A brand name is the written on spoken part of a trademark, in contrast to the pictorial mark; a trademark word. If customers recognize and respect a company’s brand name, it becomes one of the most valuable assets of the company.

Brand recognition is especially important for products with little inherent differentiation, for example soft drinks, beer, cigarettes and other similar products can be easily duplicated. A study by the Grocery Manufacturers of America found that shoppers would go to another store to get the brand they want, rather than settling for something else. That is the importance of branding.

For example, the major difference between any fast food joint and McDonald’s, is the brand name. From brand name, comes a new concept called brand extensions. Brand extensions are where there are new product introductions under an existing brand, to take advantage of the existing brand equity. When companies experience flat sales trends, coming up with brand extensions seems to solve the problem. If we take the example of Coke and Pepsi, in the three years from 2000 to 2002, these soft drink giants had introduced more than 13 new beverages, such as Pepsi Blue, Pepsi Twist and Diet Coke with Lemon, to name a few. Products were also brought to the market under different names, Sierra Mist (Pepsi) and Red Flash (Coke).

One of the major problems with brand extensions is that it overrides the existing niche image that the brand had created in the first place. For example, if we take Victoria’s Secret, the retailer known for its sexy lingerie, the existing market image of the brand was one of sophistication and luxury. However, despite its brand image, women opted for more comfortable and durable lingerie, which led the brand to launch ‘Body by Victoria’, a line of simple bras and also linen and cotton pyjamas. Although this strategy worked, one marketing executive noted, “They are really at risk of harming the core brand that they’ve built by simply extending it to cover a broad array of products.” Nevertheless, given the reality of the marketplace, Victoria’s Secret had little choice in making that decision.

The other side of brand extension can be clearly explained by Volkswagen’s attempt to enter the luxury market with the introduction of the Phaeton, which had a cost price of $85,000. As an advertising executive observes, “It’s harder to convince consumers to pay a lot of money for a model with a mass market badge on it than for a luxury car marketer to tempt a customer with a less expensive model.”

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