 Assalamu alaikum khawatim Hazrat. Basim Hassan welcomes you to the virtual university of Pakistan. We are proceeding to lecture number 25 of the brand management, MKT 624. In the previous lecture, I was talking about brand extensions and in relation to that we learned things like what are these strategic deliberations that we have to undertake in order to be very precise and in order to be very accurate about the brand extensions so that we do not really wander into areas which are not really associated with the territory of the main brand, meaning the patent. In addition to the deliberations, I was also talking about a few factors which have to be considered in relation to the same thing, meaning the strategic direction for brand extensions. I talked about three of those, the one being that the brand does not have to have a very narrow vision. The managers as well as the brand have to be a little broad minded so that the brands could be stretched whenever they need be. I gave you an example of a brand which the managers thought had become old and tired and they stopped stretching the brand with the result that the new entries which they went for did not really work in the marketplace. So brands could have to be broad minded to the point again that you do not really wander into marketing no man's land at the same time they must not be narrow minded to the point that they deny you the opportunities for extension. Another important point that I discussed about brand extensions was that awareness about the company and the reputation of the company and also in relation to the brand have got to be of a very high level before you start considering the brand extensions because you are entering a new territory, a new field altogether and it is the awareness about the company and the reputation which really help in your favor in extendibility. Another factor that we learned was the essence of the new brand has got to stay close to the main identity of the original brand meaning if the distance between the two is huge which cannot really be reconciled by the target market you may run into certain problems and I gave you the example of the manufacturer that is into the manufacturing of the disposable plastic items getting into the perfumes the customers did not look upon the two of the markets close in relationship and the new field the company entered did not turn out to be a friendly field it turned out to be a hostile market. Point number four that I did not really have time in the previous lecture to talk about is that expertise and the ability to transfer technical know-how from one field to another is something which really matters when you start considering brand extensions. Now this basically means that the brand must be believable in the new field because the customers do look upon your expertise and your technical know-how in relation to the existing brand that you already have. To give you an example the Japanese can manufacture by the name of Sony. When that got into the manufacturing of the computers and laptops in particular the company was taken very seriously because the company had a reservoir of technical know-how and expertise in other fields of electronics so customers looked upon the expertise of the company in relation to the image they had in their minds regarding the company. If that effort was undertaken by company into foods or into fertilizers for example the company may not have had the level of success which the company I'm talking about did register. So you've got to take this factor into the very serious consideration to what extent the people look upon you as competent in terms of having the right technical know-how and the ability to transfer that expertise to the new field that you have opted for. Another factor that you must consider before taking into consideration the point of extendability the perceived difficulty of manufacture on part of the customers. We are not to lose the basic fact that everything that we consider has got to be customer driven and customer centered because it is for the customer that we are doing everything and it is the customer who is going to provide us with added sales. The perceived difficulty relates to how difficult it is to the manufacturer of a certain product and let us get back to the same example which I gave you just a moment ago if customers perceive that the technology that you have undertaken is not your cup of tea meaning they might perceive that it is beyond you in terms of your technical know-how and expertise they might not take you very seriously. So in other words we can interpret this factor as the one which says the harder it is for a manufacturer to get into a field in terms of the technical know-how meaning the more difficult it is as perceived by the customers the easier it is for the manufacturer to get into that new field because when customers start thinking that it is such a difficult technology it is so modern that only company ABC has the technical know-how to live up to its promise and therefore this company is going to deliver. Conversely if the level of technology is perceived by the customers as something which is commonplace the advantage which I am talking about by getting into a field of high technology and customer perception that you have the compatible level of technical know-how the more advantageous it becomes for you to get into that field. So in other words we can summarize this factor like the following that the harder it is perceived by the customers to get into a particular field the better it is for a strong brand and for a strong company to get into that field in order to get full less benefit and the more the area is considered or perceived by customers as the commonplace the less advantage you have as a strong brand to get into that area because the customers start thinking well this is something so common that most of the companies do have the capability of producing something which is going to satisfy all the needs. Another factor which you must consider before deciding upon the extensions is the factor of what they call complementarity. Now this complementarity can also be called fit meaning they fit between the two products because you have a product which exists in the market and you are going to come up with a new one and what remains to be seen is to what extent the two products are related with each other in terms of some emotional benefits in terms of certain values and if both give emotional benefits to the customer meaning the same customer or similar customers then the chances of getting into that extension are very favorable. An example could be a manufacturer of fashion clothing getting into perfumes, similar customers or maybe the same customers who are into fashion clothing and they are the people who also love good perfumes. So if you happen to be the same with the manufacturer into two different categories the chances are into your favor because there are certain emotional associations that run across the same kind of customers. So this is an important consideration which must not be lost sight of before you start making final decisions about extensions. As a conclusion of all the factors that I have talked about as considerations toward extendability I can make the statement that brand extensions have got to be very logical and they have got to be very coherent. Any incoherent and illogical extensions are going to diminish the value of the brand and that goes without saying that you get into extensions because you are adding to your brands you are multiplying the brand family and through that multiplication you are bringing the more value to the company and trying to achieve the growth gap by achieving your financial as well as strategic marketing goals. So much about the factors that we have to consider before we get into extensions. Now having known all those factors let us now try to learn how do we get into the right extendability meaning how to pick the right extension. Picking the right extension is the function of the very clear understanding on your part of your brand and your competitor's brands. Well this again is one of the fundamentals which have to be talked about over and over again relating any marketing concept because it is about your brand and competition that the whole marketing effort is all about. So a good knowledge of your own brand and brands of competition on your part is going to help you to pick the right most extension and in that connection I would say that it basically is the brand vision and the brand image that you have developed or trying to develop along with the brand persona and contract and everything and the brand based customer model that gives you a clear lead into the kind of extension that you should go for. Why? Because it is a combination of all these factors or a function of all these factors which really defines for us the right most positioning on the positioning map for the product or for the brand which we are trying to extend. If we have for the right brand vision we are very clear about the objectives that we need to achieve for so many years down the line and that vision gets translated in other words into all those objectives that have to be sought. Come what may. It is the brand image meaning the associations which the customers have with our brand that we know and it is going to be the caching in on those associations when it comes to the question of extending that brand and therefore the brand persona which we are considering about the new entry in terms of the brand's identity it's the personality it's total of the set of characteristics that together we must consider before we position the brand on the positioning map and of course all these things the later foundation for the brand based with the customer model which is the in a way final step toward the positioning process and meaning that's where the positioning process starts you end something there and pick something another vital and very strategic from there by getting into positioning. So having known the components of the brand vision and the brand image and the brand contract and the customer model we can make a few statements which are very pertinent in relation to the brand extension the first statement is that brand vision helps your brand goals and strategic roles all the roles to which the brand is supposed to be playing to enable you to achieve all the strategic goals may those be in terms of hard numbers meaning financial goals or may those be in terms of marketing objectives like the level of market share that you have to achieve and the position of the brand which you would like to see on the ranking of all the brands within the category like you might set this goal to yourself that this brand has got to be number two year down the road and from there on we have to get into direct competition or a direct fight with number one to dislodge that brand to become number one so on and so forth the image persona and contract helps us determine the brand strengths and weaknesses how to do that we have learned that by now and we are quite very knowledgeable the customer model leads us to look into the areas of needs and hence provides us with a basis for identifying opportunities the brand based customer model also helps us to get into the conceptions on part of the customers relating our brand as well as those of competition the brand based customer model also helps us to define extension boundaries and after the customer model let us get into the area of positioning positioning provides us with the overall screen for development of the brand extension but once we have reached there we really can pinpoint that this is where we belong it must take place such and such name meaning the same name of course set of characteristics all strategic that have to be developed in terms of a strategic framework once we have all these questions and all the considerations and all the cross checks that I have been talking about for the learning process we can get into the actual model building and the actual model building relates the strategic framework that we have to develop in relation to brand building because we have reached a point where we are going to introduce a new brand meaning an extended brand the first point toward that is we have to explore the opportunity areas now opportunity areas is not something it took the boils down to the same things that I have talked about meaning the clarity about the version the clarity about the image the clarity about brand persona contract the promises and all that and based on the model we have to look at those needs which are not yet met so we are back to the unmet needs which are going now to be fulfilled with the help of the extended brand you must take into account the possibility of moving upwards when you are extending a brand instead of moving downwards because moving downwards does have some negative implications which I should be talking later but the point here is whenever you are extending you should extend basically for the better extend for for something which is not as good as it could be I wouldn't say for the verse but what I am saying is unless you are driven into a very fierce competitive battle that you really have to move downwards in order to teach a lesson to your competitors like many of the managers talk about you shouldn't really go downwards the effort has got to be toward enhancing the value of the brand and not to diminish it by any stretch of imagination the second step toward building that model is that you have to generate brand based ideas so that you can carry out a very accurate analysis of the situation you have a few opportunities and you have to go for the right most extension therefore you have got to go through a process of screening just to make sure that whatever you come up with has to be in line with the consumer cited needs and not company generated ideas again I would say you have got to be very consumer centered or consumer centric it is the analysis which is going to pinpoint for you that this is the right most opportunity which offers itself for extendability and therefore it is going to be that situation which is going to enable you to be very convincing with the customers that whatever you are offering does carry a point of difference and it is not the same thing which we have been selling before so in other words the difference that the new brand meaning the extended brand has with the existing brand now I am talking about line extension and brand extension at the same time you have got to look into the most relevant fit in terms of the situation whether you are getting into line extension or into brand extension if you are getting into brand extension meaning in new area altogether then the question of having a very close fit between the existing brand and the new brand may not be as relevant as it sounds in relation to line extensions but the fact remains is that you have got to make it very clear the point of difference that you have come up with whatever is the situation this analytical process addresses the positioning that you have invested for the brand and also for your purchasers because this pin points the exact location on the map and that is a function of the point of difference and quality and the pricing and therefore the right segment that you are trying to hit so that is going to make very clear to you the potential to add value to the company now having been done with step number 2 of building the strategic model we now get on to the next step which is about developing the brand extension strategy I would say the most important step and all that we have been doing so far was meant to get to this particular point which is going to talk about all the strategic moves that the company is going to make toward achievement of all the goals you come up with a strategic statement which is just about a few sentences and like any statement of strategy may that be positioning or may that be any other area of business this has to be concise and yet at the same time be comprehensive enough to give you leads into so many different areas meaning into the areas of associated strategies into the areas of sub-strategies into the areas of execution which are going to be translations of the associated strategies and sub-strategies what do you talk about in this statement well you talk about the reason for being for the brand why is it that you need that brand and what is the rationale what was the background what particular need the brand is going to satisfy so naturally you talk about the segment where the brand is going to operate in and you talk about the brand's strengths which you envisage the brand is going to deliver meaning you are building into the brand certain promise which you do not really talk about as part of this statement but that set of promises will flow out of this statement the brand promise and before that the brand image back to the statement you talk about all the relevant factors what does the product look like and where the product is going to be priced in other words what is going to be the price quality index and in relation to that all the related strategies that you think or a brand manager should consider and should talk about you should put those into writing as part of your strategy statement meaning once you have made the statement then you start getting into sub strategies or associated strategies and start pinpointing all those factors which are going to build up those strategies and factors which are going to help those strategies execute themselves you talk about objectives you talk about packaging you talk about different sizes and needless to say the point of difference just to give you an example of skin caring cream competition is selling in 40 grams and that is the market norm you look at holding very carefully and analytically and by getting into the market research process formal or informal you have reached the conclusion that there is nothing stopping any player within the category to come up with something which is more than 40 grams then that becomes a point of difference in itself so that has its bearing onto the packaging side which means that also is going to cause certain changes in the production and operations and so on and so forth but you being the marketing people who are going to be responsible for propping the new brand up and then consolidating its base you have got to be very clear about the formats in terms of the extension whether you are going to format that only by one more size meaning in 45 grams or maybe 50 grams or maybe you are going to introduce two or three at the same time having a few more points of positioning and this is how you build up the strategy on the basis of the screening process which you carried out as a step before getting down to your strategic framework as a conclusion we can say that all the strategies and all the associated strategic maneuvers and movements have to stem from the strategy statement about the brand that you are going to introduce that is of utmost importance that that completes our discussion on brand extensions and also brand extensions meaning getting into different areas altogether and with this I would say that understanding in relation to the concepts meaning to the well differentiated concepts should be very clear when it comes to strategies and strategy statements and how those are translated into a detailed framework do not really worry about that because my last lectures I would explain to you how a strategic framework should look like maybe we can get into developing something as a hypothetical case so that you know what is going to be the fruit of the overall learning that we are going to look at by the end of this semester so rest assured until that time that we shall know what all this framework looks like over learning about the brand extensions so far may sound like the brand extensions are the ultimate answers to creating new brands well that is not the case we have got to look into the situation very carefully before deciding whether we should go for brand extension or we should try to create a new stand-alone brand so in other words what I am talking about is that the brand extensions do have their limitations not all the needs could be satisfied by just one brand or by a handful of brands you need to have different brands because you are dealing with different positions in different categories so it is not that the brand extensions all the time are the great recipes for creating something new it is not that in the words of a marketing expert every time we come up with a brand extension we kill the one opportunity of what could have been the creation of a new brand he talks about the opportunity cost which we pay by not getting into a new brand which could have been a valuable brand and the basic objective of any business is to add to the value of business and the more you introduce the brands and the more successful they are the more value you add so the opportunity cost which the expert talks about cannot be quantified but the fact remains that the cost is high something which was not introduced could have been what he calls a brand new beautiful brand but the question is how many brands the company should have or when is the time the company should go into new territories with new brand names this is a question which is answered by the concept known as brand portfolio and that is what we are going to discuss strengths of the brand extensions notwithstanding according to this marketing expert we have to get into introduction of new brands whenever we have the right rationale to go for those and we have to look for those opportunities so that we can identify the situations rightly and start introducing new brands now this is easier said than done there is a cost to it you will recall the learning in relation to brand extensions that not only they offer a higher level of success but they involve costs which are much lower maybe in one-fifth of the cost of development for a new brand so the question might flash into your minds why is it that I am talking about the brand portfolios well the reason once again is the needs could be satisfied by just one brand even if you have a lot of extensions there is a limit to the different positions that you can go for and there is a limit to what one brand can do in one particular market meaning in one particular category getting back to the point of costs the marketing experts know and by experts I mean not only the theorists but the practical managers that the development of a new brand is risky it is costly it is time consuming it involves the more energy and so on and so forth but then at the same time it is something which offers the company a higher level of value meaning it adds to the value just imagine having just one strong brand which you are working on with of course a few extensions and then also the thing in terms of having another brand which is going to be strong or which was introduced earlier by somebody else and which is strong and you are looking after two brands meaning the marketing department is handling and managing a portfolio of two parent brands which are then subdivided into sub species so on and so forth and then think about the power the added power and value the company is going to get to itself another reason that we get into new brands and like to have a portfolio of different brands because different brands are in a better position to cover the market meaning a portfolio of brands that gives us better coverage that you are covering the one market with the one brand and within the same market there is a very strong possibility that you have to go for another brand why and how I shall get into that in a few moments but it becomes imperative very very essential for the company to do that otherwise you start eating to your own brand and it loses its identity and the consumer is confused and when I say confused it means the consumer or the customer doesn't really want to get back to your brand because he has certain complaints so the question is if a portfolio of brands is that attractive and could be that powerful what should be the size of it how many brands should we have in that portfolio again before I answer that question we have to get back into the history of the brand portfolio why is it that we have that companies have so many different brands well one of the prime reasons that the companies have more than one brand is because of the factor of growth in order to address the growing needs we introduce new brands and we introduce new brands because we want to cover the market more effectively that's what I said earlier so in other words when companies get into periods of growth they like to get into new segments and they like to get into new channels of distribution getting into new segments and channels of distribution at times necessitates for the companies to get into new brands there are also a few more factors which could make it very important for you to get into new markets and to get into those markets with new names you will recall I gave you the example of Toyota cars in relation to the brand value pyramid one factor could be that the company found itself sitting at the pinnacle of the brand value pyramid beyond which it couldn't go and this was an opportunity which the company found to itself meaning by creating a new product with a new brand name which could attract buyers from a different segment altogether and buyers of those cars who were willing to pay a much higher price that that was the level of price which the company could not envisage charging within the segment it was operating in so this was a situation in which the company thought it prudent to create the new channels of distribution meaning the company decided not to sell their new brand by the name of Lexus through the same distribution network to which it had in place for Toyota cars so in other words what the company did was it tried to circumvent a conflict which could have been inherent if the same dealers were selling two different brands so this is what I meant when I said companies like to get into the different brands or brand names when they are addressing needs of different segments and when they are dealing with different channels of distribution the companies have got to make sure that there is no conflict of interest when it comes to fulfilling needs of customers and at the same time when it comes to dealing with their dealers and the middlemen you see the members of the trade who are instrumental in making those sales possible to the ultimate customer there must be no conflict and that can be preempted only if you get into a new brand name interesting brand name is going to entail so many inherent problems which are going to be contrary to the very foundations of the overall marketing concepts so that is the one area which really necessitates or which necessitated always for the companies to get into different brand names and hence develop a portfolio another factor which really has contributed to brand portfolios has been the factor of acquisitions as in when the acquisitions took place and you will recall that acquisitions took place and they do take place with intention on purpose after doing a lot of homework and acquisitions took place because the intending company wants to own the brands of the target company and once those brands are acquired they add to the portfolio which the company already has so that also the contributes to the growth of the portfolio again making this question very pertinent as to what is the ideal and the practical size of a portfolio well there is a consensus among experts that the portfolio should not be very large meaning the portfolio should have a few brands where every brand has a certain meaning and has to be supported by a certain rationale the problem is that all the brands that you may have have got to be brought into the public significance so to say they have got to be talked about they have got to be promoted they become very familiar with general public and meaning all the target segments they are really targeted at going for advertising campaigns or communication campaigns so to say for so many different brands if you have a large portfolio is very expensive nowadays and even the largest of the companies would like to avoid giving that level of compatible communication exposure to all the brands within their portfolio if the portfolio is large so the need is that the portfolio would be kept very small however there are certain considerations if you are an international brand I mean an international company you have different brands that are strong in different areas then they may call more different communication campaigns and that may not make the effort very expensive because you are trying to cover all the markets in a very effective way in terms of communication and that is what they call in marketing terminology the expansive role of brands not the expensive but expansive it's within A because it deals with expansion and when that is the case for example you have very strong with brand A in country A and the strong with brand B in country B you have tried your best but brand A does not seem to be working due to any set of reasons in country B and therefore you have to have that different brand there this example could also be applied in terms of one national market that having different or evoking different kinds of consumer response within different regions and you may decide that you have to keep one brand for this region and that brand for that particular region the point is that you've got to keep your costs because it's very manageable and that is what the no managers are dealing with portfolios of brands would like to escape I mean that is such a reality however if the markets are common then that exercise might amount to multiplying the expenditure which you are incurring on communications and all managers dealing with portfolios of brands like to keep their communication budgets within manageable limits so there's a growing realization on part of the managers that the portfolio size has got to be kept small there's no way that you can go for productivity gains and cost efficiencies by keeping the portfolio large you will recall that there is that dire need for being very competitive in present day's world and one of the ways that you really can cut costs is by way of stepping down to your advertising campaigns or your communication campaigns and that is one of the areas through which you can go for those kind of productivity gains and cost efficiencies so if you have a large number of brands to look after there's no way that you can achieve all that in the pharmaceutical industry the way they are regrouping their production and research facilities because of an awesome amount of investments that go into pharmaceutical research it is nowadays considered prudent and pragmatic to the joint hands to merge with the net result that all those brands are being manufactured in the same factories with little variations the question here is there's got to be a limit to those variations so that the brands could be managed in a more practical manageable way another factor that necessitates this small size of portfolio is the factor of internationalization of brands the many of the brands in the present day's global market have become international and if you have a large number of brands within a portfolio and you also want to be international or you have become international because of the efforts that you have carried out then just look at the massive amount of investment that you have to carry out to manage all the brands that you have so this is a factor which makes it necessary for the managers to think that the size of the portfolio should be small now this doesn't answer the question of how many brands should there be to the A portfolio very convincingly just talking about the factor of cost efficiencies the factor of high productivity gains and the factor of going international the real answer lies in linking every brand with its strategic role the meaning of the market it is going to be a part of and a very clear definition of that market and a very clear definition of the segment of which the brand is going to be a part it is through that analysis which really leads us towards deciding how many different brands we should be having and therefore having a different brand for a different market is a study of market segmentation we can divide the markets by segments in terms of products in terms of customer expectations and in terms of types of customers now these are the segmentations which really define the behavior of a brand and therefore out of that anticipated behavior we have to decide how many brands we are going to have for different segments now this is not to say that for every different segment we get into we have got to have a different brand now all I am saying is that it is the study of the segments and segmentation which basically defines the role of one particular brand and on the basis of that could we decide how many brands not really how many brands we should have to a portfolio it is the study segmentation which leads us to decide whether we should have a new brand or not and if we have a new brand well that is an addition to the bag next time when we enter this kind of an exercise all over again we go through the same factors and we decide whether we go for a new brand for the new segment or not I shall talk about that in the next lecture let me now give you a recap of what I talked about in today's lecture the discussion on extensions meaning line extensions and brand extensions stands concluded we have seen the positive sides that really drive us into going for brand extensions and we also have seen that the brand extensions may those be line extensions or brand diversifications are not the answers to all brand introductions they have some limitations we discussed about those and those are the limitations which take us into another area of interest and that is the portfolios of different brands I started talking about portfolios what portfolios are and what should be the ideal size of portfolios another concept that is very well known to us and that is the concept of implementation I will pick up my discussion in the next lecture from where I am leaving Allah Hafiz until that time