for the preparation and implementation of brand extension strategies.
Excerpt from the Book
1.1 Problem Definition and Objective
Over the last decades, an increasing number of companies have begun to recognize that their brands are the most real and marketable assets they have developed and thus are a source of competitive advantage (e.g. Aaker 1990, p. 47; Kapferer 2004, p. 233). Through the establishment of brands and brand images, the positioning and diversification of own products towards competitors’ products is supported and an additional value which goes beyond the mere technical-physical characteristics is created (e.g. Keller 1993, p. 2).
The capitalization of this brand value through a brand extension strategy defined as “the use of established brand names to enter new product categories or classes” (Keller & Aaker 1992, p. 35) has become the preferred alternative for growth and a guiding strategy for product planners (e.g. Tauber 1988). Thereby, a company uses the equity built up in the names of existing brands, for example to improve the likelihood of new product success or to enhance marketing productivity (Rangaswamy & Burke & Oliva 1993, p. 61). The latter has especially gained importance due to a dramatic rise in costs for introducing new products. Especially advertising expenses have exploded due to the information overflow of consumers and the increasing number of products struggling for their attention.
In practice, brand extensions have therefore been the core of strategic growth for a variety of companies. Especially in the last two decades, a strong tendency towards the brand extension strategy has shown compared to the new brand strategy. Whereas in the USA until 1984, the share of extension products in total new product introductions in the fast-moving consumers goods segment was only 40% (Aaker & Keller 1990, p. 27), the share amounted to 90% in 1991 (Rangaswamy & Burke & Oliva 1993). Some brand-owners like Procter & Gamble even launched their new products exclusively under established brand names in a period of time (from 1992-1994) (Zatloukal 2002, p. 3).
While there have been several successful examples such as the extension of Boss (clothing) to Boss perfumes or Camel (cigarettes) to outdoor clothing, there have also been significant marketplace failures such as Harley Davidson wine coolers (Aaker 1990; Keller 1998) or Levis tailored suits.
Summary of Chapters
1 INTRODUCTION: This chapter defines the core problem of brand extensions, highlighting their increasing importance as a growth strategy and the inherent risks of failure.
2 BRAND EXTENSIONS: TACKLING THE CHALLENGE OF GROWTH IN INTERNATIONAL MARKETS: This section covers theoretical fundamentals of brand equity, the strategic rationale for extensions, and provides a conceptual model for assessing success.
3 KEYS TO SUCCESSFUL BRAND EXTENSIONS: The main part of the thesis, which offers an extensive categorization and analysis of internal (parent brand/company) and external (market/consumer) success factors.
4 IMPLICATIONS FOR THE PREPARATION OF A BRAND EXTENSION STRATEGY: This chapter provides practical guidelines and steps for managers to forecast and evaluate the potential success of a brand extension.
5 BRAND EXTENSIONS IN PRACTICE: This section illustrates the practical implementation of extension strategies through the specific cases of Hugo Boss and the Virgin Group.
6 CONCLUSION: The final chapter summarizes the findings and emphasizes the necessity for continuous research and careful analysis to mitigate the risks associated with brand extensions.
Keywords
Brand Extension, Brand Equity, Success Factors, International Marketing, Brand Management, Parent Brand, Brand Strategy, Marketing Competence, Consumer Perception, Brand Positioning, Brand Strength, Brand Fit, Line Extension, Retailer Acceptance, Competitive Advantage.
Frequently Asked Questions
What is the core focus of this thesis?
The work focuses on identifying and analyzing the success factors of brand extensions within the context of international marketing.
What are the primary themes discussed?
The main themes include brand equity, internal and external success factors, the strategic importance of brand fit, and the practical application of extension strategies in various market environments.
What is the primary goal of the author?
The goal is to provide a comprehensive overview and practical guidelines for managers to assess the extendibility of their brands and make informed decisions on extension strategies.
Which scientific methodology is employed?
The research is based on a synthesis of over 50 empirical studies, supplemented by real-world market examples and the application of SWOT-analysis to evaluate success factors.
What is covered in the main section of the paper?
The main body (Chapter 3) provides an extensive breakdown of internal factors (characteristics of the parent brand, company, and extension product) and external factors (market and consumer characteristics).
Which keywords define this research?
Key terms include Brand Extension, Brand Equity, Success Factors, International Marketing, and Brand Positioning.
How does the author characterize the 'Virgin' brand extension model?
The author highlights Virgin's model as an intangible, value-based approach that allows for diverse extensions into seemingly unrelated industries, though it carries risks of brand image dilution.
Why is 'fit' considered critical for brand extensions?
Fit is identified as one of the strongest determinants of success because it facilitates the transfer of positive associations and confidence from the parent brand to the new extension product.
- Quote paper
- Master of International Business Administration Carolin Wobben (Author), 2006, Success Factors of Brand Extension in International Marketing, Munich, GRIN Verlag, https://www.grin.com/document/58639
