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Managing Brand extensions: Case study of Gucci
November 18, 2011

Brand Management

Branding of products or services is the cornerstone of a company’s global expansion strategy. A firm’s strength is measured by it brand identity, market performance, and solid customer base (Aaker, 1996; Keller, 1998). Global firms strive to own number 1 or 2 brand products as a weapon of manufacturers over growing retailer power (Barwise & Robertson, 1992). Companies with strong global brands such as Coca-Cola, IBM, Samsung, Nokia, Sony, and many others have greater potential brand extensions thus strengthening their global market position and boosting existing brand value (Keller, 2008). Branding is an important component in firms geared towards international markets. Until recently, most firms across the globe except the United States had no established strategies for building strong brands. Firms seeking to internationalize their operations and products did so through the piecemeal acquisition of enterprises in different nations or entering into alliances across their national borders (Aaker, 2001).

Previous studies on branding either in local or global markets focused on value or equity linked to the brand name and the factors that underlying their value creation (Kapferer, 1997; Keller, 1998). In recent times, much attention has shifted towards analysis of firms’ value as embodied in their brand and equity and other products resulting of value dilution (Keller, 2008). This interest may have been driven by the ever-growing market value and power related to brand strength due to limited costs in the successful launching of new brands. The interest of international market is at present mostly centered about international branding in the discussion of benefits and merits of building successful global brands (Basil & Herr, 2006).

Positioning Strategies

A well conveyed global brand is a key element in the overall global marketing strategy because its offers platform for leveraging the brand strength and penetration of new markets. The process involves assimilation, acquiring of brands, and rationalization of brand strategy to other kinds of strategies present in the broad global market (Keller & Lehmann, 2006). From these insights, the present study examines Gucci’s internationalization strategy through brand building and management.

Gucci recognizes that meeting today’s business needs is a major challenge due to market volatility brought about by stiff competition from substitute products among other factors. Furthermore, a number of forces such as mergers, emerging categories, and brand extensions have complicated the already dynamic market (Douglas & Craig, 2002). From this point of view, the reality is that creating awareness of a given product does not guarantee its relevance to customers and keeping the business afloat. To address these challenges, Gucci adopted balanced brand portfolio strategies as emerging essential tools in maintaining brand relevance on the global market arena (Basil & Herr, 2006).

Coordinated brand management in Gucci will help it to avoid investment in overlapping product marketing and brand development ventures. This is captured from the mission statement, which clearly communicates to employees and consumers the company stand, thus avoiding instances of confusion among customers through multiplication of brands in response to competitor’s strategy (Aaker, 2001).
There are five key branding elements:

Differentiation

In present markets characterized by price wars, differentiation offers an alternative to the competition. However, it is not easy to attain the sustainable level of brand differentiation because quick competitors’ responses through copying render effective differentiation base point short lived. The solution is the creation of branded features, differentiators, programs, or services that offer sustainable differentiation points Douglas & Craig, 2002). Gucci relies on its strengths to win price wars on the international market, for instance, the company has an elaborate and strong brand image with an international presence. Its luxury products appeal to customer aspirations through high-end innovation, design and style. In addition, the established retail distributions ranging from retail stores to internet marketing provides sustainable differentiation points.

Energize

Often energy gaps occur especially for leading brands in mature categories reputed for high quality, innovation, and trustworthiness. The brands require extra energy to avoid boring consumers. A portfolio solution is the creation of branded energizers through sponsorship programs promotions, re-branding of products in an effort to energize or enhance a target brand by aligning it to a brand with substantial energy. The target in launching “Gucci girl” is achieved sales of 1.8% in the first year and push expansion strategies to attain 5% sales increase in the third year. Although this strategy appears ambitious, the company has laid the framework of energizing its brand to cement its trustworthiness and innovation of top quality products.

Extend

In most organizations, growth is desired to create company vitality and realize shareholders objectives. The brand is a key asset in spurring growth in new sub-markets with modest competition and attractive offer. Creating and leveraging brand assets is achieved through brand extension strategies. This helps in leveraging of brands to adjacent product categories thus building platforms for brands. The built platform eventually spurs many other products using sub-branding instead of incremental extension (Youn & Kim, 2008). Gucci’s brand extension strategies will take advantage of existing brand names and their strength through consumer awareness to leverage costs and pressures of extending “Gucci Girl” across international borders and other product lines.

However, extension decisions raise concern about the impact of extension on the brand and brand impact on the extension. The fear is that wrong or ill-conceived implementation of extension could easily damage the existing brand image. Gucci recognizes this threat because luxury items have many substitutes and mostly target upper-class market segments. Therefore, “Gucci girl” is well positioned to assume vertical extension growing into the super-premium market due to its appeal in meeting attractive margins and product vitality. However, the company is aware that, vertical extensions of its brands may be compelling, but anticipates delicate brand portfolio issues such as brand credibility and risk co-exist (Aaker, 2001).

Clarity

Employees and consumers often get frustrated when they try to determine the position of a company on its chain of products within the market set up. In addition, most brand building strategies loose focus causing inefficiency in budgetary allocation for brand development. To alleviate these challenges, portfolio strategies incorporated in Gucci’s internationalization strategy directly addresses clarity through well-coordinated communication channels. One option is a reduction of the brand numbers within market setting especially those with established strategy. Likewise, it is necessary to clarify roles of different brands and development strategies consistent to set objectives. Another option is leveraging corporate branding within a given portfolio usually by appointing representative people such as prominent sports persons to instill culture and values of the organization as endorsers of the brands (Basil & Weber, 2006).

Identify beginning and end

The customer is the main target of any branding strategy, it is, therefore, important to define starting point in marketing in a disciplined manner by evaluating opportunities of brands in the consumers’ vision. This involves establishing consumer needs and intersecting their behavior with preferences (Aaker, 2001). Gucci has internal models that facilitate understanding, organizing, and managing essential tasks in brand development. The branding models place greater emphasis on advertising and building of brands, leveraging the brands, identifying positions the brand hold, and means of protecting previous brand investments. These factors are recognized as being critical in meeting the company’s business sustainability goals. Most companies have a tendency of over indulging in brand building strategies though it is a key aspect, greater focus on it risks losing touch with other critical strategic brand management elements. Available frameworks in Gucci ensure that brands are managed beyond their starting point through the incorporation of four branding components. These include identifying, building, leveraging, and offering protection to the brands (Deborah, 2006).

Brand building

Marketers’ first stop on the market is the definition of what a brand represents otherwise known as brand identity. The identity of a brand is captured through a map with concentric circles whose core defines branding elements, and outermost circle defining secondary elements. A clear visualization of a brand identity by marketers is the key tool in designing marketing tools necessary in brand building. Marketing tool commonly adopted by marketers is the Porter’s 4P’s (product, price, place, and promotion) (Simmons & Becker-Olsen, 2006). A promotional strategy is based on 4P’s incorporates both conventional advertising methods, and innovative approaches. Customer’s experience with a product naturally builds and solidifies their preference. Therefore, management of product supply chain and placement must consider customers desired perception, accompanied by promotions at each selling point. Gucci is ware of turbulent market for luxury goods with boundaries set within hierarchical needs theory and other non-economic factors. For these reasons the company, sets product prices that are low enough to gain large sales volumes but not too low to dilute the image of its brands (Loken, Ahluwalia, & Houston, 2010).

Brand leveraging

To attain better returns on investment, marketers choose best means of utilizing available brand assets. Product lines from Gucci fall in a competitive sector with competition expected from companies such as Dior, Chanel, and YSL. To win over the competitive advantage, the company employs leveraging of established brand assets to equity by creating line extensions, co-banding of the products, and brand extensions. Line extensions entail the addition of new forms of service or product to fight for market share with upcoming competitors such as Lancome and MAC. However, choice of line extensions should address critical questions touching on which brand and how to launch the line extension with foreseeable success. This is to avoid being entangled in expensive ventures with less increment on revenue, Gucci cosmetics launch of “Gucci girl” attempts to position an inspirational fulfillment and experimental enrichment in its customers. According to Keller (2008), branding is creation and delivery of a promise to targeted consumers. The promise within a brand refers to the functional component that satisfies customers’ desires through experience, aspiration, and enrichment.

Brand extension differs from line extension because it targets the extension of branded products or services to new categories. This strategy is beneficial in realizing real growth opportunities by carefully selecting viable brand extensions. Co-branding, on the other hand, involves leveraging of brands through strategic alliances with complimenting brands (Lafferty, 2007). This often assumes the ingredient branding form where a marketer considers co-branding as appropriate given the prevailing circumstances (Deborah, 2006). The global Gucci brand will be enhanced through co-branding by launching new makeup line but using extensions of the existing brand. Gucci luxury brands, have a high visibility and will form prime candidates for brand extension of its new “Gucci Girl” brand into emerging markets in Asia pacific, and Eastern Europe. Already Gucci shoe lines and handbags have a high recognition in Eastern Europe, this will be a valuable asset in brand extension to the new brand.

Measure brands

Measures on brand performance have a closer association with customers experience with the product or service. The marketer must identify customer’s desires and address the non-product links accompanying the brand based on customers’ attitudes (Youn & Kim, 2008). These include brand’s color, personality, and attitude towards the country of origin. To achieve this, a marketer monitors consumers’ impression and identifies key elements in the brand and their role in brand management (Douglas & Craig, 2002). Gucci has adopted an enticing array of colors, tones, textures and shades with the aim of meeting age group tastes and individual styles. Measuring equity for a given brand is a critical element of strategic brand management. This involves both quantitative and qualitative approaches in gaining knowledge on the brands value to customers. Quantitative methods include calculation of financial asset value and analysis of consumer’s willingness to purchase a given brand. Qualitative methods include measuring brand collages that enable consumers to visualize the brand in words and pictures (Keller, 2008).

Brand Protection

Conventional means of protection to brands were enshrined in legal teams working in securing trademarks. However, today’s competition targets brand dilution through mimicking and copying of strategies. Monitoring such activities minimizes dilution costs. Strategies adopted by Gucci in minimizing dilution costs include co-branding, brand extensions, and line extensions (Deborah, 2006).

Integrated Marketing Communications

Marketing plan design is one of the clear-cut strategic options central to brand building and brand identity on the international market. The branding elements incorporated in the Gucci marketing plan is the best communication strategy. The important component of the successful marketing plan is embedding consistent and harmonious brand extension programs covering all product lines and across country borders to foreign market segments. Gucci will achieve this through the effective definition of the brands at all levels of brand building using marketing programs. The marketing programs include a brand extension, brand protection, measurement of brand performance, brand leveraging, and differentiation discussed above.

In conclusion, the present study suggests these elements as the optimal patterns in the optimal brand building. The internationalization-marketing plan incorporates the branding history of each product, mode of expansion, and organization culture as summarized in the company mission statement. In this way, the company is able to build a coherent and strong brand identity on the global market and sustaining its position amid stiff competition.