Marketing Strategy : The Logic of Brand Extensions

The Logic of Brand Extensions

Originally Published Here at Adclubbombay.com

Brand extension is a strategy where the company uses an existing brand name to launch products in the existing or new category. This brand extension strategy is often the most used growth strategy for brands by marketers. The popularity of this strategy has given rise to a host of discussion among the academic and professional community about the efficacy of brand extensions.

Why Marketers go after brand extensions?

Exploiting existing brand’s equity

Brand extensions often are perceived to be a less risky strategy for launching new products. The logic behind using the existing brand name for new products is to exploit the brand equity of the existing brand. Recently Sundrop which is a famous sunflower oil brand launched Sundrop Peanut Butter. The use of the prominent brand in the new product is expected to trigger trial usage by the consumers of the parent brand.

Costs of launching brand extensions are low

Compared to launching new brands, brand extensions are perceived to be less costly to launch. The reason is that both the channel members and the consumers are familiar with the brand. Hence the extensions are tapping on the existing awareness of the brand. The marketers can thus use their budget to increase the trial usage rather than spend money on creating brand awareness. In one way using existing brand names helps marketers to skip one step in their brand building process.

Experiment

Brand extensions also prompt marketers to explore new categories for the brand. Since the cost of launching brand extensions are lower compared to a new one motivate the marketers to leverage the existing brand’s equity into new categories.

Expand

Brand extensions also expand the scope of the brand. Ponds, which started off as a cold cream, is now an umbrella brand that endorses a wide range of beauty products. Dettol which is a highly successful antiseptic lotion brand has now a basket of products ranging from soaps to plasters. The brand extensions increase the scope and turnover of the brand and thus give more revenue to the firm.

Brand Extensions have its own set of negatives. Brand extensions are based on some assumptions which if gone wrong can affect the parent brand’s equity.

One assumption in brand extension is that consumers like the brand hence will like all the products endorsed by the brand irrespective of the categories. The second assumption is that the parent brand’s equity can be leveraged across various categories. Hence brand extensions will have similar positive equity as the original brand.

Critics argue that brand extensions will dilute the original brand’s equity. Sometimes there is a proliferation of extensions that dilute the parent brand’s positioning. So when a soap brand extends itself into shampoo, the core identity of the brand as soap is now irrelevant. If not clearly defined, the parent brand may lose its product associations in the consumer’s mind.

Another danger in brand extensions is the positioning confusion. For brands which are extending to related-categories are better off in positioning because the brand can continue with the same positioning when extending to related categories. But when the brand is moving to unrelated categories, the same positioning may not work in the new category. A change in the positioning for brand extensions will have adverse impact on the original brand’s position.

However, brand extension is an invaluable strategic tool for marketers looking for expanding the scope of the brand. Marketers have to get their basics right before embarking on the extension strategy.

To Extend or Not to Extend

This may sound too basic a question but every marketer should ask this question about the brand.

“Whether this brand should be extended in future?”

The future of the brand lies in this question. For a new brand, the decision to extend or not to extend in future will have its implication in the selection of brand name and positioning. A brand name which is highly associated with a product feature or category will have limited scope for future extensions. The positioning strategy will also have to be crafted in a manner which will facilitate future brand extensions. For an existing brand, this question will bring about a need for a change in the current positioning strategy.

Have a Vision

The most important task for a marketer looking for brand extension is to have a vision for the brand. Brand extensions as a short-term marketing strategy will be damaging for the parent brand. The development of a long term vision starts with the critical questions as to whether the brand should be extended or not. Once the marketer has decided on the extension, he has to chart a growth path for the brand. The vision involves deciding whether the parent brand should be used as an umbrella brand or as an endorser. Should the brand be used for unrelated extensions or limited to a category?

The careful planning of the brand’s future will eliminate lot of confusion in terms of positioning, category decisions etc.

Line Logic

Marketers should be clear about the impact of a line or brand extension on the product line of the company. Authors John Quelch and David Kenny in an Harvard Business Review article – Extend Profits Not Product-lines suggest that the company sales officers should take a line logic test where they should be able to explain in one sentence, the strategic role played by each SKU (stock keeping units) in the product line .The consumer should also be able to understand the how these extensions fits his/her needs.

Focus

The biggest threat of brand extension is the possible loss of focus on the parent brand because of extensions. Brand Extensions are opportunities for growth. While extending, marketers should not forget that the extensions are based on the equity of the original brand. Any change in the marketing mix strategy of the extensions will have an effect on the parent brand. This strong relationship between the extensions and parent brand should be taken into consideration during every brand promotions.

Lost Opportunity

Every brand extension is lost opportunity to build a new brand. While extensions take away lot of pressure from the marketers, one should have a clear understanding about the potential loss of an opportunity to build a new brand.

Brand Update : Slice

This season, Slice has come out with another campaign further reinforcing the highly successful positioning of ' Pure Mango Pleasure '. Slice has found a perfect match in the brand ambassador Katrina Kaif and the ad agency has extracted maximum from the celebrity.

Watch the ad here : Slice

I am not a spoil sport but when the celebrity and the brand gel too much the inevitable question arises as to " What Next". When I raised this question in one of the forums, lot of my ex-students asked me this very important question " Why should you ask What Next ?" . If things are working perfectly fine, why be a cynic ? There will be many other celebrities who will be taking place of Katrina . Frankly I did not have answers for that .

When we look at branding as a long term strategy, it is important to look at all brand associations on a long term perspective. Slice had hit upon a terrific idea of " Pure mango pleasure " and Aamsutra concept. The brand also found a perfect match in Katrina Kaif. There is an intense chemistry between the positioning concept and the celebrity now. It reminds me of the Accenture - Tiger Woods relationship.Accenture consciously built that singular pivotal association with Tiger Woods that landed up in trouble. Now Accenture had to break the earlier association built over a number of years and getting some equally good creative campaign for the brand is not going to be easy.

The lesson is that brands must have a plan to take the concept forward independently. I assume that marketers at Pepsi may have thought about it. Marketers should feel jittery when there is too much association with any celebrity for that matter. Be it Akshay Kumar for Thums Up or Katrina for Slice.

For now, Slice is on a roll. Insiders say that the brand has grown more than 300% in Kerala alone in the last quarter.
Great Going

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Wipro Smartlite : Savings Account

Brand : Wipro Smartlite

Company : Wipro

Ad Agency : Orchard Advertising

Brand Analysis Count # 448

Wipro Smartlite is an interesting brand. Interesting because of the patience with which the company is nurturing the brand and also for the consistency of positioning which is now a rare feature in the current Indian marketing world.

Wipro Smartlite was launched in 2001 marking the foray of Wipro Lighting division into the CFL market. After 9 years, Smartlite is India's fifth largest CFL brand. The Indian CFL market is estimated to be around Rs 700 crore and is expected to grow fast because of the current trend towards energy efficient products. The lighting market is dominated by the incandescent bulbs which sells around 90-95 crore units every year.

The CFL market was growing slowly because of the significant price differential compared to incandescent bulbs. While the ordinary bulb costs Rs 10-15, CFL used to cost between Rs 110-115. This huge price differential made CFL to be considered as a luxury rather than a value for money product.

The entire CFL market become the center of focus in the last couple of years due to strong campaign from Government and NGOs. Despite the higher cost, CFL is considered to reduce the electricity consumption to a large extent thereby provide continuous savings . Such campaigns increased the awareness of utility of CFL among the general public.

Wipro Smartlite has positioned itself on the savings platform. The brand has adopted the tagline " Savings Account of your house " and uses the benefits like (a) Saves 40% electricity (b) lasts longer (c) better lighting ,to reinforce the positioning . The brand has roped in celebrities like Paresh Rawal and Jayaram in its campaigns.

Watch the campaign here : Wipro Smartlite

The CFL market faces the issue of cheap imports from China. The market is full of cheap low quality China CFLs which are sold at a ridiculously low prices. The margins of these China CFLs are so high that retailers push these products to the consumers.

The next few years will witness a tremendous growth in the CFL market in India. Consumers are becoming more conscious about energy saving products and are convinced about the value proposition of CFL. The high profile promotions of players like Wipro, Philips, CG , Havells etc will further expand the market for CFL.

Marketing Strategy : After Marketing

What Will You Do After Marketing

Originally published here at adclubbombay.com

Marketing in conventional sense has been defined as the process where organizations and individuals satisfy their needs and wants by creating and exchanging offerings of value. After -Marketing is a term that denotes the activities that a firm undertakes after the sale is completed.

Usually after-marketing activities are broadly understood as after-sales service. After-Marketing is more than the service support that is given after-sales. In the case of a product that needs service support like automobiles or in the business marketing, after sales service is a relevant and forms a major component of After-Marketing.

But in the case of a product like soap, there is no scope for after-sales service but there is a scope for after-marketing activities. While traditional marketing emphasis on activities till the sale is done, after-marketing strategies starts after the sales are made. These activities will take the simple transaction of buying and selling to the next level of relationship marketing. A relationship between the buyer and seller will depend a lot on what the seller does after the order is signed.

While After-Sales Service activities are applicable to products and services that require service support, After-Marketing is applicable for all products and services.

Define the After-Marketing Activities

The first step in After-Marketing is the recognition of the fact that sale is not the end of the relationship but a beginning of a relationship. And relationship is more than repeat purchases. In the case of business to business relationship, the after-marketing activities are marked by continuous follow-up by the sales department. In the case of a consumer product which requires service support like a TV or an automobile, the after-marketing activities include the product service support given by the company. In these cases, after –marketing activities are clearly defined and obvious.

For a product like soap or a shampoo, there is no scope for after-sales support. Hence the marketer has to define the concept of after-marketing. This includes what the brand should do after the selling is done and also what it expects the consumer to do after he has bought the product.

Sunsilk expects its consumers to visit their website and participate in discussions and exchange their ideas with the company. The brand has a clear understanding about what it expects the consumers to do after they have used /interacted with the brand. Sunsilk through its website also offers much information to the consumers about hair-care and solving hair-related problems. Thus there is a continuous connection with consumers over and above the transaction of buying a shampoo. This is a planned process that includes investment of resources on the part of the brand to connect with the consumers.

Take Initiative to Connect

After-Marketing activities can be of two types – Active and Passive. Active after-marketing involves reaching out to the consumers and encouraging consumers to interact with the company. Fastrack brand has a presence across various social marketing sites like Twitter through which the brand tries to connect with its existing and potential consumers.

Recently Dettol ran a high profile advertising campaign asking their existing consumers to narrate the various purposes for which they use Dettol. Consumers use Dettol for disinfecting floor, wash the wounds, disinfect the diapers, use it during bathing etc. These insights helped Dettol to run a campaign highlighting the multiple uses of Dettol.

Passive activities are where the brand expects consumers to initiate a connection. Having a toll free number printed on the back of the pack is a passive after-marketing activity while running a contest for consumers to call the company and suggest ideas is an active effort.

After-marketing activities also is aimed at providing a complete experience to the consumers about the product. The success of a product lies in how well the consumer is able to derive maximum from the product. So the marketer should ensure that the consumer use the product completely and thus gains maximum utility from the product.

Take the example of a mobile phone. Now mobile phones are loaded with applications and features and it is often found that consumer seldom uses the many applications in their phones. Unless the consumer fully uses the features, a complete product experience cannot be guaranteed. After-Marketing activities can be planned to equip the consumer to fully use their product. Easy to read manuals, education of consumers by the sales people on the features, web based support etc can be initiated so that the consumer gains the maximum usage from the product.

After –Marketing is not trying to sell more. The frequent SMS’ that is sent to the subscribers by the cellular service providers announcing various offers and schemes often creates irritation because the intention is to sell more. The timely delivery of bills, reminders,acknowledgement of payment received act as good after-marketing activities because the intention is to help the consumer.

Create Loyalty by Sharing

Consumers want solutions not products and marketers have to rise above the products to solve the consumer’s problems. A soap marketer can be a solution provider for hygiene /skin care related problems by sharing information about hygiene and skin care. A toothpaste marketer can be a solution provider of dental related issues and problems through information sharing. Colgate through its website is offering lot of information about dental care and dental hygiene.

In this era where competitors can copy every possible product/service features, after-marketing activities provide an opportunity to create a meaningful differentiation for the marketers. Although these activities require investment of resources , in the long term ,after-marketing activities will define the extent of consumer loyalty commanded by the brand.

Brand Update : Santoor

This season, Santoor has launched another brand extension - Santoor Deodorant. The brand now has a wide range of products under its brand portfolio. Now Santoor has soap, talc, face wash and now deodorant.

The brand is slowly but steadily moving in the direction of becoming a personal care brand rather than a soap brand. This 600+ crore brand was on a roll last year becoming one of the largest selling soap brands in India. The brand consistently invested in brand building and never shied away from spending in advertising.

The new extension is to cash in on the opportunity for a deo brand for ladies. Although there are many deo brands for the female segment, the market is growing and opportunity exists for new brands also.

I raise the issue of brand dilution when ever I see brand extensions. Although I am a critic of brand extensions, this strategy is inevitable for many reasons. In the case of Santoor, these extensions are a part of Wipro's strategy to make Santoor a family brand for personal care products. Brands like Pond's , Lakme , Vaseline have successfully metamorphosed into Family Brands.

The talking point about Santoor is the positioning. For over 25 years, the brand has been talking about the concept of " For a Younger Looking Skin". All the campaigns were reinforcing that message consistently and powerfully. When the brand moved into talcum powder, it had to deviate from "younger looking" to "freshness". In the case of deo also, the brand is talking about freshness.

Now if Santoor aspire to be an umbrella brand , it may have to dilute or change the core brand positioning of " Younger looking skin " and include brand value like Freshness . This is relevant for products like Deo and Talc . For other products like facewash or creams , the classic positioning will work for the brand.

Another factor is that Santoor soap derives its strength from Turmeric and Sandal . The brand even derives the name from these two ingredients. The positioning also derives strength from these two ingredients. Now when the brand expands its product portfolio, it has to look beyond these two ingredients. Hence if at all the brand wants to expand its horizon, it may have to find other sources of strength.

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Brand Update : Rin Vs Tide Round II

After the high profile direct attack on Tide, Rin has entered the second stage of its aggressive marketing campaign. The brand has started a new campaign called the Rin 1 crore Challenge. The brand is running a commercial featuring the challenge.

This time, Rin has refrained from directly naming Tide . The brand is using the traditional format of masking the competitor in this challenge campaign. The brand has announced Rs 1 crore prize money if any other detergent can prove that it provides more whiteness than Rin ( conditions will definitely apply).

The new ad strikingly resembles the Rs 1 crore purity challenge campaign of HUL's Pureit brand. Pureit's successful campaign may have prompted Rin to copy the campaign format.

The new campaign is aimed at reinforcing the positioning of Rin as "The detergent that provides the best whitening of clothes". By offering a staggering amount, it is conveying the confidence about the brand promise. It is courageous on the part of the brand to make such a move.

Another striking factor about the new campaign is the new brand ambassador for Rin. No its not Amitabh Bachchan . Rin has roped in Kajol as the new brand ambassador. HUL has really flexed its marketing muscle fully. Kajol gives the campaign some amount of authenticity and attraction to the viewers. I doubt whether such challenge campaigns evoke customer participation but it gives opportunity for marketers to advertise and organize events for brand promotion.

It is nice to see the HUL reviving its competitive spirit. HUL is a marketing machine which went into slumber in the last few years. This is a company that has the best marketing minds of India. Good to see these minds back in action.

Somebody wake up P&G....

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