What Are The Advantages and Disadvantages of Brand Stretching Essay Example

What Are The Advantages and Disadvantages of Brand Stretching Paper In addressing the above question it is first important to establish what a brand is and the implications this gives to both existing products and products that may be laundered using existing titles. This essay will examine articles written concerning the stretching of brands and identify which brands have been successful and unsuccessful in this pursuit and why. It will also examine the financial motives for companies to penetrate existing markets using already established new products or services has lead to prosperity or disaster. The American Marketing Association refer to branding as the use of a name, a term, a symbol or a design to identify the goods or services of one seller and to distinguish them from those of the competition (WK4 Lecture). This use of branding is said to create an identity of the product that quickly allows consumers to identify a desired item and also gives a guarantee of quality of the product. Branding is also seen as being mutually beneficial to Manufacturers as protection is offered from competition, it allows maintenance of a premium price, promotion is made more efficient because the brand helps to evoke an image, and it also helps in the introduction of new products with the same brand name (WK4 Lectures). 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Partly because of this the advertising tended to be based on the idea of reliability and guaranteed quality. (1971 p.3). It was due to such strategies (according to King) that the manufacturers dominated the market from about 1900 to 1960. However since the 1960s the market has turned a full cycle, returning control to the retailers (although maybe not so much to the wholesalers). This is illustrated by Caulkin (1987) who states that over the last two or three decades there has been a massive shift in the balance of power form manufacturing towards the retail end of the economy (p.46). This Caulkin states, is particularly notable in food and fast moving consumers goods. Large supermarkets such as Tescos, Asda and Sainsbury started to implement own-label goods which over time sharply reduced the manufacturers share of the market within only a few exceptions (such as baked beans and pet food) (Caulkin 1987). In an attempt to combat what is discussed above many manufacturers are returning to what was described in an article in the Economist 10/90 as an old standby of marketing; brand-stretching (p.105). This based on the principle of using an existing established brand name to help the launch of new products into the market. However, the potential for this sort of practice is said not to be unlimited. Peter Philips of CPC International commented in the Economist article If you get brand-stretching right , you can travel further for less money. If your get it wrong, you risk weakening the core values of the original product (10/90 p.105). Although it is important to note that stretched brands have a better chance of survival than new brands, OC and C found that, of products launched by the same multinational six years ago, only about 30% of new brands exist today while over 50% of stretched ones do (10/90 p.105). With statistics such as these, one can see that it indeed may be advantageous to a company to exploit its name in the promotion of new products and when expanding into new markets. The Economist article stresses the popularity of brand-stretching in the areas of food and drink. Advantages may also be sought when one considers the point made above that the cost of promoting new products with already established brand names, which is said to be considerably cheaper. The Economist article (10/90) points out that promotional costs for stretched brands are in fact 36% cheaper when compared to completely new products. This is presumable due to the public already having an awareness of the brand name, so the only real cost incurred is raising awareness of the existence of the product itself. The use of a brand name also implies assurance of quality (King 1971). It may further be considered that the use of a brand name on its own may persuade people to try new products, such as the Mars Ice Cream Bar. This may be considered in particular when one looks at the larger supermarket chains such as Sainsburys. Over the last two decades Sainsburys have produced own brands to compete with nearly every product that they stock. Due to the image conveyed by Sainsburys that implies (or in fact, guarantees) quality, it has been possible for them to penetrate nearly all areas of the food market successfully. This success may be attributed to the analysis of what a product is as defined by Nickels (1978). Nickels sees a product as an intangible sense of value that a consumer perceives when he or she weighs the benefits and drawbacks of making an exchange. It may therefore be viewed that the success of Sainsburys is mainly due to the consumer seeing little difference in quality between branded goods and Sainsburys own label goods, with Sainsburys holding th e advantage when price is considered. This point is reiterated by Caulkin (1987), who states that growing public perception that the best own-brands are no longer cheap alternatives to the real thing, but comparable in quality as well as price with the main manufacturers lines. The phenomenon of brand-stretching has not been unique to the manufacturing and retail sectors, but has in fact been used by those in the sector of public service. Nickels cites areas, such public libraries that have sought the advantages of brand-stretching. He refers to increased success of libraries that reconsidered what to offer by viewing the service they provide from the perspective of the public. This has resulted in a marked change of service in some American libraries which now provide services such as the loaning of domestics pets, childrens toys and the provision of music rooms and access to such things as a printing press, (1978 p.195). Nickels continues to state that the product of a library today may be anything that will satisfy the needs of selected market segments Libraries are much more successful today because they have designed their products to fit the needs of people (1978 p.196). It can therefore be seen that brand-stretching can be of great advantage when a n eed or area of market penetration is correctly recognised. However, when a company seeks the advantages of brand stretching, they must take great care to ensure that they get it right. The Economist article (10/90) points out that brands are not endlessly elastic. Stretching can also undermine the credibility of the original product. Consumers may not believe that the new product shares any of the cachet or characteristics of the old, or they may simply forget what was attractive about the original item, (10/90 p.105). However, when one considers this comment, it may well be true to say that not all stretched brands will be successful, but that does not seem to generally render original brands obsolete. If one is to consider the failure of David Hunter, (a stretch by Levis), it does not seem to of had an adverse effect on Levis. The problem seems to have aroused simply due to the manner that the stretched brand was marketed, i.e. those who bought classic tailored clothes would not buy them form Levis and not vice versa. It seems more simply, that it was inappropriate for Levis to have used their name to penetrate this particular market. This story seems to be reiterated by Van Den Burghs and Jargons low calorie salad dressing that failed using the name of flora. This, however does not seem to have harmed flora margarine in its place of market leader. It should be noted though that it is felt by many in the field of marketing that a failed product could cause disastrous effects for established products. Prof. Birger Wernerfelt of the MIT Sloan School of Management stated in the Economist article that Umbrella branding means putting up the reputation of the old product as a bond for the quality of the new one (10/90 p. 105). However in the field of well established brands, stretching by own-brand manufacturers has not been so successful. Items such as baked beans are said to have made little headway and that Heinz still hold half the share of the market. The same is said to also apply to pet foods, with Mars Pedigree Pet Foods not having been toppled form their No 1 spot (1987 p.47). A further point that has been made concerning brand stretching as a disadvantageous pursuit was made by Messrs Al Ries and Jack Trout (Citied in the Economist 10/90 p.106). In their book Bottom Up Marketing they argue that by companies widening their products, (even those who have been successful) they have hurt their brand equity. This they attribute to the nature of communication in Western Society being so large that they feel that, you are lucky if your brand can mean one thing. Almost never can it mean two or three things, (10/90 p.106). Thus confusing consumers of an established image of original brands. From the above discussion it can be seen that brand-stretching can be a good way of penetrating new markets. by good use of an established brand name considerable savings can be made in the field of promotion, as there is already an existence of brand awareness so promotion can more easily be centred around the product itself, with the added bonus that consumers may feel more inclined to give an initial trail of products displaying brand names they already know, ( such as the Mars Ice Cream Bar). This too is now the case with established own-brand labels, such as Sainsburys which offer marginally cheaper prices of products now perceived to be of equal quality to that of established brands. However inappropriate stretches, or those which do not offer good quality products have a danger of undermining the credibility of already established brands. Although from the research this sort of practice on the whole seems to lead to failure of the stretched brand, generally leaving the origina l in tact.