Essay: Yamaha Corporation and Virgin Group – brand extension strategy

Introduction
Yamaha Corporation is a Japanese multinational corporation with a wide range of products and services. Yamaha has grown to become the world’s largest manufacturer of musical instruments, as well as a leading manufacturer in other areas, like motorbike and audio/visual related products (Yamaha annual report 2011). The beginning of Yamaha’s business went back to 120 years ago, when Torakusu Yamaha, the founder, repaired a broken reed organ in Japan. Ten years later, 1897, Nippon Gakki Co., Ltd. was established with capital of 100 million Japanese yen. The name was officially changed into Yamaha Corporation in 1987 to mark the 100th anniversary of its foundation (www.yamaha.com/about_yamaha/corporate/). The Production of upright Yamaha piano began in 1900 (www.yamaha.com/about_yamaha/corporate/). Today, Yamaha is a worldwide known brand for its excellent and high-quality products including musical instruments, audio/visual, semiconductors, motorbikes and so on. Yamaha musical instruments segment includes manufacture and sale of the traditional craftsmanship piano, professional audio equipment and the operation of music schools and English language schools. Moreover, Yamaha also sells a variety of music-related products sourced from other manufacturers and accessories. Yamaha is continuously growing and becoming better (Yamaha annual report 2010 and Yamaha annual report 2011). Yamaha’s first brand extension was taken place in 1903, three years after the first Yamaha piano was made. Yamaha made use of its woodworking expertise to begin building fine furniture. The first acoustic guitar was produced in 1942. And in 1954, Yamaha Music School was established as well as Yamaha’s first Hifi player was produced. Yamaha’s most well-known case in brand extension is the establishment of Yamaha Motor Co., Ltd. in 1955. In 1960s, Yamaha stretched its business to recreation business and wind instruments. In the recent year, 2007, music entertainment business holding company was set up. Yamaha’s internationalization began in 1958 by which an overseas subsidiary was set up in Mexico. Two years later, US subsidiary was established. In 2002, Yamaha Music & Electronics Co., Ltd.’s opened up in China marked a new page in Yamaha’s history (www.yamaha.com/about_yamaha/corporate/).17 In April 2010, Yamaha launched a three-year medium-term management plan entitled “Yamaha Management Plan 125” in order to lay a strong foundation for growth, particularly in the musical instrument, music and audio domains (www.yamaha.com/about_yamaha/corporate/ and Yamaha annual report 2011).
The Parent Brand: Yamaha Musical Instrument
The year 1900 witnessed the birth of first Yamaha upright piano. The first grand piano was produced two years. Within four years, a Yamaha piano was awarded the Honorary Grand Prize at the St. Louis World’s Fair. Yamaha has joined the Faust Harrison Piano collection, which stands for high quality and good value instruments (www.yamaha.com).
Yamaha brand represents the expert in assembling musical instruments. The goal of Yamaha is to inspire people with the joy of music performed on musical instruments that capture the heart and soul of both the player and audience (Yamaha annual report 2010 and Yamaha annual report 2011). Yamaha pianos have consistently remained the yardstick for piano production since the first piano was introduced to the world in 1900. Yamaha’s expertise in acoustic and digital technologies makes it the world’s only integrated manufacturer of a complete lineup of musical instruments, which are sold to professionals and beginners alike. Yamaha’s musical instrument categories span acoustic instruments such as pianos, brass instruments, and digital musical instruments. Yamaha has also carved out a new segment in hybrid instruments, which combine acoustic and digital qualities (www.yamaha.com/design).
In the meanwhile, Yamaha is also recognized as a trusted and admired brand (Yamaha annual report 2011). The quality of Yamaha pianos is recognized by world renowned pianists while Yamaha pianos have served to captivate audiences from many world-class stages, for example, the eleventh International Tchaikovsky Competition where Denis Matsuev and the Yamaha CFIIIS claimed victory in 1998 (Yamaha annual report 2011).
By the end of fiscal year 2011, the net sale of Yamaha musical instruments was 271.1 billion Japanese yen, in which 14.5% were Yamaha piano. 26% of Yamaha’s musical instruments were sold in Europe, followed by North America-22.4%. Yamaha made an amazing sale in its domestic market where 21.7% of Yamaha’s total sales were sold (Yamaha annual report 2011).
The reasons why Yamaha brand is so successful in one hundred years can be summarized as follows: Firstly, Yamaha always keeps high-quality in its core technical expertise based on traditional craftsmanship in acoustics and advanced digital technology. Secondly, Yamaha has acquired development of high-quality products by forging close relationships with customers-artists. Besides, a global strategy built on Yamaha’s localized marketing and service activities in each country makes Yamaha brand both unique and famous. Moreover, Yamaha has gradually launched a variety of activities through the operation of music schools to increase the music playing population (Yamaha annual report 2010 and Yamaha annual report 2011).
The Extended Brand: Yamaha Motorbikes
Even though Yamaha is well-known as a musical instruments manufacturer, it has not been tied down to this only category. After sixty years of piano making, Yamaha started its new business in motorbike manufacturing. In 1954, the expertise in metallurgical technologies led Yamaha to the manufacture of the first Yamaha motorcycle, the YA-1(www.yamaha.com/about_yamaha/corporate/). Genichi Kawakami was the president at that time. He was also the third-generation president of Nippon Gakki. When he talked about the reasons of setting up Yamaha Motor, first is the fact that Yamaha was performing well and had some financial leeway, so Yamaha would have few problems in managing money flow. But for the challenges, it might be a little late to enter motorbike industry than other companies. After some researches and a visit to United States, Genichi saw the opportunity was still there and Yamaha’s experience in manufacturing mechanical products would turn the challenge into a great opportunity. On his tour around Europe with other company managers, the chief engineer learned how to build motorbikes. By doing as much research as possible to insure that Yamaha was able to build a bike as good as any others’, they started going to expand (www.yamaha-motor.com/corporate). In 1959, the success of the YA-1 resulted in the founding of Yamaha Motor Co., Ltd (www.yamaha.com/about_yamaha/corporate/).
Yamaha overseas expansion began as the company grew larger. In 1968, the globalization continued with Brazil and the Netherlands (www.yamaha-motor.com/corporate). In years, Yamaha continued to grow and continues to today. Yamaha Motor Co., Ltd. today, is a multinational enterprise with 140 subsidiaries and equity-method affiliates in 30 countries (Yamaha factbook 2011). Yamaha Motor’s mission is to offer new excitement and a more fulfilling life for people all over the world. Yamaha Motor strives to realize people’s dreams with ingenuity and passion, and to be a company people look to for the next exciting product or concept that provides exceptional value and deep satisfaction (www.yamaha-motor.com/corporate). In fiscal year 2010, Yamaha Motor had net sales of 1,294 billion Japanese yen, and 66.1 billion ordinary incomes. Today, Yamaha Motor manufactures a variety of specifications, each type featuring unique technologies serving its particular use: from commuting and shopping trips to long-distance touring, from road racing, motocross to other competitions. Yamaha Motor shares 12.8% of worldwide demand in 2010. Asia is Yamaha’s biggest and fastest growing market. Beginning in 2010, Yamaha Motor has initiated a new three-year Medium-Term Management Plan, designed to evolve Yamaha into an excellent engineering (Yamaha factbook 2011).
Case II : Virgin Group
Introduction
The Virgin Group was found in 1970 by a twenty years old boy Richard Branson. Until now, it has developed into a leading international investment group and one of the world’s most recognized and respected brands. And it still keeps on going. The Virgin Group achieves successful businesses in sectors ranging from mobile telephone, travel, financial services, leisure, music, holidays to health and wellness, which is really a wide scale and widely covered on different fields. According to the statistics on the official website, the group has approximately 50,000 employees in 34 countries and global branded revenues were around 13 billion pounds (21 billion US dollars) in 2011.
The Virgin Group believes in making a difference. What it seeks are value of money, quality, innovation, fun and a sense of competitive challenge. It is eager to provide its customers with a better experience by empowering the employees (http://www.virgin.com/about-us). The Virgin Group has its own vision and slogan but different subsidiary companies follow different ones. But they share the same spirit of creating sustainable lifestyles. “Our belief in the power of entrepreneurship and innovation help us rise to the new challenges that we all face” is what they keep in mind. They share the same vision which is contributed to creating sustainably happy and fulfilling lives (http://www.virgin.com/people-and-planet/our-vision). The history of the Virgin Group started from 1971: the open of the first Virgin Record Shop in London. Then it developed and became Britain’s first residential recording studio in 1972. In 1973 The Virgin Records label and Virgin Music Publishing launched in the UK with the release of Mike Oldfield’s Tubular Bells. And till 1979, Virgin opened the first Virgin Megastore in London. In the same year, Virgin Books was launched to publish which were focused on music titles. This is the development of Virgin in the early stage, starting from the field of record and music. The preliminary appearance of a company is formed within the first several years. Started from the 1980s, Virgin got stronger and became a competitive company. Virgin Games was founded in 1981. With vast progress, it was capable to buy Heaven in London. Moreover, with the launch of Virgin Atlantic Airways Company and Virgin Cargo in 1984 and the Virgin Airship and Balloon in 1987, Virgin stepped into travel and transportation field. In later 1980s, Virgin started to take part into the international business in American, Europe and Asia, but never stopped in extension, Virgin Hotels was born later at that time. In 1990s, Virgin Atlantic continued to develop. It opened up more new flights around the world. Virgin Megastores, Publishing, and Virgin Videos kept on expanding. Virgin Drinks serving Virgin Cola, Vodka and soft drinks were new established during the same time. In 1996, Virgin Trains was built aiming to becoming the best service company in the UK. In 1996, Virgin Mobile was born. Up till now Virgin Mobile owns business all over the world, in Europe, America and Asia. In the new century,
Virgin never stops its step in developing to a new field: Virgin Active, Virgin holidays, Virgin Cars, Virgin Blue, and Virgin Cosmetics set up. These years, with the rapid development in information technology, Virgin put lots of effort in this area. Virgin Group continues to complete itself as an all-powerful global company. From the new 20th century and up till now, Virgin has never stopped its extension and development, 21 but becomes stronger and stronger (http://www.virgin.com/history). The extension type of Virgin Group is category extension which means the new products use the existing brand name but in different categories. The categories of Virgin Group are very board basically including five varieties in different fields: lifestyles, Media & Mobile, Money, Music and Travel. Seen from the history and achievements of Virgin Group, it can be considered as a successful case. It might be difficult to find another company like Virgin which is a company almost covers all kinds of business. While nothing is perfect, one of the most famous failure examples of Virgin Group is Virgin Coke. It is not saying that Virgin is an unsuccessful company, but only taking the frustrated case of Virgin Coke into consideration.
The Parent Brand: Virgin Atlantic Airways Company
Looking back at the history of Virgin, the earliest brand of the Virgin Group is the field of music which included Virgin Megastore and Virgin Radio International. However, the most successful and well-known brand (or product) of Virgin Group is the field of travel, covering airways, travel agency, hotels, trains and vacations. Virgin starts to “fly” with Virgin Atlantic Airways Company. And then it continues to fly higher and become stronger, but never ends. Consequently, airlines business of Virgin is considered as a parent brand of the Virgin Group.
The Virgin Atlantic believes that there is no 100% sustainable and perfect aircraft at the moment. They are trying their best to contribute to a more sustainable lifestyle by working towards an accessible and strong global economy through profitable and low carbon aviation. The vision of Virgin Atlantic is ‘flying high’ (http://www.virgin.com/people-and-planet/flying-high) while the mission is ‘to grow a profitable airline, where people love to fly, and where people love to work’. What’s more, the company focuses on the business and leisure markets and driving efficiency and effectiveness to achieve the successes in the industry (http://www.virgin-atlantic.com/en/us/allaboutus/missionstatement/index.jsp).
1984 was the birth year of Virgin Atlantic Airways. Till the end of this decade, the company had ridership of over 1 million passengers and started improvising services on board by reaching the milestone of becoming the first airline to offer individual TVs embedded to the seats of the business class passengers. In 1992, Virgin Music was sold by Richard to Thorn EMI and the proceeds were invested into Virgin Atlantic. It was in the same year that first super economy service was launched.
In 22 1999, the Virgin Group sold 49% of the company stock share to Singapore Airlines valuing a minimum of 1.225 billion pounds. The year of 2003 Virgin Atlantic launched a revolutionary Upper Class Suite, the most comfortable and the longest seat and flat bed in business class. In March 2006 the new Virgin Clubhouse at Heathrow opened relishing lots of unique features of the flagship lounge: a brasserie and a games room, a cowshed spa, a hair salon, a cocktail bar,. In 2007, Virgin Atlantic launched a brand new check in facilities at Heathrow Terminal 3. Zone A is now wider, brighter and more spacious, for economy and premium economy passengers, enabling them to check-in at kiosks in a quicker and tension-free way. Upper class passengers can come to the upper class wing via a private security corridor so that passengers can move between the terminals to the Clubhouse much faster than ever before. Virgin Atlantic operated a pioneering biofuel demonstration in 2008 with Boeing and engine manufacturer GE Aviation on a 747 between London and Amsterdam. This was the world’s first flight using biofuel on a commercial airline. Virgin Atlantic has also ordered 15 of the 787-9 Dream liners which burn around 27% less fuel per passenger than the A340-300, the aircraft it will replace in the Virgin Atlantic fleet. The statistics also show that Virgin Atlantic makes great financial profits year by year, and keeps the vision and value in mind: Virgin Atlantic fly higher and higher till now. (http://www.virgin-atlantic.com/en/us/allaboutus/ourstory/index.jsp). The statistics also shows that Virgin Atlantic makes great financial profits year by year, and keeps the vision and value on mind, Virgin Atlantic is the biggest success by far, with its £1.9billion of turnover roughly 50% of the entire Virgin Group’s sales (David Taylor,2004). Virgin Atlantic flies higher and higher till now.
The Extended Brand: Virgin Cola
With the development and success of Virgin Group, Richard Branson showed his ambition for Virgin brand clearly in the mid-1990s (Tom Bower, 2005). He said, “I want Virgin to be as well-known around the world as Coca-Cola.” In order to achieve this goal, the best way should be entering into the cola market. In 1994, with the cooperation of Cott Corporation, a Canadian private-label soda maker, Virgin Cola was first launched in the UK market. The new cola which was in 500ml bottles was marketed as ‘The pammy’. Their curves were designed to resemble Pamela Anderson who was at the height of her popularity in the UK and USA at that time (Matt Haig, 2001)The statistics went quite well in the first period of time when Virgin Cola was introduced to the market. Virgin Cola has 50% market share in the outlets. The Virgin Cola soon spread to other countries, France, Belgium, Switzerland and South Africa. The coke was served in Virgin Atlantic flights, Virgin Cinemas and also sold in the on-board shops on Virgin Trains. But the popularity of Virgin Cola was soon cold down. At the end of 1990s, Virgin Cola crashed in sales. One of the most important reasons is that Virgin Cola cannot compete with the leading brand in the coke industry, Coca-Cola. Coco-Cola is the world most famous coke brand as well as soft drinks with 125 years of history. It is also the world biggest beverage company.
Coca-Cola is now selling in more than 200 countries with sales of 1.8 billion per day. This is a soft drink you can find almost everywhere: in grocery stores, restaurants, mass merchandisers and so on. The customers of Coca-Cola are largely responsible for the unrelenting success of the company (http://www.thecoca-colacompany.com). Numbers of researchers’ studies have discussed the reasons why the brand is so famous and have concluded that the customers of Coca-Cola share a strong brand loyalty to the brand (Tucker, 1964; Jan, 2000 & 2001; Albert, 2001). Most of the customers think Virgin Cola is nothing special but coke, and they love Coca-Cola better. While in 1998 Virgin group bought the stock of Cott Corporation and paid extra 25 million US dollars to rebuild Virgin Cola in order to replace Coca-Cola in the US market and fight with Coca-Cola. Virgin even prepared a ‘fighting show’ in the New York Times Square. After that, the sales of Virgin Cola raised a little bit in the market. However, the increase did not last long. By 1999, the statistics showed clearly that Virgin’s plan to compete with Coca-Cola in coke market on both sides of the Atlantic did not go well. Compared to Coca-Cola’s sales of 620.4 million pounds in the UK, Virgin’s sales were only 28.6 million pounds. Even though Virgin Cola lowered the price by 10 to 15 percent compared to Coca-Cola, the sales were still poor, and did not make profit. Later, Virgin Cola was stopped being offering on Virgin Trains because nearly no one bought it (Matt Haig, 2001). Afterwards, Virgin Cola slowly disappeared in the USA market and moved to other areas. The main reason is Virgin suffered too many disadvantages in the US market. (Claudio, 2001) The brand of Virgin Drinks and Virgin Cola are still there, however, Virgin Coke chooses other ways of development trying to avoid fierce competition with Coke-Cola. Virgin Cola is not as popular and famous as other Virgin brands, and is considered as a failure brand extension in Virgin Group.
Analysis
Aaker’s brand equity model analyzes the relationship between the company and the customers. A brand’s equity has an impact on the success of extensions (Pitta and Katsanis, 1995) while brand awareness as well as brand loyalty may influence brand extension, and also the parent brand. In the empirical part, two cases are given: Yamaha’s successful case that sends its motorbike business soaring off the shelves along with another case, Virgin’s dismal failure in extending its name into a new field, Virgin Cola. These two cases will be analyzed in this part using modified Aaker’s brand equity model. Four categories of brand equity will be examined to illustrate the challenges and opportunities in category brand extensions.
Brand Awareness
Brand awareness portrays the brand presence in customer’s mind. It should occur regardless of environmental conditions such as time and locations. Aaker (1991) argues that one way to gain brand awareness when consider brand extensions is to put the same name on the other products. Yamaha is a very typical case using the brand strategy. Yamaha Motor well copied the name from Yamaha successful piano brand. Although the depth of Yamaha brand, in other words the likelihood between Yamaha music instrument and Yamaha Motor is not so obvious, the breadth of Yamaha’s brand awareness has been tested since Yamaha had been tried stretching its brand categories fifty years before the first Yamaha Motor was made. Virgin Group also uses the same name in all of the products. This helps customers recognize the brand and consolidate the position. The first business that makes Virgin famous is music record, and the second is the airlines industry. Before the birth of Virgin Cola in 1994, the well- known Virgin was all about recording, megastore, travelling, games and books, but never soft drinks. The vision of Virgin–to create happy life and make it sustainable matches the product and image of them well. Although Virgin is a universal name for all the stuffs, people may not recognize Virgin Cola instead of its brand image as always. Apéria (2001, cited in Kollander and Lejon, 2007) claims that brand awareness is essential for a company. Yamaha did very well in this part. Yamaha took advantage of its material expertise to create another line of metal equipment. Yamaha’s success is a testimony to the quality and performance of its products, rather than through advertising which is a way to help lower the cost.
It is the high-quality performance that manages to unite even the most diverse of products. Unlike Yamaha, who did not 25 position itself as a champion of consumer caused entering into troubled markets. Virgin Cola did not play a well part in brand awareness. Firstly, the extended product Virgin Cola could not communicate well with customers, the other brand or products of the original ones. Secondly, because of the new brand product, the changes of brand image decline the relationship between the company and customers, as the new product confuses the customers of the previous awareness of the company. Thirdly, customers believe that Virgin can provide them with a happier life in the field of music records, travelling and games, but they doubt whether it is able to provide them with a coke in good quality. As a result, the introduction of Virgin Cola confuses the brand awareness of Virgin brand and causes the problem of changing the positioning of Virgin. This is a risk of brand extension that leads to the failure of Virgin Cola at the beginning.
Brand Loyalty
Loyalty is brand equity’s core dimension and it demands a long term strategy from the company perspective (Aaker, 1991). As the largest musical instrument manufacturer, the trusted and admired Yamaha brand has definitely built up a strong loyalty among customers. The product itself, however, is not a daily consumption as fast-food or soft drink. The consumption of one product per person in a lifetime can be limited. The immediate effect of brand loyalty might not show such an advantage in Yamaha’s case. Neither is proper to use Aaker’s loyalty pyramid. But brand loyalty can bring value: The marketing costs can be reduced (Kotler, 1994). The marketing saved cost in building such a strong loyalty was transferred to invest in other music related area. The best example is the establishment of Yamaha Music School in 1954. By spreading and educating more music lovers was not merely Yamaha’s social responsibility, but also its marketing strategy aiming to expand its potential consumers. A gradually increasing number of satisfied consumers are loyal to other brand products. The fast growing business in Yamaha Motor can hardly not be the result of strong brand loyalty built under the name of Yamaha. The excellent performance of Yamaha Motor reinforces Yamaha brand in contrary. The brand loyalty provides Yamaha with a good opportunity to enter the market and achieve success. Brand loyalty provides a very good opportunity for Yamaha to enter the market and succeed in the industry. Compared to the success of Yamaha Motor, Virgin Cola is more likely a very surprising negative example. However the problem is not all in Virgin Cola, but chosen a bad competitor. Research points out that the loyalty of customers may reduce the evaluation of parent brand and extension as well (Hem and Iversen, 2003).
Seen from the case of Virgin Cola, Coca-Cola is the strongest and most popular soft drink brand in the international market, which has been lasted for about 120 years. The manager of Virgin Group clearly knows about that, and he even said “I want Virgin to be as well-known around the world as Coca-Cola.” On the other hand, Coca-Cola firstly stepped into the market since 1880s. In 1998, Coca-Cola sold more than one billion eight-ounce drinks per day which is more than 236 million liters. As a result, Coca-Cola as world’s biggest coke brand with more than hundreds years’ history brand, surely wins a great group of customers. The strong loyalty of brand for Coca-Cola can be self-evident. Whilst, Virgin Group was founded in 1970, even it rapidly developed to be one of the strongest companies in the UK, the original business of the company is music record, and the most famous brand image of Virgin is games and airlines. However, the company decided to participate in soft drink industry, against the powerful leader brand Coca-Cola. Although the price was 15—20 per cent lower than the leading brands, not enough consumers were won over. The loyalty of consumers to Coca-Cola provided strong competitiveness to the brand in the market competition. Consequently, Virgin cola is not a patch on Coca-Cola, because of lacking of loyalty customers. Also because of the loyalty, Virgin made wrong estimation of the market, thus finally lost to the opponent.
Brand Association
Brand association is defined by Aaker (1991) as anything linked in memory to a brand. Developing associations is worthwhile because when the attribute is meaningful, the association can directly translate into reasons to buy or not to buy a brand (Aaker, 1991). Aslo as Keller (1998) has pointed out, brand association can affect consumers’ purchasing decisions. As for its importance in brand extension, Aaker (1991) added that an association can provide the basis for an extension by creating a sense of fit between the brand name and a new product, or providing a reason to buy the extension. Brand attitudes are the other types which are defined as consumers’ overall evaluations of a brand (Keller, 1998).Yamaha at first has an association with high techniques in manufacturing piano instruments that helps it to expand to other instruments like guitar. As the extended brand under the same name, Yamaha Motor is found to enjoy the associations with high-quality too. Additionally, the goal of Yamaha is to inspire people with the joy of music performed on musical instruments that capture the heart and soul of both the 27 player and audience. Yamaha is not only a piece of instrument, it is also a type of lifestyle. Yamaha Motor shares the similar attitudes with it. The mission of Yamaha Motor is to offer new excitement and a more fulfilling life for people all over the world. Besides the high-quality product, there is more that success requires. The close relationship between Yamaha’s parent brand and the extended brand brings better brand associations in its brand extensions. Brand associations have trade-off, too, as in the unsuccessful case of Virgin Cola.
The original business of Virgin is far from soft drinks, which made it hard for customers to believe that the two totally unrelated products can share the same attitude. It was difficult for customers to imagine an airline company can produce good coke, neither a famous music record could do so. The customers’ overall evaluations of the product-related image might never be “good taste coke”, but happy holiday or beautiful music instead. Bear these in mind, customers chose not to take the new brand of coke whenever they associated the product with Virgin. There were not enough reasons to attract customers to buy the product. Thus, this can be considered as a psychopathy conflict of customers. It is exactly caused by the big differences between the parent brand and extended brand of Virgin.
Perceived Quality
Perceived quality refers to the customer’s awareness of products’ superior quality in relation to other products (Aaker, 1991). Even though perceived quality cannot be objectively determined because it is a perception, and because it is not simply satisfaction, according to Aaker, a strong brand with respect to perceived quality will be able to extend further, and will find a higher success probability than a weaker brand. In Yamaha’s successful case, Yamaha brand had already become a successful and strong brand before Yamaha Motor was born. Yamaha brand was marked as high-quality with unique traditional craftsmanship in acoustics and advanced digital technology. Based on either self-previous experience or feedbacks and comments from others, customers’ expectation can be easier found to consider Yamaha Motor also perceived a high quality. Years later, Yamaha Motor has developed very successfully with high quality and good feedback as well. This enhances the perceived quality of original Yamaha brand in return. In this case, the failure of Virgin Cola is not related to this point. In customers’ mind, Virgin is a famous and large-scale company with good reputation as well as good experience. So the customers can think about other Virgin products.
Conclusions
This paper analyzes the challenges and opportunities a company faces when implementing brand extension strategy. Four factors in Aaker’s brand equity are used to compare two brand extension cases.
Challenges always exist in brand extensions no matter how successful the parent brand is. When stretching the brand to a new category, the company should be aware of consumers’ strong brand loyalty to an existing brand. Take the example of Virgin Cola, the buyers’ strong loyalty to Coca-Cola destroys the development of Virgin Cola. As a matter of fact, it is essential to think and act thoroughly when considering extending the brand into new market and make sure the product is able to compete with the competitors. Secondly, the unrelated relationship between the extended brand and the parent brand may cause restriction regarding the positioning of the new brand. Virgin’s case illustrates that the big change from entertainment to soft drink confuses the consumers. It is not easier for consumers to associate it with the original slogan. Furthermore, it causes a psychopathy conflict to customers.
Opportunities can be found accompanied by challenges at the same time. Firstly, the loyalty of an existing welcomed brand can make good contribution to brand extension. Yamaha Motor takes good advantage of the loyalty of parent brand’s customers. Customers trust the new brand because of their love for the parent brand. The association of the parent brand, in addition, can lower the risk of producing new brand to the market if the parent brand’s image is positive and well related.
Regardless of the result of each brand extension in the case, it is a good way to use the same or at least related brand name as the original brand while extend the brand. This is an efficient way to enter the new market, because the original brand name is already in the mind of the customers. Both Yamaha and Virgin intend to use this strategy to attract customers. From what has been discussed in the analysis, perceived quality is the only category that both Yamaha and Virgin have in common. The quality and reputation of parent brand makes great influence on the extension brand. Good brand image of the parent brand can bring benefit to the development of the extension brand. Conversely, negative impact will affect the new brand. Both companies enjoy a very good brand reputation, but the result of brand extension is completely different. Thus, it is not easy to tell in category brand extension whether the perceived quality might be the challenge or opportunity.
Limitation
Several potential areas of limitation for this paper could be the following:
Firstly, only two companies are analyzed. The small amount of samples might limit the result. Besides, the two cases are category brand extension which is only one type of brand extension. It will be interesting to analyze other types of brand extension, like line extension or vertical extension. Thirdly, this paper uses Aaker’s brand equity to implement in the analysis part. It concentrates on the company brand that might affect the success the brand extension. Other factors, however, like the company size, interior management and product market share can also have influence too. Furthermore, only secondary data is implemented is this paper. And it is evaluated only by the authors, which might limit the objectivity of this paper. Therefore, further researches can be conducted with primary data with different perspectives towards this topic