IMPACT OF BRAND EQUITY ON BRAND EXTENSION

Abstract

In today‟s market, companies use a common method to launch a new product by using existing brand name on a new product in different category. This common method is known as Brand Extension. A company opting for brand extension hopes to leverage its existing customer base and brand loyalty to increase its profits with a new product offering. It involves introducing a new product under the existing brand name. It has become a popular new strategy because of its attractive advantages. The strategy of brand extension is to capitalize the brand equity since it plays a key role in providing a new source of revenue. Also, risk associated is also high since an unsuccessful brand extension or even a successful brand extension could damage the original brand. This study analyzes the factors influencing brand extension. Specifically the study analyzes the impact of similarity, brand reputation, brand association, brand awareness and brand loyalty on the success of brand extensions into related or unrelated categories of FMCG products. A set of hypotheses were developed and tested by regression analysis. It investigated the effect of these factors on hypothetical potential brand extensions of two well known brands, Dettol and Cinthol in the FMCG sector.