Brand Extensions

Virgin: An extension-based
business model

Case study
South Africa
Johannesburg
Hong Kong
Canada
Kenya
India
 Virgin: An extension-based
business model
 300 companies
 Brand’s DNA: Seek opportunities in
markets choked by ‘false competition’
(Underdog business model)
 Virgin: An extension-based
business model
 Values: service quality, innovation, fun and
value for money
 ‘Way of life’ brand – enjoy life to the full –
make customers happier
 Umbrella branding is the ‘glue’
 Virgin: An extension-based
business model
 To finance his expansion, Branson usually
seeks support from appropriate partners in
order to minimise his own investment, even
if this means not being the majority
shareholder (Virgin Megastores in UK)
 Virgin allows start-ups to begin with a world
brand as their ‘birth gift’
 Virgin: An extension-based
business model
 Branson also resells his businesses - but
only after adding value with his brand
(Virgin Atlantic)
 The Virgin brand remains the property of
Virgin Enterprises, a company of which he
is the sole owner
 Virgin: An extension-based
business model
 Weakness: The further you get from the
British zone of influence, the weaker and less
emotive the brand becomes
 Major failures: Virgin Cola, Virgin Clothing
 Question: If Virgin = Branson then what
happens to the company after Branson?
 Leveraging
Leveraging
the
theBrand
Brand

Stretching
Stretching
Line
Line Brand
Brand Co-
Co-
the
theBrand
Brand
Extensions
Extensions Extensions
Extensions branding
branding
vertically
vertically

Down
Down Up
Up
 Brand Extensions
 When a firm uses an established brand name to
introduce a new product
 Brand extension classification
– Line extension
 Marketers apply the parent brand to a new

product that targets a new market segment

within a product category the parent brand
currently serves
– Category extension
 Using the parent brand in a different product

category
 Line Extensions: Why
 At its beginning, there is only one form of the
product (Coca-Cola)
 With time, the brand acknowledges differentiated
expectations and decides to respond with product
offerings - it evolves with the consumer
 Therefore, the extension is an expression of the
brand that it cares - reinforces the relationship
 Line Extensions: Why
 Growth and profitability
 Successful Category
Extensions
 Apple
 Kingfisher
 Ivory
 Nirma
 Caterpillar
 Unsuccessful Category
Extensions
 Harley Davidson wine coolers
 Bic perfumes
 Kleenex diapers
 Levi’s Tailored Classics suits
 Bournvita biscuits
 Pond’s toothpaste
 Advantages of Extensions
 Facilitatenew product acceptance
– Improve brand image (VAIO from Sony)
– Reduce risk perceived by customers
– Increase the probability of gaining distribution
and trial
– Increase efficiency of promotional
expenditures (Brand is already known. Focus
on product in marketing communications e.g.
Dettol)
 Advantages of Extensions
(Cont.)
 Facilitate new product acceptance
– Reduce costs of introductory and follow-up
marketing programs (“Halo effect” – iPod)
– Avoid cost of developing a new brand
– Allow for packaging and labeling efficiencies (e.g.
printing and merchandising – “Billboard effect” –
Coke)
– Permit consumer variety seeking
 Advantages of Extensions
(Cont.)
 Provide feedback benefits to parent brand
– Clarify brand meaning (e.g. Kingfisher,
Gillette)
– Enhance the parent brand image
– Bring new customers into brand franchise and
increase market coverage (Chota Coke, Allen
Solly for Women, Women’s Horlicks)
– Revitalize the brand (Lifebuoy)
– Permit subsequent extensions (Becomes
easier)
 Disadvantages of Extensions
 Can confuse or frustrate consumers
 Can encounter retailer resistance
 Can fail and hurt parent brand image (Mercedes
A Class, Maruti Versa)
 Can succeed but cannibalize sales of parent
brand (Diet Coke, Mach 3 Turbo)
 Disadvantages of Extensions
 Can succeed but diminish identification with any
one category (Cadbury in UK – food products)
 Can succeed but hurt the image of the parent
brand (Evian licensed to J&J – skin care
products)
 Can dilute brand meaning (Gucci – 22k products
– 7k)
 Can cause the company to forgo the chance to
develop a new brand (Levi’s & Dockers)
Identifying potential
extensions
Perimeters of brand extension
No-go area

Extension zone

Outer core

Inner core
Kernel line
extension
Spontaneous
associations

Latent potential
Building a brand through
systematic extensions
Nivea extensions galaxy
No Go
Beauty
Face
Lip-
Deo care Vital
No GoNo Go
Hand NiveaNo Nivea
Go
Creme Soft For men
Body
Sun Baby Hair care

Bath care
No Go
 Reading
 StrategicBrand Management by Kevin
Lane Keller. Chapter: 12
 The New Strategic Brand Management by
Kapferer. Ch: 12