Building and managing strong brands is regarded as one of the key drivers for attaining success in the hospitality industry. The trend can be observed at both the local and the global level. Application of brand and line extensions has become a major trend in the hospitality industry. Brand extensions and line extensions would be the key method for launching innovations in coming years (Sumarjan et al 2013). The critical review of brand and line extensions for hospitality industry is done to understand the impact on the industry, brand management and brand equity.
Impact of brand and line extension on management of brand in hospitality industry
Strategies for brand extensions are beneficial due to the reduction of costs associated with the process of introduction of a particular brand name and enhancement of the chances of success of the brand in a new category. Common application of concepts of brand extensions across several and varying categories of product can be observed. For instance, the Virgin brand is one brand in the hospitality industry that has been extended across a range of products. The brand has an original association with record label ownership. It has seen extension into areas such as airline ownership and music publishing. Another example of successful brand extension is McDonald’s. It is a fast food restaurant brand famous at the global level. It has extended the brand name into McCafe, which is a gourmet coffee shop, and McTreat which is an ice-cream and dessert shop (Lee, 2007).
A company in the hospitality industry can make a use of endorsed brand extension strategy for extending the power of the brand identity that is well accepted to a varying range of concepts, which in turn, are differentiated by the market segment. In the hospitality industry, customers generally base their buying decisions on their perception of the brand of the company.
Brand extensions and line extensions influence the brand management. In general, more than half of the products that are introduced every year are brand line extensions. Positive impact of brand line extensions is seen in the form of higher market share due to increased variety in the product offerings. Higher profit is also observed as long as the hospitality companies carefully assess the impact of extension. Furthermore, effects of consolidation and activities related to mass branding are generally seen to create an immediate increase in the worth of shareholders for the original brand company. Such increase is positive and is seen in the short-term (Kwun, 2010).
Examples of positive impact of brand extensions are Westin Hotel and Resorts, Westin Heavenly Bed and Westin Heavenly Shower for line extension., Holiday Inn Express, Holiday Inn Select and Holiday Inn Crowne Plaza are examples for the category extension. In brand-line extension, companies benefit from the facilitation of adoption process and acceptance of new products, since end-customers assume that the new offerings possess the same level of quality as the parent brand. The service provider also bears minimal cost of branding owing to no need of name research and extensive advertising for spreading the awareness of the brand name. Furthermore, as response of the user will see the tendency of being faster, the introduction stage in the life cycle of the product is reduced where profits are emerged to be negative (Lee, 2007).
Kwun (2010) argues that negative effects of brand line extensions on brand management of hospitality companies are also observed in regards to formation and management of brand portfolios. In the report by Haussmann (2002) mentioned in the work of Kwun (2010), the author presents the argument that lodging companies that are involved in providing multiple brand products experience a decrease in the value proposition for owners of hotels and their franchisees. The reason for such decrease is that all multiple brand products of such companies are part of the same corporate program. For instance, operational costs are increased, but service delivery quality is decreased. In a similar way, mass branding can lead to a decrease in the overall quality of services, as it is inclined towards increasing the tendency of not promoting personalized services that guests of the hotel expect (Kwun, 2010).
A number of researchers carried out in the concerned field of brand management have suggested that when company goes for an inappropriate brand extension, it can lead to creation of damaging associations, which can prove to be a daunting barrier for the enterprise to overcome.
Analysis of the brand line extension to brand equity and brand management
As competition becomes intense in the industry, brand line extensions in vertical form have taken a lead in proving to be an increasingly crucial strategy for attaining growth to foster both the premium or value markets. The example of vertical line extension is seen in the case of Marriott chain of hotels. Marriott extended its hotel chains to the step down extension named ‘Courtyard Inn by Marriott’. The extension was done for catering to economic travelers. Considering the step-up extension, American Express offered American Express Platinum. It gives premium customers of the company an exclusive privilege. All such brand line extensions allow the enterprise to leverage the equity associated with the brand that is already well established when the company expands to different markets (Lei, Ruyter & Wetzels, 2008).
Kim (2013) gives stress on a fit between the category of the parent product and the extension. It is a primary factor in the evaluation of brand extensions. It leads to capturing the variation of brand line extension in comparison to the original brand. Customer attitude towards brand extension is one of the measures to see the influence of brand line extensions on brand equity. Consumers, in general, give preference to an extended form of a product that has come from comparatively popular brands. One of the prominent aims to initiate a brand extension strategy is attaining benefits with the help of leveraging consumer’s favorable attitude towards the concerned brand to other offerings. When the brand equity is higher, purchase and preference intentions are higher as well. In the study conducted by Aaker (1991), brand equity of Holiday Inn was observed to be more than Howard Johnson. Brand equity has an impact on preferences of consumers. When companies extend the brand whether in category or in line, the effect is observed on the brand equity (Kim, 2013).
Brand extensions can also bring negative outcomes for the brand equity. Products getting extensions to categories that are extremely dissimilar may lead to failure. A customer can enjoy a massage on the flight of Virgin Atlantic and he may be inclined to drinking Virgin Cola or he can stay in a Virgin hotel. However, a customer who has had a bad enough experience with any of the offered product lines can take the decision of avoiding all the other product lines. Thus, decisions of wrong extension can lead to weakening the brand associations and diluting the brand equity (Kayaman & Arasli, 2007).
Brand extensions have become prominent in the hospitality industry. The strategy is used to increase the brand equity and many companies can be found to have an inclination for extending a popular and successful brand in the market. A positive brand extension can increase the brand equity, while the failure can have a huge negative impact. Brands, such as Virgin, Holiday Inn and Marriott are examples of following a successful brand extension strategy. However, if the customer has bad experience with any of the offerings, the impact is seen on the harm brought to the original popular brand as well as the brand family.
Kayaman, R. & Arasli, H. (2007). Customer based brand equity: evidence from the hotel industry. Managing Service Quality, 17(1), 92-109.
Kim, W.G. (2013). Branding, brand equity, and brand extensions. Retrieved October 31, 2014, from http://ebooks.narotama.ac.id/files/Handbook%20of%20Hospitality%20Marketing%20Management/Chapter%204%20%20Branding,%20Brand%20Equity,%20And%20Brand%20Extensions.pdf
Kwun, D.J. (2010). How extended hotel brands affect the Lodging Portfolio. Journal of Retail & Leisure Property, 9, 179–191.
Lee, K. (2007). Brand Extension in the Upscale Hotel Industry; Conceptual Model, Industry Trends and Consumer Perceptions. London: ProQuest.
Lei, J., Ruyter, K.D. and Wetzels, M. (2008). Consumer Responses to Vertical Service Line Extensions. Journal of Retailing, 84 (3), 268–280.
Sumarjan, N., M, Z.M.S., Mohd, R.S. & et al. (2013). Hospitality and Tourism: Synergizing Creativity and Innovation in Research. London: CRC Press.