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Brand or line extensions?

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Brand or line extensions?

When should one speak of line or of brand extension? This is a necessary step in growing the brand through:

An extension of the line to enrich the basic promise through diversity (like providing new tastes, new flavours for a jam brand or a crush brand such as Minute Maid).A finer segmentation of a need (like the many variants of each shampoo brand according to the type of hair, age of customer, or kind of scalp problem).Providing complementary products. As mentioned in the discussion on line brand architecture, a brand might provide all the products involved in solving a specific consumer problem. A brand fighting hair loss would not limit itself to its first product, a shampoo for instance, but also provide a gel, a hair dye and so on.

What is noticeable is that through these line extensions, the brand aims at intensive growth. It deepens its problem-solving ability more or less to the same customers, for the same need and consumption situation. This is not viewed as a diversification (which involves different clients and different products).

At the other extreme no one would quarrel with describing as brand extensions, rather than line extensions, Virgin Airlines, Hewlett- Packard’s entry into the digital photo business, the Mercedes Class A, the Porsche Cayenne (its entry into the 4 × 4 market), Yamaha bikes (from a company originally known for its musical instruments), the Caterpillar fashion line, Salomon new surf- boards (for the Hawaiian and Australian beaches), Ralph Lauren domestic paint, Evian cosmetics, Merlin Gerin moving from switchgears to electrical distribution products, or GE extending from electricity to capital investment.

Typically in such brand extensions, the brand moves to another remote category, in which it is open to question whether it has the ability to deliver the same benefit, and therefore to stay the same. The buyers may be different, or the same: the first to buy the Porsche Cayenne were existing Porsche owners who now have two Porsche cars. In fact most of the early research on brand extension has focused on remote extensions, far from the prototypical product.

Some of these brand extensions are more than simply brand extensions: they are real diversifications. The company wants to develop itself in new categories that may become dominant in its future sales. Certainly this is not the case for Caterpillar, but it could be the case for HP, stuck between Dell and IBM in its core activity. Few people recall that Findus, the name for frozen food, comes from ‘Fruit Industry’, the core original business of that Scandinavian company.

Where does line extension end, and where does brand extension start? Perrier is a case in point. To grow its sales the brand has launched three new products in three years:

In 2001 it launched its first ‘Pet’ bottle, nicknamed ‘rocket’ because of its specific shape. It was the first time since the brand creation (in 1847) that a non-glass bottle had been created. It was aimed at mobile consumers and out-of-home consumption situations (such as stadiums and offices).In 2002 Perrier Fluo was created: it is an aromatised water in a plastic fluorescentcoloured small bottle. It is aimed at the young and competes in the soft drink market.In 2003, Eau de Perrier was launched to try to achieve better penetration in the table water market. The famous Perrier bubbles, which are the essence of the brand, prevent the brand from appealing to those who like to drink less bubbly water with meals. This extension had finer bubbles (like San Pellegrino) and a finer and more elegant bottle.

How should these extensions have been described? At Nestlé Water, the owner of Perrier, they are called line extensions for the sake of simplicity. However, despite the fact that all these new products are basically water, the soft drink entry qualifies as brand extension more than the others. It aims at a market dominated by other competitors, which is subject to other success factors, and is aimed at different consumers.

The ability of any product given the Perrier name to meet the demands of the soft drink market is surely a long-odds bet. Here promotion and place are essentials. Also, the brand evokes less fun than any other soft drink brand. This is why the decision was taken to have Perrier only endorse the product, the big name on the bottle being ‘Fluo’.

This refers both to the very odd colours of the bottle and to the fact that it is fluorescent in the darkness, a typical situation in discotheques and late-night bars. However the main question will be the ability of Nestlé Water to cater to these new circuits of distribution and consumption.

For Aaker and Keller (1990), brand extension refers to the use of the name of a brand on a different product category. This was the case when Bic went worldwide from ballpoint pens to disposable lighters, disposable razors, and even stockings and hosiery in central Europe. One should then speak of line extensions when the brand launches new products in the same category.

Therefore Diet Coke should be called a line extension. Interestingly, at the Coca-Cola Company, Diet Coke is called the second ‘brand’ of the company, which says it has two worldwide leading brands: Coke and Diet Coke (called Coke Light in Europe). These differences in perception are not an academic problem. They hint at the fact that, although the product may be the same, the market, the ‘category’ may be different.

Since the emergence of ‘category management’ we know that category does not mean product (Nielsen, 1992). Therefore, Perrier Fluo would be considered as a line extension by those who focus on the physical resemblance with the core product of the parent brand: basically it is the same water. For us, it qualifies as a real brand extension, for it aims at a different category of need, and of usage situation, and of users, and of competition.

The same would hold true a fortiori for Evian spray, which vaporises water onto the face. The product, created in 1968, holds the same water as any Evian bottle, but the need and usage are very different as the channel of distribution.

As for all concepts, the best tactic is also to realise that they are relative, and that they cannot obey simple yes/no cut-off points. One should acknowledge that there are both highly continuous extensions, which apparently capitalise on the real or perceived knowhow of the brand (as with HP’s entry in the digital market), and highly discontinuous extensions, which do not capitalise on this know-how but on a mission, a set of values driving all the behaviours of the brand whatever the market it decides to compete in. We analyse the Virgin case below.

This scale of discontinuity has a lot of implications. It is a measure of the risk taken by the corporation itself. The current brand literature focuses heavily on the intangible facets of brands, probably because they are treated as intangible assets in accounting terms. But this is a semantic confusion: a performance-based brand is also an intangible asset.

Overlooking the performance source of brands leads us to underestimate the weight of corporate abilities. Some companies just do not have the know-how or resources necessitated by the extension of the brand into specific categories. Certainly they can use licensing as a way of circumventing the problem: for example Evian Affinity (a cosmetic line) is managed by Johnson & Johnson.

The other possibility is to outsource. It is a classic way of moving more quickly and benefiting from low import prices. However this often means reducing the perceived difference between brands, if most of them outsource to common OEM suppliers.

Another implication concerns the branding strategy itself. Should one give a brand name of its own to the extension, thus moving to a double-level branding architecture (that is, an endorsing or source brand architecture)? It is noticeable that Perrier is very discreet about Fluo, as all endorsing brands tend to be.

Experimental literature shows that giving the product a different name prevents dilution of the parent brand image, especially in the case of downward extensions (where the product goes from a premium price to a mainstream price) (Kirmani, Sood and Bridges, 1999). One should therefore distinguish ‘direct extensions’ (without a specific name) and ‘indirect extensions’ (with a specific brand name in addition to the parent brand) (Farquhar et al, 1992).