A Project report on

A STUDY ON BRAND EXTENSION IN FMCG

SECTOR
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 ACKNOWLEDGEMENT

I have taken efforts in this project. However, it would not have been possible without the kind
support and help of many individuals and organizations. I would like to extend my sincere
thanks to all of them.

I am highly indebted to Mr. Mahesh sir for his guidance and constant supervision as well as
for his support in completing the project.

I would like to express my gratitude to The Bhawanipur Education Society and College for
giving me this learning experience.

My sincere thanks to all the faculty members, for their assistance and guidance in the
completion of project. I would also like to thank my parents and friends for their share of
help.
 ABSTRACT

This research project is inspired by the fact that how brand extension is an important
strategy to utilize the credibility of the brand and to minimize the advertising costs. The
strategy is used in various industries these days but fast-moving consumer goods (FMCG)
is such an industry which lie closer to a consumer; hence the immediate effect of any
strategy can be properly viewed in this industry. The study is an attempt to provide a
framework to examine the effects of brand extension strategy on parent brand equity.
Also, the study shows whether brand extension of some popular brand has diluted the
brand’s name or not.
 CONTENTS

1 INTRODUCTION
1.1 Overview
1.2 Objectives of the study
2 Literature Review
2.1 Brand Extension
2.2 Definitions of brand extension
2.3 Brand development grid
2.4 Advantages and disadvantages of brand extension
2.5 Brand extension Process
2.6 Indian FMCG Sector & Brand extension strategy
2.7 Market Size
2.8 Government Initiatives
2.9 Major players of the industry
2.10 Possible direction of brand extension
2.11 SWOT analysis of FMCG sector
3 Research Methodology
3.1 Introduction to Research Methodology
3.2 Type of Research & Data used
3.3 Questionnaire Design
3.4 Hypothesis
3.5 Limitations
4 Data Analysis
5 Findings
6 Suggestion
7 Conclusion
8 Bibliography
9 Annexure

1.INTRODUCTION

In today’s competitive environment where the customer possesses tremendous choice for
choosing brands, it is a really challenging task for a marketer to attract new and retain the old
customer. Introducing a new brand is relatively difficult and risky in a highly competitive
market. It not only requires considerable amount of resources both in terms of money and
time, but also high creative and innovative skills. Therefore managers, prefer to use well
known and established brand names with specific associations. Many firms extend their well-
established brands into new product categories as an attempt to leverage the asset; that is
brand equity. Brand extension is quite beneficial as it saves the cost and time involved in
establishing a new brand name and also increases the probability of success. The popularity
of brand extensions is understandable considering the fact that how difficult it is to launch a
new brand name with increasing cost and increasing competition. Some of the uses and
functions of brand extensions are:

i) to provide a new product with a competitive advantage.

ii) to allow greater efficiency through brand-wide advertising and promotions making it cost
effective.

iii) to increase consumer awareness for newly introduced brands.

iv) to familiarise with the core brand and offer a less risky route to a new product category
and appeal in the marketplace.
v)to help define a recently formed brand in the minds of consumers, which in future helps the
extension.
vi) to enable to redefine and revitalize declining brands.
vii)to disassociate a brand from a product at the end of its lifecycle.

A strong brand name can work like a magic wand for marketing managers provided they
have clear idea of when and how to use it for exploiting business opportunities and how-to
product it. Some firms strongly believe that brand extension tend to be more efficient and
capture greater market share than individual brand. Brand extensions can be used to give a
new lease of life, when the core brand approaches the maturity stage in the product life cycle.
But sometimes, the strategy of brand extension quality may pose a serious damage to the
parent brand and wrong extension could dilute the core brand’s brand equity.

1.1 OVERVIEW:

The Fast Moving Consumer Goods (FMCG) sector is a huge and important part of almost
every economy of the world. FMCG are products that are sold quickly and at a relatively low
cost. Like any other industry FMCG industry has various sub-segments. Main segments are:

Household Care: which incorporates fabric wash, laundry shops, detergents, household
cleaners such as dish cleaners, toilet cleaners, air fresheners, mosquito repellents etc.

Personal Care: which incorporates oral care, skin care, hair care, cosmetic and toiletries,
feminine hygiene, paper products etc.
Food and Beverages: which incorporates health beverages, soft drinks, snack food, processed
foods, vegetables, dairy products, branded flour, rice and sugar, tea, chocolates etc.

The goods produced by this sector are less immune to recessionary pressures as they are daily
necessities. A very high number of products are manufactured and sold by the FMCG sector.
The sector has low entry barrier and is characterized by enormous sales, which results in stiff
competition and often low margins.

1.2 OBJECTIVES OF THE STUDY:

 to examine in-depth the perceptions and purchase behaviour pattern of consumers

with respect to products launched through brand extensions in the FMCG segment.

 To identify whether demographic factors have any influence on consumer’s

evaluation of brand extension in the FMCG segment.

 to determine whether consumers are risk takers when it comes to buying extended
FMCG products.

 Identify the factors that influence the consumers to accept brand extensions in FMCG
products.
 To analyse the marketing strategies adopted by different FMCG companies.

2.LITERATURE REVIEW:

2.1 BRAND EXTENSION: Brand Extension is the use of a recognised brand name in new
product categories. This new category to which the brand is extended can be related or
unrelated to the existing product categories. A renowned/successful brand helps an
organization to launch products in new categories effortlessly. For instance, Nike’s brand
core product is shoes. But it is now extended to sunglasses, soccer balls, basketballs, and golf
equipments. An existing brand that gives rise to a brand extension is described as parent
brand. If the customers of the new business have values and aspirations synchronizing those
of the core business, and if these values and aspirations are embodied in the brand, it is likely
to be accepted by customers in the new business.
2.2 Definitions of Brand extensions

Brand extensions, “the stretch of the Aaker and Keller, 1990

established franchise to a different product
class”.
A brand extension is any effort to extend Kotler, 1991 B
established brand names to launch new or
modified products or lines.
Brand extensions refer to using “an established Choi, 1998, p. 655
brand name in one category to introduce
products in totally different categories”.
Variation on quality levels of product within a Randall et al., 1998 A
category is referred to as a vertical extension;
variation on the function or category of the
product is referred to as a horizontal extension.
A brand extension, on the other hand, is when Speed, 1998 p. 105
“a current brand name is applied to a new
product in a completely different product
category”
Brand extension is a popular brand strategy to Swaminathan, Fox & Reddy, 2001
attach an existing brand name to a new product
introduced in a different product category.
A brand extension strategy can be conceived as Davis and Halligan, 2002
a means of optimizing relationship with
consumers

2.3 BRAND DEVELOPMENT GRID:

Line extension refers to extending an existing brand name to new forms, sizes, colours,
ingredients or flavours of an existing product category. This is a low-cost, low-risk way to
familiarize new products. For example, When Coca-Cola introduces a new flavour, such as
diet cola with vanilla, under the existing brand name.
Brand extension also assumes an existing brand name, but combines it with a new product
category. Thus, an existing brand name is extended to a new product category. For instance,
Kellogg’s has extended its Special K healthy breakfast cereal brand into a complete line of
cereals plus a line of biscuits, snacks and nutrition bars.
Multibrands means marketing many different brands in a given product category. P&G
(Procter & Gamble) and Unilever are the best examples for this.
New brands are needed when the power of existing brand names is waning. Also, a new
brand name is appropriate when the company enters a new product category for which none
of its current brand names are appropriate.
2.4 ADVANTAGES AND DISADVANTAGES OF BRAND EXTENSION:
Brand extension has mainly two advantages:
1. Facilitates acceptance of new product: Consumers make assumption about a brand
extension based on the parent brand; brand extension can improve a brand image by
remaining true to these assumptions. Risk perceived by consumer is reduced when buying a
brand which they already associate with quality. When introducing a brand extension, the
marketing campaign does not have to create awareness of both brand and product. Cost of
developing new brand is saved. The expense of introductory and follow up marketing
program is reduced.
2. FEEDBACK BENEFITS TO PARENT BRAND AND COMPANY: Brand extension
enhances the image of the parent brand, attract new customers into the brand franchise
thereby increasing market coverage. It revives the brand.

rand extension can also bring some disadvantages:

1.There may be risk that the new product can damage the image of core product if the brand
extension fails.
2.Brand extension in unrelated market may lead to loss of reliability if brand
name is extended so far.

2.5 BRAND EXTENSION PROCESS: Major brand extension strategy

decision
 PRODUCT SPONSORSHIP ADVERTISEMENT

BRAND NAME SALE

BRAND
EXTENSION
SUCCESS/FAILURE

BRAND
BRAND EQUITY
EXTENSION

BRAND BRAND
POSITIONING DEVELOPMENT

2.6 INDIAN FMCG SECTOR AND BRAND EXTENSION STRATEGY:

Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy
with Household and Personal Care accounting for 50 per cent, Healthcare-31 per cent and
food and beverages 19 per cent in terms of market share. Growing awareness, easier access
and change in standard of living have been the key growth drivers for the sector. The urban
segment (accounts for a revenue share of around 55 per cent) is the prime contributor to the
overall revenue generated by the FMCG sector in India. Conversely, in the last few years, the
FMCG market has grown at a faster pace in rural India as compared to urban India. Semi-
urban and rural segments are growing at a rapid pace and FMCG products account for 50 per
cent of total rural spending.
Ayurveda products are gracefully embraced by buyers, which resulted in Patanjali being
ranked as the most trusted brand in FMCG product according to IBEF February 2020 report.
 A huge demand for existing products is inspiring more FMCG players to extend their
existing brand and expand their product portfolio as well. To increase their market share and
withstand long term growth, avoid the risk of new brand launch failure and achieve cost
efficiency, most of the FMCG companies are going for brand extension approach. Existing
reputation of the parent brand helps extensions gaining market share faster than new
launches.

For instance, Nestle launched a record number of variants this year — from its Maggi Cuppa
Mania (the instant cup noodles), Maggi Pichkoo (a tomato ketchup pouch pack) to Maggi
Bhuna Masala (a readymade cooking aid). It also introduced NesVita Pro-Heart, a fat-free
packaged milk product in Delhi/NCR region.

Other FMCG leading companies such as Marico had launched Saffola Functional Food for
‘diabetics management’ and Britannia launched NutriChoice 5 Grain, a biscuit made from
five “healthy cereals”. Dabur too unveiled a pudina variant of its popular Hajmola brand
apart from extending its Gulabari skin-care range.

Beverage company Coca-Cola India presented apple flavour for its ‘Fanta’ brand as its
competitor PepsiCo chose to introduce apple flavour for its ‘Tropicana Twister’ range.
PepsiCo’s food wing, Frito Lay, extended its range with Desi Beats apart from introducing
new Kurkure flavours for Quaker Oats.

Godrez Consumer Products (GCPL) stretched its Ezee brand as a daily wash liquid detergent
under the new variant, Bright & Soft, and it plans to further extend it to the post-wash
category.

2.7 MARKET SIZE:

The retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 840 billion
in 2017, with modern trade expected to grow at 20 per cent - 25 per cent per annum, which is
likely to boost revenues of FMCG companies. Revenues of FMCG sector reached Rs 3.4 lakh
crore (US$ 52.75 billion) in FY18 and are estimated to reach US$ 103.7 billion in 2020. The
sector witnessed growth of 16.5 per cent in value terms between July-September 2018;
supported by moderate inflation, increase in private consumption and rural income.
Rise in rural consumption to drive the FMCG market. It contributes around 36 per cent to the
overall FMCG spending. FMCG urban segment witnessed growth rate of 8 per cent whereas
rural segment grew at 5 per cent in quarter ended in September 2019. The revenue of
FMCG’s rural segment is forecasted to grow to 11-12 per cent in 2020.

2.8 GOVERNMENT INITIATIVES:

Some of the major initiatives taken by the government to promote the FMCG sector in India
are as follows:

 The of India has approved 100 per cent Foreign Direct Investment (FDI) in the cash
and carry segment and in Government single-brand retail along with 51 per cent FDI
in multi-brand retail.
 The Government of India has drafted a new Consumer Protection Bill with special
emphasis on setting up an extensive mechanism to ensure simple, speedy, accessible,
affordable and timely delivery of justice to consumers.
 The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of
the FMCG products such as Soap, Toothpaste and Hair oil now come under 18 per
cent tax bracket against the previous 23-24 per cent rate. Also rates on food products
and hygiene products have been reduced to 0-5 per cent and 12-18 per cent
respectively.
 The GST is expected to transform logistics in the FMCG sector into a modern and
efficient model as all major corporations are remodeling their operations into larger
logistics and warehousing.

2.9 MAJOR PLAYERS OF THE INDUSTRY:

1.HINDUSTAN UNILEVER LIMITED(HUL) -Hindustan Unilever Limited is

ranked at foremost position in the list because of its years of experience in delivering quality
goods to consumer. The company was established in 1933 and has head office functioning in
Mumbai. This company has been developing products that comprises food and beverages,
personalcare and homecare. The company has a wide range of products in categories like
food and beverages, personal care home care and water purifying segments. The company
has more than 35 prestigious brands like Dove, Knor, Lifeboy, Ponds, Lakme, Surf Excel,
Elle18, Broke Bond, Kwality, Sunlight and much more. Here is the Annual Report of 2017-
2018, Which Shows that the Company has 18,000 employees and has sales of INR 34619
crores.

Employees-17000(approx.)

Turnover-4.0 Billion Dollar

2.COLGATE-PALMOLIVE- This is an American company with its corporate office in

New York that operates worldwide in the consumer product segment. The company’s most
popular and successful product is Colgate toothpaste. Basically, the company operates in
soap, detergent, and oral hygiene products. It leads the Indian toothpaste market by 54.7% of
market share value. According to the Annual Report of 2017-2018, the Company has roughly
38000 employees and has sales of INR 12045 crores.

Employees-37000+

Turnover-17.08 Billion Dollar

3. ITC LIMITED- ITC Limited has been involved in the industry since last 100 years with
its headquarters in Kolkata. In the FMCG segment, the company has a wide range of
products. The list includes Foods, Personal Care, Cigarettes and Cigars, Branded Apparel,
Education and Stationery Products, Incense Sticks and Safety Matches. Some of the most
popular product brands are Ashirwad atta, Bingo chips, Savlon, Mangaldeep Agarbatti, Wills,
Fiama, Vivel, etc. According to Annual Report 2017-2018, the company’s growth is 10500
crores.

Apart from the fast-moving consumer items the company operates in the hospitality, paper,
packaging, agri-business, and IT sectors.

Employees-29000+

Turnover- 7 Billion Dollars

4.NESTLE- Nestle India dates back to 1912 when it began operating as the Nestle Anglo-
Swiss Condensed Milk Company. Post independence, Nestle has worked closely with
indigenous manufacturing and today has eight manufacturing facilities in the country for their
products. The India offices are in Kolkata, Mumbai, Chennai, and Delhi. Its corporate office
is located in Vevey, Switzerland.

They cater to the nutritional and wellness requirements of Indian consumers and the popular
labels include Nescafe, Maggi, Milky Bar, Kit Kat, Bar One, Milkmaid, Nestea, Nestlé Milk,
Nestlé Slim Milk, Nestle Dahi and Nestle Jeera Raita. Nestle has truly emerged as the largest
manufacturer of food items globally. The Nestle Annual Report 2017-2018 shows that the
company has sales of INR 12045 crores.
Employees-328000+
Turnover- 87 Billion Dollar

5.PARLE-AGRO - Parle Agro is an Indian company. Basically, the company operates in

the food and beverage industry. the company has several popular brands in the beverages and
confectionery segment. Some of the most popular products are Frooti, Appy Fizz, Hippo,
Parle G, Bailey, etc.

Employees-2500+
Turnover-1 Billion Dollar

2.10 Possible direction of brand extension

Taylor’s model (2004 in Kline, 2006) (in the picture below) of consumer brand extension
attitude formation has triggered additional brand extension research in various countries.
Their exploratory research provided valuable insight into which extension constructs
influence the attitude of consumers toward the extended brand. The launching of new brands
is much more costly than expanding existing strong brands, but each extension is not
necessarily successful.

Brand extension strategy comes in two primary forms (figure 1): horizontal and vertical. In a
horizontal brand extension situation, an existing brand name is applied to a new product
introduction in either a related product class (basic extension) or in a product category
completely new to the firm (total extension). A vertical brand extension, on the other hand,
involves introducing a brand extension in the same product category as the core brand, but at
a different price point and quality level (direct extension) or in a product category with less
connection to the basic product line (indirect extension). There are two possible options in
vertical extension. The brand extension is introduced at a lower price and lower quality level
than the core brand (step-down) or at a higher price and quality level than the core brand
(step-up). In a vertical brand extension situation, a second brand name or descriptor is usually
introduced alongside the core brand name in order to demonstrate the link between the brand
extension and the core brand name. Although a brand extension aids in generating consumer
acceptance for a new product by linking the new product with a known brand or company
name, it also risks diluting the core brand image by depleting or harming the equity which
has been built up within the core brand name (Aaker, 1990, Chen & Liu, 2004). Brands value
can exploit for its expansion, which is subject to various factors: the core brand values, the
characteristics and personality and the attitude of consumers to the brand. Successful
expansion of the brand is created by: increased the likelihood that consumers will accept the
message of a new line of products when this message includes a known element, update
existing product line with new brand offerings and more efficient use of the marketing costs.

2.11 SWOT ANALYSIS OF FMCG:

STRENGTHS

1. Low operational costs.

2.Presence of established distribution networks in both urban and rural areas.

3.Presence of well-known brand in FMCG sector.

4. Deep roots in local culture and great understanding of consumer needs.

WEAKNESS

1. Lower scope of investing in technology and achieving economies of scale, especially in

small sector.

2. Low export products.

3. Counterfeit products. These products narrow the scope of FMCG products in rural and
semi-urban market.

OPPORTUNITIES

1 Untapped rural market.

2.Rising income levels i.e. increase in purchasing power of consumers.

3.Large domestic market- a population of over one billion.

4.Export potential.

5.High consumer goods spending.

THREATS

1.Removal of important restrictions resulting in replacement of domestic brands.

2.Slowdown in rural brand.

3.Tax and regulatory structure.

3.RESEARCH METHODOLOGY

3.1 INTRODUCTION TO RESEARCH METHODOLOGY

Research Methodology is the way of systematically solving the research problem. It is the
way to methodically solve research problem by logically adopting various steps. Also, it
defines the way in which the data are collected, analysed and interpreted.

3.2 TYPE OF RESEARCH AND DATA USED

The Research Methodology that has been adopted to carry out this research study includes
both exploratory and empirical work. Exploratory research aims to explore the main aspects
of an under-researched problem and empirical research exclusively relies on observation or
experience with hardly any regard for theory and system. Such research is data based.
DATA USED: There are two types of data
 PRIMARY DATA: Primary data is collected directly by the researcher through
interviews or experiments
 SECONDARY DATA: These are data collected by someone else like government
surveys or scientific publications.
Secondary data is used in this research.
The exploratory study is based on the findings out of books on this issue written by various
authors, articles published in journals, magazines, periodicals, newspapers, and web
materials. The study has also taken figures and facts from Government sources and Annual
Reports of the FMCG companies. Theoretical Framework has been developed for the
research study. The empirical part is based on the questionnaires prepared and distributed
among consumers.

3.3 Questionnaire Design

The questionnaire has been developed in such a way so as to serve the purpose and objectives
of the study. The questionnaire for the consumers has been divided into two sections-
Demographical Data and Technical Data (i.e. subject related data). As Brand and Brand
Extension aspects are related with consumers’ perceptions, emotions and associations, the
Demographical Factors are important for this study. The Technical questions in Consumers
survey questionnaire are mostly structured, with multiple-choice questions, some of which
have been framed by using Likert 5-point scale where ever required.

3.4 Hypothesis
Hypothesis test can be defined as the formal procedures that statisticians use to test whether a
hypothesis can be accepted or not. A hypothesis is an assumption about something.
There are types of statistical hypothesis:
a) Null hypothesis - A null hypothesis is a type of hypothesis used in statistics that
proposes that there is no statistical significance in a set of given observation. It is
presumed to be true until statistical evidence nullifies it for an alternative hypothesis.

b) Alternative hypothesis – The alternative hypothesis is contrary to the null hypothesis. It

proposes that the sample observation is influenced by some non-random cause.

3.5 Limitations

The limitation faced by this research is mainly due to restraints in resource, time and words.

 No primary data has been used in this research project. The research is based on
secondary data; therefore, the facts and figures may vary and might not be accurate.
 The FMCG sector is a huge sector and therefore only few of the major players of this
industry are referred in this research. Also, only few products were mentioned in the
questionnaire.

 Since most of the FMCG companies have opted for brand extension, so, it was
difficult to cover all the brands and their brand extensions in this sector.

 The statistical tools used for collecting and analysing data could have been more
useful if primary data were used and if I had more knowledge and resource regarding
the project.

By overcoming the limitations, I would have been able to deliver a much better
project.

4.DATA ANLYSIS
 HYPOTHESIS

HYPOTHESIS TESTING:H1

H01 :There is no significant difference between gender of respondents and their level of
awareness of brand extension.

H11 :There is significant difference between gender of respondents and their level of
awareness of brand extension.

DATA OF MALE RESPONDENTS

AWARENESS OBSERVED(O) EXPECTED(E) O-E (O-E)2 (O-E)2/E

LL 0 0 0 0 0

PL 6 5.44 0.56 0.3136 0.057647

ML 18 19.72 -1.72 2.9584 0.15002

HL 10 8.84 1.16 1.3456 0.152217

DATA OF FEMALE RESPONDENTS

AWARENESS OBSERVED(O) EXPECTED(E) O-E (O-E)2 (O-E)2/E

LL 0 0 0 0 0

PL 2 2.56 1.44 2.0736 0.81

ML 11 9.28 1.72 2.9584 0.318793

HL 3 4.16 -1.16 1.3456 0.323462

CALCULATION OF X2

Where X2 = ∑ (O – E) 2/ Ei = 1.812139179

For X2
0.05 , degree of freedom =(2-1)(4-1)=3=7.81 (TABLE VALUE)

Here the calculated value is 1.812139179 which is less than

tabulated value .Hence our Hypothesis is accepted at 5percent level in Chi

–square test.
Thus we conclude that there is no significance difference between the gender of
respondent and their level of awareness of brand extension.

6.FINDINGS
 GENDER WISE DISTRIBUTION
32%

Male
Female

68%

Figure 1 suggest the Gender-Wise Distribution of Respondents.

Out of 50 respondents,34 is male (68% of total respondent) and 16 are female (32% of the
`total respondents). It is concluded from figure 1 that majority of the respondents are male.

Age Group of Respondents

40-60 years
14%

20-40 years
40-60 years

20-40 years
86%

Figure 2 shows us the age group of the respondents for the study.
The majority of respondents 43(86%) belongs to age group 20-40 years and 34(68%) of them
are students.

Table 1: Opinion of Respondents towards Awareness Regarding Brand

Extensions

Opinion Number of Percentage

Respondents
YES 45 90
NO 0 0
MAYBE 5 10
TOTAL 50 100

It is concluded from the Table 1 that all (90%) the respondents selected for the study are
aware of brand extensions.

Table 2: Distribution of Respondents towards the Level of Awareness

of Brand extensions

Level Awareness Number of Percentage

Respondents
High Level 13 26
Medium Level 29 58
Partial Level 8 16
Low Level 0 0
Total 50 100
 58
60

50

40
PERCENTAGE

26
30

16
20

10
0

0
High Level of Medium Level of Partial Level of Low Level of Awareness
Awareness Awareness Awareness
LEVEL OF AWARENESS

It is inferred from the Table 2 that 29 (58%) of the total respondents selected for the study
have medium level of awareness regarding brand extensions and 13 (26%) have high level of
awareness for brand extensions and 8(16%) have partial level of awareness regarding brand
extensions. Hence, it is concluded that majority (58%) of the respondents have only medium
level of awareness for brand extensions.

Figure 3: Distribution of Respondents towards the Level of Awareness on Brand

extensions

Consumer preference towards brand extension

The graph below shows consumers’ preference towards brand extension.

 Brand extension creates brand awareness- Among the 50 respondents, majority (23)
strongly agree to the statement.

 Brand extension increases the probability of gaining distribution- Majority (18) of the
respondents disagree to the statement.

 Brand extension reduces the risk of product failure-Majority of respondents (24) agree
to the fact.
  Image of parent brand is strong enough to help the extension-25 out of 50 respondents
strongly agree to the fact that image of a brand helps in extension.

 Failure of brand extension damage the parent brands perceived quality- Majority (23)
of respondents agree to the given statement.

 Associate quality of product to its brand name-26 of the respondents agree to the fact
that the associate the quality of products to its brand name.

 Innovation increases the image of brand extension-30 out of 50 respondents strongly

agree that innovation and image of brand is inter-linked.

35
30
25
20
15
10
5
0

SDA D N/NDA A SA

Brand extension and how they complement their parent brand

There are a lot of FMCG products, here, 5 famous parent brands are considered -Dettol,
Colgate, Maggie, Amul and Parachute and how the brand extension of these brands have
complemented each other from consumer’s point of view. The respondents were asked a 5-
point Likert scale question in which 5 is strongly agree, 4 -agree ,3-neutral, 2-disagree and 1-
strongly disagree.
Dettol is a brand owned by a UK company Reckitt Benckiser. Dettol has extended its product
to Dettol Handwash, Dettol Sanitizer, Dettol Shaving Cream etc. In this study, Dettol
Handwash was considered. Majority (84%) of the respondent believes that Dettol handwash
complements its parent brand whereas 16% gave a 4 Likert- scale point which means they
agree that Dettol handwash complements its parent brand.

Hence it can be concluded that all the respondents agree that Dettol handwash complement its
parent brand.

Colgate is a Colgate-Palmolive product that extended its brand into Colgate toothbrush,
Colgate Plax, Colgate Mouthwash etc. In this study, responses were taken for Colgate
Toothbrush.22 respondents gave 5 scale point, 21 respondents gave a 4-scale point and 7
respondents gave a 3 Likert-scale point. Thus, it can be concluded that majority of
respondents consider Colgate toothbrush complementary to its parent brand Colgate.

Maggie is Nestle company’s most famous product in FMCG category. Maggie extended its
brand into ketchup, pasta, soup etc. Respondents were asked about Maggie Ketchup in the
survey question. 64%of the respondents strongly agree and 24% respondents agree that
Maggie ketchup complements its parent brand while 12 % respondents were neutral.

Amul is an Indian company that is a leading manufacturer of dairy products. Its extended
product include cheese, butter, ghee, etc. Majority of the respondents consider that Amul
cheese has complemented its parent brand.

Parachute is a famous hair product of Marico Ltd. Company. It extended its brand into body-
lotion.40% strongly agree, 30% agree while 26% of respondents are neural to the statement
that parachute body-lotion complement its parent brand. 4% respondents disagree and believe
that it does not complement its parent brand.
 45
42
40

35 33
32
30

25
22 21
20
20
16 15
15 13
12
10 8 7 6
5
1 2
0
Dettol Handwash Colgate toothbrush Maggie Ketchup Amul Cheese Parachute body lotion

5 4 3 1

Brand extension and how they dilute the parent brand

The respondents were asked about how some of the failed brand extension has affected the
parent brand through a Likert 5- point scale question. The table below shows the respondents’
views regarding the dilution caused by these products on their parent brand. 5 of such brand
extensions of 5 popular FMCG brand were taken into consideration for this study.

New Coke was one of the failed brand extension of Coca Cola company. It is known as the
biggest marketing blunder of all times. The table below shows that among 50 respondents,
14% strongly agree and 16% agree and consider the failure of new coke to dilute the brand
whereas 34% strongly disagree and 16% disagree and consider that the failure has no impact
on parent brand. 20% are neutral and could not decide whether the failure had an impact or
not on the parent brand.

Amul ready-to-eat pizza is one of the brand extensions of Amul which is not quite a success
like the other brand extension of Amul. Majority (32%) of the respondents are neutral and
could not decide about the extension diluting the parent brand. 6% respondents strongly agree
and 14% agree that the failure of the brand extension has diluted the parent brand.

Rasna Oranjolt was a product launched by Rasna brand in year 2000 which was aerated
drink. 28% of respondents strongly disagree and 20% 0f respondents disagree that the failure
of Rasna Oranjolt has not diluted Rasna brand.20% strongly agree and 24% agree that it has
diluted the Rasna brand. 16% of the respondents were neutral. Thus, it can be concluded that
Rasna Oranjolt product’s failure has diluted the parent brand to some extent.

Saffola Zest is a brand extension of Saffola. 32% of respondents strongly disagree and 14%
of respondents disagree that the failure of Saffola Zest has not diluted Saffola brand.8%
strongly agree and 22% agree that it has diluted the Saffola brand. 24% of the respondents
were neutral. Thus, it can be said that the failure has not caused big impact on parent brand.

Bournvita Biscuit is the brand extension of Bournvita. 14% of respondents strongly disagree
and 22% of respondents disagree that this product has not diluted Bournvita brand.18%
strongly agree and 18% agree that it has diluted the Bournvita brand. 18% of the respondents
were neutral. It can be concluded that the brand extension had no impact on parent brand.

18 17
16 16
16
14
14
12 12 12 12 12
12 11 11
10 10
10 9 9 9
8 8 8
8 7 7 7
6
6
4
4 3

0
New Coke Amul ready-to-eat Rasna Oranjolt Saffola Zest Bournvita Biscuit
pizza

5 4 3 2 1

Consumer’s perception towards quality of the given brands.

Ranking Dettol Colgate Amul Maggie Parachute

5 45 32 35 32 27
4 5 15 13 15 13
3 3 2 3 10
2
1

The following table shows consumer’s views regarding the quality of the given brand. Dettol
was ranked 5 by 90% of the respondents and other 10% ranked it 4. Colgate was ranked by
64% of respondents a rating of 5. 30% gave a 4-star ranking.6% gave 3-star ranking. Amul
was given a 5-star ranking by 70% of respondents.26% respondents gave 4-star ranking and
4% gave 3-star ranking. Maggie was given a 5-star ranking by 64% of respondents.30%
respondents gave 4-star ranking and 6% gave 3-star ranking. Parachute was ranked 5 by 54%
of the respondents and other 26% ranked it 4. Other 20% ranked it 3.

50
45
45

40
35
35
32 32
30
27
25

20
15 15
15 13 13
10
10
5
5 3 3
2
0
Dettol Colgate Amul Maggie Parachute

5 4 1
 SUGGESTION

The study on the factors influencing consumer preferences towards brand extensions and
their impact on parent brands’ image is an accumulated and simple evidence to show that it is
an important and pervasive phenomenon. This study has important implications for
organisations and has the potentiality to benefit firm. To understand consumers’
preferences/perception and behaviour, marketers need to know what product and brand
knowledge consumers have acquired and stored in the memory. They may also wish to
determine how consumers organise a product category and what types of knowledge are
likely to be activated by particular marketing strategies. Hence, an understanding of meanings
that are activated when consumers are exposed to certain extensions are necessary. Cognitive
learning often modifies the existing knowledge structures in memory. The findings suggest
several factors that need to be considered in managing brands, especially when it comes to
launching brand extensions. A thorough understanding of consumer behaviour and
preferences will go a long way in helping managers. A good understanding of the factors that
influence consumers’ preference/perception for brand extensions and their influence on
parent brands’ image should at best help extensions succeed in the market and not weaken the
parent brand.

The following are the important implications and suggestions based on the study.

 Brand managers need to understand that consumers’ learning and attitude towards
brand extension differ at various levels of experience in using them. They need to
make sure that the quality of the products is maintained over time because;
associations based on direct experience with the brand are likely to be believed more
than other influences.
 Brand managers need to understand that consumer perception towards brand
extensions differ on their level of knowledge and awareness which is influenced by
their personal factors. Marketers need to chart out appropriate communication plan to
improve the level of awareness for brand extensions among consumers.

 Extensions shall be positioned in the market cautiously without weakening the parent
brand otherwise; it would lead to developing negative perception for brand
extensions.

 The findings suggest that extensions need to have a logical fit with the parent brand.
Marketers need to ensure that brand extensions shall match with consumers’
expectations in terms of complementarities, substitutability with the parent brand.

 In order to create a logical fit between the parent brand and extensions, FMCG
companies need to ensure that brand extensions shall be positioned to communicate
similar properties of the parent brand.

 Marketers need to create a perception in the minds of consumers that skills used for
producing brand extensions are the same as that of the parent brand. This is possible
through developing the right image and personality fit between the parent brand and
extensions.

 Brand managers need to carefully investigate potential negative feedback effect

before launching brand extension that deviates from the concept of the parent brand.

 Brand extensions that could create confusion or a negative image for the parent
should not be undertaken by the marketers. At the same time, brands should not be
stretched to too many diverse categories risking dilution in the long run.

 Companies need to be very cautious while entering into too many extensions since
failure of brand extensions may damage parent brands’ perceived quality. Entering
into too many extensions can lose parent brands’ unique identity too.
 Findings indicate that brand extension do affect parent brand equity. Therefore,
extension should be introduced in such a manner that they help strengthen brand
equity. So, the following suggestion can be considered by the brand managers while
extending into a new product category.

CONCLUSION

Brand extensions are not a western phenomenon but have become prevalent in India too, in
the recent past. Given the cultural differences in their attitudes, values and behaviour of
consumers, this study enables on to see the pattern that is emerging in an industrialising and
urbanising society like India. This study is among the pioneer and micro analytic tests of
hypothesis provides insights into important factors governing consumer behaviour. The study
shows that consumers are risk takers in buying extended FMCG product.

Notably, this study identifies the factors influencing consumer preferences for brand
extension. At the same time, this study tries to find out consumers’ perception towards
extended brand and their impact on parent brands’ image. For marketers who would like to
enhance the performance of extended brands, this study suggests strategies and practices.
This study has thrown a newer dimension for marketers to consider. To conclude, this study
on consumer preferences/perception for brand extensions and their impact on parent brands’
image; their antecedents beyond the western experience would enable one to see patterns
emerging in a country like India.
 BIBILOGRAPHY

en.wikipedia.org/wiki/Brand_extension

en.wikipedia.org/wiki/FMCG_in_India

https://www.ibef.org/industry/fmcg.aspx

https://shodhganga.inflibnet.ac.in/bitstream/10603/39888.pdf

https://www.scribd.com/document/341381634/SWOT-Analysis-of-FMCG-Industry

https://www.researchgate.net/publication/314216580_An_Overview_of_Indian_FMCG_Sect
or

http://www.iosrjournals.org/iosr-jbm/papers/Vol16-issue4/Version-2/E016422835.pdf
https://www.nielsen.com/in/en/press-releases/2012/brand-stretching0/
https://www.ukessays.com/essays/marketing/brand-extensions-in-an-fmcg-sector-marketing-
essay.php

ANNEXURE

Brand Extension
Marketing Research survey

* Required

1.Name *

2.Gender *
Male
Female

Other
3.Age Group *
20-40years
40-60years

Above 60year

4.Occupation *

5.Are you aware of Brand Extension? *

Yes
No

Maybe

6.If yes, indicate your level of awareness *

High level of awareness
Medium level of awareness

Partial level of awareness

Low level of awareness

7.Please give your opinion for the following statements regarding factors influencing
consumer preferences towards brand extensions and its impact on parent brand (Please
tick the appropriate box) (SDA) Strongly Disagree, (DA) Disagree, (N/NDA) Neither Agree
nor Disagree, (A) Agree, (SA) Strongly Agree *

STATEMENT SDA DA N/NDA A SA

Brand extension creates brand
awareness.

Brand extension reduces

probability of gaining distribution.

Brand extension reduces the risk

of product failure.

Image of parent brand is strong

enough to help the extension.

Failure of brand extension

damage the parent brand's
perceived quality
 Associate quality of product to its
brand name.

Innovation increases the image

of brand extension.

8.On the basis of how the brand extension complement the parent brand, rate the
following *
5 being very high complementary and 1 being very low complementary

5 4 3 2 1
Dettol
Handwash

Colgate
Toothbrush

Maggie
Ketchup

Amul
Cheese

Parachute
Body lotion

9.Rate the following extensions on the basis of how they dilute the parent brand *

5 being very high and 1 being very low in diluting the image of the parent brands

5 4 3 2 1
New Coke

Amul ready-
to-eat pizza

Rasna
Oranjolt

Saffola Zest

Bournvita
 Biscuit

10.Rate the perceived quality of the following brand*

5 being ‘very high quality’ and 1 being ‘very low quality’.

5 4 3 2 1
Dettol

Colgate

Amul

Maggie

Parachute