Marketing

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CHAPTER 1
INTRODUCTION

1.1 Overview
A product extension, more commonly referred to as a brand extension or line extension, is the addition of new products to a line to leverage a proven or reputable brand name.(Neil Kokemuller) Many companies adopt brand extension as strategy with the aim of benefiting from the brand knowledge achieved in the current markets. When a company launch a new product and market under the umbrella a well-known brand name, failure rates and marketing costs are reduced (Keller, 1993). Keller (1993) states that more than 80 per cent of firms resort to brand extensions as a way of marketing goods and services. Competition forces firms to adopt strategies that create a competitive advantage for the firm. Creating a brand name with well established associations is one way of achieving this aim. Firms invest heavily in developing a brand. It is a very costly process but has many returns once success is achieved (Keller, 2008). Brand extension as a marketing strategy has become even more attractive in today’s environment where developing a new product costs a lot of money and can be time consuming. Literature on extensions dominantly addresses the question of how the parent or core brand helps the new product during its launching stage. Although literature touches on the possible reciprocal effects of the new product launching on the equity of the core brand, their number is limited. This article presents a research study of brand extension with developing an innovative product in a new product fast moving consumer goods category. Brand extension as an important element in the process of brand management launching of a new product is usually done through brand extensions. The newly introduced brand extension capitalizes on the equity of the already established (core) brand name (DeGraba & Sullivan, 1995, Pitta & Katsanis, 1995) or even the company or corporate name (e.g. Coca-Cola). Consumer familiarity with the existing core brand name aids new product entry into the marketplace and helps the brand extension to capture new market segments quickly (Dawar & Anderson, 1994, Milewicz & Herbig, 1994). This strategy is often seen as 98beneficial because of the reduced new product introduction marketing research and advertising costs and the increased chance of success due to higher preference derived from the core brand equity. In addition, a brand extension can also produce possible reciprocal effects that enhance the equity of the parent brand (Chen & Liu, 2004). The whole policy of the brand must be included for the brand extension strategy. To determine that how far we can extend our product we should first answer these questions:(Davis, 2002, p. 508): − Does the brand extension strategy consistent with the vision strategy? − Does the brand extension strategy improve the brand image? − Does the brand extension strategy consistent with the brand positioning strategy? − What will be the impact on the brand in the case of unsuccessful brand extension? Brand extension strategy comes in two primary forms: horizontal and vertical. In a horizontal brand extension situation, an existing brand name is applied to a new product introduction in either a related product class (basic extension) or in a product category completely new to the firm (total extension). A vertical brand extension, on the other hand, involves introducing a brand extension in the same product category as the core brand, but at a different price point and quality level (direct extension) or in a product category with less connection to the basic product line (indirect extension). There are two possible options in vertical extension. The brand extension is introduced at a lower price and lower quality level than the core brand (step-down) or at a higher price and quality level than the core brand (step-up). In a vertical brand extension situation, a second brand name or descriptor is usually introduced...
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