Why Do Brands Have Extensions ?

As the business environment is changing, the profile of the organizations as well as the way of conducting business is changing too. Use of technology and globalization has changed everything about business. Marketing is no longer what it used to be. Online marketing has changed the face of conventional marketing and both are incomparable by any standards.

When we look at the job profile of brand managers, we find that over the past few years, there have been several changes. Today’s brand managers are not only planning product promotion and marketing services, but work as business managers responsible for the brand. They are in fact responsible for the sales, growth as well as the profits of the brand in Multinational companies. A strong brand may have a team of brand managers working on the brand across several geographic locations and countries. With the global brands being present in various markets, there arises the need for local factors and sensibilities to be built into the brand and into the brand management as well. Therefore it makes it imperative to build a brand management team or structure that can work through micro and macro levels.

Take a look at the shelf in the super market when you visit next time and you will be surprised to see that each of the leading brands be it in the medical section, soft drink or grocery item, there are likely to be multiple variations of the same brand with little difference. Of course we are talking about the brand extensions that have become the latest strategy adopted by brand managers to exploit the brand value. Coke is perhaps the best and the most common example where you get to see variations of coke in the shelf today. Brand extensions have become the norm of the day. The question that one needs to ask is whether such brand extensions are really required and worthwhile?.

In the market place, where competition is very high and intense amongst brands, the brand managers are always under pressure on multiple fronts. First and foremost, for a brand to grow or retain market share, there has to be continual effort to deliver incremental value through the brand. Secondly, managements have increased expectations from the brand in terms of revenue growth, market share as well as the bottom line. Brand managers therefore are forced to opt for brand extension strategies in order to create product differentiation and to increase revenue streams. Sometimes, brand extensions become necessary to reign in some of the niche segments which may not be addressed by the parent brand and thus the brand extension helps gain incremental market share.

Brand extensions are also considered to be the most natural progression for brands. When organizations spent a lot of investments into manufacturing and technology for launching the parent brand, they would not like to leave out any opportunity to capitalize on the capacity that they have created and maximize returns on investment.

The next logical question that one asks is whether such brand extensions are useful and beneficial for the brand. What is the effect of brand extensions on the parent brand?. It is difficult to predict what the exact result would be for, the results in the case of such brand extensions have been mixed in the market.


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