BRANDING Thesis Vineetmalani

Brand Extensions Lead To Brand Dilution -1-
ACKNOWLEDGEMENT
This thesis is a result of efforts , time and skills contributed by a number of

people. I would like to take this opportunity to thank all of those who have worked
towards successful completion of this thesis.
I thank Dr. Swarup , for his valuable inputs and ideas supplied in the beginning.
He took great pains to guide us in the right direction and suggested corrective
actions from time to time. Periodic meetings with him during the last few months
have been hugely beneficial for my development as a management student as
well as a human being.
I also sincerely acknowledge the help provided by my institute - “Indian Institute

of Planning and Management” . The resources made available to me in form of
latest literature, journals and books on Branding and Marketing as well as the
inputs of visiting and internal faculties of the institute have gone a long way in
culmination of this thesis.
Finally, I am grateful to my friends and fellow students currently working in

organisations like Hindustan Lever , H.C.L and Metlife Insurance for facilitating
the search for raw data for the purpose of research .
BRANDING BASICS
“A house of brands is like a family each needs a role and relationship to others” –
Seffrey Sinclair.
The brand tells why products exists, where they come from and where they are
going. It also sets their guidelines. A brand is not a fact set in stone. It must be
able to adapt to the times and to changes in buyer’s behavior and technology.
A brand is both memory and future of its products. A brand is built up from day to
day; it is never set down once and for all of course its past must not determine its
future too narrowly. But when a brand moves out in all direction, it can loose its
meaning and become void of content.
Brands have been important ever since advertising for mass produced products
began. As Sephen Kint said, “A product is made in a factory. A brand is bought
by a consumer”.
There in lies the rub. The encounter between brands in a competitive

environment enhances consumer expectations which become more and more
demanding as advance technology offers marginal improvement and a better
price value relationship. The consumer is constantly on the look out for a better
product; even more for a better product at a more affordable price.
Flop and success; hits and misses; blockbusters and mega flops – is marketing
becoming more like the movies? Or is the case of marketing imitating art?
Whichever way you look at it, the fact remains that today marketing is an art that
needs to be mastered to ensure that brands have a long and successful run at
the box-office. Marketing, like the performing arts, has it all : action drama,
conflict, climax. And like all good movies, there is a concerted team effort where
professionals bring together a diverse range of expertise and competence under
the creative direction of the leader, the director. Likewise every brands launch,
requires a Spielberg, a Richard Attenborough or a James Cameron: a man with
vision, passion and a story to tell.
Everybody loves a blockbuster, a mega-hit, a box-office bonanza. But flops are

an inescapable fact of life. For every Titanic, there are many more that, sink
without a trace, A it is not just a combination of big bucks, creative skill and epic-
scale hype. If it were, the much talked about Waterworld wouldn’t have turned out
to be such a damp squib at the box-office. So what is the magic formula? And,
more relevant : can there be a magic formula?
Therein lies the twist in the tale. For if every movie worked to a magic formula,
there would be no magic in the movies. Similarly, no two brands can be marketed
according to a precise marketing formula. For in marketing, as in the movies, no
single formula can be applied to two brands. Copycat movie abound in the Hindi
film industry. Critics may argue that copycat moviemaking works I the Hindi film
industry, but that’s far from true. Even Karan Johar’s Kuch Kuch Hota Hai, is only
an extension of the cinematic trend that was started by Hum Aapke Hai Koun and
Dilwale Dulhaniya Le Jayenge. They will belong to a new genre of films – the
family-oriented love story – but each has an appeal that is distinct. As distinct as
a Coke form a Pepsi or a Santro form a Matiz.
Marketing like movie-making, is all about offering the right product at the right
time. Hit movies, like brand successor, are all about creativity, execution and
direction. On the creativity front, it all begins with a compelling story.
THE EXPERIENCE
A bunch of Nike-clad, cell-phone toting kids walk into PVR Anupam, the multiplex
at Delhi, to watch Titanic. An upper-middle class couple stroll into Mumbai’s
NCPA to see the latest venture of Adoor Gopalakrishnan. Two different movies
that promise two different types of experiences. Each has its own set of value
perception – on the basis of which it is judged and loved or hated. Now what if
there was a switch I of “experience mindset”. Say, if the couple went to watch
Adoor Gopalkrishnan’s film with the expectation of a Titanic-like experience? The
result; disaster, without a doubt.
Not just movies, but brands too are constantly being evaluated on the basis of
their “perceived value”. With brands very often, it is the price-and-positioning
combination that causes blips to occur on the perceived value barometer. The
Club Med Holiday makers who thought they were paying the price for a holiday in
a Swiss chateau but came back with the feeling that they had been palmed off
with a holiday on the beaches of Pattaya.
No prizes for guessing what would happen if the cinema halls of Shahjahanpur in
Uttar Pradesh were to screen The English Patient? So too, Chennai
management plays a crucial part in determining whether the brand s destined to
have a golden jubilee run or be wiped off the market in the first week.
And finally, direction is the key to a successful film and a brand. How the director
of a film orchestrates the various elements is what makes or breaks a film. So is
the case with a marketer. How he chooses to deploy his resources, how he
connects the brand's current role with a strategic vision for the future and how he
priorities organizational capabilities and strategic vision for the future and how he
priorities organizational capabilities and strategic competence are all the keys to
averting a brand disaster. Ultimately, averting brand flops is all about the art and
drama of market leadership.
BRAND EXTENSIONS
We are here to talk about brand extensions. A company my use its existing brand
name to launch new products in other categories. Honda uses its company name
to market such different products as automobiles, motorcycles, lawn mowers,
and snowmobiles. This allows Honda to advertise that it can fit “six Hondas in a
two car Garage”. Godrej now features its name on soap, lotion, shampoo,
conditioner, shower gel, locks, almirahs, raw chicken and God knows what in
future. A new trend in corporate brands building its that corporation are licensing
their name to manufacturer of a wide range of products from bedding to shoes.
Brand extensions also involves risk. The new product might disappoint buyers &
damage their respects for the companies other products.
The brand may lose its special positioning in the consumers mind due to dilution.
Dilution occurs when consumers no longer associate a brand with a special
power or highly similar products.
Brand extension is not, however, a recent phenomenon (Gamble, 1967). It has

long been prominent in the luxury goods sector. India has always had big
business houses like Tatas , Godrejs and Birla who tend to push newer and
varied products under one Brand Name. Tata – From Steel to Cars , Godrej –
From locks to Farm fresh Chicken . The latest to join the bandwagon have the
Ambanis who after decades of excellence in Industrial chemicals have now
forayed into telecom and power .
WHY EXTEND THE BRAND?
Recent attention does not focus on the process of extension as such, but on the
benefits which it promises. Firms have come to appreciate that branding does
not just amount to an act of customer communication or a graphic exercise on
packaging, but implies a total behaviors pattern. The brand survives and fulfils
i.ex e
its intention only if it permanently surpasses itself by improving its product and
adapting it to ever-heightened consumer execrations. Innovation allows the
brand to remain up-to date and demonstrates and unceasing attentiveness to
the changes in customer taste. Most brands which have pinned their fortunes on
a single state of the art product, relying on advertising to update their image,
have fallen by the wayside to be modern in today's world means being in tune
with developments in user habits(e.g. in the food market, offering simplified
meals and individual portions) this in turn did not develop-their own initial level
of ability in line with such changes, they run the risk of being left behind.
A second major factor in brand extension is the cost of advertising. Brand

reasoning proceeds on competitive lines., Gains in productivity must be sought,
right down the line. This is only fully possible when it spreads the scope of its
ambition form local to national markets, and then the world wide market.
Sacking the widest market possible is the only means of supporting the
increasing costs of research and development and industrial investment. The
only way to achieve this wider market is through advertising. If your add to this
the need to outgun the competition, at least matching their share of voice, it is
easy to understand the trend towards increases in advertising expenditure.
Advertising is one out come of permanent reinvestment in research, a quest for
qualitative progress an better performance in the market. The high cost of
Advertising makes it impossible to support an excess of brands- there is no
alternative but to concentrate one's means on just a few major brands. Most
firms therefore evaluate their brand portfolio at a given time and select those few
which are to be the subject of advertising expenditure. These will be the brands
with diversified, innovative products. Brands extension therefore results from the
concentration of efforts on a few brands. New products which would have been
previously have been launched as new brands, under their own name, are now
introduced under the aegis of an existing brand, but possessing the full authority
of a strategic company brand.
The surge in brand extension is not, however, totally ascribable to technological

factors. For a long time, brand extension was hampered by the classic brand
concept.
THE CLASSIC BRAND CONCEPT:
The classic brand concept rests on the equations :
1 brand = 1 product = 1 promise or customer benefit
So it is that Procter and Grumble give every new product a specific name, totally
independent of fall their other products. Levi’s corresponds to a certain promise,
Dockers to another and Sykes to yet another. Compare this policy with that of
Cognate - Palmolive. Palmolive is a toothpaste, a soap, a shower gel and an
aroma talc.
The classic brand concept leads to an increase in the number of brands. If a

brand relates only to one physical products and one promise, one cannot in
principle use this to cover other products - a proper name as surely as Aristotle is
the name of a well known Greek philosopher (Cabot, 1989). Such a concept
gives little opportunity for brand extension, either by permanently increasing the
level of adding to the formats to cater for the latest user practices (e.g. packet,
drum, mini-drum) or by multiplying the varieties (e.g. Chocolates with nuts,
chocolates with wafer , dark chocolates etc).
MEANING OF BRAND :
The classic brand concept therefore takes the initial phase of the brand for is
reality. Though we can accept that the brand starts with a product, it is not the
product : the brand is the sense, the meaning of the products.
Products have no voice. A customer faced with a washing machine with no

brand is confused. How can he gauge whether he will be satisfied with it? The
brand signifies the intention of the creator - the value which he seeks to include
in this machine. What has the creator sought to inject into this products - a love
of tradition, the taste of a job well done, a respect for modern fancies, or finally a
wish to find a happy compromise between innovation and durability?
Extension cannot go in all directions. It is the brand which defines this source of
direction and the ultimate course. The brand carries with in itself the code for
future products which it will embrace.
What does this concept change in terms of brand extension? In the classic
concept, extension scarcely ventures beyond the stage of technological know-
how. The key concept is that of skill. The only question which the businessman is
asked is : do you a or do you not the industrial technique or know - how? Such
a question is in itself a form of reasoning which still relates to the physical
product - it shows a misunderstanding of the nattier of brands. Following this
line of reasoning, a Swatch car would make no sense. Swatch does not how to
make a car.
The wider brand concept implies extension beyond the sphere of the initial
technique. The brand is not seen in terms of technological know how, but as a
way of dealing with products, transforming them, and giving a common meaning.
In that case, the idea of a Swatch car may be reasonable, for one can foresee
how the Swatch values can segment the car. It suffices for Swatch to find a good
partner : Fiat or Volkswagen, perhaps.
TYPES OF BRAND EXTENSION :
Brand extension is a leap away from the initial technology. Here again we must
make the distinction between associated extension or continuity extension and
discontinuous extension. A major optics brand may extend to photocopying :
this happened with Cannon, Minolta, Kodak, and Agfa. A sports brand can
embrace every sporting requirement (Adidas, Nike and Puma). Discontinuous
extensions do away with technological affinities - the physical bridge between
products. These are true diversification's. For example, Yamaha manufacture
both motor cycles and classical pianos of repute. Retailer brands cover the
whole field of consumer products and even durables.
Some extensions are therefore far removed from the brand's initial territory whilst
other are in close proximity. This leads to brands with a narrow outlook-specialist
brands - or brands with a wide spectrum (Philips, General Electric). Is it better to
have a specialist or a broad approach? This question cannot be answered in
general terms. We have to remember that the brand is arbitrary and can choose
whichever path it desires. If Gillette decides to put is name on soaps, nothing
can stop it. If the company strategy is to give greater consideration to
capitalizing on one name, thus saving on advertising, it will opt for a brand with a
wide spectrum.
Degree of product dissimilarity changes the meaning and status of the brand
need to cover these products. Close extensions are compatible with formula
brands – Samsung can put it’s name on Televisions , DVD Players , LCD
Monitors and Refrigerators without risking equity dilution since products are
closely related. Extension one degree further corresponds to a 'know - how'
brands. Palmolive ,for instance , adds hygiene to every thing it touches, be it
personal hygiene (shower gels) or oral care(Colgate). T-series is the ultimate in
economy and therefore sells the audio cassttes as good a bargain as their
washing powder. When it first came on the scene, Sony was exclusively a high
fidelity brands. In a few years it acquired a name in television and video and by
Brand Extensions Lead To Brand Dilution - 10 -
the same token has seen its image and significance develop. Technology,
sensitivity and innovation, however, still remain its central values. The furthest
degree relates to a brand define Donny by a deeper philosophy.
In concrete terms ,brands having no depth, no identity apart from a physique(a

product or formula), can not support wide ranging extension. If they extended,
they decline and regress to the level of a port-brand-that of a factory brand worth
only a guarantee of origin. They become diluted, with no more meaning .
This is the case with Mitsubishi. Its name does not really relate to a unifying
brand, capable of leaving its impairing. It is a corporate or factory name. It does
not signify any meaning other than that of the generic image of Japan. Mitsubishi
cars do not seem to manifest any particular ideal of design, nor do Mitsubishi
television or machine tools, for example. It is also the case with Philips.
In contrast brands given too great a dimension, some are under exploited. These
only cover a narrow field of products but ,have an inner mystique which could
impart a significance to a wide spread of products.
A typical case of brand under exploitation is that of Nike.While Reebok continues

to sell more and more pullovers and T-Shirts and Adidas makes it’s footing
stronger in Personal hygiene market , Nike is just contend to sell shoes
BRAND EXTENSION : HOW ?
Before setting about any practical extension , there are two preparatory stages.
The first -and exploratory stage-probes all the associations with the brand which
are present in the collective public mind. This stage allows conjecture as to which
products would be compatible with the brand's meaning . once this has been
established, we have to turn our eyes back to the market. This brings into play
the second study phase- testing the new products ideas.
A decision can not be made on the strength of this information alone. Brand
extension is the result of strategic decision. It also involves factors linked with
production , marketing , finance and human resources. Extension always
involves a certain risk-no form of study can accurately predict the effect of
extension on the brand itself over a period. How will its status, its meaning ,its
equity be affected?
It cannot be over-emphasised that extension can not be contemplated without

complete knowledge of the brand's attributes:
- What are its attributes?
- What is its personality?
- What is the purpose?
- What is its heart?
- What contract does it offer to customers and consumers?
- What is its latent potential?
This questions can only be answered through both quantitative enquiry (to
establish the popularity of the brand and its image)and qualitative approaches.
The brand's latent potential and source of inspiration are not revealed by more
image surveys. Access to its prism of identity and its motivating force requires
qualitative investigation..The qualitative phase finally allows an under standing of

the brand's function from the user angle. Is the brand one's own personal , or a
symbol for the multitude?
If I said “shaving system”, “after-shave” and “shaving gel” and asked someone to
name a brand, which is common across these categories, Gillette might come
readily to mind. On the other hand, if I asked the same question after mentioning
“airline”, “cola” and “records”, Virgin might not be recalled so readily.
And yet, both brands have been extended successfully. Both have a shared
quality that provides an ‘agglomerating glue’ which determines the success of
brand extensions. The ‘agglomerating glue’ of Gillette is ‘Shaving products’, for
Virgin, it is ‘Richard Branson’.
The first question about Brand Extensions is: Why should one consider them at
all? The most common would be that it will grow the Brand franchise. If it were
only that simple! The reason why the effort could fail is that this strategy
presupposes one or more assumptions.
Assumption One. It will help get trial / sell the new product.
This need not be inevitable, even if it seems ‘reasonable’. Because the extension
of the brand name will help to get trial only if it is seen to Add Value to the new
product. Some years ago, Nirma introduced a toothpaste – but the many
consumers who saw a value in Nirma washing powder, did not find it in the
toothpaste.
The most critical failing in many brand extention initiatives is that they
start with the marketer, not the consumer
Assumption Two. It will help to strengthen the existing product.
A brand extension can achieve this, but only if the new product incorporates a
truly New Idea. For example, the Apple computers brand was actually enhanced
by the introduction of the iPod MP3 Player - but that happened only because the
iPod is a sensationally new idea. The Apple brand could not have achieved this,
if the iPod were just another MP3 player.
Assumption Three. The brand equity will ensure ready acceptance in the new
category.
A common assumption is that the brand has enough Stretch to carry its strength
into a new category. But Bournvita was unable to stretch its strength as a health
beverage to biscuits. Internationally, Xerox couldn’t stretch the brand to
computers. And consider the recent announcement that Amul will extend the
brand into sugar. Will the brand stretch that far? What do you think?
The most critical failing in many Brand extension initiatives, however, is that they
start with the marketer, not the consumer. Because while the trademark may
belong to the marketer, the brand finally exists in the mind and heart of the
consumer. Brand Extensions will succeed only when they create a Consumer
Connect. Here are some guidelines on looking for them.
Guideline One: Extend a strong Attribute / Performance Characteristic

Association.
This is the simplest level at which to begin. Amul stands for pure milk.
Indeed it is likely that to many consumers, Amul is milk. Therefore, it is easy to
extend the brand from wet milk, to butter, to cheese, to dairy whitener, and
recently, to ice cream. However, with pizza, Amul may now be moving just a bit
too far from the core ‘milk’ association. Does the consumer think Pizza = cheese
(=milk) or is Pizza = baked food?
In a like manner, Sunsilk is a brand that stands for beautiful hair. So it seems
legitimate to extend it beyond shampoo to hair colour.
Guideline Two: Extend a strong Benefit Association.

Fair & Lovely owns the skin fairness benefit strongly enough to extend the brand
from the original fairness cream to a lotion to a soap to an under-eye cream.
Lux is strongly linked to the beauty benefit. So it can extend from the toilet soap
to an entire range of beauty products such as Moisturing body wash and Sun-
protection products.
Guideline Three: Extend an association with a Consumer Attitude or Belief.
An intangible like this can actually be a very strong basis for extending a brand.
Think of Body Shop. The brand represents an ethical, environment- friendly world
view. For consumers who share this point of view, this is strong enough to prefer
Body Shop products across a host of categories.
Nike and its swoosh stand for pushing oneself beyond the limit and an
individualistic attitude – so the brand appeals to those who share this view and
who wear the brand as a
badge: in sports shoes, sports goods, bags, casual wear, even watches.
Guideline Four: Extend the brand based on Brand Essence.
Brand Essence is one of the most slippery aspects of branding. It is not the
Brand benefit, it is not the Brand Differentiator, it is not the Brand Personality; it
may incorporate aspects of all of these and yet be beyond them. To put it in
another context, there is a “Bogie-ness” that makes Humphrey Bogart unique
and something “Marilyn-esque” that keeps every buxom blonde from being
another Marilyn Monroe. That is Brand Essence!
The essence of the Ferrari brand is thrill and excitement. The essence of the
Dunhill brand is old-world, refined, sophisticated luxury. Brands with such
indelibly etched essences can carry the essence across a wide spectrum of
products. So Ferrari is not just fast cars, it is also expensive clothes and
fragrances. Dunhill is cigarettes; but it is also lighters, jewelry, watches, writing
instruments, men’s clothes and more.
There are also several watch-outs to note before extending brands.
Watch-out One: Is your brand extension sending out contradictory signals?
This could be happening in the case of Nivea, where after offering skin-care
products for women for years, a range of men’s toileteries was introduced under
the same name. Bad idea.
Another brand, Zodiac, avoided such a situation. Zodiac is formal, sober, mature.
Not exactly the right associations for trendy clothes! Zodiac has created the Zod
brand to enter this category, rather than extend Zodiac into potentially
incompatible territory.
Watch-out Two: Is there any link to the brand extensions or is it merely a
convenient, available name that’s being used?
Maggi came into India with 2-Minute noodles - a hearty, anytime snack. Since
then the Maggi brand has been extended to sauces, soup cubes, even pickles.
There is nothing that holds this set of products together. Is it surprising that the
extensions are not resounding successes?
Watch-out Three: Check the interpretation of the link across extensions.
Dettol was the ubiquitous antiseptic liquid (and then cream). When the brand was
first extended to soaps, the antiseptic property was interpreted to mean care and
Dettol was launched as ‘The Love and Care Soap’. It did not work.
Today, many years later, Dettol soap offers protection – a more realistic
interpretation of the antiseptic property, and the soap is doing far better.
In closing, I’d like to state that brand extensions are certainly a valid strategic
option for a brand manager. With the right basis of extension, they can offer
advantages in terms of getting trade support, reducing barriers to trial, improved
media-spend multiplier effects, and so on.
The key issue is whether there is an underlying linkage binding and mutually
strengthening the brand extensions. If you’re Richard Branson, you can stretch
your brand across an airline, a cola, and a record label. If you are Michael
Jordan, a line of basketball shoes makes sense. If you are Lata Mangeshkar a
fragrance is probably not such a great idea.
RESEARCH METHODOLOGY
INITIAL OR NULL HYPOTHESIS:

“Unrelated Brand Extension When Done With The Sole Purpose Of Boosting
Sales and Capitalizing on existing equity Lead To Brand Equity Dilution .”
SAMPLE SIZE :
100 Respondents
SAMPLE TYPE :
50 out of 100 respondents were solely shopkeepers , retailers and store
managers . In their case , the certain open ended queries were also made apart
from the structured questionnaire . During analysis , their response was given a
better weightage .
The remaining 5 respondents were from all types of backgrounds and walks of
life – Housewives , Salaried Professionals , Working women , Senior citizens etc.
SELECTION OF BRANDS TO BE STUDIED :

The selection of brands to be covered under the purview of this research was
done with due care in order to cover all diversity of Branding . Nirma was
selected as it belonged to Habitual Buying behavior, low involvement category
with it’s majority customers being adult ladies . Cadbury , the other selected
brand was chosen for exactly the opposite attributes – high involvement variety
seeking category with children and teenagers being principal buyers.
In order to prove the hypothesis on the international scale , Virgin (of Richard
Branson fame was also included . Most of the data pertaining to Virgin was
acquired through direct in depth interviews with Virgin Officials in India.
QUESTIONNAIRES
Cadbury
(Shopkeepers, Store Managers)
1. In what intervals does Cadbury launches sub brands ?
a. Quarterly b. Semi-Annually c. Annually
2. Was falling Sales a prime reason for Cadbury to launch sub brands ?
a. Yes b.No
3. How does the pattern of sales changes after brand extension ?
a. New Sub-brands eat into the share of Original brands of Cadbury
b. New Sub-brands help cut into the share of rival brands while not affecting
sales of original Cadbury brands.
c. Sales of Cadbury and rival brands stay unaffected while brand extensions
bring in new customers.
4. What was the pattern regarding prices of Extended Brands ?
a. Prices were on par with old original Cadbury brands.
b. Prices were lower than the prices of original Cadbury brands .

c. Prices were higher than the prices of original Cadbury brands .
5. What was the status of branding and promotional exercise undertaken for the
new Cadbury brands ?
a. Intensive branding in all stages of product life cycles
b. Intensive branding and promotional expenditure in early growth stages

followed by reduced efforts in mature stages
c. Expenditure which is below par than that of original brand in all stages of
product life cycle
6. How did the customers warm up to the new brands ?
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
QUESTIONNAIRE - Nirma
(Shopkeepers, Store Managers)
1. In what intervals does Nirma launches sub brands ?
a. Semi-Annually b. Annually c. Bi-Annually
2. Was falling Sales a prime reason for Nirma to launch sub brands ?
a. Yes b.No
a. New Sub-brands eat into the share of Original brands of Nirma
sales of original Nirma brands.
c. Sales of Nirma and rival brands stay unaffected while brand extensions
a. Prices were on par with old original Nirma brands.
b. Prices were lower than the prices of original Nirma brands .
c. Prices were higher than the prices of original Nirma brands .
5. What was the status of branding and promotional exercise undertaken for
the new Nirma brands ?

product life cycle
6. How did the customers warm up to the new brands ?
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
QUESTIONNAIRE (Cadbury and Nirma)

(Customers)
1. What did you feel about the brand extension?
 Very good  Good  OK  Bad
2. What do you think about the prices
 Very good  Good  OK  Bad
3. Do you think the price is worth the quality?
 Yes  No
4. Do you think that the brand extension is worth the original brand's reputation?
 Yes  No
5. Do you think it’s a successful brand extension and it would prove the worth?
 Yes  No
THANK YOU
NIRMA – QUANTITATIVE ANALYSIS
Following is the question wise analysis of the questionnaire which the store
managers and retailers were asked to fill :
1. In what intervals does Nirma launches sub brands ?
a. Semi-Annually b. Annually c. Bi-Annually
Responses out of 100 :

a. Semi-Annually- 10
b. Annually - 46
c. Bi-Annually - 44
50
45
40
35
30
25
Responses
20
15
10
5 Figure 1
0
A B C
Following are the salient features of the Responses :

1. 90% of respondents believe that Nirma extends it’s brands in long intervals ,
i.e. in an year or more . Nirma is in a comparatively stable product category
where customer doesn’t experiments much.
2. The fact that Nirma decided to launch a beauty soap for everyday use
deviated from it’s original market of detergents. With no core competency in this
new product category, failure was bound to happen
2. Was falling Sales a prime reason for Nirma to launch sub brands ?
a. Yes b.No

a. Yes - 17
b. No - 83
90
80
70
60
50
40 Responses
30
20
10 Figure 2
0
A B
Following patterns were also observed :

1. An overwhelming number of people believed that Nirma’s foray in other
markets was ill advised simply because they were doing so well in their original
washing powder market. A quick look at the sales records for the financial years
1999-2000 ,2000-2001 and 2001-2002 confirm that the sales were on a steady
rise all through at a rate of around 8%. In the year 2002-2003 , profits took a
beating because of Nirma beauty soap and extra power dishwashing bar .
2. Although extending from washing powder to dishwash powder seems a logical

step , industry insiders believe that it is a highly fragmented market with each
segment having it’s own leader. Dishwash brands like Pril are hard to dislodge
from their position in an already saturated market.
a. New Sub-brands eat into the share of Original brands of Nirma
sales of original Nirma brands.
c. Sales of Nirma and rival brands stay unaffected while brand extensions
a. New Sub-brands eat into the share of Original brands of Nirma – 62
sales of original Cadbury brands – 23
bring in new customers – 15
70
60
50
40
30 Responses
20
10 Figure 3
0
A B C
1. Nirma has always belonged to the economy class of washing powder market
where it leads other brands like Wheel and Rin. When it tries to compete with
premium brands like Surf and Ariel with sub brand like Nirma Super, it fails to
deliver because it lacks the basic core competence.
2. The saturated nature of the market is the reason why Nirma, or for that matter
any brand would fail to bring in new customers with a new sub-brand. This
explains such a low response for option C .
a. Prices were on par with old original Nirma brands.
b. Prices were lower than the prices of original Nirma brands .
c. Prices were higher than the prices of original Nirma brands .
Responses out of 100:

a. Prices were on par with old original Nirma brands – 23
b. Prices were lower than the prices of original Nirma brands - 16
c. Prices were higher than the prices of original Nirma brands – 61
70
60
50
40
30 Responses
20
10
Figure 4
0
A B C
Following patterns were also noticed :

1. An overwhelming proportion of respondents suggesting that brand extensions
are often expensive point towards the precise reason for their downfall ,i.e. high
prices . While the customer may like to experiment once , high prices will prevent
him from becoming a regular buyer.
2. The lower end of washing powder market is any way extremely price sensitive.
No brand enjoys any brand loyalty among customers as they switch brands on
the price perimeter alone . Nirma thus flirted with danger by introducing
expensive variants.
5. What was the status of branding and promotional exercise undertaken for
the new Nirma brands ?

product life cycle
Response out of 100 :
a. Intensive branding in all stages of product life cycles - 34


followed by reduced efforts in mature stages - 41
product life cycle - 25
45
40
35
30
25
20 Responses
15
10
Figure 5
5
0
A B C
Following patterns could also be noticed :
1. The results are equally staggered and don’t point in any specific direction .
However , we can draw a few conclusions from the one-to-one interactions with
the dealers . Many dealers believed that whatever branding took place was at the
customer level through television and print media. Nirma paid scant attention to
dealer management and hardly ever listened to their feedbacks. The fact that
Nirma had grown into a giant brand made it believe that whatever product they
will introduce in the market will succeed .
2. With reduced margins it was a Catch 22 situation for Nirma. Large expenditure
on branding and promotions would reduce the profits further while very low
expenditure would not generate enough margins to break even . This was one
company which would have been best advised to stick with their core product.
NIRMA – QUALITATIVE FINDINGS AND

RECOMMENDATIONS
Nirma is an over Rs. 17 billion brand with a leadership presence in Detergents,

Soaps and Personal Care Products, offering employment to over 15,000 people.
The Brand was introduced by Mr. K. K. Patel in 1969. Making phosphate free
synthetic detergent powder by hand and selling it at Rs. 3/- per kg., when the
lowest priced detergent brand was Rs. 13/-. This value-for-money plank
revolutionised the industry and made fabric wash detergents available to the
masses. Today, Nirma sells over 800,000 tonnes of it's detergent products
annually, giving it a 35% share of the Indian market, which is the world's second
largest fabric wash products market. This makes Nirma India's largest detergent
marketer and one of the world's biggest detergent brands. Even though Nirma
was a late entrant in 1990 in the highly competitive toilet soaps market, it is
already the second largest manufacturer, selling close to 1,06,000 MT of bathing
soaps in 1999-00. The brand has over the years introduced products in toiletries
and personal care with soaps, shampoos and toothpaste, thus offering the
consumer a complete product portfolio. Carrying on Nirma's mission of providing
'Better Products, Better Value, Better Living' to its over 300 million consumers
through an efficient distribution network.
Nirma's philosophy of providing quality products at the best prices has led to
investment in the latest technologies for our multi-locational manufacturing
facilities, with full-scale integrated complexes at Mandali - Mehsana, Ahmedabad,
Baroda, Bhavnagar, Kanpur and Indore. To have a greater control on the quality
and price of its raw materials, Nirma has undertaken backward integration into
manufacture of Industrial Products like Soda Ash, Linear Alkyl Benzene (LAB),
Alfa Olefin Sulphonates (AOS), Fatty Acid, Glycerine and Sulphuric Acid.
Nirma's vision, based on it's Indian experience and aided by a professional

management team, is to replicate it's leadership position internationally. Within
the short span of a year, Nirma achieved commandable position in the leadership
of detergent market in Bangladesh through it's joint venture there, M/s.
Commerce Overseas Limited.
Nirma is aptly considered as a marketing

miracle and this is reflected in the strength of
the brand. Nirma has successfully challenged
and changed the conventions of detergents
marketing and today leading business
schools are analysing it's strategies to
demystify this miracle. Nirma's core
marketing thrust revolves around prompting
consumer trials by offering a good quality
product at most competitive price and
retaining these new consumers by
continuously offering the same 'Value For
Money' equation. This is borne by the fact that today Nirma can boast of a strong
brand loyalty from it's 400 million consumer base.
Nirma sells over 800,000 tonnes of detergent products every year and
commands a 35% share of the Indian detergent market, making it one of the
world's biggest detergent brands. The brand promotion efforts are complemented
by Nirma's distribution reach and market penetration, through a country wide
network of 400 distributors and over 2 million retail outlets, making Nirma
products available from the smallest rural village to the largest metro, in a
continent sized country like India.
Based on the pragmatic concept of 'Umbrella Branding',
Nirma has been increasingly successful in extending it's
brand equity to other product categories like Premium
Detergents, Premium Toilet Soaps, Shampoos, Tooth pastes
and Iodized Salt, thus opening new vistas to the field of

Brand building.
Nirma has followed up it's original marketing

success in the economy segment of the
detergent powder and cake market, with Nirma Super Cake and
Nirma Super Powder in the premium segment. Nirma's entry into the
soaps market was marked with the introduction of Nirma Bath, a
carbolic soap, today an established brand in this segment. Close on the heels of
this, was launched Nirma Beauty Soap in three
variants, which in a matter of a few years has
become the third largest toilet soap brand in India.
This encouraging market reception has been kept
going with the launch of Nirma Premium and Nirma
Lime Fresh. In fact, 17 million packs of Nirma Lime Fresh were sold in the very
first month of its launch and that too without any advertising support. That's the
power of the Nirma Brand.
Today Nirma has expanded into the personal care market with Nirma Shikakai,
Nirma Beauty Shampoo and Nirma Toothpaste and into products like Iodised
Salt, thus providing the consumer with a more complete product portfolio.
Qualitative Research Study

Objective: To determine the primary associations that consumers make with
Nirma and its products, specifically Nirma washing powder & Nirma beauty bar in
the middle and upper classes. Gauging Consumer Perception, both before and
after the launch of Nirma Beauty Bar.
Data collection approach: Non structured In-depth interviews.

Output: Associations with Nirma & its products and how well these support the
hyothesis. Importance Ranking as well as Rating of specific attributes, relevant to
the product portfolio and performance of Nirma and its products on these
attributes. Brand Image of Nirma and Brand recall
Type of Study: Exploratory study.
Research Matrix
Research Hypotheses/ Information needs

Problem Research
Question
What are the Nirma soap has Associations that
specific intangible consumers make
associations benefit, w.r.t.
that consumers customer -Nirma brand
make when benefit and -Nirma detergent
they think of relative price -Nirma soap
Nirma-the type
Nirma brand, associations
Nirma detergent
and Nirma
soap?
What has been Nirma Soap has Perception of
the impact of enhanced the Nirma detergent
the extension brand image of and Nirma Soap in
on the core Nirma the mind of the
brand? consumer
Perception of the
Nirma brand
-before the brand
extension
-after the brand

extension
How has Extension of a Consumers’
Nirma’s brand into not- perception of
extension into so-near product viable future
toilet soaps becomes easier extensions for the
impacted the after intervening Nirma brand
directions and brand
possibilities for extensions i.e.,
future Nirma will now
extensions? (after its
extension into
soaps) find it
easier to extend
into more
diverse product
categories.
Data Analysis Plan

The data analysis after the pre-testing was over, was carried for both the sets of
questionnaires separately first and inferences from them were later clubbed to
arrive at the overall perspective. We will now illustrate the specific input derived
from each question for each information need as per the requirements stated in
the research matrix.
• Associations that consumers make w.r.t.
o Nirma Brand
o Nirma Washing Powder
o Nirma Beauty Bar
The eleven categories in the Brand specific association model were used to
categorise the responses to the above questions, in the form of frequency tables.
These would provide input to validate the hypothesis about the associations
related to Nirma products.Perception of Nirma, Nirma detergent and Nirma Soap
in the mind of the consumer, especially after the launch of Nirma beauty bar. This
information need required multiple questions, involving ranking of relevant
attributes for the brand and the two product categories and then rating of Nirma
and its products on those attributes. Information regarding the possible future
extensions was gathered through an open-ended question in both the
questionnaires (Qn 7 in 1 and 2). The responses are later classified in broad
product categories, where required.
Results
The results from the data analysis are presented in this section.
The top of the mind brands in the Washing powder category were:
• Surf
• Ariel
• Nirma
The top of the mind brands in the beauty soap category were:
• Lux
• Dove
• Rexona
Thus, it was observed that Nirma Beauty Bar did not feature in the top of the
mind recall (unaided) in this segment.
The respondents personified Nirma in the following manner:
Nirma is a middle-aged, average-looking housewife, dressed in a saree,
traditional and competent by nature.
The relevant attributes, in order of decreasing importance, in the choice of any

brand as a whole were found to be:
• Quality
• Performance
• Value for money
The attribute of price was also considered to be important but it was reflected
more in the respondents’ preference for ‘value for money’ products.
The respondents were also asked to rate Nirma on the same attributes as above.
The ratings revealed that Nirma was perceived to be a brand that was strong on
the aspects of availability, value for money and price. However, the respondents
felt that Nirma was not a very high quality or high performance product.
The associations that the respondents have with the Nirma brand are as follows:
• Customer Benefits:(Clean, Whiteness, Value for Money)
• Product Attributes:(Yellow)
• Celebrity: (Advertisements of Nirma)
The association of relative price also came out very clearly but the emphasis was
clearly on Nirma being a value for money brand.
The 3 most important attributes in importance ranking for the category of washing
powder were as follows:
• Performance
• Mild on hands
• Lathers well
The attributes of price, availability and good for hand washing were also
considered to be important. To a certain extent, the attribute of lathers well
indicates good performance in the mind of the consumer.
The rating of Nirma washing powder on these attributes is as follows:
The respondents considered Nirma washing powder to be very strong in the
areas availability, price, good for hand-washing and Lathers well. However,
Nirma does not fare too well on the aspect of Mild on hands and performance.
The associations of the respondents with Nirma washing powder is as follows:
• Customer Benefits
• Use/Application
• Price
• Celebrity
The attribute importance ranking for the category of beauty soap is as follows:
• Cleaning
• Fragrance
• Moisturisation
The associations of the respondents with Nirma Beauty Bar is as follows:
• Celebrity Association
• Product attributes
• Customer Benefits
• Intangibles
Nirma Beauty bar has been personified as:
“Nirma beauty bar is a young glamourous woman in her early twenties, dressed
in Western or Indian casuals, trendy and modern in her outlook towards life”.
The broad product categories in which Nirma could launch extensions, according
to consumer perception are as follows:
• Clothes Whiteners
• Starch
• Liquid soaps
• Skin care products
• Dishwashing liquids and other cleaning liquids
Inferences
• Nirma beauty soap does not enjoy top of the mind recall in spite of it being
the third largest selling soap in the Indian market. This is because of the
availability of Nirma beauty soap. Although availability is not one of the
important attributes in the mind of the consumer, in this low involvement
product buying behaviour is very significantly influenced by shelf-
presence.
• Nirma as a brand is more associated with the core product of washing
powder rather than the beauty soap. This was reflected in the similar
associations for Nirma as a brand and Nirma washing powder.
• The common associations between Nirma brand, Nirma washing powder
and Nirma beauty soap is that of Customer Benefits, specifically Value for
money. The secondary research also revealed that initially Nirma was
perceived as a cheap, medium quality product, in the period of time before
the launch of Nirma beauty soap. However, Nirma then moved towards a
Value for money product, which was reinforced through the successful
launch of Nirma beauty bar.
• The attribute rating of Nirma washing powder clearly indicates the
consumer perception that Nirma washing powder delivers medium quality
at a very reasonable price thereby proving to be a Value for Money
product.
• The attribute rating of Nirma soap, on the other hand indicates very good
performance on all the relevant attributes. Therefore, based on a better
performance plank combined with the reasonable price, allowed it to
develop the Value for money image.
• The options suggested by the respondents for future expansions clearly
place Nirma as a company that is linked with superior cleaning abilities.
The associations of Nirma with the washing powder category and the Use
category of Clothes indicate that Nirma is very strongly associated with
this particular aspect of cleaning. The success of Nirma in the beauty
soaps category further strengthens this observation, because cleaning is
considered a very important attribute for beauty soaps also. The fact that
most of the future extension possibilities are linked with cleaning or
clothes, Nirma cannot immediately consider diverse brand extensions.
• The consumers therefore have three very strong associations with Nirma.
The first of these continues to be its cleaning ability. The aspect of Value
for money follows closely. Then there is the Celebrity association. The
success of Nirma soap can be explained on the basis of the first and the
third factors and based on these two factors it also managed to impart the
attribute of Value for money to the parent brand to a large extent.
• The difference in the personification of Nirma washing powder and Nirma
beauty soap also corroborates the shift in the perception of consumers.
Conclusions
The hypothesis the group started with was that Nirma Beauty bar has the
following associations in the minds of the consumers:
• Intangible benefits
• Customer benefits
• Relative price
After our study, we have found that though the first two associations hold, the last
one i.e. Relative price, does not come through. Instead the primary customer
benefit of Value for Money partly reflects the relative price association. The price
of Nirma bar is comparable (slightly lower) to that of Lux, and it performs well on
most of the important aspects of a beauty soap. This has given it the connotation
of a Value for Money product. This has also been the extension’s major
contribution to the parent brand’s equity. Nirma as a whole is now associated with
Value for Money products and this has been borne out in our study. Nirma beauty
soap has drawn upon and extended the positive association from the parent
brand but has also developed unique associations for itself like the Celebrity
association.
Thus, the model helps us to explain the Nirma’s brand extension into soap
category and the resultant effect on consumer perception about the brand.
However, the extension into the soap category is still related to the parent, in so
much that it continues with the cleanliness attribute as one of the primary
functional benefits. As we have seen, cleanliness and application for clothes are
the primary associations for the parent brand (the same as for Nirma washing
powder) and thus, for the time being at least the future extensions will have to be
in related categories. Over time, if the extensions are successful in developing
new, stronger associations like Nirma beauty bar has done, they may lend a
broader meaning to the core brand and thus, facilitate its foray into more diverse
product categories.
CADBURY – QUANTITATIVE ANALYSIS

Following is the question wise analysis of the questionnaire which the store
managers and retailers were asked to fill :
1. In what intervals does Cadbury launches sub brands ?
a. Quarterly b. Semi-Annually c. Annually

a. Quarterly - 20
b. Semi-Annually- 65
c. Annually - 15
A B C
Figure 6
Following are the salient features of the Responses :

1. 85% of respondents believe that Cadbury extends it’s brands frequently , i.e. in
less than six months . With such a high rate of brand extensions , the resources
of Cadbury are bound to dilute and become less efficient.
2. Those who responded with option c (Annually) , were actually small retailers
who did not stock the full range of Cadbury products and hence were ignorant
towards certain recent offerings of Cadbury .
2. Was falling Sales a prime reason for Cadbury to launch sub brands ?
a. Yes b.No

a. Yes - 43
b. No - 57
A B
Figure 7

1. Since responses are almost equal for both the options , it is hard to draw
conclusions from this question . However , when asked in detail , respondents
revealed that since chocolates induce a variety seeking buying behavior in
customers , brand extensions were introduced to keep the customers loyal to
Cadbury umbrella brand.
2. A large number of respondents believed that the combined sales of all
Cadbury brands after the extensions remains almost same ,i.e. new brands
reduce the sales of old Cadbury brands.
a. New Sub-brands eat into the share of Original brands of Cadbury

sales of original Cadbury brands.
a. New Sub-brands eat into the share of Original brands of Cadbury – 57
sales of original Cadbury brands – 21
bring in new customers – 22
A B C
Figure 8
1. Over 50% respondents believed that new sub brands like Picnic and
Caramello only eat into the share of existing flagship brand of Cadbury – “Dairy
Milk”. Such results make the entire exercise of extending brands very futile .
2. Retailers who chose options B and C were again small time store keepers and
were also at times unaware of new innovations introduced by Cadbury .
a. Prices were on par with old original Cadbury brands.
b. Prices were lower than the prices of original Cadbury brands .
c. Prices were higher than the prices of original Cadbury brands .
Result out of 100 :
a. Prices were on par with old original Cadbury brands – 19
b. Prices were lower than the prices of original Cadbury brands – 10
c. Prices were higher than the prices of original Cadbury brands - 71
A B C
Figure 9
Following patterns were also noticed :
1. An overwhelming proportion of respondents suggesting that brand extensions

are often expensive point towards the precise reason for their downfall ,i.e. high
prices . While the customer may like to experiment once , high prices will prevent
him from becoming a regular buyer.
5. What was the status of branding and promotional exercise undertaken for the
new Cadbury brands ?

product life cycle
Results out of 100 :
a. Intensive branding in all stages of product life cycles – 11

followed by reduced efforts in mature stages – 42
product life cycle – 47
A B C
Figure 10
Following patterns could also be noticed :

1. Here , another reason for failure of brand extensions gets highlighted . The
budgets and resources earmarked for the new brands are often lower than the
actual brand. As a result , customers soon forget about the brand .
2. Cadbury being a brand which operates in low involvement category , such

reduced expenditure becomes even more detrimental. Since customers find the
taste and quality almost same across all chocolate brands , the key differentiator
is promotion which is lacking in case of new sub brands .
CADBURY – QUALITATIVE FINDINGS AND

RECOMMENDATIONS
CIL and the Cadbury's brand are synonymous with chocolate in the minds of
Indian consumers. A part of the leading US-based global confectionery and
beverages major, the Cadbury Schweppes group,2 CIL has been the leader in
the Indian chocolate market for many decades. The company began
manufacturing operations in Mumbai in 1946. CIL was initially incorporated as a
wholly owned subsidiary of Cadbury Schweppes in 1948 and was called Cadbury
Fry (India) Ltd. The first product to be launched in the country was the globally
successful brand, CDM.
In the early 1960s, CIL shifted its manufacturing base to a plant in Thane,
Maharashtra. The plant, which expanded substantially over the years,
manufactured a range of CIL products. The company's R&D and engineering
development divisions were also located in Thane. In the 1960s, CIL launched a
range of products such as Crackle, 5 Star, Gems, Tiffins, Nutties, Butterscotch
and Caramels. Most of these products became instant successes and led to
rapid growth in chocolate consumption in India. Following this, the company
launched Cadbury's Eclairs in 1972, priced at 25 paise.3 Eclairs, Cadbury
chocolate, was a runaway success, despite being priced higher than the
available sugar confectioneries in the market at that time.
In 1978, Cadbury Schweppes had to dilute 60% of its equity in Cadbury Fry to
comply with FERA guidelines.4 Cadbury Schweppes's stake in CIL was further
diluted to 40% in 1999. In 1982, Cadbury Fry was renamed Hindustan Cocoa
Products. In 1983, Cadbury Schweppes increased its stake in the company to
51%. In the 1980s, CIL focused on acquiring and applying advanced technology
in the production and packaging of CIL products. The company laid emphasis on
innovative packaging that would make an impact on customers.
In 1982, the company set up a factory at Induri (Talegaon district, Pune,

Maharashtra) to increase the milk-yield (required for Cadbury products'
preparation). The factory was engaged in the manufacture of intermediate
products such as condensed fresh cream milk and a few brands of chocolates.
Over the next few decades, CIL ventured into various segments of the food
industry. In addition to the chocolates and sugar confectionery segment, the
company entered the mailed foods, cocoa powder, drinking chocolate and malt
extract segments. The company brands gained high popularity in most of these
segments. During the mid-1980s, CIL launched biscuits under the Cadbury Butter
and Glucose brands. However, these products did not do well and the company
discontinued them by the late 1980s. In 1986, the company launched the mailed
food brand, Boumvita, which became a runaway success (Refer Exhibit I for
CIL's product/brand profile). In 1989, CIL set up another manufacturing plant at
Malanpur (Madhya Pradesh). The company also had third party factories at
Warana (Maharashtra), Phalton (Maharashtra) and Hyderabad (Andhra
Pradesh).
In 1989, the company was renamed as CIL. The company continued to diversify
and ventured into the ice cream segment. It launched brands such as Dollops
and Lopstop. However, as the ice cream business did not generate the synergies
CIL had planned, it sold its ice-cream business to Brook Bond in 1994.
CIL was present in all major sub-segments of the chocolates segment and many
of its brands were market leaders in their respective segments. Since its entry
into India, CIL had been the leader in the chocolates segment. Analysts attributed
its success to its rigorous marketing efforts, which stayed in line with changing
consumer needs, year after year. The company launched various products in
different pack sizes, available at various price points. As people generally
purchased confectionery products on impulse, the company gave importance to
product visibility and availability. CIL introduced Visicoolers, vending machines
and jars, and placed then at Star Outlets5 and amusement parks. The company
also introduced 'Sheet Metal Dispensers,’ which were placed at the cash
counters of thousands of retailing shops for dispensing chocolates. These
dispensers attractively displayed the range of CIL's chocolates, thus helping the
company position its brands strongly in the minds of Indian consumers.
In 1990, CIL's domination of the Indian chocolates segment was threatened by

the entry of Nestle India (Nestle), the Indian subsidiary of global FMCG major,
Nestle S.A (Switzerland), into the Indian chocolate segment. Nestle, which
entered India in the 1950’s, was a leading player in the coffee and milk products
segments in India. It entered the chocolate segment in India with the launch of a
range of premium chocolates under the Nestle brand name. In 1994, Nestle
introduced BarOne (chocolate bar with peanuts) and soon garnered a
respectable, market share in the chocolate segment
CIL carried out many successful advertisement campaigns on TV and other

media. As a result, CIL brands gained high consumer recognition. During the
1980s, CIL identified children as its target audience and developed campaigns
that appealed to this segment. However, by the mid-1990s, chocolates were
being positioned as near-meal substitutes by both Nestle and CIL. This was
because the market was moving from being children-centric' to encompass
adults as an important target segment.6 In 1994, to cope with this change in) the
composition of the target audiences, CIL decided to target CDM at adults instead
of only children.
The result was a new campaign which repositioned CDM. The company brought
out a series of advertisements that carried the tagline, Kya Swaad Hai Zindagi
Mein' (Real Taste of Life - RTOL). These advertisements depicted people from
various backgrounds 'celebrating life,' with CDM in the backdrop. One such
commercial (called the 'cricket' commercial) reportedly became one of the most
popular TV advertisements in the history of Indian advertising. It featured a girl
breaking into an impromptu dance on a cricket field after her boyfriend scored the
winning run in a highly tense match. Through a few other such commercials, the
RTOL campaign succeeded in extending its reach to adults by steering the adults
towards self-expression and spontaneity. Subsequently, sales of the entire range
of chocolates, 5 Star, Gems, Eclairs, Fruit & Nut, Crackle, Nutties, Butterscotch
and Tiffins, grew by 20%.
In 1995, Nestle entered the wafer-chocolate segment by launching its global

'bestselling' wafer chocolate brand KitKat in India. CIL responded quickly by
launching its own wafer chocolate brand, Perk, to meet the KitKat challenge.
Both the brands were backed by promotional campaigns and decibel advertising.
CIL even roped in upcoming Hindi movie actresses Rageshwari and Priety Zinta
for its 'Thodi Si Pet Pooja - Kabhi Bhi, Kahin Bhi' (Satisfy hunger - Anytime,
Anywhere) campaign.
Even though KitKat's 'Have a Break, Have a KitKat' campaign becoming a huge
hit, Nestle's sales lagged far behind CIL's. In 1996, while CIL's market share was
76%, Nestle's was only 10%.
Though CIL continued to be the market leader in the chocolate segment during
the late 1990s, it faced problems regarding the market shares of 5 Star and Perk.
5 Star's market share had declined to 15% in 1997 from over 20% in 1995; and
Nestle's aggressive marketing of KitKat had placed Perk under threat. CIL's
management thus decided to focus on new product launches stay ahead of the
competition and regain market share.
REINVENTING THE BRANDS - CEASELESSLY
CIL launched a number of new products in 1998, such as Picnic (a chocolate bar
with wafer, peanuts, raisins and caramel), Byte (a strawberry flavoured candy),
English, Toffee (a chewy toffee) and Cadbury Gold (a CDM with a soft center).
While Picnic was promoted as a 'solid, filling and ingredient-packed' chocolate,
Cadbury Gold was promoted through an 'emotional' appeal.
The advertisement featured a woman by a poolside eating a bar of Cadbury Gold

and fantasizing about being in the men's changing room, with the men running
separately to cover themselves. The commercial ended with the woman smiled in
a self-chiding but mischievous manner. This advertisement aimed at changing
the existing brand image in the consumer's mind (of family values and
wholesomeness), by emphasizing self-indulgence and mood-upliftment. Cadbury

Gold thus tried to add a new dimension to traditional CIL brand values of family
values and wholesomeness.
Much to the company's dismay, these new products failed to click with the
consumers, largely because of their taste. During that same period (the late
1990s) Nestle's range of snack-substituting chocolates such as Charge, Nuts,
KitKat orange and Crunch, ate into the share of most of CIL's new launches
(Picnic and Cadbury Gold were eventually discontinued).
In late 1999, a new two-fold vision was formulated for CIL - one, doubling
shareholder value and, two, putting 'a Cadbury in every pocket.' To achieve this,
the company planned to increase the depth of chocolate consumption by adding
10 million consumers every year, launching more new and innovative products,
relaunching existing major brands, and revampimg the marketing mix, advertising
and promotional strategies, and focusing on the gifts segment. To increase the
depth of chocolate consumption, CIL strengthened its distribution network to
reaching 80,000 additional retail outlets every year. It also offered low-priced
packs for the masses and launched new products that targeted different age
groups.
CIL decided to focus on the availability and affordability of its products to

increase chocolate consumption in the country. Small affordably priced packs of
all the leading brands were launched to help improve the penetration of CIL's
chocolates. CDM was made available at various price points such as Rs 1, Rs 2,
Rs 5 (13gms), Rs 10 (26gms), Rs 15 (43gms), Rs 50 and even at Rs 100. The
high priced packs were positioned as ideal gifts for various festival and family
occasions and festivals. 5 Star was also offered at two price points, Rs 5 (14gms)
and Rs 10 (33gms).
As a result of the above measures, by late 2000, CIL succeeded in adding over 8
million customers to its existing consumer base of 65 million. During the period
CDM's market share increased significantly from 23% to 25%. 5 Star's sales also
increased from 12% to 14%. In 2000, CIL enjoyed over 70% share of the 22,500
tonnes Indian chocolate market (Refer Table I).
MARKET SHARES OF BRANDS IN THE CHOCOLATE MARKET (2002-2003)

TABLE I
BRAND BY VALUE (in %) BY VOLUM- (in %)
CDM 23.7 23.1
Nestle Chocolates* 25.1 24.7
5 Star 12.4 14.1
KitKat 14.3 11.2
Perk 9.2 8.3
Gems 9.5 9.3
Milky Bar 2.7 2.8
Picnic 2.6 2.5
Munch 0.5 0.7
Others - 3.3
Total 100.00 100.00
Source: The ORG-Marg Retail Audit

*Nestle's other chocolate brands such as Premium chocolates, Nestle Classic
etc.
However, CIL realized that the share of chocolates in the total amount spent by
consumers on impulse products (mainly chips/wafers, non-core biscuits, ice
creams, soft drinks and chocolates) had been declining in the late 1990s. In light
of this the-company decided to focus on expanding the share of chocolates in the
impulse buying category. This marked the beginning of numerous product
launches and relaunches by CIL during 2000-2002.
In 2000, Perk 'Slims' was launched – lighter and crisper than the previous
version, its packaging had also been modified. In addition, Perk was introduced
in different flavours – strawberry, mango and mint, to satisfy the varying

preferences of consumers. A new product, Relish, was launched in the same
year.
In July 2000, CIL launched Milk Treat (a white chocolate-coated wafer) targeted
at children. The advertisement campaign promoted it as a product that had 'the
goodness of milk married to the fun of chocolate.' According to CIL, "Milk Treat is
an ideal product for children as it combines food- health and nutritional values of
milk with values of excitement and fun that children generally associate with a
Cadbury chocolate product." Milk Treat was launched to compete with Nestle's
Milky Bar, a moulded white chocolate. CIL's other launch during the year was
Chocobix (a glucose biscuit with chocolate covering).
In February 2001, Mathew Cadbury (Mathew) became CIL's Managing Director.

He continued with the policy of placing 'a Cadbury in every pocket. The company
therefore went ahead with the launch and relaunch of chocolates. In June 2001,
CIL relaunched Eclairs with new packaging that carried the caption 'Kar De Dil
Pe Jadu' (Do Magic on the Heart). Eclairs were made available in various pack
sizes that ranged from cartons to 90 gm pouches priced at Rs 15. CIL also
launched the Eclairs Tub Pack (Rs 25) in the gift segment.
In July 2001, CIL relaunched 5 Star, with a new tagline, 'non-stop energy.' This
was an extension of its previous taglines 'an energy bar' and 'reach for the stars.'
To reach its core target segment (for 5 Star) - the youth - the company undertook
extensive on-ground promotional activities, outdoor advertising and TV
campaigns. 5 Star was usually positioned as something that made 'one's dreams
come true,' but the new 'Rok sako to rok to' (Stop if You Can) commercial was
strikingly different. It portrayed the inexhaustible energy of a young man who
runs up the floors of a skyscraper to plead forgiveness (for his delay) of his
girlfriend. The girlfriend keeps shuttling between the floors in a lift, only to find
that her boyfriend has reached the floor before her. The advertisement ends with
the girl giving up and forgiving the young man.
On-ground promotional activities for the new 5 Star included two days of road
shows that ended with a rain dance and live music performance. CIL also
entered into an alliance with youth websites like indya-com, cricinfo.com and
hungama.com to communicate the core brand features of 5 Star to young
people. Commenting on these innovative promotional activities, a CIL
spokesperson said, "Our principle objective is to modernize 5 Star's brand image
and chance youth connect. Through effectively communicating the functional
attribute of 5 Star along with the fun elements associated with chocolate, we
intend to make the brand the 'top of mind' energy enhancer in the youth's life
space."
In mid-2001, Gems was relaunched. The brand was given a new packaging and
the formula was improved. The new Gems were crispier, crunchier and had more
chocolate. Targeted at children, it came in a flip top tube and was also offered at
low price points, Rs. 5 (14gms., and Rs. 1 (three Gems), to aid self-purchase (by
children). A new commercial was also developed to position Gems as a fun-
loving children's product.
In late 2001, CIL launched the 'Temptations' range of chocolates. Temptations

was available in five flavors - Old Jamaica, Roast Almond Coffee, Mint Crunch.
Honey Apricot and Black Forest According to company sources, the Temptations
range, had been specially formulated to remain solid in a tropical climate. The
range targeted the premium ‘adult' sector between the ages of 25-40 years and
was priced at Rs 30 (64 gms).
The Temptations range was promoted through both print and electronic media
(TV and FM radio). In addition, visuals were placed at outlets and points ornate
of the product. One TV commercial featured a couple playing pranks on each
other to-avoid snaring their 'Temptations.' As part of the brand's promotional

activities, CIL included a card in the 'Temptations' pack that gave a brief history of
Cadbury chocolates. The card also provided consumers with a number that
enabled them to log on to the company's website and participate in a contest and
win prizes (including a trip to Seychelles, a popular tourist destination.
During 2001, CIL also launched a range of gift packs for various festive
occasions and celebrations such as Diwali (Diwali Range), Valentine's Day
(Sweet Nothings Range), and Rakhi. In addition, CIL offered special chocolates
such as Ice Monds (almonds coated with white chocolate) and Kaju Maaza
(cashew coated with chocolate) for special festive occasions. Other unique gift
packs of CIL included a musical jewellery box; an executive desk set in a multi-
functional leather case filled with chocolate coated almonds; a cut glass plate
and bowl filled with assorted confectionery and an air tight cookie-jar. These gifts
were priced between Rs 85 and Rs 1,500.
In January 2002, CIL launched 'Celebrations,' a selection of assorted chocolates

in three flavors aimed at the 'gifting' segment. Priced at Rs 50 (74 gms), Rs 100
(148 gms) and Rs 200 (324 gms), the product was targeted at the premium end
of the market. Explaining the rationale behind the launch, Bharat Puri (Puri),
Director (Sales & Marketing), CIL, said, "The launch of Celebrations arrives to
leverage the inferences of a consumer research conducted by the company that
reveals the socio-psychographic leaning of the Indian demography which
displays a preference for lending a more contemporary youthful gift on any gifting
occasion."
In order to promote the product as an ideal gift for all occasions, CIL focused on
product visibility at retail points. According to Puri, "Celebrations will be available
in top-end retail food outlets as well as key gifting outlets. Being a premium
gifting product, the emphasis at the retail level will be on ensuring adequate
display and visibility for the product as well as the appropriate standards for
storage."
Innovative promotional and advertisement strategies were developed to support

all the above launches/relaunches. (The company allocated over 11% of its sales
for its advertising and promotional activities in 1999-00 and planned to maintain
this figure for a few years.) Many of CIL's advertisement campaigns became very
popular and the company bagged various awards for the same, such as
'Advertising Campaign of the Century' (Cadbury Gold), 'Advertiser of the Year'
(2000) and the 'Grand Effie' Award for Milk Treat (2000).
To increase the visibility of its products, CIL targeted areas near bus stops,
colleges, schools, cafes and places of entertainment like theaters and
amusement parks. CIL also launched three company websites,
cadburyindia.com, cadburygift.com and boumvita.com. In addition, the company
entered into marketing alliances with various portals to offer products (on those
portals that were developed for festive occasions and celebrations such as
Valentines Day and Friendship Day.
In 2001, CIL's sales volumes grew by 5.8% (against a targeted volume growth of
10%). This growth was attributed to the launch of small pack variants of the
leading brands and the new advertisement campaigns. The company reported
that Milk-Treat had garnered 3% of market share, and that Perk and 5 Star had
also registered marginal volume growth. CIL was still the market leader in the
Indian chocolate business with a 69.2% market share and a consumer base of
over 65 million. Sales increased from Rs 2.531 billion in 1995 to more than Rs
6.263 billion in 2001. Net profits also increased from Rs 200.8 million to Rs. 574
million during the same period (Refer Exhibit II for CIL's financial performance).
When Puri replaced Matthew as the Managing Director in January 2002, there
was a radical shift in the company’s policies.
A CHANGE IN FOCUS
Puri changed CIL's vision statement from 'A Cadbury in every pocket' to 'Life full
of Cadbury and Cadbury full of life.' As a result, the company shifted its focus
from launching new brands to rejuvenating and strengthening the existing brands
(CDM, 5-Star, Perk, Gems and Eclairs). In addition, CIL planned to extend its
reach to semi-urban and rural markets. Puri said, "Small towns present
tremendous opportunities.
CIL also decided to sell its products through 'non-traditional' outlets like music
stores (such as MusicWorld), malls, renowned bookstores and popular apparel
outlets (such as Pantaloons and Wills Sport boutiques). The company planned to
put chocolate carts (similar to traditional bicycle ice-cream carts) in malls and
near college campuses to increase its reach. Commenting on this Puri said,
"Making the product available in the right places will always give dividends."
The March 2002 decision to change the positioning and advertising of CDM was
essentially a part of the above shift in strategy. Commenting on the reason
discarding the 'excuses' plank for CDM, Roy said, "You don't always need an
excuse to do what your heart commands. It's like falling in love."
Despite me numerous measures taken by CIL during 2000-2001, only CDM

managed to show positive growth; the market shares of the other brands
remained stagnant. According to analysts, for the past few years, the company
had failed to achieve the growth volumes it had set for itself. Meanwhile, Nestle
managed to take away over 6% of CIL's market share between 2000-2002.
According to analysts, of the 6%, 3% of the market share was acquired by Nestle
during the first quarter of 2002 alone.
Both Nestle and CIL had launched many products during 2001-2002. Unlike
Cadbury's 'new' products Nestle's products differed substantially from its existing
range. By providing variety, Nestle was able to increase its share in the
chocolates and confectioneries market from 26% in 2000 and 29% in 2001 to
32% in March 2002. Analysts felt that because Cadbury did not launch new
products, its product portfolio lacked variety compared to Nestle's. According to
them, this was the main reason for the decline in CIL's volume share from 66% in
2001 to 63% in March 2002. However, even when CIL brought out new products
- Picnic, Cadbury Gold, Triffle, Relish - many of them were non-starters. Some
analysts attributed the failure of many CIL brands to the slump in the
confectionery market.
While Nestle derived its revenues from various sectors such as milk products,
coffee, culinary products, confectionery and other beverages, CIL was present
only in the chocolate sugar confectionery and mailed food segment. Thus, Nestle
had the option of diversifying its risks across its vast product portfolio, something
CIL could not do (Refer Exhibits III ^TV for Nestle's Product Portfolio and
Financial Results). In addition, Nestle had 1 million retail outlets, while CIL had
only 0.45 million outlets.
In mid-2002, CIL launched 'CDM Chunky' in three variants — plain chocolate,

raisins and cashew - priced at Rs 15 (plain chocolate, 42 gms) and Rs 20
(42gms). The company also launched variants of Perk such as Perk XL and Perk
XXL, priced at Rs 10 (15.5gms) and Rs 20 (28gms). The usual advertising and
promotional campaigns supported the launches.
In mid-2002, the KitKat/Perk story was repeated when CIL launched a new brand
Chocki (a chocolate in liquid/paste form) in response to Nestle's Choco-Stick
launched a few months earlier. Choco-Stick, launched in Tamil Nadu (and later in
Andhra Pradesh), had become a huge hit with the kids. CIL was thus forced to
launch Chocki.
Priced at Rs 2 (8 gms), Chocki began picking up volumes. The fact that Chocki's
launch went against Puri's decision not to focus on new product launches was
something CIL did not seem to be bothered about - at least for the time being.
CIL - PRODUCT PROFILE
TABLE 2
SEGMENT BRANDS & VARIANTS
*Chocolate • Cadbury Dairy Milk (Fruit & Nut, Relish, CDM Gold, )M Chunky in
Chocolate, Raisin and Cashew Flavours) Five Star
• Gems
• Perk (Perk Slims, Perk XL, Perk XXL) Crackle
• Creamy Bar Roast Almond
• Nutties
• Tiffins
• Truffle
• Picnic
• Milk Treat
• Temptations Celebrations
• Chocki
*Malted Foods • Boumvita
*Confectionery (Sugar) • Eclairs
• Googly
• Frutus
• Jelly
FINANCIAL PERFORMANCE OF CIL (1993-2001)

TABLE 3
(in Rs million)
Year 2001 2000 1999 1998 1997 1996 1995

Assets
Employed
Net Fixed Assets 1433.2 1398.8 1463.3 1488.3 1527.7 922.9 676.7
Net Current 1215.0 941.3 635.9 518.6 638.2 356.9 330.8
Assets
Others 83.5 4.6 33.5 27.1 38.4 43.1 38.7
Total 2731.7 2344.7 2122.7 2034.0 2204.3 1322.9 1046.2
Financed By (C) (b) (a)
Equity Share 357.1 357.1 238.0 238.0 198.4 124.0 124.0
Capital
Reserves & 2168.6 1966.0 1782.0 1588.1 1470.0 821.5 769.1
Surplus
Shareholders' 2525.7 2322.1 2020.0 1826.1 1708.0 1019.9 893.1
Funds
Loan Funds 70.8 22.6 102.7 207.9 496.3 303.0 153.1
Deferred Tax 135.2 - - - - - -
Liability (Net)
Total 2731.7 2344.7 2122.7 2034.0 2204.3 1322.9 1046.2
Sales 6263.2 5711.4 5110.8 4283.3 3541.4 3138.8 2530.8
Profit &
Appropriations
*PBDT 1163.4 1038.1 816.6 578.2 404.6 406.8 389.8
Depreciation (237.9) (218.5) (199.5) (193.4) (136.9) (84.6) (64.0)
*PBT 925.5 819.6 617.1 383.8 267.7 322.2 325.8
Tax (328.3) (296.5) (204.8) (120.6) (82.0) (119.0) (129.0)
*PAT Before
Exceptional
Items 597.2 523.1 412.3 264.2 185.7 203.2 196.8
Exceptional (30.4) (24.0) (29.7) (13.6) - - 4.0
Items
Tax Adjustments -
of Earlier
Years 7.2 21.2 (15.6) 11.6 - - -
PAT 574.0 520.3 367.0 262.2 18S.7 203.2 200.8
Dividend and 214.8 219.0 173.1 144.0 83.5 76.3 68.2
Tax on
Dividend 359.2 301.3 193.9 118.2 102.2 126.9 132.6
Per Share '

Information
(Rs)
Before 16.72 14.65 17.32 11.10 7.80 10.24 15.87
Exceptional
Items
Book Value Per 70.73 65.03 84.87 76.72 70.34 49.46 71.94
Share
Dividend Per 6.00 5.00 6.50 5.50 3.50 3.50 5.5
Share
(Excl. Tax on
Dividend)
VIRGIN – INTERNATIONAL PERSPECTIVE
“I believe there is almost no limit to what a brand can do. You can ignore those
who go on about brand stretching." 1
- Richard Branson, Chairman & CEO, Virgin Group, in October 1998.
"There are times that a brand just has to say 'no' to a brand extension. Weak
brand extensions weaken the entire brand, and that is a terrible thing to do to a
strong brand name. "3
- John L. Mariotti, President & CEO, The Enterprise Group, commenting on
Virgin's brand
extension strategies, in July 2002.
THE DEBATE ON VIRGIN

The story of Virgin, one of the United Kingdom's (UK) most globally popular
brands, evolving into the "most stretched brand ever" in the history of the
corporate world, had become a part of marketing folklore by the end of the
1990s. The issue of the role played by the man behind the brand, Richard
Branson (Branson), in building it through unconventional publicity stunts, has
also been done to death. The amount of media coverage that their Virgin group
and Branson have generated is indeed impressive. In fact, Virgin is often cited as
THE answer to silence those who claim that no brand can be everything to
everyone.
Spanning a wide range of businesses, such as music, aviation, FMCGs,
broadcasting, publishing, bridal emporiums, cosmetics, telecommunications
financial services and utilities, Virgin seems to defy many widely believed
marketing postulates, particularly the ones related to brand extensions.
Supporters of the Virgin group's business strategies claim that in a world of one
product/idea companies, such as Coca-Cola, McDonald's and Southwest, Virgin
was one of those select few that were equally at home with selling condoms and
running trains.
Virgin - Brand Extension or Brand Dilution?

But did these brand extensions translate into financial success? Since the late
1990s, many of Virgin's extensions had fared rather poorly, particularly its cola,
vodka, utilities, train services, computers and mobile telephony (in Singapore)
businesses. Since the Virgin group was a private entity, analysts did not have
access to its financials, and hence could not categorically comment on its overall
performance.4 The fact that Branson and his team made elaborate efforts to
balance the poor showing of one venture with profits of another further
complicated the matter.
Given these circumstances, it was but natural for marketing experts and industry
observers to take divergent stands regarding the soundness of Virgin's branding
strategies. Commenting on the issue, Jeremy Bullmore, advertising industry
veteran and outside director for advertising firm WPP Group, said, "I cannot think
of a company that has put its brand on so many products. Overstretching ends
up in only one way: snapping."
BUILDING THE VIRGIN EMPIRE
The Virgin empire's origins can be traced to a music record shop started by
Branson in London in 1972. The name Virgin was chosen since all the people
involved in the record shop venture were virgins (denoting novices) as far as the
world of business was concerned. From the very beginning, Virgin Record
Company was a success, with artists and groups such as Mike Oldfield, Phil
Collins, Peter Gabriel, Paula Abdul, Janet Jackson, Bryan Ferry, Belinda Carlisle,
The Rolling Stones, Simple Minds, The Human League, Culture Club and
Genesis in its portfolio.
Unlike other companies in the industry, Virgin did not license its music production
to other companies in various countries. Instead, it set up its own outfits to
handle its business, a move that helped the company retain its independence. By
the early 1980s, the company had become one of UK's top six recording
companies. The first instances of extending operations were related to the music
business: the company set up a recording studio, a video studio, an export
company and entered the movie production business.
The first major extension of the Virgin brand name was in the aviation business,
when the company started a passenger airline service between London and New
York (in 1984). The venture, named Virgin Atlantic Airways (Virgin Airways),
aimed at offering high quality service to air travelers at competitive prices. Virgin
Airways took off to a good start and soon became one of the leading airline
companies in the US. To complement this business, Virgin entered the freight,
courier and holiday services businesses over the next row years.
In 1986, Virgin went public and became a listed company. However, in 1988, the
share prices almost halved in the wake of the 1987 stock market crash. Since
this happened even though Branson believed that the businesses had performed
satisfactorily, he bought back the entire equity that had been floated in 1988,
making Virgin a fully private enterprise once again.
By the early 1990s, the group's airline business was facing problems, largely due
to intense competition from the dominant player, British Airways. Reportedly, the
Virgin group's gross debt in 1991 was £468 million, with pre-tax losses of £34
million. Branson sold off Virgin Record Company's assets to Thorn EMI for $1
billion and used the amount to help the airline business survive (although
Branson said that he had sold off the immensely successful music business
since it was not posing any major challenges to him).
Over the next few years, Branson brought many more diverse businesses under
the Virgin banner (Refer Exhibit I for a list of the companies and Exhibit II for a
chronological profile of some major events in the company's history). While many
of the new ventures were joint ventures with leading companies, many others
were brought into the Virgin fold simply by being given the license to use the
Virgin brand name for their businesses. Though Virgin was comfortable running
small businesses (such as the bridal emporium), it did not hesitate to take up big
businesses (such as Virgin Airways) that required large investments.
By the mid-1990s, the Virgin group comprised over 100 companies, operating in
15 countries, with combined annual sales of $1 billion. In 1997, when the British
government decided to privatize a part of British Rail, Virgin decided to take up
the challenge of running two rail lines. Since the airline venture, this was being
seen as the most radical (and hence dangerous) extension of the Virgin brand.
In an interview to Forbes magazine in February 1997, Branson was asked about
his views regarding Virgin's ability to manage so many diverse businesses.
Branson said, "I knew nothing about the airline business, financial service
industry, soft drink business, any of them started. If you can run one company,
you can run any company. You can learn the nuances of a particular industry in
two months. And it is so great being in so many different businesses. That is the
fun of it.
During the late 1990s, Virgin entered the Internet and telecommunication
business. While virgin.com was to be made into one of the world's top ten
portals, the cellular telephony business was expected to complete Virgin's
transformation into a new-economy major. By-now, the Virgin name
encompassed over 340 businesses under 200 companies. In^(l999, the group
employed 25,000 people across the world and posted revenues of $5 billion.
In December 1999, Virgin sold a 49% stake in Virgin Airways (Singapore Airlines
Ltd. for $979 million. Branson planned to use this money to expand into e-
commerce ventures. In 1999, the mobile phone venture became operational in
UK. All these new businesses were under the Virgin umbrella. In an interview to
Business Week in January 2001, Branson said, "We are lucky to have a brand
that works with almost any business." In late 20ah^Vtfgm began offering mobile
phone services in Singapore as well.
BUILDING THE VIRGIN BRAND
According to Branson since the Virgin brand conveyed a sense of youth, quality,
innovation and fun to young people across the globe the decision to launch
products such as cola, vodka and clothing under the label made perfect sense.
He said, "I think the Virgin name is the most valuable, as long as we could apply
the name to any product or any industry we wanted to. A brand name that has a
global reputation for quality is more powerful than almost anything. If you have
that to start with, it is relatively easy to build industries."
Talking of the rationale behind the decision to tap so many businesses, MT

Rainey, Managing Partner of Rainey Kelly Campbell Roalfe (Virgin's main
advertisement agency), said, "Virgin has a reputation for being innovative and
taking on large, lazy competitors. If your products match that reputation, you can
swap between diverse businesses."
All along. Virgin tried to portray itself as an entity that sought to compete with
companies that were exploiting customers because of their stranglehold on the
market. From its very first venture, music records, to its entry into the cola
business, the idea of a brand fighting it out with existing market leaders for the
customer's sake was carefully nurtured. Virgin sources referred to the above
approach as entering markets that were in "need of reinvention." Even industry
observers referred to Virgin as an 'anti-establishment' brand that worked
innovatively to build its image of being a consumer champion.
Branson claimed that making money was not the main motive behind Virgin's
entry into so many different businesses. The main motive was the group's belief
that it could radically change the way business was done. He said, "We like to
use the brand to take on some very large companies that we believe exert too
much power."8 Company sources, however, claimed that no brand extension
decision was made recklessly or without adequate market research (Refer
Exhibit II for a note on the group's expansion philosophy).
Interestingly, the Virgin brand had become famous all over the world without any
heavy global brand-building campaigns on the company's part! Most of its
popularity could be attributed to Branson's personality and his smart public
relations (PR) skills. According to a www.panaceapr.com article, all new Virgin
businesses were built primarily through PR, and advertising played only a minor
role. While a competitor spent $40 million on advertising its financial services
business, Virgin Direct spent just $4 million in the same time period. Branson
said, "When we launched Virgin Direct we found word of mouth, fueled by a small
PR campaign, was more than 30 times as effective as the small amount we
spent on advertising.”
These PR efforts generally took the form of unusual stunts in which Branson
himself was a key player. His eccentric moves - dressing up in full bridal finery to
launch Virgin Bride, appearing almost naked at the launch of Virgin's mobile
services, and driving a tank up to the Coke sign at Times Square to launch Virgin
Cola - not only attracted attention to him, they built a unique and positive image
for Virgin.
Andrew Craissati (Craissati), Chairman and CEO of Virgin (Asia) Management
Ltd, said that besides attracting attention, Branson's tactics were prompted by
another, very basic issue – the lack of funds to advertise on the scale of big
multinational companies. He said, "Richard did not have any money, so he could
not afford to buy an advertisement in the newspaper. So he thought, if I jump out
of a tall building, all the journalists are going to take a picture of me, and I get
coverage for free." Thanks largely to Branson's antics, Virgin was able to bring
Microsoft's co-founder Paul Alien and world renowned investor George Soros (as
investors), and many leading companies (for technical and other business
collaborations) under the brand's fold over the years. Commenting on the way
the Virgin brand was nurtured over the years, Craissati said, "While brand
diversification can pose a risk to companies who do not have the finesse to
manage it. Virgin welcomes the challenge with open arms. In other words, the
multi-faceted Virgin brand is kept together simply by behaving as if the brand
does not exist.""
Rita Clifton, CEO of global brand consultancy firm Interbrand, said that since the
Virgin brand had been built around fun and goodwill, entering various businesses
using these two attributes was quite easy for the group. Appreciating Virgin's
branding strategies, Kay Carey, Brand Development Manager, Unilever Australia,
said, "Virgin is all about 'power to the people.' Taking on global issues and
attitudes can be a way for global brands to gain new consumer relevance and
resonance."
As the Virgin name began appearing on increasingly diverse products and

services, industry observers and analysts began criticizing many of the group's
ventures. Some even claimed that the group seemed to be violating its claim that
it extended the Virgin brand only into those areas that suited its image. For
instance, while the cosmetics and clothing businesses seemed to fit Virgin's
'youth-oriented' image, other extensions such as telecommunications and
financial services (among others) seemed to have nothing to do with its image.
VIRGIN IN TROUBLE
According to a Business Week article. Virgin had experienced the perils of

entering unrelated businesses early on, when it entered the aviation business.
After all, problems with Virgin Airways had led to the distress sale of the
profitable Virgin Records. Contrary to his earlier stand that he sold the music
business because he did not find it challenging enough, Branson said “I had to
sell a company I loved." Reportedly, his bankers had pressurized him to sell the
music business. After the sale, instead of focusing on entering businesses with
synergies, Branson simply decided not to rely on bank loans in future.
Thus, Virgin's future businesses, such as financial services, cola and trains, were
funded largely by wealthy joint venture partners. In return for the Virgin brand
name and a minimal investment, Branson took a controlling interest in all these
companies (for instance, Branson invested £1000 in Virgin Vie, a cosmetics
company, in which he owned a 50% share while the joint venture partner, Victory
Corporation, invested £20 million for its 50% share!) However, over the years,
Virgin had to buy back the stake of many such partners at hefty prices. This was
primarily because Branson did not want to give up the control over any venture to
the partners.
Commenting on the entry into the business of running cinemas after Virgin
acquired MGM in 1995, Branson himself admitted, "We put the Virgin Cinemas in
perhaps slightly sooner than I would have liked.” This was indeed one of those
rare instances in which Branson openly acknowledged that his extension

strategies had not turned out as planned.
Meanwhile, the cola business in the US proved to be a dismal failure, as even a

year and a half after its launch. Virgin Cola was nowhere near Coca-Cola and
Pepsi. The financial services business, which was launched in the mid-1990s,
had lost over $33 million by late 1998, and the company was not even expecting
to earn profits in the near future. By now, the vodka venture had proven to be a
miserable flop as well; the brand was available only in Virgin's flights and a few
duty-free shops.
In 1999, only the travel, entertainment, rail and hotel businesses were profitable;
most of the other ventures, such as Virgin Direct, V2 Records, Virgin Express,
Virgin Trading, Virgin Bride, and Virgin Net, were making losses. After the failure
of many ventures (such as clothing, computers and a magazine), Branson
appointed Gordon McCallum (McCallum), a former McKinsey consultant as
Group Strategy Director, Gordon's main task was to keep a check on the use of
the Virgin brand name for future ventures.
While Virgin had claimed that it would change the way trains were run in the UK
(faster and on- time), the company could not deliver on its promise. Not only was
the group unable to improve service, it also faced problems from the unionized
workforce. In fact, delays in Virgin trains prompted the then Deputy Prime
Minister John Prescott to refer to the privatized rail line initiative as "a national
disgrace."15 Customer complaints also increased substantially since Virgin took
over the operations of the rail lines.
Virgin sources stated that since the group did not prepare consolidated accounts,
it was not possible to ascertain the group's financial standing as a whole.
According to a study conducted by The Economist (published in February 1998),
Virgin either owned firms (around 200 at that point of time) or had a 50% or less
equity in them. The group claimed that many of its ventures airlines, retailing and
railways were profitable. Of these businesses, only the airlines venture published
its accounts. Since accounts were not available for the other businesses, there
was no way of ascertaining their profitability.
Mark Ritson (Ritson), Assistant Professor of Marketing at the London Business

School, said that though Virgin had been extended to so many brands, it had
failed miserably at generating value for customers, for its various stakeholders,
and for itself. He said, "For every Virgin Atlantic or Virgin Music Group there have
been numerous failures. Unfortunately, the successes in music or flights are sold
off to support the failed ventures."
Summing up the precarious position Virgin was in, a February 1998 article in The
Economist said,
"For a company so diversified, it is vulnerably dependent on a single brand."
Ritson supported this stand, saying that just because the Virgin brand had the
potential to be extended, the group could not always earn profits by doing so.
THE ISSUE OF BRAND EXTENSION/BRAND DILUTION

Branson responded to criticisms of Virgin's brand extension strategies by arguing
that Virgin looked at long-term growth and not short-term profit. On the issue of
dilution of brand equity, he said, "The key to making sure the Virgin name stays
fresh and successful is obviously not to overdo it, and to make sure any product
we apply it to is really going to go in there and shake up the industry it is in. So
we are really only working with products that we think can grow into global billion
dollar businesses within five years.”
Commenting on the detractors of brand stretching, Branson said, "They think that
brands only relate to products and that there is only a limited amount of stretch
that is possible. They seem to have forgotten that no one has a problem playing
a Yamaha piano, having ridden a Yamaha motorbike that day, or listening to a
Mitsubishi stereo in a Mitsubishi car driving past a Mitsubishi bank."18 He added,
"There is always a danger of diluting the brand if you do not do things with good
value, panache and style. The idea of diversification in a brand, I think we have
proven it can be done."
In June 2000, in an interview to the Australian Broadcasting Corporation,

Branson admitted that the way he managed Virgin was very different from the
way most leading businesses in the Western world managed theirs. According to
Branson, most companies remained focused in specific product/service
categories as they were answerable to their shareholders, the fund managers
and a host of regulatory authorities. He said, "Fortunately, we are not a public
company - we are a private group of companies, and I can do what I want."
Branson often made such statements. Those who had been following the group's
evolution over the years felt that Branson's "I can do what I want" attitude
stemmed from the fact that the Virgin brand and Branson were inseparable. Even
the employees at Virgin were staunch supporters of his way of managing the
wide portfolio of businesses. Branson received this support because the group
empowered its employees, continuously motivated and inspired them to get the
work done, and treated them as part of the Virgin family.
In 1994, an opinion poll was conducted in UK for PR Week. The survey revealed
that while 93% of the people were aware of the Virgin brand, 97% of them were
aware of Branson. This highlighted the fact that the man behind the brand had
become more popular than the brand itself. Commenting on the relation between
Branson and the brand, Jean Oelwang Virgin Mobile's Director (Marketing), said,
"He lives and breathes the brand's values."
Analysts felt that the above scenario could prove counter-productive for the
company in the long run. A September 1997 Financial Times article had this to
say on the above issue, "Finding the right distances between Branson and his
branded businesses will be one of the keys to the group's future success."
Martin Campbell, an employee in the marketing department of Virgin Direct (the

financial services arm), acknowledged that Branson's name had helped the
business) take off smoothly; but he also commented that the strong relation
between the brand and the person was unsettling, "People investing pension
money need to feel comfortable and secure for the long term. We are going to
exist for 200 years, and clearly Richard is not."
However, Branson did not agree with these views. He said, "When artists die,
their products sell for twice or three times as much. Hopefully, the same thing will
happen to Virgin products if I go."
WHERE DOES VIRGIN GO FROM HERE?

Meanwhile, problems with various Virgin businesses continued into the 21st
century. Virgin Clothing was closed in 2000 and Virgin Cosmetics posted a loss
of £6.7 million for the financial year ending March 2001. After the terrorist attacks
in the US in September 2001, Virgin's airlines businesses suffered from the
global slump in the industry. Virgin Rail was also expected to become a problem
when the subsidies from the UK government that were making the venture
profitable ceased.
However, due to their strong belief in the brand, people at the Virgin group
seemed to be unwilling to accept that any son of brand dilution existed. In fact,
there were plans to keep exploring new options in the future. In March 2002,
Branson said, "Virgin is not a one-product brand, like Nike or Coca-Cola. It is
different and diverse, so there are opportunities to extend it across a wider range
of marketing areas. I want to make Virgin the number one brand in the world,
instead of around 10th, which is where it is now. There is great scope for this
globally."
In an unprecedented move, Virgin appointed Ashley Stockwell (Stockwell) as the

first ever Brand Marketing Director of the Virgin group in July 2002. Reportedly,
Stockwell was appointed to deal with the negative publicity surrounding Virgin
Energy (due to accusations of mis-selling in early 2002). There were also reports
that this move was aimed at helping the group sail through the new launches
planned at that time (mobile telephony in the US and Virgin Blue airline in
Australia). Stockwell himself said that as the Virgin group was growing very fast
someone was needed to take responsibility for protecting the brand's values and
developing the existing guidelines for brand building.
Meanwhile, Virgin's problems continued into October 2002, The mobile phone
venture in Singapore had to be closed down since Virgin managed to garner just
1% of market share in its first year of operations.
Some analysts said that now that the Virgin brand had a guardian in the form of
Stockwell, things were bound to improve. However, many industry observers felt
that it was quite probable that the Virgin brand would continue to make
unsuccessful brand extensions in the future.
Uncertainly regarding the profitability of Virgin’s future brand extensions would in

all probability continue to plague those studying the group's brand management
strategies. For the time being, Branson had made at least one thing certain,
“Well, we would not launch a cigarette.'
QUESTIONS FOR DISCUSSION:

1. Analyze the values associated with the Virgin brand (as envisaged by the
Virgin group). How did these values help the brand extend itself into different
businesses over the years?
2. What role has Branson played in the evolution of the Virgin brand?
Branson has been criticized for the way in which he runs the group. Is this
criticism justified? Why/Why not?
3. Do you think that the group's brand extension strategies have diluted the
Virgin brand's equity? Give reasons to justify your stand. Briefly sum up the
advantages and disadvantages of using an umbrella branding strategy for related
as well as unrelated businesses.
4. In light of the problems plaguing the group in the early 21st century and
the failure of numerous Virgin ventures in the past, what do you think the future
has in store for the brand? What should the group do to ensure that the
extensions do not severely erode the existing brand equity?
THE VIRGIN GROUP OF COMPANIES*

TABLE 4
COMPANY BUSINESS
Virgin Active Health and leisure club operating in the UK and South
Africa.
Virgin Atlantic Airline flying to 20 destinations in the US, Caribbean, South
Africa, and Asia.
Virgin Atlantic Using Virgin Atlantic's extensive network. Virgin Atlantic
Cargo Cargo offers cargo capacity to over 120 destinations
worldwide.
Virgin Balloon Passenger balloon fleet in the UK, Holland and Belgium.
Flights
Virgin Bikes Expert advice on bikes, gear, training, servicing and
insurance.
Virgin Blue Low fare airline flying in Australia.
Virgin Books International bestsellers on music, sport, TV, movies and
comedy.
Virgin Brides Comprehensive bridal emporium (gowns, dresses, venue
selection).
Virgin Business A business-to-business service for small/medium sized
Solutions businesses.
Virgin Cars Expert advice on cars and related services. ^
Virgin Cinemas Chain of cinemas in Japan. A—\\
Virgin Cosmetics Swiss formulated skin care and sophisticated color
cosmetics"
Virgin Credit Credit card service with unique rewards programs.
Cards
Virgin Drinks Soft drinks sold in Europe, Asia and Africa.
Virgin Experience Bungee jumping, Ferrari driving, chocolate supplies African
safaris, etc.
Virgin Express Operating scheduled services from the UK to Brussels and
on to European cities.
Virgin Healthcare Charity promoting healthcare issues.
Virgin Holidays UK-based tour operator specializing in long haul holidays to
America, the Far East, Australia, and South Africa.
Virgin Home Home telephone, electricity and gas services.
Virgin Incentives Corporate incentive vouchers exchangeable for goods and
services within the Virgin world-and partner companies.
Virgin Limobike Motorcycle passenger service.
Virgin Limousines Limousines serving Northern California from San Francisco
headquarters.
Virgin Music, movies, computers games and books. More than 80
Megastores Megastores in ((Europe, Japan. Canada and the US, plus
the world's largest entertainment store on London's Oxford
Street.
Virgin Mobile Mobile phone services in the UK, the US and Australia.
Virgin Money ISA’s, Mortgages, Unit Trusts, Share dealing plus news and
views. \\^/
Virgin.net Internet Service Providers with over one million customers.
Radio Free Virgin Digital radio broadcasting company.
Virgin Student One-stop shop to reach UK's student population. Runs UK's
LTD number one student website (Virginstudent.com), a national
discount card (the VCard), and a national on-campus
marketing network (VSMN).
Virginstudent.com Student website providing free email, SMS, online photo
albums, articles, instant messaging and competitions.
Virgin Trains Over 1600 train services a week to over 130 stations.
Virgin Travelstore Online travel agency.
Virgin Wines Wines.
V2 Music Independent record label.
Arcadia Video production company providing in-flight entertainment for
Virgin Atlantic, corporate videos, destination guides, music
features, training videos and video press kits.
Babylon Restaurant with a rooftop view of London's city skyline.
Caroline 2 UK-based international wholesale distributor of music-related

products, encompassing both export and import.
HEMS Charity operating the London Helicopter Air Ambulance.
Limited Edition Exclusive collection of hotels selected by Richard Branson for
their individual style, superb cuisine and high-level service.
Necker Islands In the British Virgin Islands. Available as a private holiday
island for families and friends, or top level incentive destination
and inspiring retreat.
The Roof One and a half acres of themed gardens, ornamental fountains
Gardens and palm trees, flamingos and natural wildlife. Available for
exclusive hire for private functions. It has a night club for
private members. ^
Sound and Distributors of value-for-money CDs, cassettes and videos^ \\
Media
Thetramline.com Online service to help people find out train timings book tickets
and reserve seats online for every train service in mainland UK
THE VIRGIN PHILOSOPHY
Virgin believes in making a difference. In customers' eyes, Virgin stands for value
for money, quality, innovation, fun, and a sense of competitive challenge. Virgin
delivers a quality service by empowering its employees, and facilitating and
monitoring customer feedback to continually improve the customer's experience
through innovation. Virgin's growth has not only been impressively fast, it has
also been based on developing good ideas through excellent management
principles rather than on acquisition.
Virgin looks for opportunities where it can offer something better, fresher, and
more valuable, and then seizes them. It often moves into areas where the
customer has traditionally received a poor deal, and where the competition is
complacent, And with its growing e-commerce activities. Virgin also looks to
deliver 'old' products and services in new ways. Virgin is proactive and quick to
act, often leaving bigger and more cumbersome organizations behind.
When Virgin starts a venture, it bases it on hard research and analysis. Typically,
Virgin reviews the industry and puts itself in the customer's shoes to see what
could make it better. Virgin asks fundamental questions: Is this an opportunity for
restructuring a market and creating competitive advantage? What are the
competitors doing? Is the customer confused or badly served? Is this an
opportunity for building the Virgin brand? Can the Virgin brand add value? Will it
interact with our other businesses? Is there an appropriate tradeoff between risk
and reward?
Virgin is also able to draw on talented people from throughout the group. New
venture are often steered by people transferred from other parts of Virgin, who
bring with them Virgin's trademark management style, skills, and experience,
virgin frequently creates partnerships with others to combine skills, knowledge,
market presence, and so on. Contrary to what some people may think. Virgin's
constantly expanding and eclectic empire is neither random nor reckless. Each
successive venture demonstrates Virgin's skill in picking the right market and the
right opportunity.
Once a Virgin company is up and running, several factors contribute to making it

a success: the power of the Virgin name; Richard Branson's-personal reputation;
Virgin's unrivaled network of friends, contacts, and partners the Virgin
management style; the way talent is empowered to flourish within the group. To
some traditionalists, these may not seem hardheaded enough. To them, the fact
that Virgin has minimal management layers, no bureaucracy, a tiny board, and no
massive-global HQ is anathema.
Virgin's companies are part of a family rather than a hierarchy. They are
empowered to run their own affairs, yet other companies help one another, and
solutions to problems come from all kinds of sources. In a sense. Virgin is like a
community, with shared ideas, values, interests, and goals.
BIBLIOGRAPHY
Websites :
1. www.cadburyindia.com
2. www.indiainfoline.com
3. www.magindia.com
4. www.karvy-com
5. www.agencyfaqs.com
6. www.cadburyschweppes.com
7. www.sharekhan.com
8. www.myris.com
9. www.nirma.co.in
10. www.virgin.com
Selected Readings :
1. Singh Namrata, Price Hike May Not Augur Well, www.indian-express.com,

April 1998.
2. Bhatnagar Mohini, Cadbury's Revitalizes, www.domain-b.com, March 1999.
3. Dhawan Radhika, Sweet Success, www.businessworldindia.com, March 2000.
4. Singh Namrata, Cadbury Targets Kids with Milk Treat, www.expressindia.com,
July 2000.
5. Shatrujeet.N, Cadbury's Perk: Fixing Market Shares, www.agencyfaqs.com,
September 2000.
6. Munshi Toral, Cadbury India, www.indiainfoline.com, April 2001.
7. Krishnan Aarati, What's Sweet and What Isn't, www.blonnet.com, July 2001.
8. Perkins B. Anthony, Like a Virgin, www.redherring.com, December 1995.
9. Virgin Needs to Add Ads, Advertising Age, March 31, 1997.
10.A Good Reputation is the Key to Virgin's Diversity, www.btimes.co.za,

September 21, 1997.
11.Behind Branson, The Economist, February 02, 1998.
12.Flynn Julia, Zellner Wendy, Light Larry & Weber Joseph, Then Came
Branson, Business Week, October 15, 1998.
13.Branson Richard, Making Brand Extensions Work, Sales & Marketing,
October 1998.
14.Dutta Anirudha, Features, www.indiainfoline.com, December 13, 1999.
15.Capell Kerry, Richard Branson is no Techie, but he Loves the Web, Business
Week, January 31,2000.

BRANDING Thesis Vineetmalani

Încărcat de

Informații document

Descriere originală:

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

BRANDING Thesis Vineetmalani

Încărcat de

Drepturi de autor:

Formate disponibile

Brand Extensions Lead To Brand Dilution -1-

This thesis is a result of efforts , time and skills contributed by a number of

I also sincerely acknowledge the help provided by my institute - “Indian Institute

Finally, I am grateful to my friends and fellow students currently working in

There in lies the rub. The encounter between brands in a competitive

Everybody loves a blockbuster, a mega-hit, a box-office bonanza. But flops are

Brand extension is not, however, a recent phenomenon (Gamble, 1967). It has

WHY EXTEND THE BRAND?

A second major factor in brand extension is the cost of advertising. Brand

The surge in brand extension is not, however, totally ascribable to technological

THE CLASSIC BRAND CONCEPT:

The classic brand concept rests on the equations :

1 brand = 1 product = 1 promise or customer benefit

The classic brand concept leads to an increase in the number of brands. If a

Products have no voice. A customer faced with a washing machine with no

TYPES OF BRAND EXTENSION :

In concrete terms ,brands having no depth, no identity apart from a physique(a

A typical case of brand under exploitation is that of Nike.While Reebok continues

BRAND EXTENSION : HOW ?

It cannot be over-emphasised that extension can not be contemplated without

- What are its attributes?

- What is its personality?

- What is the purpose?

- What is its heart?

- What contract does it offer to customers and consumers?

- What is its latent potential?

qualitative investigation..The qualitative phase finally allows an under standing of

Guideline One: Extend a strong Attribute / Performance Characteristic

Guideline Two: Extend a strong Benefit Association.

INITIAL OR NULL HYPOTHESIS:

SELECTION OF BRANDS TO BE STUDIED :

1. In what intervals does Cadbury launches sub brands ?

a. Quarterly b. Semi-Annually c. Annually

3. How does the pattern of sales changes after brand extension ?

a. New Sub-brands eat into the share of Original brands of Cadbury

4. What was the pattern regarding prices of Extended Brands ?

a. Prices were on par with old original Cadbury brands.

b. Prices were lower than the prices of original Cadbury brands .

c. Prices were higher than the prices of original Cadbury brands .

a. Intensive branding in all stages of product life cycles

b. Intensive branding and promotional expenditure in early growth stages

6. How did the customers warm up to the new brands ?

1. In what intervals does Nirma launches sub brands ?

a. Semi-Annually b. Annually c. Bi-Annually

3. How does the pattern of sales changes after brand extension ?

a. New Sub-brands eat into the share of Original brands of Nirma

4. What was the pattern regarding prices of Extended Brands ?

a. Prices were on par with old original Nirma brands.

b. Prices were lower than the prices of original Nirma brands .

c. Prices were higher than the prices of original Nirma brands .

a. Intensive branding in all stages of product life cycles

b. Intensive branding and promotional expenditure in early growth stages

6. How did the customers warm up to the new brands ?

QUESTIONNAIRE (Cadbury and Nirma)

1. What did you feel about the brand extension?

 Very good  Good  OK  Bad

2. What do you think about the prices

 Very good  Good  OK  Bad

3. Do you think the price is worth the quality?

NIRMA – QUANTITATIVE ANALYSIS

1. In what intervals does Nirma launches sub brands ?

a. Semi-Annually b. Annually c. Bi-Annually

Responses out of 100 :