Brand equity of parent brand helps new product within the same umbrella


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Brand equity of parent brand helps new product within the same umbrella

  1. 1. 2010 BRAND MANAGEMENT HO:- brand equity of the parent brand helps a new product within the same umbrella H1:- brand equity of the parent brand dose not helps a new product within the same umbrella MAJOR FACTORS THAT LEAD TO A BRAND CHOICE PREPARED BY:- SIDDHANT JAIN 09020541097 MARKETING AND FINANCE 1
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  4. 4. PROCESS OF BRAND EQUITY THE PYRAMID OF BRAND EQUITY MAJOR FACTORS THAT AFFECT BRAND EQUITY 1. Association with the parent brand: The consumers association with parent brand motivates the consumer to buy new products of that company if the company is a consistent performer. If it has been providing quality over the period of time the consumer will feel proud in associating itself with the brand. This will create brand equity through the word of mouth. 4
  5. 5. For example UB group was successful in launching Kingfisher airlines because the consumers of its alcohol feel proud in drinking it. 2. Familiarity of the parent brand – means the proper use of communication strategy by the company to make the maximum public familiar with its brand and products. If the people are familiar with the brand they tend to use its new version all the more. 3. Awareness of the parent brand – shows how well the brand has climbed the BRAND LADDER. Brand awareness is the first step. 4. Longitivity of the parent brand - How long the brand has been in the market serving the people affects the consumers’ choice of new brands launched by the company. 5. Reliability of the parent brand- affects the consumers on the basis of how comfortable, secured, trustable the consumer feels using the brand. BRAND EXTENSIONS A company my use its existing brand name to launch new products in other categories. Honda uses its company name to market such different products as automobiles, motorcycles, lawn mowers, and snowmobiles. This allows Honda to advertise that it can fit “six Hondas in a two car Garage”. Godrej now features its name on soap, lotion, shampoo, conditioner, shower gel, locks, almirahs, raw chicken and God knows what in future. A new trend in corporate brands building is that corporation is licensing their name to manufacturer of a wide range of products from bedding to shoes. Brand extensions also involve risk. The new product might disappoint buyers & damage their respects for the company’s other products. The brand may lose its special positioning in the consumers mind due to dilution. Dilution occurs when consumers no longer associate a brand with a special power or highly similar products. 5
  6. 6. History of Brand Extension Brand extension is not, however, a recent phenomenon (Gamble, 1967). It has long been prominent in the luxury goods sector. India has always had big business houses like Tatas, Godrejs and Birla who tend to push newer and varied products under one Brand Name. Tata – From Steel to Cars, Godrej –From locks to Farm fresh Chicken. The latest to join the bandwagon have the Ambanis who after decades of excellence in Industrial chemicals have now forayed into telecom and power . WHY EXTEND THE BRAND? Innovation allows the brand to remain up-to date and demonstrates and unceasing attentiveness to the changes in customer taste. A second major factor in brand extension is the cost of advertising. BRAND EXTENSION : HOW ? Before setting about any practical extension , there are two preparatory stages. The first -and exploratory stage-probes all the associations with the brand which are present in the collective public mind. This stage allows conjecture as to which products would be compatible with the brand's meaning . second study phase- testing the new products ideas. A decision cannot be made on the strength of this information alone. Brand extension is the result of strategic decision. It also involves factors linked with production , marketing , finance and human resources. It cannot be over-emphasised that extension can not be contemplated without complete knowledge of the brand's attributes: What are its attributes? What is its personality? What is the purpose? What is its heart? What contract does it offer to customers and consumers? What is its latent potential? 6
  8. 8. Why Brand Extension Fail? The reason why the effort could fail is that this strategy presupposes one or more assumptions. Assumption one. It will help get trial / sell the new product. This need not be inevitable, even if it seems ‘reasonable’. Because the extension of the brand name will help to get trial only if it is seen to Add Value to the new product. Example, Nirma introduced toothpaste – but the many consumers who saw a value in Nirma washing powder, did not find it in the toothpaste. Assumption Two. It will help to strengthen the existing product. A brand extension can achieve this, but only if the new product incorporates a truly New Idea. For example, the Apple computers brand was actually enhanced by the introduction of the iPod MP3 Player - but that happened only because the iPod is a sensationally new idea. The Apple brand could not have achieved this, if the iPod were just another MP3 player. Assumption Three. The brand equity will ensure ready acceptance in the new category. A common assumption is that the brand has enough Stretch to carry its strength into a new category. But Bournvita was unable to stretch its strength as a health beverage to biscuits. The most critical failing in many Brand extension initiatives, is that they start with the marketer, not the consumer. Brand Extensions will succeed only when they create a Consumer Connect. Guidelines For Brand Extension Guideline One: Extend a strong Attribute / Performance Characteristic Association. This is the simplest level at which to begin. Amul stands for pure milk. Indeed it is likely that to many consumers, Amul is milk. Therefore, it is easy to extend the brand from wet milk, to butter, to cheese, to dairy whitener, and recently, to ice cream. However, with pizza, Amul may now be moving just a bit too far from the core ‘milk’ association. Does the consumer think Pizza = cheese (=milk) or is Pizza = baked food? 8
  9. 9. Guideline Two: Extend a strong Benefit Association. Fair & Lovely owns the skin fairness benefit strongly enough to extend the brand from the original fairness cream to a lotion to a soap to an under-eye cream. Guideline Three: Extend an association with a Consumer Attitude or Belief. Nike and its swoosh stand for pushing oneself beyond the limit and an individualistic attitude – so the brand appeals to those who share this view and who wear the brand as a badge: in sports shoes, sports goods, bags, casual wear, even watches. Guideline Four: Extend the brand based on Brand Essence. There are also several watch-outs to note before extending brands. Watch-out One: Is your brand extension sending out contradictory signals? This could be happening in the case of Nivea, where after offering skin-care products for women for years, a range of men’s toileteries was introduced under the same name. Bad idea. Watch-out Two: Is there any link to the brand extensions or is it merely a convenient, available name that’s being used? Maggi came into India with 2-Minute noodles - a hearty, anytime snack. Since then the Maggi brand has been extended to sauces, soup cubes, even pickles. There is nothing that holds this set of products together. Is it surprising that the extensions are not resounding successes? Watch-out Three: Check the interpretation of the link across extensions. Dettol was the ubiquitous antiseptic liquid (and then cream). When the brand was first extended to soaps, the antiseptic property was interpreted to mean care and Dettol was launched as ‘The Love and Care Soap’. It did not work. Today, many years later, Dettol soap offers protection – a more realistic interpretation of the antiseptic property, and the soap is doing far better. 9
  10. 10. UMBRELLA BRANDING : When a company extends the brand name to a new product line or revamps the product and again launches a product or diversifies the product portfolio it is known as umbrella branding. With the help of various corporate examples and case studied we will try to prove that the hypothesis is valid. HO:- brand equity of the parent brand helps a new product within the same umbrella 10
  11. 11. EXAMPLES 11
  12. 12. Example 2 :- NIRMA Complete Case of nirma Nirma is an over Rs. 17 billion brand with a leadership presence in Detergents Soaps and Personal Care Products, offering employment to over 15,000 people. The Brand was introduced by Mr. K. K. Patel in 1969. Making phosphate free synthetic detergent powder by hand and selling it at Rs. 3/- per kg., when the lowest priced detergent brand was Rs. 13/-. This value-for- money plank revolutionized the industry and made fabric wash detergents available to the masses. Today, Nirma sells over 800,000 tonnes of its detergent products annually, giving it a 35% share of the Indian market, which is the world's second largest fabric wash products market. This makes Nirma India's largest detergent marketer and one of the world's biggest detergent brands. Even though Nirma was a late entrant in 1990 in the highly competitive toilet soaps market, it is already the second largest manufacturer, selling close to 1,06,000 MT of bathing soaps in 1999-00. The brand has over the years introduced products in toiletries and personal care with soaps, shampoos and toothpaste, thus offering the consumer a complete product portfolio. Carrying on Nirma's mission of providing 'Better Products, Better Value, Better Living' to its over 300 million consumers through an efficient distribution network. Nirma has successfully challenged and changed the conventions of detergents marketing. Nirma's core marketing thrust revolves around prompting consumer trials by offering a good quality product at most competitive price and retaining these new consumers by continuously offering the same 'Value For Money' equation. This is borne by the fact that today Nirma can boast of a strong brand loyalty from it's 400 million consumer base. The brand promotion efforts are complemented by Nirma's distribution reach and market penetration, through a country wide network of 400 distributors and over 2 million retail outlets, making Nirma products available from the smallest rural village to the largest metro, in a continent sized country like India. Based on the pragmatic concept of 'Umbrella Branding', Nirma has been 12
  13. 13. increasingly successful in extending its brand equity to other product categories like Premium Detergents, Premium Toilet Soaps, Shampoos, Tooth pastes and Iodized Salt, thus opening new vistas to the field of Brand building. Nirma has followed up its original marketing success in the economy segment of the detergent powder and cake market, with Nirma Super Cake and Nirma Super Powder in the premium segment. Nirma's entry into the soaps market was marked with the introduction of Nirma Bath, a carbolic soap, today an established brand in this segment. Close on the heels of this, was launched Nirma Beauty Soap in three variants, which in a matter of a few years has become the third largest toilet soap brand in India. This encouraging market reception has been kept going with the launch of Nirma Premium and Nirma Lime Fresh. In fact, 17 million packs of Nirma Lime Fresh were sold in the very first month of its launch and that too without any advertising support. That's the power of the Nirma Brand. Today Nirma has expanded into the personal care market with Nirma Shikakai, Nirma Beauty Shampoo and Nirma Toothpaste and into products like Iodised Salt, thus providing the consumer with a more complete product portfolio. DETAILED CASE OF CADBURYS AND NESTLES UMBRELLA BRANDING Cadbury's brand are synonymous with chocolate in the minds of Indian consumers. A part of the leading US-based global confectionery and beverages major, the Cadbury Schweppes group,2 CIL has been the leader in the Indian chocolate market for many decades. The company began manufacturing operations in Mumbai in 1946. CIL was initially incorporated as a wholly owned subsidiary of Cadbury Schweppes in 1948 and was called Cadbury Fry (India) Ltd. The first product to be launched in the country was the globally successful brand, Cadburys Dairy Milk. In the 1960s, CIL launched a range of products such as Crackle, 5Star, Gems, Tiffins, Nutties, Butterscotch and Caramels. Most of these products became instant successes and led to rapid growth in chocolate consumption in India. Following this, the company launched Cadbury's Eclairs in 1972, priced at 25 paise. Eclairs, Cadbury chocolate, was a runaway success, despite being priced higher than the available sugar confectioneries in the market at that time. In 1978, Cadbury Schweppes had to dilute 60% of its equity in Cadbury Fry tocomply with FERA guidelines. 13
  14. 14. Cadbury Schweppes's stake in CIL was further diluted to 40% in 1999. In 1982, Cadbury Fry was renamed Hindustan Cocoa Products. In 1983, Cadbury Schweppes increased its stake in the company to 51%. In the 1980s, CIL focused on acquiring and applying advanced technology in the production and packaging of CIL products. The company laid emphasis on innovative packaging that would make an impact on customers. In 1982, the company set up a factory at Induri (Talegaon district, Pune,Maharashtra) to increase the milk-yield (required for Cadbury products preparation). The factory was engaged in the manufacture of intermediate products such as condensed fresh cream milk and a few brands of chocolates. Over the next few decades, CIL ventured into various segments of the food industry. In addition to the chocolates and sugar confectionery segment, the company entered the mailed foods, cocoa powder, drinking chocolate and malt extract segments. The company brands gained high popularity in most of these segments. During the mid-1980s, CIL launched biscuits under the Cadbury Butter and Glucose brands. However, these products did not do well and the company discontinued them by the late 1980s. In 1986, the company launched the mailed food brand, Bounvita, which became a runaway success. In 1989, CIL set up another manufacturing plant at Malanpur (Madhya Pradesh). The company also had third party factories at Warana (Maharashtra), Phalton (Maharashtra) and Hyderabad (Andhra Pradesh). In 1989, the company was renamed as CIL. The company continued to diversify and ventured into the ice cream segment. It launched brands such as Dollops and Lopstop. However, as the ice cream business did not generate the synergies CIL had planned; it sold its ice-cream business to Brook Bond in 1994 CIL was present in all major sub-segments of the chocolates segment and many of its brands were market leaders in their respective segments. Since its entry into India, CIL had been the leader in the chocolates segment. Analysts attributed its success to its rigorous marketing efforts, which stayed in line with changing consumer needs, year after year. 14
  15. 15. The company launched various products in different pack sizes, available at various price points. As people generally purchased confectionery products on impulse, the company gave importance to product visibility and availability. CIL introduced Visicoolers, vending machines and jars, and placed then at Star Outlets and amusement parks. The company also introduced 'Sheet Metal Dispensers,’ which were placed at the cash counters of thousands of retailing shops for dispensing chocolates. These dispensers attractively displayed the range of CIL's chocolates, thus helping the company position its brands strongly in the minds of Indian consumers. In 1990, CIL's domination of the Indian chocolates segment was threatened by the entry of Nestle India (Nestle), the Indian subsidiary of global FMCG major, Nestle S.A (Switzerland), into the Indian chocolate segment. Nestle, which entered India in the 1950’s, was a leading player in the coffee and milk products segments in India. It entered the chocolate segment in India with the launch of a range of premium chocolates under the Nestle brand name. In 1994, Nestle introduced BarOne (chocolate bar with peanuts) and soon garnered a respectable, market share in the chocolate segment. CIL carried out many successful advertisement campaigns on TV and other media. As a result, CIL brands gained high consumer recognition. During the 1980s, CIL identified children as its target audience and developed campaigns that appealed to this segment. However, by the mid- 1990s, chocolates were being positioned as near-meal substitutes by both Nestle and CIL. This was because the market was moving from being children-centric' to encompass adults as an important target segment. In 1994, to cope with this change in the composition of the target audiences, CIL decided to target CDM at adults instead of only children. The result was a new campaign which repositioned CDM. The company brought out a series of advertisements that carried the tagline, ‘Kya Swaad Hai Zindagi Mein' (Real Taste of Life). One such commercial reportedly became one of the most popular TV advertisements in the history of Indian advertising. It featured a girl breaking into an impromptu dance on a cricket field after her boyfriend scored the winning run in a highly tense match. Subsequently, sales of the entire range of chocolates, 5 Star, Gems, Eclairs, Fruit &Nut, Crackle, Nutties, Butterscotch and Tiffins, grew by 20%. 15
  16. 16. In 1995, Nestle entered the wafer-chocolate segment by launching its global 'bestselling' wafer chocolate brand KitKat in India. CIL responded quickly by launching its own wafer chocolate brand, Perk, to meet the KitKat challenge. Both the brands were backed by promotional campaigns and decibel advertising. CIL even roped in upcoming Hindi movie actresses Rageshwari and Priety Zinta for its 'Thodi Si Pet Pooja - Kabhi Bhi, Kahin Bhi' campaign. Even though KitKat's 'Have a Break, Have a KitKat' campaign becoming a huge hit, Nestle's sales lagged far behind CIL's. In 1996, while CIL's market share was 76%, Nestle's was only 10%. Though CIL continued to be the market leader in the chocolate segment during the late 1990s, it faced problems regarding the market shares of 5 Star and Perk. 5 Star's market share had declined to 15% in 1997 from over 20% in 1995; and Nestle's aggressive marketing of KitKat had placed Perk under threat. CIL's management thus decided to focus on new product launches stay ahead of the competition and regain market share. CIL launched a number of new products in 1998, such as Picnic (a chocolate bar with wafer, peanuts, raisins and caramel), Byte (a strawberry flavoured candy), English, Toffee (a chewy toffee) and Cadbury Gold (a CDM with a soft center). While Picnic was promoted as a 'solid, filling and ingredient-packed' chocolate, Cadbury Gold was promoted through an 'emotional' appeal. Much to the company's dismay, these new products failed to click with the consumers, largely because of their taste. During that same period (the late 1990s) Nestle's range of snack- substituting chocolates such as Charge, Nuts, KitKat orange and Crunch, ate into the share of most of CIL's new launches In late 1999, a new two-fold vision was formulated for CIL - one, doubling shareholder value and, two, putting 'a Cadbury in every pocket.' To achieve this, the company planned to increase the depth of chocolate consumption by adding 10 million consumers every year, launching more new and innovative products, re launching existing major brands, and revampimg the marketing mix, advertising and promotional strategies, and focusing on the gifts segment. To increase the depth of chocolate consumption, CIL strengthened its distribution network to reaching 80,000 additional retail outlets every year. It also offered low-priced packs for the masses and launched new products that targeted different age groups. CIL decided to focus on the availability and affordability of its products to increase chocolate consumption in the 16
  17. 17. country. Small affordably priced packs of all the leading brands were launched to help improve the penetration of CIL's chocolates. CDM was made available at various price points such as Rs 1, Rs 2, Rs 5 (13gms), Rs 10 (26gms), Rs 15 (43gms), Rs 50 and even at Rs 100. The high priced packs were positioned as ideal gifts for various festival and family occasions and festivals. 5 Star was also offered at two price points, Rs 5 (14gms) and Rs 10 (33gms). As a result of the above measures, by late 2000, CIL succeeded in adding over 8 million customers to its existing consumer base of 65 million. During the period CDM's market share increased significantly from 23% to 25%. 5 Star's sales also increased from 12% to 14%. In 2000, CIL enjoyed over 70% share of the 22,500 tones Indian chocolate market However, CIL realized that the share of chocolates in the total amount spent by consumers on impulse products (mainly chips/wafers, non-core biscuits, ice creams, soft drinks and chocolates) had been declining in the late 1990s. In light of this the-company decided to focus on expanding the share of chocolates in the impulse buying category. This marked the beginning of numerous product launches and relaunches by CIL during 2000-2002. In 2000, Perk 'Slims' was launched lighter and crisper than the previous version, its packaging had also been modified. In addition, Perk was introduced in different flavours – strawberry, mango and mint, to satisfy the varying preferences of consumers. A new product, Relish, was launched in the same year. In July 2000, CIL launched Milk Treat (a white chocolate-coated wafer) targeted at children. The advertisement campaign promoted it as a product that had 'the goodness of milk married to the fun of chocolate.Milk Treat was launched to compete with Nestle's Milky Bar, a moulded white chocolate. CIL's other launch during the year was Chocobix (a glucose biscuit with chocolate covering). Eclairs were made available in various pack sizes that ranged from cartons to 90 gm pouches priced at Rs 15. CIL also launched the Eclairs Tub Pack (Rs 25) in the gift segment. In July 2001, CIL relaunched 5 Star, with a new tagline, 'non-stop energy.' This was an extension of its previous taglines 'an energy bar' and 'reach for the stars.' To reach its core target segment (for 5 Star) - the youth - the company undertook extensive on- ground promotional activities, outdoor advertising and TV campaigns. In mid-2001, Gems was relaunched. The brand was given a new packaging and the formula was improved. it came in a flip top tube and was also offered at low price points, Rs. 5 (14gms), and Rs. 1 (three Gems), to aid self-purchase (by children). In late 2001, CIL launched the 'Temptations' range of chocolates. Temptations was available in five flavors - Old Jamaica, Roast Almond Coffee, Mint Crunch. Honey Apricot and Black Forest 17
  18. 18. According to company sources, the Temptations range, had been specially formulated to remain solid in a tropical climate. The range targeted the premium ‘adult' sector between the ages of 25-40 years and was priced at Rs 30 (64 gms). In January 2002, CIL launched 'Celebrations,' a selection of assorted chocolates in three flavors aimed at the 'gifting' segment. Priced at Rs 50 (74 gms), Rs 100 (148 gms) and Rs 200 (324 gms), the product was targeted at the premium end of the market. In 2001, CIL's sales volumes grew by 5.8% (against a targeted volume growth of 10%). This growth was attributed to the launch of small pack variants of the leading brands and the new advertisement campaigns. The company reported that Milk-Treat had garnered 3% of market share, and that Perk and 5 Star had also registered marginal volume growth. CIL was still the market leader in the Indian chocolate business with a 69.2% market share and a consumer base of over 65 million. Sales increased from Rs 2.531 billion in 1995 to more than Rs 6.263 billion in 2001. Net profits also increased from Rs 200.8 million to Rs. 574 million during the same period Nestle managed to take away over 6% of CIL's market share between 2000-2002. According to analysts, of the 6%, 3% of the market share was acquired by Nestle during the first quarter of 2002 alone. Both Nestle and CIL had launched many products during 2001-2002. Unlike Cadbury's 'new' products Nestle's products differed substantially from its existing range. By providing variety, Nestle was able to increase its share in the chocolates and confectioneries market from 26% in 2000 and 29% in 2001 to 32% in March 2002. While Nestle derived its revenues from various sectors such as milk products, coffee, culinary products, confectionery and other beverages, CIL was present only in the chocolate sugar confectionery and mailed food segment. Thus, Nestle had the option of diversifying its risks across its vast product portfolio, something CIL could not do In mid-2002, CIL launched 'CDM Chunky' in three variants — plain chocolate, raisins and cashew - priced at Rs 15 (plain chocolate, 42 gms) and Rs 20 (42gms). The company also launched variants of Perk such as Perk XL and Perk XXL, priced at Rs 10 (15.5gms) and Rs 20 (28gms). The usual advertising and promotional campaigns supported the launches. 18
  19. 19. International case of umbrella branding:-VIRGIN The story of Virgin, one of the United Kingdom's (UK) most globally popular brands, evolving into the "most stretched brand ever" in the history of the corporate world, had become a part of marketing folklore by the end of the 1990s. Spanning a wide range of businesses, such as music, aviation, FMCGs, broadcasting, publishing, bridal emporiums, cosmetics, telecommunications financial services and utilities, Virgin seems to defy many widely believed marketing postulates, particularly the ones related to brand extensions. Virgin - Brand Extension or Brand Dilution? Since the late 1990s, many of Virgin's extensions had fared rather poorly, particularly its cola, vodka, utilities, train services, computers and mobile telephony (in Singapore) businesses. 19
  20. 20. BUILDING THE VIRGIN EMPIRE The Virgin empire's origins can be traced to a music record shop started by Branson in London in 1972. The name Virgin was chosen since all the people involved in the record shop venture were virgins (denoting novices) as far as the world of business was concerned. From the very beginning, Virgin Record Company was a success. Unlike other companies in the industry, Virgin did not license its music production to other companies in various countries. Instead, it set up its own outfits to handle its business, a move that helped the company retain its independence. By the early 1980s, the company had become one of UK's top six recording companies. The first instances of extending operations were related to the music business: the company set up a recording studio, a video studio, an export company and entered the movie production business. The first major extension of the Virgin brand name was in the aviation business, when the company started a passenger airline service between London and New York (in 1984). The venture, named Virgin Atlantic Airways (Virgin Airways), aimed at offering high quality service to air travelers at competitive prices. Virgin Airways took off to a good start and soon became one of the leading airline companies in the US. To complement this business, Virgin entered the freight, courier and holiday services businesses over the next row years. Over the next few years, Branson brought many more diverse businesses under the Virgin banner. While many of the new ventures were joint ventures with leading companies, many others were brought into the Virgin fold simply by being given the license to use the Virgin brand name for their businesses. Though Virgin was comfortable running small businesses (such as the bridal emporium), it did not hesitate to take up big businesses (such as Virgin Airways) that required large investments. 20
  21. 21. By the mid-1990s, the Virgin group comprised over 100 companies, operating in 15 countries, with combined annual sales of $1 billion. In 1997, when the British government decided to privatize a part of British Rail, Virgin decided to take up the challenge of running two rail lines. Since the airline venture, this was being seen as the most radical (and hence dangerous) extension of the Virgin brand. During the late 1990s, Virgin entered the Internet and telecommunication business. While was to be made into one of the world's top ten portals, the cellular telephony business was expected to complete Virgin's transformation into a new economy major. By-now, the Virgin name encompassed over 340 businesses under 200 companies. In l999, the group employed 25,000 people across the world and posted revenues of $5 billion. In December 1999, Virgin sold a 49% stake in Virgin Airways. Branson planned to use this money to expand into ecommerce ventures. In 1999, the mobile phone venture became operational in UK. All these new businesses were under the Virgin umbrella. 21
  22. 22. since the Virgin brand conveyed a sense of youth, quality, innovation and fun to young people across the globe the decision to launch products such as cola, vodka and clothing under the label made perfect sense. A brand name that has a global reputation for quality is more powerful than almost anything. VIRGIN IN TROUBLE The cola business in the US proved to be a dismal failure, as even a year and a half after its launch. Virgin Cola was nowhere near Coca-Cola and Pepsi. The financial services business, which was launched in the mid-1990s, had lost over $33 million by late 1998, and the company was not even expecting to earn profits in the near future. By now, the vodka venture had proven to be a miserable flop as well; the brand was available only in Virgin's flights and a few duty-free shops. In 1999, only the travel, entertainment, rail and hotel businesses were profitable; most of the other ventures, such as Virgin Direct, V2 Records, Virgin Express, Virgin Trading, Virgin Bride, and Virgin Net, were making losses. While Virgin had claimed that it would change the way trains were run in the UK (faster and on- time), the company could not deliver on its promise. Not only was the group unable to improve service, it also faced problems from the unionized workforce. Customer complaints also increased substantially since Virgin took over the operations of the rail lines. Virgin sources stated that since the group did not prepare consolidated accounts, it was not possible to ascertain the group's financial standing as a whole. According to a study conducted by The Economist (published in February 1998), Virgin either owned firms (around 200 at that point of time) or had a 50% or less equity in them. The group claimed that many of its ventures airlines, retailing and railways were profitable. Of these businesses, only the airlines venture published its accounts. Since accounts were not available for the other businesses, there was no way of ascertaining their profitability. Virgin Clothing was closed in 2000 and Virgin Cosmetics posted a loss of £6.7 million for the financial year ending March 2001. After the terrorist attacks in the US in September 2001, Virgin's airlines businesses suffered from the global slump in the industry. Virgin Rail was also expected to become a problem when the subsidies from the UK government that were making the venture profitable ceased. The mobile phone venture in Singapore had to be closed down since Virgin managed to garner just 1% of market share in its first year of operations. 22
  23. 23. THE ISSUE OF BRAND EXTENSION/BRAND DILUTION In 1994, an opinion poll was conducted in UK for PR Week. The survey revealed that while 93% of the people were aware of the Virgin brand, 97% of them were aware of Branson. This highlighted the fact that the man behind the brand had become more popular than the brand itself. Commenting on the relation between Branson and the brand, Jean Oelwang Virgin Mobile's Director (Marketing), said, "He lives and breathes the brand's values." 23
  24. 24. This table is according to the year 2002-03 24
  25. 25. THE VIRGIN PHILOSOPHY In customers' eyes, Virgin stands for value for money, quality, innovation, fun, and a sense of competitive challenge. Virgin delivers a quality service by empowering its employees, and facilitating and monitoring customer feedback to continually improve the customer's experience through innovation. Virgin's growth has not only been impressively fast, it has also been based on developing good ideas through excellent management principles rather than on acquisition. Virgin looks for opportunities where it can offer something better, fresher, and more valuable, and then seizes them. It often moves into areas where the customer has traditionally received a poor deal, and where the competition is complacent, And with its growing e-commerce activities. Virgin also looks to deliver 'old' products and services in new ways. Virgin is proactive and quick to act, often leaving bigger and more cumbersome organizations behind. When Virgin starts a venture, it bases it on hard research and analysis. Typically, Virgin reviews the industry and puts itself in the customer's shoes to see what could make it better. Failures/Problems of Umbrella Branding Pepsi Aha Launched on 5th April 2002 with target group of 35 yrs and above. Pepsi Aha notched up the sales of Rs.25 crore in less than a month and Rs. 80 crore in less than four and a half month within the launch in the country.This resulted in cannibalization and Pepsi Aha took 30-35 % of brand Pepsi’s share.Pepsi and Pepsi Aha together hold 20-25% of market share PEPSI PEPSI Aha PEPSI PEPSI BLUE PEPSI PEPSI Cafechino 25
  26. 26. Coke Vanilla Coke Some more Examples of Successful Umbrella Branding Horlicks come up with Horlicks junior. The credibility of its existing brands, which are positioned as health and energy drinks, acts as an easy launch pad for new products in the foods market. The company has successfully launched a variety of brand extensions of its popular Horlicks brand such as ‘Mother Horlicks’, ‘Junior Horlicks’ and ‘Horlicks Threein-one’ sachets. SBCH is aiming to grow both organically and inorganically by exploiting existing opportunities supported by its well-established distribution network. 26
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  29. 29. Conclusion Similar kind of pattern can be seen where new product of the same umbrella gaining benefit from the Brand equity of parent companies/Brands like ITC, Britannia, Parle, Reliance, Tata, Godrej, Mahindra and the list is inexhaustible. Hence we can safely say that the hypothesis with which we started with holds true. HO:- brand equity of the parent brand helps a new product within the same umbrella 29
  30. 30. REFERENCEs www.karvy-com 30