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Slideshare Agnes Jumah, Branding Literature Review

  1. 1. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Management Assignment Branding Literature Review Part One – Critical Review of Brand Development Versus New Product Development: toward a process model of extension decisions by Ambler and Styles (1997) Introduction Ambler and Styles (1997) start their document like many brand extension papers by discussing how popular brand extensions have become. They state that the aim of their paper is to “explore the managerial processes that lead to the launch of successful brand and line extensions and establish the role, if any, that brand equity considerations have in the decision process”. The theme of the paper is very relevant to those involved in brand management. It is relevant as brand extensions and brand equity have in different studies been shown to have an effect on each other (Aaker and Keller 1990, Pitta and Katsanis 1995 and Rangaswamy et al 1993). It is also relevant because brand extensions appear to be the more commonly chosen way to launch a new product. According to Kapferer (1997) the survival rates of new brands was 30% versus brand extensions with a 50% survival rate. This trend (if the gap is still the same or greater) makes understanding brand extensions and their broader relationship with brand equity an important subject for those managing brands and launching new products. An area that could have been improved in Ambler and Styles paper is their definitions. The focus of their paper is “successful extensions” yet they do not clearly define what they believe a successful brand extension is. Successful in terms of sales? Customer satisfaction? Or Reddy et al’s (1994) definition of brand extension success of profitability, relative share, market share or age? Ambler and Styles (1997) provide a sound literature review covering several seminal works in the field. As their paper focuses on a decision-making model, the addition of supporting evidence and research about the use of models in organisations and the organisational decision-making process could have made their paper more valuable to the reader. Within their introduction they include a useful and generalisable summary of risk/benefit analysis of extensions. Research Design Using 11 case study examples, Amber and Styles (1997) aim to investigate how decisions lead to successful brand extensions and what considerations are made to the brand’s equity. Through an in-depth interview structure, the authors explored five main questions including the main drivers behind line and brand extensions; what data are used in extension forecasting and who the key players are in the process. In order to establish whether brand equity was considered in the decision process, it may have been worth the interviewers defining brand equity and then asking respondents about brand equity directly as the final question of the survey as a ‘test’ of their inductive approach. The question could be for example: Do you consider your brand’s equity when making brand extension decisions? Respondents’ answers could then be compared with the deductions made by Ambler and Styles. Although this is not scientifically robust this could have provided a checking mechanism of the deductions derived from the survey. As justified in their methodology section, their approach is inductive and “uses a systematic set of procedures to develop an inductively derived grounded theory about a phenomenon”. This method of 1
  2. 2. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Management Assignment research could result in a number of misguided assumptions being made. Qualitative research of this nature is sufficient however care must be taken in the interpretation of the data. Results Ambler and Styles (1997) suggest 11 propositions (P). P1 (Brand and line extensions can be successfully used as part of either a growth or defensive strategy) does not really add to our knowledge. Indeed Reddy et al (1994) discuss “the use of established brands to access new markets...” Accessing new markets is a growth strategy. Tauber (1988) described four major opportunities for firms, one of them being “line extensions and flanker brands - a defensive tactic...” P2 (Brand and line extensions are driven by a variety of factors of which consumer need, competition and technology are most prominent). This proposition could be purely as a result of the sample and if a larger sample was involved it might be the case that other factors come to light as more prominent drivers. P3 (Formal planning processes are not geared to handle brand and line extensions until the extensions are fully developed) was an interesting finding of the research. Reddy et al (1994), Aaker (1990) and Lomax et al (1990) all highlight the increasing frequency of brand extensions. Yet Ambler and Styles show that a strategy that continues to grow with significant company-wide implications (particularly share holder value) is not part of formal business planning processes. This may have changed over the years as brand extensions have become more frequent. Propositions four, five and six (Successful extensions are implicitly decided on the basis of brand equity; successful extensions are explicitly decided against financial returns and brand equity considerations precede financial considerations in the decision process) would again all be perfectly respectable conclusions to draw if the sample size was considerably greater and diverse. As the sample is small these assumptions may be incorrect or are only relevant to this specific sample. Wider investigation is needed. The latter half of P7 (Consumer research and company experience are the major sources of data for extension forecasting) i.e. that company experience is a major source of data is obvious and adds little to our knowledge. P8 (Qualitative research is more important than quantitative research in testing brand equity related issues with consumers) is again a big assumption. It is far quicker and easier to get a focus group together to assess a potential brand extension concept than it is to trial a product and gather sales figures. The issue here may not be importance but speed and ease. In addition, market conditions may have meant that these brands were doing well and so robust quantitative research was not felt necessary. Less buoyant economic conditions could have FMCGs see quantitative research as more important. Propositions nine to eleven (Market forecasts are not influenced by knowledge or use of generalizable market simulation models; Marketing, R&D and eventually sales are the key functions involved in developing extensions; the extension development process is led by the marketing function unless the extension is technology driven) although interesting add little to our existing knowledge. P11 could be considered obvious. It is only natural for a typical market activity to be driven by the marketing department as they are likely to gain access to consumer research prior to other departments. Ambler and Styles process model is a sound representation of the decision flow for extensions based on their respondents. It could be argued that this model is only applicable for those operating B2C companies and not B2B. Additionally, it is highly unlikely that the model would apply to non-profit organisations. Limitations 2
  3. 3. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Management Assignment There are several limitations of the paper. The most obvious is that it is not generalisable as it focuses on the FMCG sector. FMCGs are unique. Their main characteristic being their frequency of purchase. Replicating the research across different types of sectors and different sized organisations including non- profits and services that are generally considered intangible may have revealed more about the decision processes of managers. In addition, the data collection was limited with responses from only 11 respondents. This is a very small sample and the results gathered cannot be considered representative of all FMCGs and can only be used as an indication of the types of decisions that are being made. The size of the respondents’ respective companies would have been useful to know – were they global like Procter and Gamble or domestic companies? Clarity as to whether the in-depth interviews were face-to-face or via telephone would have been useful. It is assumed that these were face-to-face interviews. Whether the sample selection can be considered adequate for this research is questionable. The authors state that two of the extensions took place at different times to the others – does this affect the results? A further concern of the study is that responses are not global but are from five countries. If the research was being replicated today, it would need to gather responses from more countries possibly including emerging economies such as Brazil, Russia, India and China. Another limitation of the paper is that the data were gathered via interviews – qualitative research. The authors had to make sense of and summarise the responses from a number of respondents interviewed by a number of interviewers (albeit experienced interviewers) in their own way. Different researchers could have interpreted the results in a very different way. Making the analysis quantitative, quantifying their findings or giving weightings to some of the decision-making elements could have been more meaningful to the reader. The final limitation of the paper is that it does not entirely achieve everything it sets out to. In the end, Ambler and Styles demonstrate that brand equity is considered in the decision-making process rather than establishing “the role that brand equity considerations have in the decision process”. At the time of publication, there was little research conducted on the brand extension decision-making process – the focus of many papers was more on consumer views of brand (Martinez and de Chernatony 2004). Indeed Grime et al’s 2002 paper Consumer Evaluations of Extensions and their Effects on the Core Brand highlights many such papers as does Sandor Czellar’s 2003 paper Consumer Attitude Toward Brand Extensions. So despite the limitations of Ambler and Style’s paper it does add to our learning by exploring and highlighting key points of the decision process from a non-consumer view. Their model is useful but only for schematic purposes – it is unlikely that marketers will follow it when making extension decisions as often these are not driven by managerial decisions as Ambler and Styles allude to in their second proposition. Management decisions follow different sequences in different organisations and in different circumstances. In addition, interviewing non-marketing managers would have given a better picture of brand extension decisions. Ambler and Styles state that their paper is “an initial, exploratory step” and this is accurate summation. They contribute positively to the extant theory and would have advanced thinking when this paper was first published. Part Two – Review of the Five Branding Papers 3
  4. 4. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Management Assignment Issues, Similarities and Differences of the Five Branding Papers Tauber (1988) and Aaker (1990) both focus on reviewing the benefits and potential pitfalls of brand extensions for the benefit of the marketer. Aaker (1990) is an article for Sloan Management Review that looks at the good, the bad and the ‘ugly’ results of brand extensions. Tauber (1988) despite putting forward a Franchise Extension Search model is also only a review paper written for a similar publication: Business Horizons. Neither Aaker (1990) nor Tauber (1988) undertake primary research but instead draw on their own opinion and industry examples to build their arguments and support their claims. Both are grounded in the same theory and agree on many things. Both papers highlight the ability to leverage a strong brand name and the reduced risks due to the familiarity of the brand name and efficiencies such as promotional expenditures. They also emphasise how crucial a brand extension decision is to a company strategically and agree that there is considerable risk of new ‘markets’ e.g. media costs, competition, distribution. Aaker (1990) is a more rounded paper than Tauber (1988) in terms of its depth. This could be because it was written later and benefited from research such as Aaker and Keller (1990). Aaker (1990) and Tauber (1988) state that extensions have a greater chance of survival than new products. The main reason likely for this is that there is a parent brand from which to leverage brand awareness. Aaker (1990) states resolutely that “the extension must fit the brand” and that associations must exist between the parent and extension. Tauber (1988) believes that in order for an extension to be successful it must be leveraged by the parent brand promising the same values. As stated there is no primary data to back their claims. Aaker and Keller (1990) and Martinez and de Chernatony (2004) are empirical papers focused on the consumers’ view of extensions. Written 14 years apart, they both survey responses to theoretical extensions using regression analysis. Martinez and de Chernatony (2004) focus on 15-24 year olds and show that the perceived quality of the parent brand and the respondents’ attitudes influence brand image and product image after the extension has taken place. Aaker and Keller (1990) two part research project focused on the student’s evaluation of an extension and so the two sets of authors were measuring different extension elements, however some of their research results do overlap or can be viewed adjacently. Martinez and de Chernatony (2004) found that “perceived quality of the brand has a positive effect on the general and product brand image after extension”. Aaker and Keller (1990) found that “there is no direct link from perceived quality of the brand to the attitude toward the extension”. Additionally, Martinez and de Chernatony (2004) suggest that to protect brand image, a company “should strive to be perceived as having higher quality”. Contrastingly, Aaker and Keller (1990) state that cues about extension attributes created more positive evaluations than cues about parent brand quality. There are many possible reasons for this difference in thinking. The research focus, samples, respondents and timeframe are all different. Martinez and de Chernatony (2004) focus on sportswear – a market in which brand quality is an important consideration. Martinez and de Chernatony (2004) point this out in their paper. Aaker and Keller (1990) argue that fit is split three different ways TRANSFER: how good the manufacturer will be at transferring their skills and making the new extension; COMPLEMENT: whether the extension complements the original product and SUBSTITUTE: whether the product classes are substitutes. They conclude that there is an interaction between the quality of the brand and the fit of the extension and that TRANSFER and COMPLEMENT are more important predictors of consumers’ evaluations than SUBSTITUTE. Martinez and de Chernatony (2004) find that “in the case of a brand leader such as Nike, an extension that is not considered similar to the brand, such as the camera, has no significant effect on the general brand image.” This finding could be because it is more recent research, conducted at a time where brand extensions in different markets regardless of the parent brand’s market are commonplace. 4
  5. 5. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Management Assignment Communication is a key aspect of a successful brand extension. Aaker and Keller (1990) suggest communicating the brand extension’s attribute rather than the quality of the original brand whereas Martinez and de Chernatony (2004) suggest that promotional campaigns should place a greater focus on the brand name “rather than the products being marketed” i.e. highlighting the overall brand values rather than using the brand name to highlight product category differentiation. This is a corporate ‘umbrella’ branding approach and one (amongst many others) that is being utilised by large corporate companies such as Reckitt Benckiser and Unilever. Aaker (1990) and Martinez and de Chernatony both agree that in order for an extension to be successful there must be a perception of quality or as Aaker (1990) puts it “there is little point in extending mediocrity”. Ambler and Styles’ (1997) paper is quite different to the others. It does not focus on the consumer, does not review good and bad examples but instead conducts primary research into the decision process of how successful brand extensions are brought to market. Despite being different in many ways, it includes elements of the other papers including Tauber’s Growth Matrix (1981) and Aaker and Keller’s (1990) definition of extensions. Ambler and Styles (1997) like Tauber (1988) and his Franchise Extension Search attempt to create a brand extension decision model to help the process of deciding which brand extension to attempt. Ambler and Styles’ (1997) conclusions on fit are a little different to the others - they talk of ‘brand equity fit’ where brand equity related issues are “key considerations early in the extension development process” and the focus is about the extension in relation to the brand. Collective Value of the Five Branding Papers Overall, these papers cover a number of interesting dimensions: the importance of consumer’s view of extensions; how extensions affect brand image; the benefits and pitfalls of brand extensions and the decision process for extensions. In addition, they have brought to the fore the key issues that take us through the brand extension process from ideas and decision making (Ambler and Styles 1997) through to consumer evaluation (Aaker and Keller 1990 and Martinez and de Chernatony 2004). Collectively the papers indicate key areas essential for brand extension success. These include brand awareness; the quality of the parent brand; the fit of the extension in relation to the parent brand; dilution of the brand following extension, the communication of the brand and brand extension to consumers and the difficulty of the parent company making the brand extension. Unfortunately on many of the key areas there is no general consensus and as many of the papers were published decades ago their findings may be of limited value today. These papers raise many valid points for the simple reason that brand extensions are the main way in which new products come to market. Though important, however, the papers only provide us with pieces of the jigsaw rather than the whole picture of brand extensions issues. Each paper is specific to a certain industry and as such are not generalisable. The papers tell us little about how services or non-profits brands are affected by brand extensions for example. In addition, the consumer research papers focus on responses from young people and students. This group responds very differently to innovations – how realistic then are the results? With brand extensions on the rise, a key issue that the papers highlight is brand dilution. Unfortunately, across the papers there is no clear and collective definition of what brand dilution is. It is therefore unknown whether the authors are all talking about the same thing. A sector-wide definition would be useful. With more and more brands stretching into different markets (Virgin, Easyjet, Tesco), knowing when to stop stretching may become key factor for industry. When do marketers know when a brand has been 5
  6. 6. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Management Assignment worn out? What are the early indicators of brand dilution? With the rate of brand extension today is brand dilution possible? Discussion and research in this area would be beneficial. None of the papers appear to be based in vastly different theoretically backgrounds and there is much cross-referencing of each other’s work. This is symptomatic of research that is in the early stages of knowledge development and could be because some of the papers were written years ago when brand extension was relatively new. It would be interesting to replicate each paper today. A noteworthy emergence since many of the papers were published is the resource based view of strategy (RBV). Although RBV companies are not technically conducting brand extensions (but are determining their market based on their competencies) this is what it may appear as from the consumers’ point of view. This issue of fit and communicating overall brand values regardless of product category may be highly important. However there is a reverse side to the argument. As consumers have become more familiar with extreme brand extensions (e.g. Gucci Hotels, Tesco mobile phones) perhaps fit is no longer such an issue. Though not entirely comprehensive, the papers give us a broad overall knowledge of many of the key issues to consider when extending a brand. Developing them to consider more of today’s issues would be a beneficial step. 6
  7. 7. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Management Assignment Part Three - Papers in Relation to Brands in the Charity Sector These papers are not directly relevant to brands in the charity sector as none of the papers reviewed or conducted research in this area. Some of the areas highlighted by the papers however, do have some implications for voluntary organisations. Large charitable organisations such as Oxfam have extended their brand to cover charity shops, greeting cards and events such as Oxjam. Therefore with large charity brands such as Oxfam, these papers would be useful. Charitable transactions or donations are different to transactions where the purchaser is given something directly in return. Research has shown that the reputation of the receiving organisation is important where donations take place and is crucial to long term funding (Sarstedt and Peter 2009). This implies that the issue of quality of the parent brand (which includes reputation) as highlighted by the papers is important. In the case of Oxfam, the quality of its brand could have an effect on how its charity shops, greeting cards and events are perceived. From a practical point of view, this means that charity brands should consider their parent brand’s quality before extending. In reality, this is only applicable to a few charitable organisations. Extensions are only a possibility for larger charity brands as smaller charities are unlikely to consider brand extensions, have marketing departments or indeed marketing managers. The papers also indicate fit of extension as an important factor of brand extensions. It may be the case that fit or appropriateness is less of an issue within the charitable sector as activities of a charity are often driven by the needs and wants of the beneficiaries or members and therefore could take any direction. The Association of Chief Executives of Voluntary Organisations (ACEVO) has extended its services and products for members from lobbying to include publications, events, private medical insurance and help lines. This is not an issue as its income is primarily from members and funding bodies. But for those where donations are from the public such as ChristianAid, the question of fit may be more valid. The benefits of brand extensions as highlighted by the papers such as quality associations; enhancement of the core brand; cost savings and improved chances of success all apply to the charity sector too. In addition, the pitfalls of extensions such as no value added; negative associations; poor quality and negative effect on the image of the parent brand can also happen to charity brands. Age Concern England decided to launch a membership organisation called Heyday in 2006. Unable to reach its target of 300,000 members Heyday was forced to close and its staff made redundant. This resulted in significant bad press and a total loss of £16million (source: Third Sector Magazine, 2007). Donors to Age Concern understandably would not have been happy and this may have impacted donations and brand image. Age Concern has now merged with Help the Aged to form Age UK. The papers raised the difficulty of the extension i.e. the difficulty of the parent brand making the brand extension. This may be the opposite for charities where its extension is not a core area of expertise. Many charities now offer credit cards: Shelter, Breakthrough Breast Cancer and Red for example. Managing credit cards is not the forte of charities and so these are extensions are co-branded and managed with financial institutions such as The Co-operative Bank, MBNA and American Express. It may be the case that charities can successfully extend into other areas perceived as difficult as long as they do so with organisations that have relevant credibility as long as it is for the benefit of their cause. In the case of charity credit cards, they generate much needed funds for the respective charity. Brand awareness according to the papers is essential for extensions to leverage. For large charities, like Oxfam, brand awareness of the parent brand would help with their greeting cards and second-hand shops for example. In all charities, (but again more so in larger charities) it can be argued that this leverage can be also be seen with their campaigns and appeals leveraging the awareness of the parent brand. Recent 7
  8. 8. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Management Assignment appeals by Unicef and the Disasters Emergency Committee (DEC) following the Haiti earthquake would not have generated the millions of pounds they received if their brands were not well known to the public. Communication of brands and their extensions was also highlighted by the papers. Charities tend to communicate their overall mission with different campaigns and special appeals. Examples include: Macmillan Cancer Support with their overall We are Macmillan brand message and smaller Living with Cancer? We’re here to help campaign. Similarly, Oxfam has its overall Be Humankind brand statement and is also currently running Oxfam Unwrapped and Climate Change Cost Lives campaigns. Communicating the overall brand values gives charity’s sub-brands, services or campaigns the ‘halo effect’. This is particularly important when resources are scarce or when donors would prefer resources to be spent on beneficiaries or core actions of the charity (e.g. relief aid, primary care, rescue work) and not marketing which is often the case. Most charities can be considered resourced based view organisations as they determine their activities by their competencies and are not dictated by markets but by the services they can offer. Though brand extensions are a different concept to resource based competencies some of the issues facing an organisation that extends its brand - such as fit, communications and negative associations - can also be faced by resourced based organisations. The papers can be used and referred to by charity brands to some extent and some of the issues and scenarios highlighted by the papers are played out in the charity sector. However, the papers are only of real relevance to the larger non-profits where true brand extensions exist, examples of which are given above. For many charities (including small ones) campaigns and appeals may act in a similar way to extensions, however this is only a suggestion and research in this area is required. There are over 170,000 charities registered with the Charity Commission in the UK covering animal welfare, environmental care, the arts and many more. The charity sector is wholly unique therefore specific research relating to brand extensions must be carried out within the non-profit setting. 8
  9. 9. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Management Assignment Bibliography and References Books Aaker, David A. (1991), Managing Brand Equity, Free Press, New York Kapferer, J-N., (1997) Strategic Brand Management, Second Edition, Kogan Page, London Academic Papers & Magazines Aaker, David A. (1990), “Brand extensions: The Good, the Bad, the Ugly”, Sloan Management Review, 31, pp. 47-56 Aaker, David A. and Kevin Lane Keller (1990), “Consumer Evaluations of Brand Extensions”, Journal of Marketing, 54, pp. 27-41 Aaker, David A. and Kevin Lane Keller (1990), “Consumer Response to Brand Extension”. Journal of Marketing, 54 (January), pp 27-41 Ambler, T., and Styles, C (1997), “Brand Development versus New Product Development: Toward a Process Model of Extension Decisions”, Journal of Product and Brand Management, 6(4), pp 222-34 Arvind Rangaswamy, Raymond R. Burke and Terence A. Olivia (1993) “Brand equity and the extendibility of brand names International”. Journal of Research in Marketing, Volume 10, Issue 1, March, pp 61-75 Czellar, S (2003) “Consumer Attitude toward Brand Extensions: an integrative model and research propositions”. International Journal of Research in Marketing 20 pp97-115 Grime,I., Admantios Diamantopoulos and Gareth Smith (2002) “Consumer Evaluations of Extensions and their Effects on the Core Brand”. European Journal of Marketing. Vol 36, No 11/12 pp1415-1438 Hou, J. , Lanying Du and Zhilong Tian (2009)“The effects of nonprofit brand equity on individual giving intention: mediating by the self-concept of individual donor” International Journal of Nonprofit and Voluntary Sector Marketing, Volume 14 Issue 3, pp215 – 229 Reddy, Srinivas K. Susan L. Holak and Subodh Bhat (May 1994) “To Extend or Not to Extend: Success Determinants of Line Extensions” Journal of Marketing Research Vol. XXXI, pp243-262 Lomax, Wendy, Kathy Hammond, Maria Clemente and Robert East. (1996) “New Entrants in a Mature Market: An Empirical Study of the Detergent Market”. Journal of Marketing Management 12 pp281-295 Martinez, E and de Chernatony, Leslie (2004), “The Effect of Brand Extension Strategies upon Brand Image”, Journal of Consumer Marketing, 21(1), pp. 39-50 Pitta, Dennis A. and Lea Prevel Katsanis “Understanding brand equity for successful brand extension” Journal of Consumer Marketing Vol. 12 NO. 4 1995 pp. 51-64 Ritchie, Robin J. B., Sanjeev Swami and Charles B. Weinberg (1999) “A brand new world for nonprofits” International Journal of Nonprofit and Voluntary Sector Marketing, Vol. 4 No. 1, pp.26–42 9
  10. 10. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Management Assignment Sarstedt , M., and Matthias Peter Schloderer (2009) “Developing a measurement approach for reputation of non-profit organizations” International Journal of Nonprofit and Voluntary Sector Marketing. Published online on Wiley InterScience Tauber, E M (1988), “Brand Franchise Extension: New Product Benefits from Existing Brand Names” Business Horizons, 24(2), pp36-41 “Heyday: Total investment came to more than £16m” – Third Sector Magazine, Indira Das-Gupta, 01 August 2007 10