In this section, we will present theories relevant to brand licensing. We will start with explaining the theory of brand, followed by the theory of brand extensions and, subsequently, the brand licensing. Then we will cover the brand equity model and theory on reasons to buy. To conclude the theoretical framework, we will look into the theory of brand fit and attitude. Each section of the theoretical framework will start with an explanation how the chosen theory is related to the study and how it can help us to fulfil our purpose.
Choice of Theory
The theory presented in this section is mainly based on previous research done by the leaders in the brand management field – David Aaker and Kevin L. Keller as well as other prominent researchers. Because this study is centred on the problem of brand licensing, which is a form of brand extension, it is crucial to first explain the underlying concept of brand and brand extensions. These two theories will help us to better understand how brands create value and what are the possible outcomes of brand licensing. Furthermore, we will present a brand equity model developed by Aaker (1996) which looks into such issues as brand loyalty, brand awareness, perceived quality and brand associations. Likewise, the theory on consumers‟ reasons to buy will provide us with understanding of the relationship between perceived quality of the parent brand and consumers‟ willingness to purchase a product licensed by this brand. The brand fit model will explain why the match between the parent brand and the licensed product is important and what impact it has on consumer choices. Finally, a theory on attitude is presented so the reader can get a better understanding of consumer reaction towards the three products.
What is a Brand
“A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well.”
– Jeff Bezos (Hof, 2004).
In order to grasp the concept of brand licensing, it is important to investigate the general concept of a brand. In our study, the brand theory will serve a role of the base for further elaboration. Hence, the overview of the brand theory will help us to understand why brand reputation is so important when implementing a brand licensing strategy.
The concept of brand is not a new one, it has been present for centuries. Brick makers in ancient Egypt used to put symbols on the bricks in order identify their products. The trademarks as we know it now have most likely evolved in the mediaeval times where trade guilds marked their products to assure the consumer that they are purchasing a quality product and give the producer legal protection in the exclusive market. Brand names, though, first appeared in the sixteenth century when whisky distillers started
Brand licensing – Once you pop, you can‟t stop shipping their goods in wooden barrels with producer‟s name being “branded” on the barrel. Such type of branding was done not only to identify the producer but also to prevent the product from being substituted by a cheaper version of liquor (Farquhar, 1990).
Despite the fact that brands have had an important role in commerce for centuries, it was only in the twentieth century when the branding and brand associations became so significant to competition (Aaker, 1991). Over time, the concept of brands has evolved and has been given many different interpretations. According to Kotler and Keller (2009, p.783),“a brand is a name, term, sign, symbol or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of the competitors”. Following this definition, Kapferer (1997) suggested another interpretation of a brand which he identified not as a product but rather a meaning, attached to the product which identifies the good. A former CEO of Johnson & Johnson company – James Burke, refers to a brand as a “the capitalized value of trust between a company and its customers” (Quelch & Harding, 1996, p.106).
Hence, the brand communicates all the available information that provides the consumer with a symbolic meaning, a trademark, brand identity and what the brand stands for and what the consumer can expect in quality and value (Milewicz & Herbig, 1994). In turn, brand perception helps the purchaser in the recognition and decision making process. When the consumers are familiar with the brand they can evaluate it in terms of brand‟s “personality” and consistency to comply with their needs.
One of the most important aspects of building a strong brand is to have a clear identity (Aaker, 1992). This requires a clear brand positioning in consumers‟ mindset. The brand is also a communication tool, which communicates the attributes of a product and creates brand reputation (Aaker, 1992). Aaker (1992) also notes that typically, when given several choices, the consumer is more likely to purchase a brand with a strong reputation. Therefore, famous brands make use of this notion by licensing out their trademark and logo to other companies
Brand licensing in unrelated categories is one of the most common forms of brand extensions (Aaker, 1996). Hence, it is essential in this study to first look at the general theory of brand extension and make a clear distinction between its different forms.
Brand extension is the term used when a company uses an established brand name to introduce a new product (Keller, 2008). Furthermore, Aaker argues that when launching a new product, the strategy of brand extension has been frequently used during the last three decades, as the use of an established strong brand name demands significantly less investments compared to creating a completely new brand. In addition, creation of a new brand has no guarantee for success, even despite heavy investment which makes it even more feasible to extend an existing brand (Aaker, 1991).
The term brand extension describes the different forms of extending a brand. Several definitions can be found in the literature. In order to provide a better structure for our study we have decided to divide different definitions and approaches of brand extension into three subcategories:
Line Extension – “Existing brand name is used to enter a new market segment in the same product class” (Aaker & Keller, 1990, p.27). An example of line extension would be Coca-Cola extending its Coke to Diet Coke to address the needs of customers who want less calories in their drinks.
Category Extension – “Applies an existing brand name to a product category that is new to the firm” (Farquhar, 1989, p.30). Virgin Group is a perfect example of this, it consists of a record label, transportation companies and even a telecommunication business (Virgin Group, 2011).
Co-branding – “Involves two companies combining brands on a single product to enhance appeal and differentiation” (Taylor, 2004, p.97). Aston Martin has previously collaborated with Nokia to create a mobile phone (Aston Martin, 2009).
The concept of brand licensing
As we have previously mentioned, licensing in unrelated categories is one of the most common ways of extending a brand, throughout this study we will refer to the term brand extension as a synonym to the term brand licensing.
Kevin Keller suggests a definition of brand licensing and defines is as a “contractual agreements whereby firms can use the names, logos, characters, and so forth of other brands to market their own brands for some fixed fee” (Keller, 2008, p.301). Keller (2008) writes that brand extensions through licensing have received increased attention during the last couple of decades due to its success. One of the fastest growing types of licensing is the corporate trademark licensing which refers to a brand‟s name and logo being licensed to various products in often unrelated product categories (Keller, 2008). Because licensing is a form of external brand extension, companies can extend their brand without having to manufacture the new product (Weidmann & Ludewig, 2008).
Just as with any other type of brand extension, licensing is a cheap and a relatively easy way to enter new product categories (Taylor, 2004). Furthermore, licensing allows the parent brand to take advantage of manufacturer‟s expertise. Parent brand also benefits in higher awareness from increased consumer exposure (Taylor, 2004).
However, in the process of licensing, quality control must not be overlooked as the quality has to be consistent across the parent brand and the licensed products. The licensed product must also add some kind of value to the parent brand, and go beyond what is called “logo slapping” (Taylor, 2004)
Possible outcomes of brand extensions
As we have previously discussed, the brand name is one of the most important business assets that can be leveraged when pursuing a growth strategy. However, brand licensing can have different outcomes, both positive and negative. Knowing these outcomes is crucial to this study. With the help of this theory we will be able to analyse the empirical findings in terms of outcomes of brand licensing strategy.
The field of brand extensions, has been well researched since the 1980‟s. Many researchers have elaborated the pros and cons of brand extensions. A model developed by Aaker (1991) – “Results of Extending a Brand Name” (Figure 2-1) provides an overview of the advantages and disadvantages of brand extension strategy.
In this extension outcome possibility, quality and brand associations as well as already established brand name awareness are transferred from the parent brand. Thus, the consumer can base their purchasing decision on the associations of quality and other parent brand attributes even though they might lack information about the specific product (Ostrom & Iacobucci, 1995). Through these transferred associations, positioning of the new product is facilitated (Aaker, 1991).
The aim of brand extensions is to enhance and add value to the parent brand, however, this is not always the case (Aaker, 1991). By extending the brand name with a product in a new segment, the company can increase awareness of the brand to a larger share of population and to facilitate future purchase of the brand‟s core product.
The Bad: The brand fails to help the extension When a brand name is added to a product in a new product class to add credibility, recognition and quality associations, it may lead to an initial success (Aaker, 1991). However, an extended product can also evoke negative brand association. Some attributes that seem attractive in one product category may be found unattractive in another (Aaker, 1991). Nevertheless, one way of reducing negative associations may be done through collaboration with another brand which possesses suitable associations for the particular product class.
It has been previously found that when a company stretches its brand to an entire new and unrelated segment parent brand associations are less likely to be transferred. Therefore, when a parent company stretches its brand to unrelated product classes, often through a licensing agreement, the consumer tend to rely on the information about the quality of the product provided by the licensee (Aaker, 1991).
The Ugly: The brand name is damaged
Even a successful brand extension strategy can cause damage to the parent brand as a result of negative associations of the new product being transferred back to the parent brand (Aaker, 1991). Damage to the parent brand is done when the associations of new extension tend to be inconsistent with the parent brand. In addition, if the quality level of extended product does not live up to the parent brand‟s quality level the brand image is further damaged (Aaker, 1991).
More Ugly: New brand name is forgone
When undertaking a brand extension, the company excludes the opportunity to create a new brand with its own personality which can be a profitable source, however, also more risky (Aaker, 1991).
Hence, a successful brand extension strategy has to be designed with caution and consideration of many aspects. In order to deliver a successful extension there must be a fit between the parent brand and the extension in terms of associations, attributes and overall quality perceptions (Aaker, 1991)
1.2 Problem discussion
1.3 Purpose .
1.4 Research Questions
2 Theoretical Framework
2.1 Choice of Theory
2.2 What is a Brand
2.3 Brand Extensions
2.4 Brand Equity Model
2.5 Reason to Buy
2.6 Brand Fit
2.7 Attitude towards brands and products
2.8 Summary of theory
3.1 Quantitative Approach
3.2 The research “onion”
3.3 Research Approach
3.4 Research Strategy
3.5 Time Horizon
3.6 Data Collection Methods
3.7 Analysis Approach
3.8 Method Quality
4 Empirical Findings
4.1 Study Demographics
4.2 Level of Awareness
4.3 Perceived quality
4.4 Likelihood to buy
4.5 Brand associations
4.6 Attitudes towards products
5.1 Perceived Quality
5.2 Likelihood to Buy
5.3 Brand Associations
5.5 Modification of Aaker‟s Model
5.6 Explanation of the model
7.1 Managerial Implications
7.2 Critique of the study
7.3 Other Findings
7.4 Suggestions for further research
GET THE COMPLETE PROJECT