A MAJOR PROJECTON

BRAND EXTENSION STRATEGY OFPROCTER AND GAMBLE

AND HINDUSTAN LEVER LTD.

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF BACHELOR OF BUSINESS ADMINISTRATION (BBA)

GURU JAMBHESHWAR UNIIVERSITY HISAR

TRAINING SUPERVISOR SUBMITTED BY PUNEET DUTTA

ENROLLMENT NO- -

IITM2009-2012ACKNOWLEDGEMENT

The present work is an effort to throw some light on ‘Brand Extension Strategy Of Procter

And Gamble and Hindustan Lever Ltd. The work would not have been possible to come

to the present shape without the able guidance, supervision and help to me by number of

people.

With deep sense of gratitude I acknowledge the encouragement and guidance received by my

organizational guide and other staff members

I convey my heartful affection to all those people who helped and supported me during the

course, for completion of my Project Report.

PUNEET DUTTA

1

EXECUTIVE SUMMARY

The key ingredients of a brand are image attributes and products (Loken, Joiner, and Peck,

2002). For example, the Coke brand can be associated with image attributes such as

refreshing, tastes great, All-American, etc. Conversely, the Coke brand can also be associated

with products such as Coke Zero, Cherry Coke, Diet Coke, and so on. Marketing activities

and communications can convey either brand image attributes or product category

information. The important thing is that the prominent information communicated to

consumers is presented consistently between the brand and the brand extension.

The present study is purely an exploratory study, dependent on both the primary and the

Secondary sources of data. The primary sources of data constitutes the interaction (both

formal and informal) of the researcher with the top managers and other company officials of

the Hindustan Lever Limited and Procter and Gamble and 50 consumers who were randomly

selected. The Annual Reports of the concerned companies and the relevant literature and

facts and figures available on the problem of the study in various books, journals and

magazines constitutes the Secondary sources of data.

Objectives of this study are:-

1. To understand the concept of Brand extension in the Indian business scenario.

2. To analyse whether brand extension can be a successful strategy in sell and profit

maximization

As a result of my project work I wish to conclude that

HLL sales growth in June 2007 was decreased due to the problem with promotion and

pricing. Although being the most competitive product on the basis of the Market Operating

Price (MOP), the shampoos are still not selling much. This is perhaps due to the bargaining

stress on the customer and the weak push given by the dealer to the particular item, when

actually it should be sold like a high volume product.

2

Another serious suggestion is that HLL and P& G must give good attention to their all the

products rice and all are not getting much attention. The dealers don’t provide much support

to the customers in making them understand the real Quality behind them. Either, the

technical details should be presented in a clearer manner or the dealers need to be educated

properly.

3

TABLE OF CONTENTS

1. INTRODUCTION 1-2

Industry Overview

2. RESEARCH METHODOLOGY 3-5

Research objectives

Research design

Data sources

Sample design

Limitations of the research

3. COMPANY PROFILE 6-27

Market Presence

Range of products and services

SWOT Analysis

4. CONCEPTUAL DISCUSSION 28-41

5. DATA ANALYSIS AND INTERPRETATION 42-59

6. CONCLUSIONS / FINDINGS 60

7. RECOMMENDATIONS 61

8. ANNEXURES 62-64

9. BIBLIOGRAPHY / REFERENCES 65-67

4

INTRODUCTION

Product is a bundle of satisfactions that a customer buys. It represents a solution to a

customer’s problems. The product is always a combination of tangible and intangible

benefits. Three concepts of a product: Tangible Product, Core Product, and Augmented

Product can be considered in this context.

WHAT MAKES UP A BRAND?

The key ingredients of a brand are image attributes and products (Loken, Joiner, and Peck,

2002). For example, the Coke brand can be associated with image attributes such as

refreshing, tastes great, All-American, etc. Conversely, the Coke brand can also be associated

with products such as Coke Zero, Cherry Coke, Diet Coke, and so on. Marketing activities

and communications can convey either brand image attributes or product category

information. The important thing is that the prominent information communicated to

consumers is presented consistently between the brand and the brand extension.

BRANDS ARE VIEWED AS “CATEGORIES”

Brands are viewed as categories not only by managers in companies, but also by consumers.

Many companies are organized by brand, and brand leveraging-strategies are becoming

increasingly popular. Therefore, it is common to see the promotion of a full range of products

under a brand name in a single communication. In this environment, consumers will be more

inclined to think about brands as categories when evaluating a brand name. Research in

consumer psychology also shows that brand categories function psychologically like other

types of categories (Boush & Loken, 1991; Morrin, 1999).

A brand is the name for any marketable unit to which a unique, relevant and motivating set of

associations and benefits - functional and emotional - have become attached. A brand variant

is to extend a brand name within the same product category by offering different product

attributes such as form, perfume, colour and so on. Brand is a powerful differentiator in a

competitive market place. A brand represents values (trust, confidence, comfort and

1

reliability) in a customer’s mind. Some brand-related questions likely to be faced by an

educational institution:

Should we develop a brand for our institution individually or should we join hands with our

institutions of the region and promote a common brand? (IITs have realized that IIT as a

brand is the common property of all IITs and they must project it globally)

Does it make more sense to have a brand for the institution as a whole or is it preferable to

have a separate brand for each product offering? (NIIT tried to develop separate brands like

GNIIT but has realized that developing NIIT as one brand is the better course)

What core values does our brand suggest? Do this match with the overall offerings made

by the institution? Is there a mismatch between the offerings and the brand image? What can

be done to correct the mismatch? (MANIT, Bhopal recently got the status of NIT and shed its

earlier name of MACT. MANIT is regularly in news in local press due to the hooliganism of

its students. This has meant that MANIT’s brand image is very poor through it has been

awarded such a high status by the Government.).

A brand extension is to extend the brand name established in a particular product category to

a new category. Finally a sub-brand is a product which has the same core values as the

mother brand, but is targeted at another target sector. For example, Hindustan Lever has

Sunsilk as a brand of shampoo; the shampoo has several variants which differ in terms of

colour, perfume and, possibly, ingredients which serve a functional purpose. Brand

extension, on the other hand for the Sunsilk brand name is Sunsilk conditioner which extends

a shampoo brand name into an adjacent, but different product category. Indeed, if Sunsilk

had a hair wash soap under the same brand name, then we could also define that as a brand

extension.

2

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problems. It may be

understood as a science of studying how research is done scientifically. In it we study the

various steps that area generally adopted by a researcher in studying his research problem

along with the logic behind them. It is necessary for the researcher to know not only the

research methods / techniques but also the methodology. Researchers not only need to know

how to develop certain indices and tests , how to calculate the mean, the mode, the median or

the standard deviation or the chi square, how to apply particular research techniques, but they

also need to know , which of these methods or techniques , are relevant and which are not,

and what would they mean and indicate and why. Researchers also need to understand the

assumptions underlying various techniques and they need to know the criteria by which they

can decide that certain techniques and procedures will be applicable to certain problems and

others will not. All this means that it is necessary for the researcher to design his

methodology for his problem as the same may differ from problem to problem. For example ,

an architect while designing a building, has to consciously evaluate the best of his decision ,

i.e., he has to evaluate why and on what basis he selects particular size, number and locations

of doors, windows and ventilators, uses particular materials and not others and the like.

The present study is purely an exploratory study, dependent on both the primary and the

Secondary sources of data. The primary sources of data constitutes the interaction (both

formal and informal) of the researcher with the top managers and other company officials of

the Hindustan Lever Limited and Procter and Gamble and 50 consumers who were randomly

selected. The Annual Reports of the concerned companies and the relevant literature and

facts and figures available on the problem of the study in various books, journals and

magazines constitutes the Secondary sources of data.

3

SAMPLE SIZE: 50

SAMPLE AREA: NCR DELHI

OBJECTIVES

3. To understand the concept of Brand extension in the Indian business scenario.

4. To analyse whether brand extension can be a successful strategy in sell and profit

maximization

To develop a comparative understanding of the brand extension strategy followed by two

major consumer product companies i.e. Hindustan Lever Limited and Proctor and Gamble.

The section includes the overall research design, the sampling procedure, the data collection

method, the field method, and analysis and procedure.

RESEARCH DESIGN:-For this research project exploratory method is using

DATA COLLECTION METHOD:-The data collect for the research can be classified as primary data and secondary data.

Primary data is by visiting existing customer and expected customer of Hindustan Lever

Limited. And making them fill up the questionnaire

.Secondary data is from internet, books, magazine etc.

RESEARCH INSTRUMENTThe instrument use for data collection is structured questionnaire. Question is open and close

ended depending upon the information that needed to be elicited. I am also using the scaling

technique to assess the attitude of the customer.

Sampling plan:-

Keeping all the constrains in mind a sample size of 100 people .The sampling procedure is

systematic sampling

4

LIMITATIONS

Everything in this world has its own advantages and disadvantages which shows ‘nothing is

perfect’.

Following are the problems faced but it’s a part of game:

1. TIME CONSUMING: It is very much obvious that it is a time consuming process. So

much time has been spent for this purpose.

2. LOW PARTICIPATION: Obviously many respondents have not participated in this

and have also created some problems which simply shows that they were not interested.

3. BIASNESS: Sometimes interested customers were also biased so the collected figures

involve both positive and negative figures.

4. It does not cover all the aspects of the company.

5

COMPANY PROFILE

HINDUSTAN LEVER LIMITED

Hindustan Lever Limited (HLL), a 51%-owned subsidiary of Anglo-Dutch giant Unilever,

has been working its way into India since 1888. India's largest consumer goods company,

HLL markets products such as beverages, food, and home and personal care goods. Its

brands include Kwality Wall's ice cream, Lifebuoy soap, Lipton tea, Pepsodent toothpaste,

and Surf laundry detergent. HLL markets atta (a type of meal), maize, rice, and salt, and its

export division ships castor oil and fish. The company also sells bottled water and over-the-

counter healthcare products. Douglas Baillie, former president of Unilever's Africa Business

Group, became the firm's first expatriate leader in March 2006. Recently in February 2007,

the company has been renamed to "Hindustan Unilever Limited" to provide the optimum

balance between maintaining the heritage of the Company and the future benefits and

synergies of global alignment with the corporate name of "Unilever". This decision will be

put to the Shareholdrs for approval in next "Annual General Meeting”.

The Group's principal activities are to manufacture and market consumer products. The

Group operates through seven segments: Soaps and Detergents, Personal Products, Exports,

Beverages, Foods, Ice Creams and Other. The products include home and personal care

products, foods and beverages, industrial and agricultural products. Home and personal care

products consists of personal and fabric wash, household, oral care, skin and hair care,

deodorants, perfumery, colour cosmetics and baby care. Foods and beverages includes tea,

coffee, cooking fats and oils, bakery fats, ice creams, tomato products, fruit and vegetable

products, rice, salt, atta and rawa, marine products and mushrooms. Industrial and

6

agricultural products includes specialty chemicals, bulk chemicals, fertilisers, animal feeds,

seeds, plant growth nutrients, processed-tri-glycerides and agri commodities, yeast, leather,

footwear and carpets, thermometers and plantations. Some of its brands include Kwality

Walls ice cream, Lifebuoy, Lux, Breeze, Liril, Rexona, Hamam, Moti soaps,Pureit Water

Purifier ,Lipton tea, Brooke Bond tea, Bru Coffee, Pepsodent and Close Up toothpaste and

brushes, and Surf, Rin and Wheel laundry detergents, Kissan squashes and jams, Annapurna

salt and atta, Pond's talcs and creams, Vaseline lotions, Fair & Lovely creams, Lakmé beauty

products, Clinic Plus, Clinic All Clear, Sunsilk and Lux shampoos, Vim dishwash, Ala

bleach and Domex disinfectant

In 2005, Hindustan Lever Limited (HLL), the Indian subsidiary of Unilever, was the

country's largest fast moving consumer goods (FMCG) company. HLL's portfolio of brands

included Lux, Lifebuoy, Liril, Surf, Ponds Vaseline, Vim, Clinic All Clear and Axe. Most of

these brands had been market leaders for several years in their respective product categories.

Over the years, HLL had extended many of its popular brands with varying degree of

success. Some extensions like Clinic All Clear anti-dandruff shampoo to hair oil category

had been successful, while others like Ponds Toothpaste had been a dismal failure. In the

early 2000s, as HLL struggled to generate growth, brand extension became an important

strategic option. HLL extended its popular brands into the premium segment to increase its

profits. By early 2003, HLL had launched a number of brand extensions with varying degrees

of success. In 2003, in what seemed to be in response to intensifying competition in several

segments, HLL decided to strengthen its already overwhelming presence in the talcum

powder category where its brand, Ponds Dreamflower, was already the market leader. HLL

also extended Lifebuoy, Vaseline and Fair& Lovely to Talc category. Senior HLL executives

wondered if these brand extensions would yield the benefits they promised. M S Banga

(Banga), Chairman HLL explained:

"I believe that each extension must strengthen the core and the core must remain unchanged.

When the core of the equity is in one direction and the product extension is in another and

you graft the two, you are unlikely to succeed. The set of peripheral or extended values can

be changed over time."

7

HLL PRODUCTS

8

HLL ANNUAL REPORT 2006

Commenting on the performance of the company, Banga, said, `In 2006, we vigorously

pursued our strategy of strengthening our brands to deliver sustainable quality growth in the

face of intense competition, a sluggish economy and declining market. HPC power brands

beat the market by growing at 3.7 per cent. In fact, for the last three quarters they have grown

by 5.8 per cent. We have also continued to improve the profitability of our foods portfolio

and have increased gross margins by about five per cent, making these businesses

increasingly `fit for growth`. Our new strategy in ice-cream focusing on premium value-

added products in metros has started delivering and the business has reduced its losses by

almost half. We have made significant progress in divesting non-core businesses and have in

the last year effected the disposal of Seeds and Diversey Lever.

Speaking about the performance of the company, Sundaram, CFO, HLL, said in his opening

remarks that group sales for the year 2006 (comprising HLL and its subsidiaries) have

declined by 5.4 per cent essentially due to phasing out of traded exports. Home and personal

care grew by 3.4 per cent. A continuing thrust on innovation saw brands such as Lifebuoy

(+24%), Fair & Lovely (+18.6%), and Lax (+14.7%) deliver robust growth.

In Foods, the culinary business grew by 7.6 per cent, driven largely by a focus on seamless

integration, launch of value-added products and innovation, which saw the Knorr brand grow

by 56.5 per cent. A number of innovations have been seeded in the market place. These

include Knorr Annapurna 4 'o clock Tiffin, Kissan flavored spreads, and Knorr Annapurna

Spices and Cooking Aids.

HLL power brand strategy has helped its soaps business beat the declining market and post

strong growth in 2006. With consumer-excitable innovations, quantum jump in quality and

market activation, Lifebuoy, Lux and Liril posted double digit growth.

HLL`s 107-year-old brand, Lifebuoy, was re-launched with a new formulation as a milled

toilet soap and a completely new positioning as a family health soap. The strategy, to

maintain the leadership of India’s largest selling soap and extend its health equity beyond its

60 crore existing consumers restored the growth of Lifebuoy, said Banga.

9

Lux, which had been re-launched earlier in 2001, reaped the benefits of the significant

investment made in product quality and effective market activation. This led to stronger

double-digit growth during 2006. The brand`s equity has been further extended to open a

new premium segment of Face and Body Wash. The response to this extension has been

encouraging.

The growth of Liril was sparked with an exciting new addition, Liril Icy Cool Mint. Along

with Lux, Liril too has been extended as a body wash to open up this new premium segment.

In detergents, HLL`s mass market brand, Wheel, continued to post good growth with its

proposition of great clean with less effort. Following its successful re-launch earlier in 2003,

it had emerged as India`s number one detergent brand by value.

HLL initiated several steps to strengthen the quality of its mid-price and premium detergent

portfolio of Rin, Surf and Surf Excel. While overall shares have been held in a sluggish

market, Rin Shakti Powder, Surf and Sunlight have posted encouraging volume growths. The

test-market of Rin Supreme nil mineral bar in Tamil Nadu has shown good results.

HLL`s skin care business posted a 22 per cent growth in 2006, propelled by Power Brands.

Fair & Lovely and Pond`s skin applications, each posted double digit growth, with

innovative products, appropriate packaging and effective advertising, despite a declining

market.

Fair & Lovely further consolidated its leadership. Ayurvedic Fair & Lovely, launched during

the year, has become the second largest brand in the skin care market, after Fair & Lovely.

HLL`s beverages business continued its strategy of profitable growth, significantly

improving profitability in 2006, over and above the very impressive gains in the previous

year. This was achieved through portfolio upgradation by focussing on Power Brands, and

securing cost advantages through a radical re-engineering of the supply chain.

The conscious rationalisation of the brand portfolio coupled with the impact of historically

low prices of loose tea for the fourth year in a row, led to a decline in turnover. India`s packet

10

tea market itself declined by over nine per cent in 2006 due to a shift from packet tea to loose

tea.

HLL has achieved significant growth in the out-of-home segment, particularly in the tea and

coffee vending channel, a strategic thrust area for the business. The Lipton brand, with

products both in the hot and cold formats, has been extended to Bangalore, with a very

encouraging response. Focus on hot tea shops, particularly in the south, also continued with a

series of steps, like special packs, daily supplies and loyalty programmes. The out-of-home

segment and Lipton will be major growth drivers in the years to come.

Turn Over Rs 110 billion

EBITDA (Operational) Rs. 18 billion

Net Profit Rs. 16 billion

EPS (Rs. 1) Rs. 7.46

Market Capitalisation Rs. 463 billion

As on 14 th May 2007 .

Despite the increasing visibility of India's consumption story, Hindustan Lever is among the

laggards in the Nifty basket over the past one year. The stock sports a one-year return of 17

per cent against the Nifty's 33 per cent. Worries about competitive pressures on earnings and

the stock's relatively rich valuation levels have trimmed its valuation premium over smaller

rivals in the FMCG space. However, for investors looking for a low-risk investment option,

the stock offers a good entry point at the price levels of Rs 220-230. At this price, the stock

trades at about 30 times its trailing earnings. Lever's earnings growth has accelerated in

recent quarters on the back of resurgent demand for FMCGs, good cost management and an

improving product mix. A deep brand portfolio that endows the company with pricing and

bargaining power and newfound aggression in product launches promise steady earnings

11

growth. Lever's business model is strongly focussed on organic growth in the domestic

market and this makes for greater predictability in earnings than an acquisition-led strategy.

MORE GROWTH DRIVERS

Lever's sales growth rebounded strongly in the September quarter of 2006 after a blip in

June. Topline growth (for continuing businesses), at 11.8 per cent in the first nine months of

2006, compares well against smaller competitors. In a healthy trend, sales growth is

becoming more broad-based. Categories such as beverages and processed foods have been

contributing more actively to growth in recent times; the home and personal-care portfolio is

no longer the sole growth driver. After devoting the past few years to pruning and focussing

its portfolio, the company has stepped up the pace of product launches and brand extensions

in recent months. The September quarter alone saw product launches/relaunches under major

umbrella brands such as Lux, Sunsilk and Lifebuoy, with over 40 new extensions/variants

unveiled during the quarter. While renewed launch activity has sharply expanded outlays on

advertising (adspend grew by 34 per cent in 2006, against a sales growth of 11.8 per cent),

the aggression appears necessary in the face of heightened competition. Payoffs from recent

brand extensions and launches can be expected to flow in over the next few quarters. Recent

rollouts in cosmetics, personal wash and shampoo have also improved the company's product

mix. A large premium portfolio may translate into greater pricing power in an inflationary

environment and improve the overall margin profile. Several FMCG companies faced

pressure on profit margins in the September quarter on account of rising input costs, but

Lever's profit growth managed to keep pace with its sales, as a result of price increases in a

few categories and an improving product mix. An expanding suite of offerings may also

allow the company to garner more shelf space in modern retail stores and capture a higher

share of wallet from young urban consumers.

FOCUS ON DOMESTIC MARKET

Lever's continued focus on the domestic market, at a time when other FMCG players are on

an overseas acquisition spree, is also a point in its favour. Though an acquisition-led strategy

12

can deliver disproportionate payoffs, overseas acquisitions also bring with them issues of

integration and managing cross-border trade, which enhance earnings uncertainty. Lever's

earnings growth stems clearly from strong volume offtake from domestic consumers. Given

that the shift in the demographic profile of Indian consumers that is now underway, a focus

on the domestic market should deliver secular and predictable earnings growth.

PROBLEM AREAS

Despite strong earnings numbers, there are quite a few problem areas for Lever. One, the

company has lost market share in categories such as fabric wash, soaps and skin care over the

past year, due to the onslaught of focussed competitors in the respective categories. With the

new entrants to FMCG space steadily expanding, Lever may have to continue making heavy

adspends and spend on new launches to protect its turf. A presence across categories and

price points gives Lever the flexibility to offset market share losses in one category through

gains and price increases in another. But a continuing slide in market shares will be a cause

for concern. The next couple of quarters will bring solid evidence on whether the frenetic

pace of new launches in recent months has helped the company make up the slippage in

market shares.

Second, the possibility of an increasing share for modern organised retail with the entry of

retailing giants such as Wal-Mart into the Indian markets, may also pose a threat to the

entrenched FMCG companies. Indian FMCG players have traditionally enjoyed considerable

clout with their distributors, given that the latter are highly fragmented. Strong retailers could

wrangle higher distribution margins from FMCG companies and launch private label brands,

which could eat into the market shares of organised FMCGs. However, there may be

mitigating factors for Lever. Even if modern organised retail does make significant inroads

into the Indian market, Lever, with its large brand portfolio straddling categories and price

points, may be better positioned to wrangle favourable terms on shelf space and margins,

than local competitors operating in just one or two categories. An extensive distribution reach

outside of the urban centres may also help the company weather the onslaught of modern

retail better than its urban-centric competitors. As to private labels, it will certainly take time

and significant investments for them to garner market share in the Indian context and the

13

threat may be muted in brand-conscious categories such as personal care and shampoos,

which are the key growth drivers for Lever.

Rival FMCG companies are busy acquiring rival brands and businesses, some of them

beyond Indian shores, in a bid for growth. But market leader Hindustan Lever Ltd (HLL) is

convinced that a significant opportunity for consolidation and long-term growth lies within

its existing portfolio of brands. The company has pumped up its marketing investments in the

current year, with ad spends expanding by 34 per cent in the first nine months of 2006, to Rs

988 crore, in its effort to draw more consumers to its established brands. An ad budget of that

size wields enough muscle to fund promos for a slew of new product lines, brand extensions

and re-launches in the domestic market. The September quarter, for instance, saw HLL

unveiling 23 new variants of Sunsilk shampoos (including a new range of hair colourants),

five new variants of Pond's face-wash and two new variants of Lakme colour cosmetics and

skin care products. What's behind the expanding marketing spends? One key reason for the

aggressive spending could be intensifying competition in categories such as soaps and skin

care, where HLL's market shares have slipped in the six months from March to September.

By investing big bucks in advertising its brands, HLL hopes to "maintain and grow" its

market share and "consolidate market leadership" in categories where it operates, according

to a company spokesman. Apart from protecting its turf, investments are also going into

expanding presence through new product lines and brand extensions. In response to a

questionnaire, a HLL spokesman explains that recent new launches are motivated by one of

three factors.

NEW OPPORTUNITIES

One, leveraging new opportunities in categories where it already has a presence — products

such as Surf Excel Gentle Wash, Sunsilk Hair Expert and Bru Cappucino explore new niches

in existing segments.

Two, offering new benefits on existing brands — for instance, Lux Uplifting Firm, Axe

Click, Close Up Milk Calcium add new variants to popular HLL brands. Third, re-launches,

14

such as those of Lifebuoy Handwash and Wheel Active, which are designed to keep the

company's older brands relevant and contemporary to consumers.

The company appears quite alive to the marketing opportunity created by the increasingly

affluent urban workforce. New launches such as the Pond's International range, HLL says,

are aimed at tapping into the "emerging top-end opportunity" (read, the affluent urban

young). Though the company wouldn't comment on whether the sharp increase in ad-spends

this year is one-off or will be sustained, HLL is clear about its intention to be present across

categories and price points in the Indian markets. The company hopes to expand its already

substantial presence by "straddling the pyramid" — offering premium brands to the affluent,

value-for-money brands to middle-income consumers and affordable quality products to low-

income consumers.

Hindustan Lever formerly focused only on better-off households employing the

Ranganayakis of India, households that buy in greater volume and at a higher end. Now it

jostles for bargain display with upstarts such as privately held CavinKare of Chennai (makers

of Chik) to catch the attention of the country's poor.  This down market extension for the

giant also called HLL isn't by choice. In order to protect its $2.4 billion in annual revenues,

70% of which is from personal and home care items, HLL has had to chase an increasingly

value-conscious market. That's right--even as India's economy has taken off and a slice of the

populace enjoys relative affluence, the grind for anyone selling goods (hard or soft) hasn't let

up. Brands boast little pricing power, no matter how bright the prospects. Credit an

increasing range of retail choices.  After five years of stagnating sales HLL is back on track

to sell lots of bath goods. Third-quarter results due at the end of October were expected to be

good, and the second quarter showed 10% revenue gains--nothing compared with the 40%

average common in the latter half of the 1990s yet still a sign of revival. "We are on a new

growth path. Price value to shareholders will be from the top line," says Arun Adhikari,

managing director of home and personal care, which accounts for most of HLL's earnings.

Shares of HLL, after years of decline, have climbed 25% this year to around $4 on the

Mumbai stock exchange. 

But this time volumes started looking up last year only after deep price cuts. But that hurt

15

profits. Operating profits grew merely 8% last quarter as margins contracted in many

products. Unprecedented competition from both minnows and multinationals has affected the

net, said Manvinder Singh Banga, the former HLL chairman, who's now president of the

food division of Unilever, in the Indian outfit's latest annual report.  In addition to the

homegrown brands like CavinKare's, HLL is battling an old nemesis, Procter & Gamble,

which is striking a blow on the laundry front.  For 75 years HLL, owned 51% by its Anglo-

Dutch parent and affiliates, has been synonymous with consumer marketing in India. It

stumbled, on the one hand, when sales to the core customer base--the urban middle class and

the rural well-off--turned flat; a series of droughts stifled rural expenditures, and the urban

well-off were spending more on televisions and mobile phones than on personal products. "It

was a combination of sluggish market growth, declining rural incomes and restructuring

within HLL," says Adhikari, a graduate of the Indian Institute of Technology in Kanpur and

the Indian Institute of Management in Kolkata. 

More important, HLL's reluctance to sacrifice margins and take risks isolated an emerging

class of consumers. India's poor may have gotten no richer, but several regional upstarts built

businesses hawking products--such as shampoos, used earlier by the better-off--to the

underprivileged at low prices for single-use packets. 

HLL's national share in shampoo has dropped from 69% in early 2001 to 49% today. "HLL

was taken aback by Chik's popularity," says Hemant Patel, analyst for the sector at ENAM

Securities.  Meanwhile, P&G, which sells home and personal care products through an

unlisted arm in India, took a leaf from the competition's book--it slashed prices of premium

detergents Tide and Ariel by up to half last year to increase its measly market share. HLL,

which also had a profitable presence in detergents, was forced to follow the price down last

year. Market shares stabilized, but HLL operating profits plunged 28%.  In the past, when

competition was scarce, HLL had more pricing power, but frequent hikes are not possible

today. Rural incomes are flat and agricultural growth stagnant, despite India's seeming boom.

(And everybody is paying more for fuel.) Moreover, with organized retailing flexing its

muscles, margins will be further squeezed. So HLL has set about tweaking costs--some

Indian states are offering large tax breaks for manufacturing units. In 2001, Hindustan Lever

Limited (HLL), the Indian arm of the Unilever group, restructured its strategy to concentrate

16

on its core brands – brands that add to the bottom line of the company. This was because the

FMCG segment, which accounts for most of HLL’s business, witnessed lower growth rates

in comparison to the double digit growth rates in the nineties. Besides, the company’s core

competence was in these consumer brands where the top 30 of its brands contributed to 75%

of its sales. Based on these factors, HLL identified 30 national power brands and 10 regional

brands from its portfolio of around 110 brands and directed its entire marketing efforts at

developing and building them. Focus on select brands helped HLL to increase the scale of

resources and spend more per brand. According to Mr. M. S. Banga, Chairman, HLL, "Our

objective is to deliver directionally with the focus on certain key products.

A Merrill Lynch report on HLL says that growth rates are now looking better from a surcease

in markdowns, but the fundamental issues of stiff competition have not changed. The report

finds HLL's valuation at 30 times earnings unjustified for a business likely to grow at best

15%

Overall, despite problem areas and a relatively rich valuation for the stock, Hindustan Lever

appears a reasonable investment option within the FMCG space on account of its improving

earnings prospects and ability to piggyback on the domestic consumption theme.

17

PROCTOR AND GAMBLE (P&G)

Procter & Gamble Co. is an American global corporation based in Cincinnati, Ohio that

manufactures a wide range of consumer goods. Its European Headquarters are in Geneva,

Switzerland. William Procter, a candlemaker, and James Gamble, a soapmaker, formed the

company known as Procter & Gamble in 1837. The two men, immigrants from England and

Ireland respectively, who had settled earlier in Cincinnati might never have met had they not

married sisters, Olivia and Elizabeth Norris, whose father convinced his new son-in-laws to

become business partners. On October 31, 1837, as a result of Alexander Norris' suggestion,

a new enterprise was born: Procter & Gamble. The company prospered during the nineteenth

century. In 1859, sales reached one million dollars. By this point, approximately eighty

employees worked for Procter & Gamble. During the American Civil War, the company won

contracts to supply the Union Army with soap and candles. In addition to the increased

profits experienced during the war, the military contracts introduced soldiers from all over

the country to Procter & Gamble's products. Once the war was over and the men returned

home, they continued to purchase the company's products.

Worldwide producer of consumer, household and pharmaceutical goods (in addition, P&G

manufactures chemicals as input for its own products as well as for the chemical processing

industry, and P&G produces Soap Operas as part of its elaborate marketing strategy in order

to hook female customers up to its brands). Procter & Gamble is a giant in household

products, and the company which defined many marketing strategies we now take for

granted. It was the first company to advertise nationally direct to consumers (in 1880) and it

literally created the concept of "soap opera" by sponsoring radio and television dramas

targeting women. Procter & Gamble (P&G) is America’s biggest maker of household

products, with at least 250 brands in six main categories: laundry and cleaning (detergents),

18

paper goods (toilet paper), beauty care (cosmetics, shampoos), food and beverages (coffee,

snacks), feminine care (sanitary towels) and health care (toothpaste, medicine).Other

inventions included the first Fluoride-based toothpaste (Crest), the revolutionary synthetic

detergent Tide, and the first disposable nappy, Pampers. P&G found life in the first years of

21st century more difficult than it may have expected, with earnings below expectations and

a series of management shake-ups as a result of under-performance. The group got back on

track during 2002 with the purchase of Clairol and Wella and a renewed focus on core

products. Following dynamic performance in 2003 and 2004, P&G demonstrated the strength

of its recovery with the announcement in 2005 that it had agreed a deal to acquire legendary

personal care products rival Gillette. Advertising Age estimated global measured advertising

expenditure of $8.2bn in 2005, making P&G the world's #1 advertiser. P&G also makes pet

food and PUR water filters and produces the soap operas Guiding Light and As the World

Turns. Finally, P&G produces chemicals. Today, P&G markets its products to more than five

billion consumers in 130 countries. The company has on-the-ground operations in over 70

countries around the world, and employs more than 106,000 people. Last year’s (2000)

turnover equaled $37 billion [£25,6 billion]. Fortune 500 lists America’s Top Performing

Companies. P&G ranks #39 on the list, before its main competitor Johnson & Johnson (#57)

and Kimberly-Clark (#142). P&G also outperforms Unilever and Nestle, the company’s main

competitors overseas.

Adbrands coverage of Procter & Gamble is split across several different pages. As of July

2006, the group operates three main global business units: P&G Beauty & Health, P&G

Household Care and P&G Gillette. In addition, Adbrands tracks several geographic units:

Procter & Gamble Latin America and Procter & Gamble Europe, as well as Procter &

Gamble UK, Procter & Gamble Germany, Procter & Gamble France; Procter & Gamble

India and Procter & Gamble Japan. Individual brands covered include Pampers, Charmin,

Crest, Iams, Clairol, Always, Tampax, Olay, Pantene, Wella, P&G Prestige Products, Tide /

Ariel, Folgers and Pringles

In the 1880s, Procter & Gamble began to market a new product, an inexpensive soap that

floats in water. The company called the soap Ivory. In the decades that followed, Procter &

Gamble continued to grow and change. The company became known for its progressive work

19

environment in the late nineteenth century. William Cooper Procter, William Procter's

grandson, established a profit-sharing program for the company's workforce in 1887. He

hoped that by giving the workers a stake in the company, they would be less inclined to go

on strike. Over time, the company began to focus most of its attention on soap, producing

more than thirty different types by the 1890s. As electricity became more and more common,

there was less need for the candles that Procter & Gamble had made since its inception.

Ultimately, the company chose to stop manufacturing candles in 1920. In the early twentieth

century, Procter & Gamble continued to grow. The company began to build factories in other

locations in the United States, because the demand for products had outgrown the capacity of

the Cincinnati facilities. The company's leaders began to diversify its products as well and, in

1911, began producing Crisco, a shortening made of vegetable oils rather than animal fats. In

the early 1900s, Procter & Gamble also became known for its research laboratories, where

scientists worked to create new products. Company leadership also pioneered in the area of

market research, investigating consumer needs and product appeal. As radio became more

popular in the 1920s and 1930s, the company sponsored a number of radio programs. As a

result, these shows often became commonly known as "soap operas”. Throughout the

twentieth century, Procter & Gamble continued to prosper. The company moved into other

countries, both in terms of manufacturing and product sales, becoming an international

corporation with its 1930 acquisition of the Newcastle upon Tyne-based Thomas Hedley Co.

Procter & Gamble maintained a strong link to the North East of England after this

acquisition. In addition, numerous new products and brand names were introduced over time,

and Procter & Gamble began branching out into new areas. The company introduced Tide

laundry detergent in 1946 and "Prell" shampoo in 1950. In 1955, Procter & Gamble began

selling the first toothpaste to contain fluoride, known as "Crest". Branching out once again in

1957, the company purchased Charmin Paper Mills and began manufacturing toilet paper and

other paper products. Once again focusing on laundry, Procter & Gamble began making

"Downy" fabric softener in 1960 and "Bounce" fabric softener sheets in 1972. One of the

most revolutionary products to come out on the market was the company's "Pampers", first

test-marketed in 1961. Prior to this point disposable diapers were not popular, although

Johnson & Johnson had developed a product called "Chux". Babies always wore cloth

20

diapers, which were leaky and labor intensive to wash. Pampers simplified the diapering

process.

Over the second half of the twentieth century, Procter & Gamble acquired a number of other

companies that diversified its product line and increased profits significantly. These

acquisitions included Folgers Coffee, Norwich Eaton Pharmaceuticals, Richardson-Vicks,

Noxell, Shulton's Old Spice, Max Factor, and the Iams Company, among others. In 1994, the

company made headlines for big losses resulting from leveraged positions in interest rate

derivatives, and subsequently sued Bankers Trust for fraud; this placed their management in

the unusual position of testifying in court that they had entered into transactions they were

not capable of understanding. In 1996, Procter & Gamble again made headlines when the

Food and Drug Administration approved a new product developed by the company, Olestra.

Also known by its brand name Olean, Olestra is a substitute for fat in cooking potato chips

and other snacks. Procter & Gamble has expanded dramatically throughout its history, but its

headquarters still remains in Cincinnati. {Source, Ohio History Central.} In January 2005

P&G announced an acquisition of Gillette, forming the largest consumer goods company and

placing the Anglo-Dutch Unilever into second place. This added brands such as Gillette

razors, Duracell, Braun, and Oral-B to their stable. The acquisition was approved by the

European Union and the Federal Trade Commission, with conditions to a spinoff of certain

overlapping brands. P&G has agreed to sell its SpinBrush battery-operated electric

toothbrush business to Church & Dwight. It also plans to divest Gillette's oral-care product

line, Rembrandt. The deodorant brands Right Guard, Soft & Dri, and Dry Idea were sold to

Dial Corporation.[1] The companies officially merged October 1, 2005. P&G provides

branded products and services of superior quality and value that improve the lives of the

world's consumers. As a result, consumers will reward us with leadership sales, profit and

value creation, allowing our people, our shareholders and the communities in which we live

and work to prosper.P&G's dominance in many categories of consumer products makes its

brand management decisions worthy of study.

21

PRODUCTS OF P& G

22

LANDMARKS OF THE COMPANY

In 1993, Procter & Gamble Home Products is incorporated as a 100% subsidiary of The

Procter & Gamble Company, USA. Procter & Gamble Home Products launches Ariel

Super Soaker.

In 1993, Procter & Gamble India divests the Detergents business to Procter & Gamble

Home Products.

In 1995, Procter & Gamble Home Products enters the Haircare Category with the launch

of Pantene Pro-V.

In 1997 Procter & Gamble Home Products launches Head & Shoulders shampoo.

In 2000, Procter & Gamble Home Products introduced Tide Detergent Powder - the

largest selling detergent in the world.

In June 2000, Procter & Gamble Home Products Limited launched Pantene Lively Clean

its unique Pro-Vitamin formula cleans oil-build up, dirt and grime in just one wash,

delivering lively, free-flowing and sparkling-clean hair.

In August 2000, Procter & Gamble Home Products Limited launched New Ariel Power

Compact detergent with a new global technology that breathes new life into clothes, by

removing dinginess from them and restoring the original colors of the fabric, by detecting

and removing deposits which are left behind from successive washes.

In November 2000, Procter & Gamble Home Products Limited presented India in the first

International Hair Styling and Beauty Expert Contest- Hair Asia Pacific 2000 in

collaboration with Sri Lankan Association of Hairdressers and Beautician.

During this period, Procter & Gamble Home Products also re-launched the international

range of Head & Shoulders, best-ever Anti-dandruff shampoo with an improved formula,

new pack-design and logo, in three variants - Clean & Balanced, Smooth & Silky and

23

Refreshing Menthol, which offers the fine combination of anti-dandruff efficacy and hair

conditioning.

In January 2001, Procter & Gamble Home Products Limited and Whirlpool India Ltd.

launched a special 'Ariel - Whirlpool Superwash' offer, making washing machines more

affordable to the people of Hyderabad. On purchase of either a 500gms, 1kg or 1.5kg

economy pack of New Ariel Power Compact, consumers are automatically eligible to buy

a Whirlpool Washing Machine for as low as Rs.238/- in Equal Monthly Installments for

24 months, by filling in the application form that comes with the Ariel pack and

contacting any one of the Whirlpool dealers mentioned on the pack.

In January 2004, Procter & Gamble Home Products Limited announced the launch of

Rejoice – Asia’s No. 1 shampoo, in India. Rejoice’s patented Micro-Silicone

conditioning technology gives twice as smooth, and easy to comb hair versus ordinary

shampoos, at affordable prices in 100 ml bottles and 7.5 ml sachets.

In March 2004, Procter & Gamble Home Products Limited reduced the prices of Ariel

and Tide bags (large packs) by 20-50%, while maintaining the superior quality. The

superior quality one kg pack of Tide now cleans a family’s one month laundry in just

Rs.23/-, while a one kg pack of Ariel cleans a family’s one month laundry in just Rs.50/-.

In April 2004, Procter & Gamble Home Products Limited announced the launch of

Pantene Hair Fall Control, which is designed to free women of their hair fall concerns by

reducing hair fall due to breakage by up to 50% within just two months, thus giving them

stronger, thicker looking and beautiful hair. The prices of Pantene 100ml and 200ml

bottles were reduced by 16%, offering superior value to consumers.

P&G defined many marketing strategies we now take for granted. Marketing (still gaining

importance) is definitely an important key to P&G’s success. As one critic put it: "Within a

paternalistic corporate culture, P&G pioneered in brand management, in consumer surveys

for marketing research, and in new product research and development. One reason for P&G's

domestic success has been their reliance on a combination of consumer research, advertising,

and distribution techniques."

24

However, P&G has not been very successful recently. ‘Annual sales growth has been

slowing over the last few years, from 5 percent in 1996 to 2.6 percent in 1999’. The company

stumbled badly in 2000 missing analysts’ profit expectations and causing its famously

reliable stock to plummet from $103 (£71,3) in January 2000 to $64 (£44,3) in June 2001 . In

1999, CEO Durk Jager kicked off Organization 2005 in order to forge better performance.

Organization 2005 includes cutting 17,000 workers over the next three years and

reorganising the company's corporate structure from four geographic business units to seven

global business units based on product categories.

Organization 2007 also aims at changing P&G's culture from a conservative, slow-moving,

bureaucratic behemoth to that of a modern, fast-moving, Internet-savvy organisation. P&G

wants to make faster and better decisions, cut red tape, wring costs out of systems and

procedures, fuel innovation, set more aggressive sales goals and nearly double its revenue.

The catalyst for all this change is IT.’

In addition, P&G wants to abandon its legacy of secrecy. ‘Its new spirit of openness is most

evident on the Internet. A year ago, it was a stodgy, nondescript site where no one other than

investors or job seekers had any reason to go to. Today, you see a consumer-friendly portal

with loads of information about P&G products.’ So far, Organization 2005 has had little to

show. However, P&G stresses the company will pick the fruits of the ambitious restructuring

plan in the near future. "This restructuring," former CEO Millen explained, "will ensure that

P&G is well placed to address the issues facing manufacturers, retailers and wholesalers at

the outset of the 21st century. Examples of these issues are the internationalisation and

consolidation of retailing, consumer loyalty and retention, category management, the

potential effects of the Euro currency and dramatic advances in information technology."

One of P&G's new strategies is linking up with other companies to extract as much value

from its brands as possible. Coke and P&G announced a $4bn [£2,77bn] alliance. The

alliance would involve the union of some 40 consumer products (including Sunny Delight,

Pringles and Minute Maid) under the umbrella of a Coke-P&G joint venture. P&G was

hoping Coke’s far-reaching distribution network could give the company a boost. P&G’s

25

renowned R&D capacities were attractive to Coke. Eight months later the consumer goods

behemoths called the wedding off. ‘A spokesman for Coke said: "After many months of due

diligence with Procter & Gamble, we felt that we could unlock the value of our brands more

effectively and profitably by retaining full control of them."

However, P&G successfully tied up with chewing gum giant the Wrigley Company. The deal

will allow P&G to cash in on the global gum, mint, and breath-freshener market. This is

bigger than the toothpaste market and equal in size to the shampoo or skincare sectors. ‘We

will soon be able to sweeten our mouths with Crest gum, Crest mints and Crest breath

freshener’, the Guardian reports ]. P&G has recently announced it will sell the Jif and Crisco

brands in a bid to get rid of under-performing brands. P&G and J.M. Smucker Co., which

makes a wide variety of jams, jellies and other foods, is acquiring the Jif peanut butter and

Crisco cooking oil brands from P&G for $1 billion in stock .

There is also a lot of interest in the possibility of a new brand from P&G, especcially one

with an Olay offiliation. With the P&G marketing muscle behind such a brand, the company

could possibly create some genuine excitment in what has been a very soft category lately. It

might also replicate the success Maybelline had when it introduced Revitalizing last year.

That line, targeted to women over 35--the same age group as Olay users--has been extremely

successful. Within Nascar Sports, Tide is the primary sponsor of PPI Motorsports #32 Ford

Taurus with Ricky Craven driving. Tide’s NASCAR sponsorship began in 1987 and

NASCAR has since become America’s number one spectator sport. Through packaging and

in-store promotional materials, Tide has built a strong awareness of, and loyalty to, its racing

program. Retailers purchase product and materials due to the strong in-store presence and the

popularity of NASCAR among their loyal customers. The special Tide Racing packages and

NASCAR collector offers are popular with this audience. In an effort to leverage Tide’s

association with NASCAR, Tide’s packaging and promotion materials have traditionally

evoked the imagery and excitement of NASCAR, taking on a racing-oriented appearance.

Landor’s challenge was to maximize the NASCAR association, while continuing to build the

brand’s core equities in a relevant way to the entire target audience, which includes both

NASCAR and non-NASCAR fans. Beginning in 2002, Landor developed a creative strategy

to couple Tide Racing sponsorship with Tide’s core benefit of superior cleaning. Tide’s

26

primary target is women aged 20-55 with children. Landor developed promotional materials

that used images of the Tide Racing family at play and headlines with racing connotations to

connect Tide to NASCAR in a relevant fashion. The result was a program that uses Tide’s

sponsorship of NASCAR as an opportunity to continue to build the brand’s core equities and

drive home the brand benefit to Tide’s target audience.

SWOT ANALYSIS

STRENGTHS: Well-established distribution network extending to rural areas.

Strong brands in the FMCG sector.

Low cost operations

WEAKNESSES: Low export levels.

Small scale sector reservations limit ability to invest in technology and achieve

economies of scale.

Several "me-too’’ products.

OPPORTUNITIES: Large domestic market.

Export potential

Increasing income levels will result in faster revenue growth.

27

CONCEPTUAL DISCUSSION ABOUT THE COMPANY

From 1 brand = 1 product = 1 promise to 1 brand = many product = many promise, the shift

in the classic brand concept. A study on the brand extension in light of consumer behaviour”

To successfully position your brand above your competitor’s continuing fight for your

customers, you must develop a brand proposition that when conveyed in marketing and

advertising campaigns, will provide an attractive, unique, and relevant message to current

and potential customers. In addition, this proposition must be realized and consistently

echoed by senior executives, customer support, R&D teams, marketing staff, sales staff, and

strategic partners.

Brand extensions have proliferated over the past decade, and the rationale behind endowing a

new product with a well-known brand name is to provide consumers--and the trade--with a

sense of familiarity and security by leveraging positive brand characteristics in a new product

category. Although brand extensions have become a standard strategy for new product

introductions in today’s fiercely competitive marketplace, the extant literature has examined

brand extensions as if they occur in a competitive vacuum. In today’s fiercely competitive

marketplace, brand extensions have become a standard strategy for new product

introductions. Brand extensions have proliferated over the past decade, escalating to an all-

time high, with estimates ranging from 81% to 95%, by the beginning of this decade (The

Wall Street Journal January 1992). The rationale behind endowing a new product with a

well-known brand name is to provide consumers--and the trade--with a sense of familiarity

and security by leveraging positive brand characteristics in a new product category.

The 1980s witnessed a Copernican revolution in the understanding of the working of the

brands. Purchases of strong brands were seen as a short cut to buy customers mind (Kapferer

1992). In fact the distinguishing aspect of the modern marketing has been its focus upon the

creation of differentiated brands. Market research has been used to help identify and develop

bases of brand differentiation (Aaker1991). A trademark or brand identifies a product and its

sources, but it does even more (Levitt 1966). Along came brand extension. Today brand

extension strategies are widely employed because of beliefs that they built and communicate

28

strong brand positioning, enhance awareness and increase profitability (Taylor and Bearden

2002).

Brands are often extended beyond their original categories to reduce the cost and risk of

entering a new product category (Aaker 1991). Research has proved that the success of brand

extension depends on the transfer of parent brand awareness and associations to the extension

(Aaker 1991). The transfer of these quality perceptions is the key in umbrella branding

(Wernerfelt 1988), in which the same brand name is used for several products. Ideally, the

parent brand’s associations can contribute to a complex yet well defined brand image to the

extension. A great benefit of brand extension is the instant communication of this salient

image (Pitta and Katsanis 1995). Furthermore, brand extension can be used to take advantage

of marketplace growth opportunities (Dawer and Anderson 1994; Lane 2000) and to exploit

positive brand equity (Keller 1993; Kumar and Ganesh 1995; C.S. Park and Srinivasan 1994;

Shocker, Srivastava and Ruekert 1994).

Brands are direct consequences of the strategy of market segmentation and product

differentiation. It performs several functions in the mind of the consumers. (Kapferer 1992).

Functions Consumer Benefits Identification To quickly see and make sense of the offer

Practicality to allow savings of time and energy through identical repurchasing and loyalty.

Guarantee To be sure of the quality no matter where or when you buy the product

Optimisation To be sure of buying the best product in its category, the best performer for a

particular purpose. Characterisation To have conformation of your self-image or the image

that you present to others Continuity Satisfaction brought about through familiarity and

intimacy with the brand that you have been consuming for years. Hedonistic Satisfaction

linked to the attractiveness of the brand, to its logo, to its communication. Ethical

Satisfaction linked to the responsible behaviour of the brand in its relationship with society.

Thus brand acts as a source of value for the consumers. The classification made by Nelson

(1970) and by Darby and Karni (1973) shows the clear distinction that consumers have in

their mind with regards to the following types of product characteristics

The qualities that are noticed by contract, before buying

The qualities that are noticed uniquely by experience, thus after buying

Credence qualities which cannot be verified even after consumption and which you have

to take on trust. In the second case the role of brand image plays an important part, it is

29

the collective representation, which is shaped over time by the accumulated experiences

of close relations, word of mouth and advertising (Kapferer1991). In the third case the

brand needs to add aura of make-believe when it is consumed.

Brand extension is a marketing strategy in which a firm that markets a product with a well-

developed image uses the same brand name but in a different product category. Brands use

this as a strategy to increase and leverage equity (definition: the net worth and long-term

sustainability just from the renowned name). An example of a brand extension is Jello-gelatin

creating Jello pudding pops. It increases awareness of the brand name and increases

profitability from offerings in more than one product category. However, a brand's

"extendibility" depends on how strong consumer's associations are to the brand's values and

goals. Ralph Lauren's Polo brand successfully extended from just clothing to home

furnishings like bedding and towels. Both clothing and bedding are made of linen and fulfill

a similar consumer function of comfort and homeliness. Arm & Hammer leveraged it's well-

known brand equities—from basic baking soda into the oral care and laundry care

categories. By emphasizing its key attributes, the cleaning and deodorizing properties of its

core product, Arm & Hammer was able to leverage those attributes into new categories with

success.

Corporate or brand licensing represents a growing share of the many trademark license

agreements developed each year. Given the value of these brands, it's surprising that few

licensor's use a formal valuation process for new license opportunities. Although valuation

remains a hotly debated subject, a modified 'value in use' approach can help to determine the

market value of brand extension license opportunities.

Numerous studies have found that brands provide greater value than other corporate assets.

Perhaps best known is the “Global Brands” study conducted by Interbrand; it concludes that

brands account for more than a third of shareholder value (on average), and in many cases,

more than 70% of shareholder value.

Today, there is a consensus among many academics, analysts and marketers that a strong

brand can provide powerful competitive advantages such as greater customer loyalty, higher

margins, and opportunities for brand extension and licensing.

30

The recognition that brands are powerful yet underutilized assets is why trademark licensing

has become a popular marketing strategy. Because many brand owners don't have the

resources to pursue every viable business opportunity, they utilize trademark licensing to

enter new markets beyond their core competencies.

Some of the basic reasons that generally contribute to the brand extension are the following

THE SHIFT IN THE CLASSIC BRAND CONCEPT Innovations allow brands to remain up to date and demonstrate an unceasing urge to detect

and respond to the profound change in customer tastes and expectations. Thus if the brand do

not follow the developments, then they run the risk of being left behind. (Kapferer 1992)

The second factor being the cost of advertising, huge investment is required for product up-

gradation. The cost of advertising makes it difficult to sustain many brands; companies prefer

to concentrate on few brands. (Kapferer 1992) Successful companies follow the principles of

building global brand to cut cost (Aaker and Joachimsthaler 1999).

The final benefit is that it enhances the parent brand or the core product also. It might help in

reinforcing the core product’s brand instead of weakening it (Nageswararao and Rajakumar

1999) Brand extension is a way of defending a brand at risk in the basic market. (Kapferer

1992)

Brand extension gives access to an accumulated image capital. Potential buyers hopes to

derive immediate profits from the brands by extending it and earning royalties. (Kapferer

1992)

Brand extension helps the firm to move away from being a mono-product. (Kapferer 1992)

The advertising of the parent brand can also bring about cross-fertilization (Keller 1993). If a

firm is looking for growth by exploiting its assets, then brand extension is a natural strategy

for it. The already strong brand can be penetrated into a new product category or it can be

licensed to others for use (Aaker 1991).

Brand extension can comprise of following areas

New product

New customer

New format

31

New channel

New business

Brand migration

Brand recycling

Kapferer has classified typology of brand extension into mainly close extension, also called

as continuous extension and discontinuous extension. Thus there would be brands that are

very close to each other and others which eliminate technological synergies and physical

links between products that form real the Shift in the Classic Brand Concept diversification.

This would result in having brands with narrow spectrum of presence or called as

‘specialised brands’ and brands with wide spectrum or called ‘generalist brands’ (Kapferer

1992). The strategy that a company would more or less depend upon is, what consumers’

perceive about the brand. The perception about the brand is built over a period of time. Aaker

views brand extension in a similar way. Here extensions are differentiated on the basic

difference of whether the extension is in the same or different product category (Aaker

1991).

WHY IS SUCCESSFUL BRANDING SO IMPORTANT TODAY?Though brand development is by no means a new idea, today consumers have more access to

information and more choices than ever before. The result is higher expectations, and the

brand’s message must captivate the consumer immediately. Companies seeking to experience

long-term success will have to create the most compelling, relevant, and consistent brand

experiences for their customers.

Remember: “You can’t escape your brand. Either you make the customer experience, or it

gets made without you.” Prophet Corp.

In order to successfully develop the most effective branding strategy, a firm understanding of

what a brand is must first be answered.

Brand line extensions reduce risk associated with new product development. Due to the

established success of the parent brand, consumers will have instant recognition of the

product name and will be more likely to try the new line extension. As a result, promotional

32

costs are much lower for a line extension than for a completely new product. More products

expand the company’s shelf space presence - enhancing brand recognition.

THE BRAND IS EVERYTHINGScott Bedbury is a leading branding consultant that has worked closely with companies like

Nike and Starbucks, has written a book titled, “A Brand New World”, published by Viking

Press. In it he gives excellent thorough definition of what a brand is.

“A brand is the sum of the good, the bad, the ugly, and the off-strategy. If is defined by your

best product as well as your worst product. It is defined by award-winning advertising as well

as by the god-awful ads that have somehow slipped through the cracks, got approved, and,

not surprisingly, sank into oblivion. It is defined by the accomplishments of your best

employee-the shining star in the company who can do no wrong-as well as the mishaps of the

worst hire that you ever made. It is also defined by your receptionist and the music your

customers are subjected to when placed on hold. For every grand and finely worded public

statement by the CEO, the brand is also defined by derisory consumer comments overheard

in the hallway or in a chat room on the Internet. Brands are sponges for content, for images,

for fleeting feelings. They become psychological concepts held in the minds of the public,

where they may stay forever. As such you can't entirely control a brand. At best; you only

guide and influence it.”

THE BRAND’S CREEDThe development of a branding strategy must begin with identifying the brand’s (the

business’) core values. These are qualities which an organization deems most important. For

instance, an organization or business may identify its core values to include: honesty,

integrity, excellent communication, and client satisfaction.

Though these values are usually never revealed to the public, they are evident in every aspect

of the organizations’ business routine, from customer service, to direct marketing, to website

design, to teleconferences, to the treatment of its employees and strategic partners. This

conveys a consistent perception to the target audience in every medium of communication

that is used. Consideration for these values should not be taken lightly for these values

33

represent the “creed” for the business and become the cornerstone for developing the brand’s

proposition. And though the brand’s proposition may change from time to time, the brand’s

core values should never change. An important aspect of brand development is to create a

positive emotional attachment to the brand which creates a response in its audience without

the audience seeing the product or directly experiencing the service. Again from Bedbury’s

book; “think Godiva chocolates for a moment: the very name, perhaps even the logo,

conjures up an image of sinful indulgence. Yes, it represents chocolate or ice cream, but it is

the feeling and the anticipation of that feeling that the brand conveys most compellingly.”

Positive emotional bonding comes from a mutually beneficial relationship built on intrigue,

trust, understanding, and support. These are qualities that often separate colleagues from

friends, and friends from family. Build your brand promise on the basis that your product

will deliver positive, relevant, and unique emotional qualities. This may be the most difficult

and often overlooked aspect of successful brand development. This is also where a lack of

comprehensive research into identifying the target audience’s needs and desires can either

make or break an attempt at developing a positive emotional attachment between the brand

and its audience. If not done effectively, a seemingly insurmountable communication gap

will develop between the internal brand perception and the audience’s actual perception.

While there can be significant benefits in brand extension strategies, there can also be

significant risks, resulting in a diluted or severely damaging a brand image. Nevertheless,

wrong brand extension may dilute and deteriorate the core brand and damage the brand

equity (Aaker, 1990; Martinez and Pina, 2003). Most of literatures were focus on the

consumer evaluation and positive impact on parent brand. In practical cases, the failures of

brand extension are at higher rate than success. On the other hand, few studies show that

negative impact may dilute brand image and equity (Loken and John, 1993; Roedder-John et

al., 1998). In spite of the positive impact of brand extension, negative association and wrong

communication strategy do harm the parent brand even brand family (Aaker, 1990; Tauber,

1981, 1988). Brand line extensions do present two potential threats. First, if the new line

extension fails to satisfy, consumers’ attitudes toward other products carrying the same brand

name may be damaged. Secondly, there is potential for intra-firm competition between the

parent product and the line extension, or between two or more line extensions. The key to

34

avoiding intra-firm competition is to clearly differentiate between products. Although

similar, the products must be different enough that they will not compete with one another as

much as they will rival other companies’ brands.

35

TYPES OF BRAND EXTENSIONHORIZONTAL EXTENSION

These apply or extend the existing product’s name to a new product in the same product class

or to a product category new to the company. There are two types of horizontal brand

extension that differ in terms of their focus (Aaker and Keller 1990). They are termed line

extensions and franchise extensions. Line extensions involve a current brand name that is

used to enter a new market segment in its product class (example- Perk and Coffee Perk, in

India). This is most successful in the case of extensions being in almost the same business as

the core product. In contrast, franchise extension uses the current brand name to enter a

product category new to the company (Tauber 1981).

VERTICAL EXTENSION

In the case of vertical extension, a related brand is introduced in the same category but with a

different price and quality balance. The new products can extend vertically in two directions,

upscale, involving a new product with higher price and quality characteristics than the

original; or downscale, involving a new product with lower quality and price points. The

vertical upscale extension carries lesser risk and seems more appealing to the management.

In this case functional products are ruled out. For example, when Gillette came up with a

gold tone plated luxury Trac II razor in a hinged prestige gift box, there were few buyers.

Upscale extensions of prestige products are more acceptable, for example, limited luxury

editions of automobiles. The vertical downscale extension is more successful in functional

products such as a stripped down version of computer software at a lower price. The new

product is inferior to the earlier product but the quality-price balance is appropriate. Though

in the case of prestige oriented product, the core audience is bothered and feels cheated with

the ‘prestige’ of their product being tarnished. For example, with the introduction of Pierre

Cardin pens (at the price of Indian rupees seven each), a part of their core audience moved

away as their ‘designer’ label was now within reach of everyone.

There are some essential features of brand extension in a competitive situation and is

comprised of two crucial strategic decisions:

Against which competitive brand to position the new product

36

The selection of product attributes or benefits that provide a differential advantage for the

product compared to the competitive offerings and to attain consumers mind share (Lane

1980). This emphasises three key factors in the implementation of the brand extension study

namely, the competitive brand in the extension category, the attributes of the extension brand

and the ‘perceived fit’ between the brand and the extension. A high fit usually spells success

like in the case of Colgate toothpaste extending into the toothbrush segment under the

general attribute of dental care. On the other hand a low fit would spell otherwise, like the

case of the owners of Pan-Parag in India coming up with their range of pens under a new

name Rotomac, as they feared the name Pan-Parag would not go down well with the users as

the name of a pen.

37

BRAND EXTENSIONS: WHAT MAKES THEM ACCEPTABLE?Which factors make a brand extension more acceptable or likable? If it is a very different

extension, consumers are not likely to accept it easily. However, if it is only moderately

different, consumers are more likely to accept and possibly embrace the extension, depending

on certain conditions. For example, factors that increase the consumer’s acceptance of a

moderately different extension include the mood of the consumer (e.g. Barone & Miniard,

2002), frequency of repetition of advertisements for the extension (e.g. Lane, 2000; Klink &

Smith, 2001), and whether the extension is coming from a “broad” brand or a “narrow” brand

(Boush & Loken 1991; Meyvis & Janiszewski, 2004). Narrow brands tend to be associated

with a specific product category (e.g., Campbell’s soup). In this case, people are less likely to

accept brand extensions to other product categories (e.g., Campbell’s spaghetti sauce).

Further, when a brand is a nonprestige brand, consumers are more likely to accept upward or

downward brand extensions in terms of price. But, when a brand is a prestige brand, owners

are less likely to accept a downward brand extension because they want to maintain brand

exclusivity (Kirmani, Sood, & Bridges, 1999). Positive past experiences with a brand can

also increase consumers’ expectations about brand extensions which need to be met (e.g.

Kim & Sullivan, 1998).

Brand Enhancement versus Brand DilutionProminent and consistent brand extensions shore up brands in various ways. First, umbrella

branding strategies save costs in terms of brand development and marketing expenses (e.g.

Smith & Park, 1992). Second, advertising for brand extensions helps parent brands, not only

in terms of increased brand recognition, but also sales (e.g. Balachander & Ghose, 2003).

Third, product experiences of one brand extension may encourage consumers to try other

extended products of the brand (e.g. Swami Nathan, Fox, and Reddy, 2001). Finally, vertical

extensions can upgrade the image of a brand. For example, if a brand introduces a higher

level of technology, the extension enhances the perception of that brand (Jun, Mazumdar &

Raj, 1999). Quite the reverse, brand extensions also run the risk of watering down parent

brands. Failure or inconsistent information dilutes the brand. For example, Loken and John

(1993) found that when Johnson & Johnson (a brand associated with high gentleness)

introduced a new product with low gentleness, the extension affected the parent brand

38

negatively. Extensions can also dilute beliefs about non-flagship products of the parent

brand, while beliefs about flagship products are less vulnerable to dilution (John, Loken, &

Joiner, 1998). In addition, inconsistent upward or downward vertical moves or competitor

counter-moves can affect parent brands negatively (e.g Kirmani, Sood, & Bridges, 1999).

Brand Dilution: What Mitigates Dilution?There are some strategies intended to help to mitigate dilution. When prestige brands extend

downward, or when brands extend to low-quality products, sub-branding can be used to

reduce dilution (e.g. Kirmani, Sood, & Bridges, 1999) . Some researchers show that

employing a cobrand for an extension can help guard the original brand against negative

effects, insofar as the co-brands’ attribute profiles are complementary rather than

noncomplementary (Park, Jun, &

Shocker, 1996). In some cases, if the brand extension is already perceived as extremely

different or inconsistent with the parent brand images, and this is prominent or salient to the

consumer, dilution is less likely to occur (Loken & John, 1993). Before Pepsi removed

Crystal Pepsi from the market, the company changed Crystal Pepsi’s name and slogan (to

“Crystal by the makers of Pepsi”) and positioned it as a “different cola.” By distancing

Crystal Pepsi from the original Pepsi, the company may have been able to minimize dilution

effects caused by Crystal Pepsi.

In order to succeed with brand extensions and enhance parent brands, brand managers should

keep prominence and consistency in mind. When extending brands, managers need to find

the commonality between the brand and the extension and must then make this commonality

evident. Prominent-consistent brand extensions are often able to enhance and shore up parent

brands. Brand extensions can also run the risk of diluting parent brands; therefore, brand

managers should be cautious. Brand dilution occurs particularly when prominent brand

extension associations are viewed as moderately (rather than extremely) different from the

brand. To mitigate dilution effects, or when the risk of dilution is high, an ideal strategy is

often to create distance through co-brands, sub-brands, and/or marketing communications,

distribution, and product packaging stressing differences between the extension and its parent

brand.

39

According to a McKinesy study the success and failure of brand extension depends on the

positioning of the product. Most of the brand extensions fail because they focus on

aspirational rather than achievable positioning. McKinesy have identified three steps, which

can help ensure success in positioning the product.

1. Ensure Relevance to Customer’s Frame of Reference

One requires to be fully aware of the frame of reference with which customer views the

product, and understand the combination of customer’s attitudes and the situations in which

the brand is used, to obtain the most powerful customer insights. Generally marketers look at

the product, as they want to launch it, and not what consumers are expecting. This gap leads

to non-acceptance of the product

2. Secure the Customer’s Permission for the Positioning

It is paramount to obtain the permission of consumers since it helps in building the bridge

that can carry customers from where they perceive the brand to be today to where one wants

to take it into the future. Bridges are often best built when they leverage the unique emotional

benefits of the brand’s equity that are relevant to the customers. For example Nirma is widely

perceived as a washing powder. If they had come out with another related product, they

would have been more successful than in their launch of Nirma bathing soap. Nirma did not

think getting customer’s preference here and launched the bathing soap without seeking their

permission. Result was that the campaign was a failure and finally they had to change the

name from Nirma to Nima.

3. Deliver on the Brand’s new Promise

It is easy to say that “do what you say”, but very difficult to implement. However if this

adage is not taken care of, it is harmful not only for the extended product but also for the

parent product. It tarnishes the image and then great effort is required to regain the lost status.

This is particularly true in service industries, given the need for tremendous organizational

change, and industries that require long lead times for organisational or infrastructure

changes. A typical example of this is the negative influence that US-64 scheme has had on

the image of Unit Trust of India (UTI). Today UTI is undergoing the process of

40

bifurcation .The cabinet committee on Economic affairs (CCEA) has decided to divide the

scheme into two parts

The old protected UTI (UTI-I), comprising US-64 for which assured repurchase prices

have been announced and assured return schemes; and,

The New UTI (UTI-II) comprising net asset value based schemes.

To regain the investors’ confidence in the UTI which has eroded in the recent past, the

package was meant to protect the pensioners and other small investors besides running the

net asset value-based schemes of the fund on professional lines. Brand extensions, if handled

correctly, could strengthen the brand and also increase its profitability. Whether or not a new

brand extension will be accepted is determined to a great extent by what information about

the brand is prominent for consumers and the extent to which the brand and brand extension

are consistent on that important information (Loken, Barsalou, and Joiner, forthcoming). If

there is a high fit between the established image of a brand and the extension category, a

brand extension with attributes that are perceived to be typical in the extension category is

judged to be of higher quality when consumers evaluate the brand extension on its own

grounds rather than in comparison with brands in the extension category. In contrast, when

the brand does not fit easily with the extension category, the brand with typical attributes is

judged to be of higher quality if the brand is positioned explicitly against the prototypical

brand of the extension category. Finally, in cases in which the brand’s attributes in the

extension category are atypical (i.e., the brand possesses attributes that differentiate it from

other brands in the extension category), positioning the brand against the category prototype

is generally preferable to the noncomparative format. Overall, low-fit brand extensions were

generally judged to be of lower quality than high-fit brand extensions, and neither the ad

format nor the type of attribute could overcome the negative effects of low fit.

Future research should examine more closely the cognitive processes involved in consumers’

judgments of brand extensions in the context of comparative brands. In addition to the

outcome measures as in the present studies, cognitive-response measures as well as

experimental manipulations should be employed to provide further evidence for the cognitive

mechanisms underlying extension-evaluations such as a reduction in the perceived distance

between the brand and the extension in the case of comparative advertising.

41

DATA ANALYSIS

CONSUMER PROFILE

(I) 55 pecent male

(ii) 45 percent female

(iii) 30 percent belong to the age group<30

(iv) 42 percent belong to the age group of 31- 45

(v) 28 percent above the age group of 45

(vi) 60 percent are graduates and above

(vii) 22 percent are having professional qualifications

(viii) 18 percent are undergraduates

(ix) 55 percent belong to the income group of 1,00,000- 2,50,000

(x) 30 percent belong to the income group of 2,50,001-5,00,000

(xi) 15 percent belong to the income group of <1,00,000

(xii) 42 percent are govt employees

(xiii) 49 percent are employees of the private sector

(xiv) 7 percent are self employed

(XV) 2 percent are unemployed

42

DO YOU USE ANY OF THE PRODUCTS OF HINDUSTAN LEVER

LIMITED OR PROCTER AND GAMBLE?

(I) Yes --------------------------------------87 percent

(II) No -------------------------------------- 5 percent

(III) Can not say /Do not know --------8 percent

HLL ------- Lakme, Sunsilk, Lux, Pepsodent, Surf

P&G --------Gillette, Oral B and Duracell

43

DO YOU BELIEVE IN THE QUALITY OF THE PRODUCT OR ITS

BRAND?

(i) Only Quality -------------------------- 45 percent

(ii) Only Brand----------------------------- 27 percent

(iii) Both ------------------------------------- 28 percent

44

WILL YOU PURCHASE A PRODUCT ONLY BECAUSE OF ITS

BRAND?

(i) Yes -------------------------------- 55 percent

(ii) No----------------------------------30 percent

(iii) Can not say/ Do not know----15 percent

45

DO YOU BELIEVE THAT BRAND EXTENSION AS A STRATEGY

WORKS FOR THE COMPANIES?

(i) Yes --------------------------- 88 percent

(ii) No ------------------------------ 5 percent

(iii) Can not say/ Do not know ---7 percent

46

HAVE YOU EVER PURCHASED AN EXTENDED BRAND?

(i) Yes -----------------------65 percent

(ii) No ---------------------- 9 percent

(iii) Can not say / Do not know -------- 37 percent

47

BETWEEN HLL AND P&G, WHICH BRAND WILL YOU

PREFER?

(i) HLL ------------------------- 32 percent

(ii) P&G----------------------- 29 percent

(iii) Depends on the product ------------39 percent

48

IF THE PRICE OF BRANDED PRODUCTS WILL BE HIGHER

THAN THE PRICE OF NON-BRANDED PRODUCTS WHICH

ARE OF SAME QUALITY, WILL YOU PURCHASE IT?

(i) Yes ---------------------23 percent

(ii) No-------------------------65 percent

(iii) Do not know/ Can not say ---12 percent

49

OFFICIAL PROFILE

(i) 58 percent of the officials belong to the age group of 35 and 50

(ii) 22 percent of the officials belong to the age group of 25 to 34

(iii) 20 percent of the officials belong to the age group of above 50

(iv) 69 percent are male officials

(v) 31 percent are female officials

(vi) 72 percent are graduates and above

(vii) 12 percent are those who are having technical and professional qualifications

(viii) 16 percent are undergraduates.

(ix) 55 percent are those who are associated with the field

(x) 25 percent are those who are in the managerial and administrative posts.

(xi) 20 percent belongs to the others category

50

DO YOU BELIEVE IN BRAND MANAGEMENT?

(I) Yes ------------------------------ 87 percent

(II) No --------------------------------12 percent

(III) Can not say / Do not know – 1 percent.

51

WHY BRANDS ARE IMPORTANT FOR A CONSUMER AND IS

THERE ANY DIFFERENCE IN BRAND ANTICIPATION OF

THE CONSUMER?

Brands are viewed as categories not only by managers in companies, but also by consumers.

Many companies are organized by brand, and brand leveraging-strategies are becoming

increasingly popular. Therefore, it is common to see the promotion of a full range of products

under a brand name in a single communication. In this environment, consumers will be more

inclined to think about brands as categories when evaluating a brand name. Research in

consumer psychology also shows that brand categories function psychologically like other

types of categories. Brand anticipation differs on the basis of the product variation and the

category of the consumer.

52

DO YOU BELIEVE THAT CONSUMERS PURCHASE PRODUCTS

ONLY BECAUSE OF BRAND?

(i) Only Brand --------------------- 32 percent

(ii) Only Quality ----------------------- 23 percent

(iii) Both quality and brand --------- 45 percent

53

Do you think brand extension is necessary for a company? If yes, why?

When a known brand extends into a product category that involves sophisticated and state-

of-the-art technology, consumers face uncertainty and perceive a financial risk when

considering the extension for purchase. The recognition that brands are a powerful yet

underutilized assets is why trademark licensing has become a popular marketing strategy.

Because many brand owners don't have the resources to pursue every viable business

opportunity, they utilize trademark licensing to enter new markets beyond their core

competencies.

What type of brand extension strategy your company follows?

Hindustan Lever has Sunsilk as a brand of shampoo; the shampoo has several variants which

differ in terms of colour, perfume and, possibly, ingredients which serve a functional

purpose. Brand extension, on the other hand for the Sunsilk brand name is Sunsilk

conditioner which extends a shampoo brand name into an adjacent, but different product

category. Indeed, if Sunsilk had a hair wash soap under the same brand name, then we could

also define that as a brand extension.

P&G's new strategies is linking up with other companies to extract as much value from its

brands as possible. Last February (2001) Coke and P&G announced a $4bn [£2,77bn]

alliance. The alliance would involve the union of some 40 consumer products (including

Sunny Delight, Pringles and Minute Maid) under the umbrella of a Coke-P&G joint venture.

P&G was hoping Coke’s far-reaching distribution network could give the company a boost.

P&G’s renowned R&D capacities were attractive to Coke.

54

ARE YOU AWARE ABOUT THE BRAND MANAGEMENT AND

BRAND EXTENSION STRATEGIES OF YOUR RIVAL

COMPANIES?

(I) Yes --------------------------- 76 percent

(II) No ------------------------------- 10 percent

(III) Do not know /Can not say------ 14 percent

55

DO YOU BELIEVE THAT BRAND EXTENSION AS A

STRATEGY WORKS FOR ACQUISITION AND MERGER OF

COMPANIES?

i. Yes ---------------------------65 percent

ii. No -------------------------------14 percent

iii. Do not know /Can not say------ 21 percent

56

WHAT IS YOUR FUTURE BRAND MANAGEMENT STRATEGY?

HLL believes that each extension must strengthen the core and the core must remain

unchanged. When the core of the equity is in one direction and the product extension is in

another and you graft the two, you are unlikely to succeed. The set of peripheral or extended

values can be changed over time.

Procter and Gamble is also concentrating on variation on its product without affecting its

core value.

57

DO YOU THINK BRANDS WILL CONTINUE TO DOMINATE THE

CONSUMER MARKET IN INDIA FOR THE TIME TO COME AND

ALSO THE STRATEGY OF BRAND EXTENSION?

(i) Yes ------------------------ 55 percent

(ii) No ------------------------23 percent

(iii) Can not say /Do not know ------22 percent

58

TO WHAT EXTENT BRAND EXTENSION CAN BE PURSUED?

Both the HLL and P&G officials believe that the strategy of brand extension need to be

pursued within its limitations. However, the limitations vary fom one company to the

other.

What are the risks involved in brand extension strategy in the consumer

market in India?

The officials of the companies identified two potential risks. First, if the new line

extension fails to satisfy, consumers’ attitudes toward other products carrying the same

brand name may be damaged. Secondly, there is potential for intra-firm competition

between the parent product and the line extension, or between two or more line

extensions. The key to avoiding intra-firm competition is to clearly differentiate between

products. Although similar, the products must be different enough that they will not

compete with one another as much as they will rival other companies’ brands.

59

CONCLUSION

Brand extensions, if handled correctly, could strengthen the brand and also increase its

profitability. Whether or not a new brand extension will be accepted is determined to a great

extent by what information about the brand is prominent for consumers and the extent to

which the brand and brand extension are consistent on that important information.

Despite strong earnings numbers, there are quite a few problem areas for Lever. One, the

company has lost market share in categories such as fabric wash, soaps and skin care over the

past year, due to the onslaught of focussed competitors in the respective categories. With the

new entrants to FMCG space steadily expanding, Lever may have to continue making heavy

adspends and spend on new launches to protect its turf. P&G has one of the largest and

strongest portfolios of trusted brands, including Pampers, Tide, Ariel, Always, Pantene,

Bounty, Folgers, Pringles, Charmin, Downy, Iams, Crest, Actonel and Olay. Both the

companies are rivals in the consumer market, hence to maximize their sell and profit keep

themselves engaging in brand extension policy as a sales promotion measure a an emerging

company management rule.

60

RECOMMENDATIONS

Key Attribute components: Value for money and Customer Care

Operational attributes.

Physical attributes.

Brand Image.

Customer Specific Details.

In any correspondence with the customers the message should be sent in these components

only to have the maximum benefit from the advertisement. Also these components should be

dealt with independently. The advertisements should speak only of the believable concepts

rather than glorifying the pretentious ones. The basic need of the customer need to be

addressed which is actually not much expensive and better quality.

HLL sales growth in June 2007 was decreased due to the problem with promotion and

pricing. Although being the most competitive product on the basis of the Market Operating

Price (MOP), the shampoos are still not selling much. This is perhaps due to the bargaining

stress on the customer and the weak push given by the dealer to the particular item, when

actually it should be sold like a high volume product.

Another serious suggestion is that HLL and P& G must give good attention to their all the

products rice and all are not getting much attention. The dealers don’t provide much support

to the customers in making them understand the real Quality behind them. Either, the

technical details should be presented in a clearer manner or the dealers need to be educated

properly.

61

ANNEXURE

PART I

2. Name

3. Age

4. Sex

5. Educational Qualification

5. Family Background a. Rural b. Urban c. Others

6. Do you use any of the products of Hindustan Lever Limited or Procter and Gamble?

(i) Yes

(ii) No

(iii) Can not say /Do not know

7. If yes, please specify some of the products.

8. Do you believe in the quality of the product or its Brand?

(i) Quality

(ii) Brand

(iii) Both

9. Do you believe that quality of a product is correspondent to its brand?

(i) Yes

(ii) No

62

(iii) Can not say/ Do not know

10. Will you purchase a product only because of its brand?

(i) Yes

(ii) No

(iii) Can not say/ Do not know

11. Do you believe that brand extension as a strategy works for the companies?

(i) Yes

(ii) No

(iii) Can not say/ Do not know

12. Have you ever purchased an extended brand?

13. Between HLL and P&G, which brand will you prefer?

(i) HLL

(ii) P&G

(iii) Depends on the product

14. If the price of branded products will be higher than the price of non-branded products

which are of same quality, will you purchase it?

(i) Yes

(ii) No

(iii) Do not know/ Can not say

63

64

PART –II

FOR THE COMPANY PERSONNELS

.(1) Name

2. Age

3 Sex

3. Educational Qualification

4. Duration of Service

5. Designation

6. Do you believe in brand management?

7. Why brands are important for a consumer and is there any difference in brand

anticipation of the consumer?

8. Do you believe that consumers purchase products only because of brand?

9. Do you think brand extension is necessary for a company? If yes, why?

10. What type of brand extension strategy your company follows?

11. Are you aware about the brand management and brand extension strategies of your

rival companies?

12. Do you believe that brand extension as a strategy works for acquisition and merger of

companies?

13. What is your future brand management strategy?

65

14. Do you think brands will continue to dominate the consumer market in India for the

time to come and also the strategy of brand extension?

15. To what extent brand extension can be pursued ?

16. What are the risks involved in brand extension strategy in the consumer market in

India?

66

BIBLIOGRAPHY

(i) Balachander, Subramanian and Sanjoy Ghose (2003), “Reciprocal Spillover

Effects: A Strategic Benefit of Brand Extensions,” Journal of Marketing.

(ii) Barone, M. J. and P. W. Miniard (2002), “Mood and brand extension judgments:

Asymmetric effects for desirable versus undesirable brands.” Journal of

Consumer Psychology, 12 (4), 283- 291.

(iii) Bottomley, Paul and SLS Holden (2001), “Do We Really Know How Consumers

Evaluate Brand Extensions? Empirical Generalizations Based on Secondary

Analysis of Eight Studies,” Journal of Marketing Research, 38, 494-500.

(iv) Boush, David M. and Barbara Loken (1991), "A Process-Tracing Study of Brand

Extension Evaluation," Journal of Marketing Research, 28 (1), 16-28.

(v) John, Deborah Roedder, Barbara Loken, and Christopher Joiner (1998), "The

Negative Impact of Extensions: Can Flagship Products," Journal of Marketing, 62

(1), 19-32.

(vi) Jun, Sung Youl, Tridib Mazumdar, and SP Raj (1999) "Effects of Technology

Hierarchy Brand Extension Evaluations," Journal of Business Research, 46 (1),

(vii) Kim, B. D. and M. W. Sullivan (1998), “The Effect of Parent Brand Experience

on Line Extension Trial and Repeat Purchase,” Marketing Letters.

(viii) Kirmani, A., S. Sood, and S. Bridges (1999), “The ownership effect in consumer

responses to brand line stretches.” Journal of Marketing, 63 (1), 88-101.

67

(ix) Klink, R. R. and D. C. Smith (2001), “Threats to the external validity of brand

extension research.” Journal of Marketing Research, 38 (3), 326-336.

(x) Lane, V. R. (2000), “The impact of ad repetition and ad content on consumer

perceptions of incongruent extensions.” Journal of Marketing, 64 (2), 80-92

(xi) Loken, Barbara, Christopher Joiner, and Joann Peck (2002), “Category Attitude

Measures: Exemplars as Inputs.” Journal of Consumer Psychology, 12(2), 149-

161.

(xii) Loken, Barbara and Deborah Roedder John (1993), "Diluting Brand Beliefs:

When Do Brand Extensions Have a Negative Impact?," Journal of Marketing, 57

(3), 71-84.

(xiii) Martin, Ingrid and David Stewart (2001), “The Dimensionality of Measures of

Product Similarity Under Goal-Congruent and Goal-Incongruent Conditions,”

Journal of Marketing Research, 38 (Nov), 471-484.

(xiv) Meyvis, T. and C. Janiszewski (2004), “When are broader brands stronger

brands? An accessibility perspective on the success of brand extensions.” Journal

of Consumer Research, 31(2), 346-357.

(xv) Morrin, Maureen (1999), "The Impact of Brand Extensions on Parent Brand

Memory Structures and Retrieval Processes," Journal of Marketing Research, 36

(4), 517-525.

(xvi) Park, C. W., S. Milberg, and R. Lawson (1991), “Evaluation of brand extensions:

The role of product feature similarity and brand concept consistency.” Journal of

Consumer Research, 18(September), 185-193.

68

(xvii) Park, C. W., Jun, S. Y., & Shocker, A. D. (1996). Composite branding alliances:

An investigation of extension and feedback effects. Journal of Marketing

Research, 33 (November), 453-466.

(xviii) Smith, D. C., & Park, C. W. (1992). The effects of brand extensions on market

share and advertising efficiency. Journal of Marketing Research, 29(3), 296-313.

(xix) Swaminathan, Vanitha, Richard J. Fox, and Srinivas K. Reddy (2001), Journal of

Marketing, Vol. 65(4), 1-15.

69