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Problem definition and objectives
In a highly competitive environment, organizations are convinced that the launch of new products in order to stratify the need of consumers can lead to an increase the success of a company. The strategy of launching new products can be successful but it remains some risks. Indeed, the launching from 30 to 35 % of new products has failed. Because of some factors like the high level of advertisement costs and the increasing competition, it becomes more and more difficult to introduce new products on the market.
A strategy to reduce these risks that becomes more and more popular is to follow a brand extension. Indeed, this strategy gained grown since 1984. 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). During the two decade, more than 40 studies have been made all over the world in order to determine the conditions that make a successful brand extension but some aspect are unknown or unexplored.
In this work, our goal is to determine exactly what the factors of a successful brand extension are and how these factors are valorized regarding the consumer’s perceptions. In order to maximize our chances of efficiency, we will first focus on the theory and after we will ask different segment of the population to respond to a questionnaire about a brand that we choose previously: Virgin.
Tell that we will apply our theoretical approach to two brands, one which failed and another one which is a full success. The questionnaire will understand the impact of consumer’s behavior and expectation in a typical brand extension’s situation.
Then we have to describe a problematic like:
What are the factors that the group Virgin uses to lead its brand extension strategy successfully?
In other words,
In which sectors have Virgin succeed or failed in terms of extension strategy?
Description of the brand extension’s concept
First, we will base our approach on a theoretical basis in order to explain the foundations of our work and our questionnaire.
The brand extension is a marketing strategy that uses the same brand name to different product, to product in different category or the same category. It is a risky strategy that has to aim to increase the sales or the brand equity.
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There exist several examples of brand extension that works or not: BIC launch a perfume but it was a failure. Contrary, Virgin launches new products and new services with the same brand name: Virgin music, Virgin Cola,…
What are the key factors for succeeding in brand extension Strategy?
There are many factors for succeeding in a brand extension strategy. Those factors are often under-estimated by manufacturers who extend their brand just for savings reasons. Indeed creating a new brand for a launching product is an expensive step that could be avoided by stretching an existing brand. Other extends brand as many categories as possible in hope of just adding sales and improving brand image.
However, if this marketing strategy is efficiently applied it can have several positive consequences like create synergies, reinforce the brand image, and have a better approach on consumer’s needs.
The main idea to understand the success of a brand extension is to consider the consumer’s evaluation concerning the fit and the level of leverage between the brand extension and the core brand. Those two main factors describe two axes of consumer’s perceptions and expectations:
• “Fit”: The fit between the expectation brand and the care brand is probably the most important factor of a successful brand extension. It refers to the boundaries issue of the different product categories under the same brand. In other word, Fit is the stretch-ability of categories that consumer could accept for a brand.
• “Image”: The brand image is the factor that influences the consumer’s behavior regarding the new category of product under the evaluation of the core brand image. We’re talking here about the global perception of brand personality.
• “Credibility”: reflects the standing of the extended product in terms of price, quality, customers services,...
• “Leverage”: is the typical properties owned by a brand that gives a competitive advantage to the brand extension in its new category. We could also include in this section the “Transfer” factor which is the ability of a brand to transfer experience and skills to the brand extension.
If we consider that a brand extension has to be spread on these axes regarding consumer’s expectation, we can extract some statement from those definitions and construct some basic principles for a successfully brand extension.
First of all, a brand stretching has to be logical with consumer’s expectations. The extended product must fit with the brand’s categories of existing products.
Secondly, parent brands must own some distinctive properties that give a competitive advantage to the company. Those attributes are not necessary to be exclusive ones but have to be important in the new category.
Finally, the brand image has also a decisive impact on consumer’s perception of an extended product. People tend to identify themselves to the personality of a brand. If these characteristics are well shared between categories, it will provide the new product an existing notoriety.
All these factors we’ve summarize to explain a successful brand extension are independent and distinctive to each brand extension strategy. All manufacturers have different strategies to launch a new product. Some will benefit from special management skills and have a high leverage level when other will just change the recipe of their product and rely on the “Fit” and “Image” factor for their chance of succeeding.