Brand Extension: The Effects of Branding

Brand Extension: The Effects of Branding

Background

Businesses face new challenges, opportunities, and threats on an almost daily basis. Responding to these and operating profitably in a dynamic market environment calls for an innovative mindset and approach among managers. Remaining relevant in such an environment and maintaining an appeal to consumers requires that marketers, for example, think of new ways of promoting their products (Atwal & Williams, 2017). How a company brands itself in a highly competitive industry determines its success. This is exemplified in the luxury industry where brand is recognized as “a significant factor that influences product or service loyalty” (Ahn, Park & Yuhn, 2018 p.22). According to these authors, branding is one of the tools that automobile firms use to distinguish themselves from, and stay ahead of, their competitors.

Capitalizing on the power of branding, companies are increasingly embracing the concept of brand extension. By definition, brand extension is the practice of introducing new products under an existing brand name (Ke & Wagner, 2020). The rationale behind brand extension is that in as much as brands are owned by companies, they exist in consumers’ minds as well as hearts and shapes consumers’ perceptions, thus influencing their decisions on what to buy (Kalra, 2019). In addition, social media has been established to be a key influencer of the perceptions that consumers have towards brands. According to Cheung, Pires and Rosenberger III (2019), consumers are increasingly using social media to obtain information about products together with brands. In the same way, businesses are increasingly using social media to build strong brands. This therefore means that brand extension can possibly and effectively be achieved via social media marketing.

Brand extension offers a number of benefits to firms. For instance, it provides companies with fun as well as unique opportunities through which they can grow their business while at the same time boosting customer loyalty (Saul, 2019). It also helps protect a company’s core product and engage with novel market segments. Brand extension also plays an important role in preserving a company’s brand essence, besides safeguarding companies against brand exploitation (Spiggle, Nguyen & Caravella, 2018).

Problem statement

There is a strong case for brand extension as an effective strategy or tool for developing competitive advantage in organizations. Even so, brand extension contains a number of risks and limitations. Success in brand extension is not always guaranteed because consumer assessment of extended brands depends on various factors (Ahn et al., 2018). In the event of failure, brand extension may negatively affect brand equity (Ahn et al., 2018). For instance, research has established that appreciation for brand extension varies depending on the life stage an individual is in. this is because various life stages come with different roles, responsibilities, and identities. As such, individuals going through life-role transitions tend to embrace brand extensions that have a low-moderate fit as compared to those not undergoing such transitions (Su, Mongal & Jiang, 2021). This implies, therefore, that the success of brand extension is not always guaranteed and depends largely on individual consumers’ judgment.

Apart from this, there is a risk of a brand becoming diluted especially where fans get less tolerant, perceiving the extension to be a contamination of the original brand (Ke & Wagner, 2020). An example is Starbucks, which has reportedly struggled to maintain consistency in its brands to the extent that brand extensions have largely generated only short-term benefits while damaging the company’s brand in the long-term. As a result, the Starbucks brand/experience has eventually been watered down and arguably commoditized (Finkle, 2019). When extensions do not achieve desired results, companies lose customers in the long-trem (Singh et al., 2012).

In consideration of the above issues, it seems that companies need to approach and implement the idea of brand extension with a lot of caution. More specifically, managers have a duty of carefully evaluating the benefits and risks of this strategy before implementing it.

Research Question

How effective is brand extension as a strategy for improving competitive advantage for companies?

Research Plan

A qualitative design will be used for this research. Descriptive surveys will be conducted among a section of companies and consumers in three industries: the service sector, automobile industry, and tech industry. The qualitative approach is selected for this particular research for a number of reasons. Firstly, having established that consumer assessment of extended brands depends on various factors (Ahn et al., 2018), a qualitative design, which is primarily exploratory in nature, would provide a comprehensive understanding of different views and reasons as to why customers perceive brand extension the way they do. Secondly, qualitative research would best offer insights and a better understanding of consumers’ experiences with extended brands.

Thirdly, and very importantly, a qualitative design would be best suited to explore the concept of brand extension given that it-brand extension- takes place within a dynamic environment. As stated in the research background section, one of the factors motivating brand extension is the fact that businesses operate in a dynamic environment. It would thus be somewhat unproductive using a quantitative design, which assumes fixed realities, to explore a concept that takes place in a dynamic environment. This makes qualitative research the most appropriate methodology as it is based on the assumptions that realities are dynamic and can be negotiated (McLeod, 2019).

Researching the above problem and answering the research question is important as it will help determine whether or not brand extension is a strategy worth implementing in companies today. A possible risk that could arise during the research is uncooperative managers.

References

Ahn, J., Park, J. K., & Hyun, H. (2018). Luxury product to service brand extension and brand equity transfer. Journal of Retailing and Consumer Services, 42, 22-28.

Atwal, G., & Williams, A. (2017). Luxury brand marketing–the experience is everything!. In Advances in luxury brand management pp. 43-57. Palgrave Macmillan, Cham.

Cheung, M. L., Pires, G. D., & Rosenberger III, P. J. (2019). Developing a conceptual model for examining social media marketing effects on brand awareness and brand image. International Journal of Economics and Business Research, 17(3), 243-261.

Finkle, C. (2019). Brand Extension Examples. Retrieved from https://brandmarketingblog.com/articles/good-branding/brand-extension-examples/

Kalra, S. (2019). Antecedents of Attitude Towards Brand Extensions. IUP Journal of Brand Management, 16(4), 29–44.

Ke, X., & Wagner, C. (2020). Global pandemic compels sport to move to esports: understanding from brand extension perspective. Managing Sport and Leisure, 1-6.

McLeod, S. (2019). What’s the difference between qualitative and quantitative research? www.simplypsychology.org/qualitative-quantitative.html

Saul, T. (2019). Brand Extensions: Why and how to diversify your brand. Retrieved from www.vennd.com.au/news-notes/why-and-how-to-extend-your-brand

Singh, J., Scriven, J., Clemente, M., Lomax, W., & Wright, M. (2012). New Brand Extensions. Journal of Advertising Research, 52(2), 234–242.

Spiggle, S., Nguyen, H. T., & Caravella, M. (2012). More than Fit: Brand Extension Authenticity. Journal of Marketing Research (JMR), 49(6), 967–983.

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