DECISION MAKING PROCESS USED BY THE MANAGEMENT IN BRAND EXTENSION: A CASE OF DIOR BRAND US
There has been numerous studies regarding consumer perceptions, evaluation of brand extensions and their influence of the equity of the original brand (Grime et al, 2002) This study is purposed to bring insights with regard to the decision making process employed by the managers at Dior brand when extending their brands. In specific, the study will assess the extent at which the process of extension theory introduced by Styles and Ambler (1997) in faster going consumer products is significant to the luxury industry. The researcher will also evaluate the required modifications in reflecting the differences between fast moving goods and luxury brand. In addition, the study will also assess the main drivers for extensions in luxury brands as well as the key elements for consideration regarding the extension of a luxury brand. From the perception of recognizing the boundaries of the extant knowledge as well as the increasingly generating the new knowledge, the study will evaluate whether the model postulated by Styles and Ambler (1997) could be employed in the luxury environment. The study will utilize secondary data as well as primary data by interviewing the senior management at Dior brand.
Recently, the industry of luxury products have been heavily impacted owing to decreased confidence of consumers. Moreover, the increased value of the euro against the dollar has subsequently decreased the worldwide spending on consumer products ( Economist, 2003). Even though the aspect of brand extension has proved to be potentially effective, as well as a positive growth strategy luxury sector, defining elements such as exclusivity, high awareness as well as desirability could be lost as the luxury brand and its marketing appeal grows thin. In essence, moat luxury firms have recently reexamined the depth of their extension and the number of regulation agreements they engage in (Economist, 2004).
There are brands which have succeeded in their extension above their conventional specialty of expertise, for instance, going from fashion industry to hospitality( Example could be derived from the Salvatore Ferragamo’s in France or Palazzo Versace hotel in Australia. Such trends assist in identifying the significance for the management of luxury brands in understanding the strategic drivers to decisions regarding brand extension, factors constituting significant decision criteria and their influence on establishing the extension. This study focuses on the extent at which the antecents, launch and decision criteria are similar for luxury and fast moving goods.
After literature review on this topic, the findings will be assessed and compared against Dior brand and its extension decision framework. After this, I will then put forth the preposition for generalized decision process for the extending luxury brands.
There has been few research carried out in the determination of whether the decision process of the managers with regard to brand extension are similar in various industries and for brands and products that post different features (McWilliam, 1993, 487 ). In reality the functional verses the degree of their abstract meaning or brand postioning may not only influence the constituencies and the consumer evaluation process in brand extension may also make a difference in the management of decision making and the strategy extension (Czellar, 2003, 1997). Where as the line and brand extension may be widespread within the luxury goods sector and fast moving goods, there is little concerning strategic antecedents, launch judgment process and decision criteria process across the various circumstances and markets? The purpose of this research is therefore to explore the decision making process by the management of Dior brand when extending their brand.
This area examines previous literature relating to different brands and their extension. The management process model of S and A will also be outlined.
Kapferer, Dubois and Paternault, (1998), explains that the aspect of prestige in a particular brand may get eroded if too many people own it. This generates a contradiction in the management of luxury brands. An organization requires to maximizing its returns but may not sell or standardize excessively. Firms dealing with luxury brands ought to sustain a frail balance between awareness and high exposure but control the level of sales. In evading the commodisation risk and maintaining a dream value, luxury brands ought to be preferred by all and utilized by few elite in the society (Kapferer, 1997, 256). This may be regarded as the main basis for differentiating fast moving goods and the market for mass consumers (Dibb et al., 2001). While luxury product organizations may focus on a small but disposable income clique of customers (Prendergast and Phau 2000, 130) a crucial component of luxury brand equity would be their inaccessibility and also desirability.
In accordance to Prendergast and Phau (2000) luxury is a concept that is subjective and which competes on the capability of evoking distinctiveness, a well recognized brand uniqueness, perceived quality and brand exposure. Quelch and Nueno (1998) explain that luxury goods are those goods whose ratio in functional utility to price is low while that of situational and intangible utility is high. Since the value of competition is still significant, the price may not be all an important issue for customers who are drawn by the status symbol. This is the main difference between groups of consumers who buy fast moving products and the minor populaces who purchase luxury brands. Consumers of fast moving products who are basically drawn by the brand and its relations, will mostly give priority to price and functionality. On the other hand, buyers of luxury goods are basically influenced by the brand as well as well as the status while the aspect of functionality is assumed.
S and A (1997), identify two strategies in definition of brands. One of this is the conventional product plus. In this case, a particular product becomes the driver while the brand is basically the identifier. The other aspect is a holistic view that is centered on a specific brand. This encompasses more than just the goods. McDonald and Chernatony (2003, p.25) effectively portrays this when they explain that a triumphant brand is a place, product, place, or an indvidual that is identifiable and augmented in away that the consumer perceives as being significant, exceptional and with extra values that meets their necessities. Moreover, its achievement emanates from being capable of upholding these extra values in the competitive phase. Such a perception could also be related to luxury brands which by definition are high in symbolic extra values. Such a view is significant to the current study because it generates the context whereby, brand extension ought to be managed.
S and A (1997) evaluated the process adopted by some managers when establishing brand and line extensions of fast moving products. Their data basis was collected by the Boston Consulting group. They found out that the managers employed two sets of criteria in making decisions regarding their extension of their brands. The criteria in brand equity were tested early during the developmental stage. This was done through a qualitative study approach which was related to the constancy of the original brand image and its extension. The also found out that the managers did not employ market simulation models in their decision making process.
The results generated from this investigation resulted into the development of a particular set of prepositions with regard to the process of extension. There are three drivers in A and S framework, )decision criteria,( whereby decisions on whether or not to proceed with extension are made ii) antecedents( which are the main driving force behind the process of extension and the launch process.
Extension decisions antecedents are further categorized into various strategic drivers which are either associated with the strategy defense or growth brand and the particular drivers. These drivers include a variety of factors whereby, the needs of consumers, competition and technology appear to be the most significant.
According to Renand and Vickers (2003, p. 473), though luxury brands may be conceptualized on the functional, interactional and experimental perspectives, there must be a difference with regard to the mixing of these components. The authors point out that luxury products are higher with regard to social, symbolic and psychological perspectives, while products that are non luxury rate higher in the functional perspectives. Renand and Vickers point out that the symbolic perspective facilitates luxury brands to uphold their status as well as continuing to command premium prices. On the other hand, the luxury good which are too depended on technology and its advancement are not in a position of upholding such a status as they become “too functional”. This is more likely to influence the management strategies employed in extension of brands. For example, customers may assess the robust existing in the parent brand of a luxury firm and its extension strategy on a symbolic and abstract level with an emphasis on unrelated relations. On the other hand, consumers may opt to evaluate fast moving goods brands on a related product level that is concrete (Czellar, 2003) consequently, the strategy employed in marketing of luxury brands and that of their extensions ought to be based on a symbolic instead of functional component.
The difference in luxury and fast moving goods points out the need of testing if any particular decision making model relating to the extension of products that are fast moving may be generalized to the particular luxury context. A managerial theory of decision making process could offer structure in managing internal relationship as well as contributing to the evaluation of indefinable values in luxury brand extension. Cowking and Hankinson (1997) established that organizations that adopted the novel structures at slow pace lead to the highly fragmented process of brand management. This indicates that studies with regard to application of a process model in would be advantageous in specific managerial contex.
The present study will examine the decision making process used by the management of Dior Brand in their brand extension. Specifically, the study will evaluate the following elements
- The decision criteria used by the management in determining on whether to go with the extension decision.
- The main drivers of the extension strategy used by the management of Dior
- The decision procedure in establishing and planning for the brand extension
- Whether the S and A model or any other decision making models is being used in the extension planning
The study will adopt a qualitative research, typical of the S and A (1997) model. This method will be considered since the preset study is concerned with understanding the issues and not measuring such. Since brand extension involved strategic and managerial decisions, the researcher will seek contact with the brand manager, the marketing director as well as other managers which are involved with the makerting of Dior goods in USA. The managers will be purposeful selected owing to their role and knowledge in such matters. Permission will be sought from the company executives as well as the participants before the actual interviewing process. The participants will also be asked to indicate which interview method they would be comfortable that is whether through questionnaires or interview method.
The participants will give their views through the interview process. This will be focused at acquiring an understanding of managerial practices and brand strategy in Dior Company, particularly for extension. The interview guide will be designed by S and A model in three basic components, decision criteria, antecedents and launch. Through this interview guide, the researcher will ask the respondents specific questions that are relevant with regard to the aspect of brand extension within Dior firm. Concerning the main drivers behind brand and line extension, the interviewees will be asked to explain on whether defense or growth strategic objectives were dominant an also the specific factors that drove the management of this firm to adopt such a strategy. I will also not forget to ask the interviewees extra factors and comments they wished to make regarding the issues in the study.
Ambler, T. and Styles, C., 1997. ‘Brand development versus new product development: toward a
process model of extension decisions’ Journal of Product and Brand Management 6 (4), 222-234.
Czellar, S., 2003. ‘Consumer Attitude Toward Brand Extensions: An Integrative Model and
Research Propositions’ International Journal of Research in Marketing 20 (1), 97-115.
Dibb, S., Simkin, L., Pride W.M. and Ferrell O.C., 2001. ‘Marketing: Concepts and Strategies’
Houghton Mifflin: Boston.
Grime, I., Diamantopoulos, A. and Smith, G., 2002. ‘Consumer evaluations of extensions and
their effects on the core brand. European Journal of Marketing, 36 (11/12), 1415-1438.
Kapferer, J-N , 1997. ‘Managing Luxury Brands’ Journal of Brand Management 4, 251-260.
McWilliam, G., 1993. ‘The effect of brand typology on brand extension fit: commercial and
academic research findings’ European Advances in Consumer Research 1, 485-491.
Nueno J.L. and Quelch J., 1998. ‘The mass marketing of luxury’ Business Horizons 41 (6), 6169.
Phau, I. and Prendergast, G., 2000. ‘Consuming luxury brands: The relevance of the ‘Rarity
Principle’. Brand Management 8, 122-138.
The Economist, 2003. ‘When profits go out of fashion’July 5th, 67-68.
Vickers, J.S. and Renand, F., 2003. ‘The marketing of luxury goods: An exploratory study three
conceptual dimensions’ The Marketing Review 3 (4), 459-478.