Brand extensions gone wrong: How far is too far?

Suppose that it’s a Sunday and you are out on your monthly shopping trip to stock up on consumables. In the brief visit, you see Harley Davidson perfumes and baby clothes, Ponds toothpastes, Coca-Cola T-shirts, and Heinz detergents. You wonder if you are seeing things. Don’t worry. Your eyesight is fine. What you are witnessing are classic examples of brand extensions.

Brand extension is the adding of a new product to an established line of products under the same brand name. What prompts a business to pursue this strategy? Broadly speaking, a company facing a saturated market faces 2 options – launch a new product or expand into a new market. A firm choosing the former option finds that extending the product portfolio under the same brand name offers several obvious economic benefits. The new product piggybacks on the success and recognition of the old product, leading to decreased advertising and marketing costs. The increased variety available to customers also leads to higher sales. Seems straightforward enough? It’s not. There are three key things that must be kept in mind before opting for brand extension.

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Firstly, the new product must convey the key attributes of the brand. When you think of Harley-Davidson, you think of adventure. So, when it launched a line of perfumes and baby clothes, the result was disastrous. Not only did the new products fail but sales of the motorcycle itself were also affected as irate customers felt alienated by the move. The new product line conveyed none of the masculine values that Harley-Davidson stood for. Harley understood its mistake and discontinued production of the unbecoming products.

Secondly, the new product must strengthen the core of the brand and not alter it. The popular Unilever beauty brand Ponds, known for face-creams and talcum powders, tried to expand into the toothpaste category. No luck. Customers perceived Ponds as a product meant for external application only. The resulting cognitive dissonance prevented consumers from using the toothpaste. Every brand is a promise and customers are incredulous if the product delivers something different than what is expected of the brand.

Thirdly, the expansion must lie within the limits of the brand perception. Heinz, a food brand, manufactured vinegar as part of its product portfolio. It decided to increase the strength of the
vinegar and market it as a cleaning agent. However, customers did not feel that a brand which manufactures eatables can develop an effective detergent. Heinz was thus unable to change the perception of the audience. As Richard Branson, CEO of Virgin Group, put it, “Brands are built around perceptions, not products”. No matter how good your product actually is, it is of no use unless it is perceived to be good.

Brands which expanded while paying heed to the trinity have been widely successful. Gillette extended its market into shaving gels. Coca-Cola launched Diet Coke. IBM moved from merely supplying computers to providing complete solutions. Another brand, however, has taken the extension to a whole new level. The Virgin Group, which embodies freedom, creativity and vigour offers everything from air travel to bridal wear. It has avoided diluting its brand by making sure that each of its products conveys the fundamental aspects of its identity to the customer.

Not all brands are suitable for extension. A company must have a deep understanding of its own offering and of the consumer’s perception of its offering. Only extensions which are aligned, both in direction and in spirit, with the core values of the brand can succeed. The rest go down in marketing history and serve as yardsticks to measure just how far is too far.

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Saket Joshi is a PGP2 student and a member of Niche. He did his Bachelor of Science (B.S.), Naval Architecture and Marine Engineering at BITS, Pliani (2010 Batch)

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Brand Updates – 26/09/13

1) HUL: Tapping India (urban) and Bharat (rural) with projects Telecalling, Columbus

Hindustan Unilever has initiated a project each for urban areas and rural markets to double its direct reach and ensure it retains its advantage of having the largest distribution network in the country even as rivals inch closer.

Project Telecalling for urban areas and Project Columbus for rural areas aim to double the country’s top consumer products firm’s direct reach to four-million outlets over the next two years.

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A market analyst said the urban initiative has the potential to change the distribution paradigm of the consumer product industry. “Project Telecalling aims to tap the uncovered outlets via telephone calls and deliver the ordered quantity, reducing the cost of additional salesmen to reach such outlets,” Anand Mour of ICICI Securities said in a recent investor note. “Project Telecalling can change the distribution paradigm in the FMCG industry – in our opinion it is easily replicable by other FMCG companies.” 

Project Columbus seeks to expand Hindustan Unilever’s distribution reach to over 150-million rural consumers directly in 2013. The move comes at a time rivals such as Procter & Gamble and ITC have been aggressively expanding their reach. Over the past three years, both these firms have invested significant amounts in increasing their footprint with a focus on rural areas. P&G already covers about 5.6-million outlets in the country against HUL’s retail network of over 7.2-million outlets.

Read More: http://economictimes.indiatimes.com/news/news-by-industry/cons-products/fmcg/hul-spreads-its-wings-to-retain-edge-with-projects-telecalling-columbus/articleshow/23070681.cms

2) Parle re-enters cola market after 20 years with Cafe Cuba

Two decades after it hived off its carbonated soft drinks portfolio, Parle Agro announced its re-entry into the Rs 15,000-crore cola market early next year with the launch ‘Cafe Cuba’, a coffee-flavoured carbonated drink.

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Parle Agro had sold its popular and iconic soft drink brands namely Thums Up, Limca, Gold Spot and Citra, to Coca-Cola in 1993 and had also signed a non-compete agreement for 10 years. 

Even today, after two decades, the Thums Up brand remains so strong that American cola major Coca Cola has not managed to push its global flagship brand Coke, ahead of this locally developed drink, making India the only market in the world, where Coke trails a group brand in market share.

The company plans to roll out Cafe Cuba by January or February 2014 and is aiming to garner a market share of 7 per cent within the very first year of its launch.

Read more: http://economictimes.indiatimes.com/news/news-by-industry/cons-products/fmcg/parle-re-enters-cola-market-after-20-years-with-cafe-cuba/articleshow/22999716.cms

3) Ruchi Soya plans to step into ready-to-cook segment

FMCG major Ruchi Soya, which has soya food brand Nutrela and edible oil brand Ruchi under its portfolio, is planning to foray into the ready-to-cook segment soon.

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“Going forward, the company is planning to focus on branded products. We will soon enter into the ready-to-cook segment soon, especially in the breakfast category, that may be an integration of soya food,” a company source said here without giving any further details.

According to industry data, the total (organised and unorganised) ready-to-cook and eat market in the country stood at $13 billion in 2013. Ruchi Soya, with a turnover of Rs 26,000 crore, is into cooking oil, palm plantation and also has products under soya foods, bakery fats and vanaspati products.

The company has a very strong presence in the southern and western regions of the country, said Shahra, while speaking on the sidelines of ‘Globe Oil 2013’ here. Ruchi Soya Industries founder and Managing Director Dinesh Shahra said “Going ahead, we will build a strong brand presence in the northern and eastern region of the country,”

Read morehttp://economictimes.indiatimes.com/news/news-by-industry/cons-products/fmcg/ruchi-soya-plans-to-step-into-ready-to-cook-segment/articleshow/22887827.cms

Nike at 2012 London Olympic Games

Nike, Inc. is the leading global designer and manufacturer of footwear, apparel, equipment, and accessories. Nike, since its inception, has relied heavily on endorsements and sponsorships of sports celebrities like Tiger Woods and Lance Armstrong to promote its products. A sports brand like Nike needed to have its presence felt in Olympics Games.

The Olympic Games are the pinnacle of human sport and achievement but, with a massive viewership across continents, they also serve an ideal platform for marketers. The London Games 2012 were no exception (it went on to become the most watched sporting event of all time) and Nike, which was not the official sponsor, managed to stand out.

Just see it: Green colored Nike shoes were hard to miss out
Just see it: Green colored Nike shoes were hard to miss out

Nike was everywhere at London – superb placement of its hoardings across London, cleverly identified sponsored sportspersons who give it the maximum visibility at the Games and the dimpled track suits along with distinct neon yellow-green Volt shoes made people sit up and take notice. 43% of medalists in athletic events endorsed Nike. More than 400 athletes including USA’s Ashton Eaton and Trey Hardee, Great Britain’s Mo Farah and France’s Renaud Lavillenie competed with the Nike Volt shoes on them. The green-yellow color was carefully chosen as it’s the most visible color to the human eye. It was remarkably visible against the red track, blue fencing stage and the black boxing ring. Nike had earlier scored a PR homerun when it found Egyptian Olympic team using counterfeit Nike outfit and rather than complain about piracy, decided to donate them Nike outfits. Add a bold brand new ad campaign and positioning (“Find your greatness”) to it and you have a successful well rounded marketing strategy.

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“Find your greatness” campaign’s message was simple – it featured everyday athletes from multiple locations called London around the world, to illustrate that greatness can be found by anyone, anywhere. It was a powerful message at a time when the world was focused on London, UK and it appealed instantly to all the sports lovers around the globe.

It’s clear that Nike struck gold at London Games and it was not just an accident – it was a result of effective implementation of seemingly very simple insights. The beauty of it all is that Nike wasn’t a sponsor of London Games 2012, but it came off as one.

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Shantanu Maheshwari is a PGP2 student and a member of Niche. He did his Bachelor of Technology (B.Tech) in Computer Science at IIT, Kanpur (2009 batch)

Niche & Insight presents Ad-mania 2013

Niche (Marketing Club of IIMA), in coordination with Insight presents to you a marketing event to test your mettle against the brightest in the country. Can you create the next ad campaign which is worth being quoted in Marketing 101? If so, BRACE YOURSELF, INSIGHT 2013 is coming. This event provides you an opportunity to get into the shoes of agencies like Ogilvy & Mather. We have witnessed the evolution of high tech products in the last 3 or 4 decades. The success of whirlwind products like high end smartphones, high definition television sets, etc. have relied heavily on successful creative marketing campaigns. Kindle your creative mind to come up with an advertisement for one of the hypothetical products. For round 1,

  • Teams will be required to submit a promotional video (a maximum of 90 seconds) for any one of these products:
    • Human cloning machine
    • Time machine
    • Human teleportation machine like the one used in Star Trek
  • Teams should also submit a brief 1 page write-up (not more than 250 words) explaining their ad campaign. The report should critique the ad-message delivered, targeted audience and why that segment was chosen, their underlying aspirations for the product, etc. Make sure that the basic idea is conveyed precisely.

To register, fill up the form below 
Insight Ad- Mania registration form

Registrations have already begun and the deadline for submitting Round 1 entries is 23:59:59 hours on 16th September, 2013. Campus round will be held on 28th/29th September, 2013.

For more details about the event, refer the website: http://iima-insight.com/events/admania/

Brand Updates – 15/09/2013

Colgate expands toothpaste range in India

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Colgate-Palmolive (India) has expanded its toothpaste range in the country with the launch of ‘Colgate Active Salt Healthy White‘. The company has appointed actors Kareena Kapoor Khan and Shriya Saran as brand ambassadors of the product, Colgate-Palmolive(India) Ltd said in a statement.  “This is the first time anywhere in the world that the company has launched a toothpaste that combines the power of salt and lemon to remove yellowness in the teeth,” it added.

Reference: http://economictimes.indiatimes.com/news/news-by-industry/cons-products/fmcg/colgate-expands-toothpaste-range-in-india/articleshow/22484237.cms

Amway India launches men’s grooming products range

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Direct selling FMCG firm Amway India has announced the launch of its new range of men’s grooming products and is targeting up to 15 per cent year-on-year growth from this launch. The range comprises of eight products including face wash, deodorant, hair cream and shaving cream for men. Globally, the Indian market is one of the fastest growing markets for men’s grooming and personal care cosmetics and men’s Skincare market has increased by 32 per cent over the last two years, the company said in a statement.

Reference: http://economictimes.indiatimes.com/news/news-by-industry/cons-products/fmcg/amway-india-launches-mens-grooming-products-range/articleshow/22486238.cms

Rs 1,250-crore Indian cheese market expected to grow 20% annually

For a lot of entrepreneurs in India now cheese is milk’s leap towards prosperity – the market for cheese is Rs 1,250 crore currently and forecasted to grow at an impressive 20% annually. And it’s going to get cheesier. There are 3,000 cheese varieties globally, experts say. India’s stores and delis offer about 40 varieties. The scope for growth is huge. Europe and even the US, those in the cheese business say, are saturated markets. India could be the next big thing.

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The ‘Gowardhan to Go’ story tells us that urban India’s long affair with tinned processed cheese is getting over. The current brisk growth is being driven by metropolitan Indians discovering ‘real cheese’ – both mass market and premium, and both foreign and local brands. A lot of that cheese is going on top of the pizzas that sell here. India is Domino’s Pizza’s third largest market, after the US and the UK. Domino’s sources all its mozzarella locally.

Reference: http://economictimes.indiatimes.com/news/news-by-industry/cons-products/food/rs-1250-crore-indian-cheese-market-expected-to-grow-20-annually/articleshow/22531188.cms

Google names next mobile OS version ‘Android KitKat’; teams up with Nestle, Hershey

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Ending months of speculation about the name for the next release of Google’s Android operating system for mobile devices, the technology company has teamed up with Nestle and The Hershey Company to name the 4.4 version of the OS ‘Android KitKat’. The sweet-themed codenames began with Android Cupcake 1.5 in 2009, and have continued alphabetically through to Android Jelly Bean 4.3 released earlier this year.

Reference: http://www.campaignindia.in/Article/355679,google-names-next-mobile-os-version-8216android-kitkat8217-teams-up-with-nestle-hershey.aspx

Titan Industries rebrands, turns Titan Company

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Watches, jewellery and eyewear manufacturer and retailer Titan Industries Limited has unveiled a new corporate identity (name and logo) to mark its completing 25 years. It will now be known as Titan Company Limited. The new logo (described as ‘Titan Star’) conveys ‘the company’s commitment to drive innovation, nurture talent, create value and delight consumers by maintaining highest global standards’, informed an official statement.

Referencehttp://www.campaignindia.in/Article/355247,titan-industries-rebrands-turns-titan-company.aspx

Too Big to Fail? – New Coke: Things you need to know!

Today, the second most recognized word on the planet after “Hello” is “Coca-Cola”. However, a marketing disaster in 1985 almost brought the company to its knees. To bring things into context, this was the time when competition between the arch rivals Pepsi and Coca-Cola was at heating up. In the late 1950s, Coke outsold Pepsi by a ratio of more than five to one. However, during the next decade Pepsi repositioned itself as a youth brand and managed to narrow the gap.

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In the 1970s, Pepsi introduced the “Pepsi Challenge” – a blindfolded taste test between Coca-Cola and Pepsi. Most of those who participated preferred Pepsi’s sweeter formula. Pepsi took the challenge global and signed up celebrities like Michael Jackson to appeal to its target market. By 1981, Coke’s #1 status was looking vulnerable. Coke tried to appeal to the market via advertising campaigns but these had little impact. The only thing keeping Coke above Pepsi was the former’s excellent distribution system.

Coca-Cola perceived the problem as related to its product (customers were preferring Pepsi’s sweeter offering). This perception was strengthened by the success of Diet Coke, which was closer to Pepsi’s sweeter formula. Thus, Coca-Cola started working on a new formula and a year later, New Coke arrived. Taste tests revealed that people preferred the new drink to both the original Coke and Pepsi.

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Coke immediately scraped the original Coke and replaced it with New Coke. On April 23, 1985, New Coke was introduced and a few days later, the production of original Coke was stopped. This joint decision has since been referred to as the biggest marketing blunder of all time. A large % of the American population boycotted the new product. Public outrage was high due to the unavailability of the original product. Coca-Cola had little choice but to make a U-turn.

Coke learnt that marketing is about much more than the product itself. As the tests had been conducted blind, the taste was the only factor assessed. Coke had invented the entire category in the 1880s and the brand name had become the name of the product itself. In 1985, a century after the product launched, the last word people associated with Coca-Cola was ‘new’. You can’t tell the world you have the “real thing” and then come up with a “new real thing”.

Ironically, through the brand failure of New Coke, loyalty towards the original one increased. Some conspiracy theorists even claim that the entire thing was a planned move to appreciate brand equity. Pepsi’s then CEO Roger Enrico pointed out that Coca-Cola are caretakers of heritage – they can’t change the image of their flagship brand.

Key Takeaways

  • Concentrate on the brands perception
  • Don’t try to clone your rivals,
  • Don’t be scared to make a U-turn
  • Do the right market research

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Saket Joshi is a PGP2 student and a member of Niche. He did his Bachelor of Science (B.S.), Naval Architecture and Marine Engineering at BITS, Pliani (2010 Batch)