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Impact of Brand Extensions

Launching brand extensions are a bit like having kids - because you can doesnt suggest you should. But if the conditions are right, and everything is extensively prepared and even though through, then it could be terrifically worthwhile" Rory Sutherland, Creative Director, Ogilvy One, as cited in (Miller & Muir, 2004). First, brand extensions begun in the blissful luxury goods industry, when the French haute couture fashion residences started out diversifying to jewelry, watches, makeup and accessories. In 1921, French luxury fashion house Chanel launched its first perfume, "Chanel n5" and it remains as yet one of the best-selling perfume in the world, enhancing the luxurious trustworthiness of the brand.

In the previous few years, many luxury fashion properties have launched new projects to be able to grow their recognizability outside their usual area of activities; i. e. , clothing, makeup products and accessories. This process initiated by evolving to new places such as hotels, pubs, or restaurants where people can experience a special disposition; often in tight relationship with the idea of the brand. While using success of several luxury brands coming into the hospitality industry such as Bulgari, Versace, this research newspaper seeks to analyze Gucci's brand extension and advise the top of directors on the influences of stretching to the hospitality business. Founded in the 1920's, Gucci has become one of the world's leading luxury fashion brands. Which has a renowned reputation for design, quality and Italian traditional experience, the brand offers an array of products (clothing, handbags, shoes, timepieces, earrings and skis). Gucci addresses all areas of product launching, from creating, through processing, and syndication. (Kering, 2013)

In the study of the arguments for and against, the researcher will look at brands that contain supposed this diversification previously to get a sign of the effects of commencing such a job. The key strategy used to examine the final results of progressing the Gucci group into the hospitality industry is the Brand expansion strategy (Aaker & Keller, 1990, pp. 27-41); that the researcher will boost through the use of the Categorization theory (Smith & Medin, 1981). Furthermore, earlier examples of failing or success of brand diversification will be talked about as in necessary to avoid pitfalls and comes with an influence on the decision. Among these good examples, the "Golden Arch Hotel", circumstance of McDonald's extends to the hospitality industry.

In order to better conduct the research, the major first rung on the ladder is to evidently define the study aims and aims. The Aim is what the paper desires to achieve with regards to the business question, as the Objectives distinguish the way the aim is going to be achieved (Manchester Metropolitan College or university, 2008). The next section will focus on both parts so as to build the framework and serve as a guiding series for the rest of this essay.


This research project aims to investigate whether a luxury brand such as the Gucci group, should stretch their products and services in to the hotel industry to be able to follow the path previously experienced by the Armani group in Dubai.


To determine whether the brand expansion strategy successively meets the group; if it is appropriate for the center brand and company goals, as diversification can enable a business to gain access to new revenue channels.

What is Brand expansion theory?

The conceptual model

Does it apply to the Gucci Group?

What will be the costs of such an activity?

What will be the benefits and limitations?

What are the competitors? (SWOT Analysis)

To critically review if the Italian lifestyle and the prestige of Italian fashion industry constitute important components of cultural heritage that may be productively used in the areas of leisure and hospitality marketing.

Does the brand equity connect with the Hospitality Industry?

What variables affect consumers' perceptions about the acceptability of brand extensions?

How similarity and consumer innovativeness may influence the brand?

To analyze whether brand extension strategy is an effective tool to keep the brand up to date whilst the organization adapt to market changes.

Does stretching to the hospitality industry risk making it lose its relevance and charm?

Is the brand strong enough to guarantee successful brand expansion? (Research study of McDonald's experience in the hotel industry)

Will it improve overall brand image or damage brand identification?

Literature review

Brand Expansion Strategy

The original meaning of a brandname, as cited by Aaker, is a distinguishing name and/or symbol (such as a logo, motto, bundle design or brand) intended to identify the products or services of one seller, also to differentiate those goods or services from those of the competition (Aaker & Keller, 1990). A brand extension is defined when a company uses an existing brand name to introduce a new product (Vukasovic, 2012), as well as, when a preexisting brand is combined with a new brand when adding a fresh product (Keller, 2008). Consumer Patterns Seminar, regrouping lots of contributors, first introduced brand expansion in 1987. They were trying to comprehend "how consumers increase prior associations about a company's brands to new products made available from the same organization" (Boush, et al. , 1987). Nowadays, brand extensions might be one of the very most researched and impacting areas of marketing (Elliott & Percy, 2007).

Brand extension is known as to be the most attractive marketing strategy; indeed, it allows to lessen the starting cost of adding new products by compensating with the consumers' perception and awareness of the parent or guardian brand (Lassar, Mittal, & Sharma, 1995). Therefore, an effective brand extension will allow manufacturers to make the most from this by gaining an increased expectation in the consumer's brain and carry more shelf space for his or her brands. It has additionally been determined that the least quality deviation in product diversification is likely to gain more consumers than when the product lines are distinguishable (Lassar, Mittal, & Sharma, 1995). The implementation of this strategy will cause lower advertising costs for the prolonged brand as well as higher sales as a result of knowledge experience of the brand.

Nonetheless, numerous researchers agreed that luxury brand extensions have been left out. Even though the luxury brands were the first ever to initiate brand extensions by extending their haute couture brand to accessories, cosmetic makeup products, watches and rings, and though brand extensions are the essence of a business model of the blissful luxury haute couture brands (Uggla & Lashgari, 2012), yet the main researchers which were conducted were either relating about a non luxury brand or a opportunity between an extravagance and a non-luxury brand, which has some particular restrictions (Stankeviciute & Hoffmann, 2011).

Previous findings on the impact of brand extensions on the blissful luxury father or mother brand will be released, accompanied by a focus on the categorization theory and a self-created conceptual model.

The Impact of Brand Extensions on the Luxury Parent Brand

It has shown that luxury brands may be reducing their reputation while diversifying and focusing on a wider market share. We track record well-known luxury brand Pierre Cardin who fall into "every consumer's reach" goods by using his notoriety in marketing a commercial quality of hundreds of products. This can be comprehended by high quality non-personal needs when customers wish to buy products, unavailable to a broader public (Dubois & Paternault, 1995).

In order to fortify the core luxury brand image of the mother or father brand, luxury brand extensions tend to be attempted, thus, the partnership between consumers and the luxury brand must be strengthened. In a report in 1995, Elyette Roux intended to measure the impact of luxury brand extensions on the parent or guardian brand image through brand prestige, brand self confidence and desirability (Roux, Consumer Evaluation of Luxury Brand Extensions, 1995). In order to do so, Roux predicted that she could use conceptual fit, transferability, and identified quality of original brand as parameters.

The results proved that brand self confidence is only inspired by the conceptual fit methodology. Thus, only luxury brand extensions that are in stringent relationship to the build brand confidence and the parent or guardian luxury brand's knowledge will have a confident outcome on the mother or father brand. If extensions are uncertain, brand image dilution may happen due to brand assurance decrease.

Brand prestige is principally expected by brand quality and conceptual fit. On a lesser extend, transferability contributes in a substantial way to brand prestige. Only recognized luxury brand extensions will enrich brand prestige, supposing the luxury brand possesses the capability to substitute its qualifications and has quality reputation. Luxury brand extensions are facing many challenges to extend focus on markets (Dubois & Paternault, 1995). The aim is to increase consumers' dependence on this type of brand. Brand identified quality and conceptual fit are the primary predictors for desirability.

The decrease of brand desirability will damage the blissful luxury brand image.

People devoting to buy luxury brands for pretention motives, will remove their demand off these brands. Globally, the results turned out that brand prestige; brand self confidence and brand desirability are significantly associated with the type of luxury brand extensions (Boush, et al. , 1987).

In 1996, Roux proceeded to go a step further, broadening the study on the impact of brand extensions on an extravagance fashion brand's self-assurance, prestige and desirability well balanced by the use of consumers' knowledge level. The hypothesis was not supported, it engaged that more experienced people would supply the mother or father brand elements more extreme evaluations. This hypothesis approves that individuals are attracted to buy luxury fashion brands for their emotional benefit and image influence. Furthermore, the analysis says that brand prestige; desirability and self-assurance, when used as purchase objective variables, haven't any relationship among each other. (Roux & Boush, The Role of Familiarity and Experience in Luxury Brand Expansion, 1996).

The Categorization Theory

Categorization enables a large variety of subordinate functions because classifying something as a category member grants or loans visitors to bring their understanding of the category to concentrate on the new entrant (Smith & Medin, 1981). The part of which any cylindrical subject is set as a flashlight gives you to comprehend the Categorization theory. Therefore, people trend to forecast its parts, trace its functions, and presume its habit (Cheah & Phau, 2008). Once people have categorized some new entity, for example, they may be using appropriate knowledge for prediction and acceptation. For instance, you can easily assume that the cylindrical thing place as a flashlight will have one power at least, will have some kind of interrupter, and can basically create a laser beam when the transition is pressed. People do not only categorize to accept new market entrants, in addition they use the new entities to modify and revise their concepts. In a nutshell, categorization facilitates learning (Medin & Rips, 2005).

The Conceptual Model

This conceptual model was proposed by the researcher to be able to raised understand the impact of brand extensions on the parent brand collateral of luxury brands. As brand expansion affects the four results, these interact in a certain way.

Figure : The impact of brand extension

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