Brand Extension and Leverage: A Case Study of Nestle's KitKat

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Brand Management
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Table of Contents
Introduction...................................................................................................................... 3
Task 1 – Building and managing brand over time............................................................4
Task 2: Brand portfolio and hierarchy management........................................................8
Task 3 – Brand extension and leverage.........................................................................13
Task 4 – Measuring and managing brand value............................................................16
Conclusion..................................................................................................................... 21
Reference List................................................................................................................ 22
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Introduction
Brand management is defined as the analysis on how consumers perceive a particular
brand in the market. The major objective of brand management is to establish superior
bonding with the target customers. The major components of brand management are
price, look of the product, packaging and others. The chosen organisation is Nestle. The
report will focus on the value and importance of brand. It will analyse the key elements
of a successful brand strategy for building brand equity. It will analyse the ways in which
brands are organised in a portfolio. The report will evaluate how the brands are
managed in a collaborative way.
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Task 1 – Building and managing brand over time
Brand is power
1. Introduction
A brand is regarded as a term, sign, name, design or combination of all intended a
particular good or service and differentiating that from other organisations (Maurya and
Mishra, 2012). Nestle has a strong brand association in the UK market having many
sub-brands such as KitKat, Nescafe, Shreddies, Aero and others.
Figure 1: Nestle brands
(Source: nestle.co.uk, 2019)
The brand is associated with coffee, cereals, and confectionary market. Brand equity
involves the benefit endowed on different products, which is reflected in the way buyers
think, act and feel with respect to the particular brand.
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Figure 2: Nestle tagline
(Source: nestle.co.uk, 2019)
There are some major stages associated with the brand building. The first stage
involves determining the target audience to whom Nestle will cater and sell its products.
In this stage, the company will identify the issues faced by the target audience and try to
meet their requirements. The next stage is to work on the brand mission, where Nestlé’s
promoters, integral members and management will discuss and work on the brand’s
mission by considering the long-terms and short-term objectives. The third stage
involves performing market research, where the company can understand competition
in the market and perception of the customers regarding the brand. The next stage is to
create a value proposition for the desired brand and convey the benefits of the brand
(Khan and Mahmood, 2012). The fifth step is to follow the brand guidelines that involve
crucial elements such as visual elements, brand strategy and the tonality of the
proposed brand. The final step of the brand building is working on brand architecture,
which aims at developing a logo, mascot, color palette, tagline, fonts, or typography for
the brand. These are developed to be used in promotional and marketing collateral
material.
Marketing department plays a crucial role to create brand awareness and image of the
company. It conveys messages to consumers regarding the effectiveness and benefits
of the brand. It designs marketing communication channels to increase the visibility of a
brand. The marketing programs designed by the department are related to product,
service, price and distribution channels. In order to build the brand equity, the
organization takes help of advertisement and promotional mediums.
2. Main body
Nestle can use different strategies to strengthen brand extension, brand equity and
revitalise the brand. By using Aaker Brand equity model, the company can apply
multiple approaches and strategies for building its brand equity. As per the model, five
categories of assets are available that add value to a brand. The categories include
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brand awareness, brand association, perceived quality, brand loyalty, and other
proprietary assets. The elements of brand fall under four important perspectives.
Figure 3: Aaker Brand equity model
(Source: Elliott et al., 2015)
The first perspective is brand as a product, which includes scope, attributes, quality, and
value of the product. The second perspective is brand as a person, which consists of
relationship and personality of consumer brands. The third perspective is brand as an
organisation, which comprises of organisational attributes. The last perspective is brand
as a symbol, which comprises visual imagery, brand architecture and metaphorical
symbols (Singh, 2013). By using this model, Nestle can become competitive in different
low-involvement markets such as drinks, confectionary, cereal, coffee and others.
Nestle can strengthen, extend and reinforce its brand through a number of strategies.
The first strategy is producing a quality product. Quality is the backbone for a brand.
Releasing a product without testing its quality and performance will lead to the failure of
a brand. An appropriate way to strengthen the brand is to meet the specific needs and
demands of customers. This can be possible by keeping an eye on competitors’
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BrandIdentitySystemBrandasproductBrandasorganisationBrandasPersonBrandassymbol

activities and industry trend. Recently, many new players have entered into the
confectionary industry. If Nestle does not perform as per customer expectation, it cannot
extend its brand. Maintaining a consistent brand is a crucial task for the company. By
communicating with customers in an engaging and consistent manner can be helpful for
it. Another important strategy is to focus on customers regularly. Feedback collected
from customers is beneficial to rebuild and redesign the brand. Mondelez, a competitor
of Nestle uses local approaches like CSR practices and collaborative work to brand its
products. Kraft food uses content marketing approach to strengthen its brand. Nestle
can use these approach to strengthen its brands.
3. Conclusion
Having a strong brand helps in building customer recognition, this indicates that
customers prefer to purchase from companies having a well-known brand. A strong
brand differentiates a company from others in the market place. When customers
recognise the brand and make a repetitive purchase, it helps in giving a competitive
edge to the business. When the company has already a strong brand, it becomes easy
to introduce new products. Customers believe that products and services from a
reputed brand are of excellent quality. This helps in marketing a product intensively and
making a huge return. When the company does extensive branding, its market share
and revenues increase due to higher customer preference. Nestle can use brand power
to enter into new geographical areas and gain new opportunities for distributing its
products. These benefits indicate that branding is an important marketing tool.
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Task 2: Brand portfolio and hierarchy management
Introduction
Brand portfolio is the collection and association of brands under an organisation’s
control. The task will focus on the portfolio strategy of Nestle and discuss its brand
hierarchy. Different strategies used to manage the brand equity will be analysed here.
1. Analyse the organisation’s brand portfolio strategy
Brand portfolio strategy is a systematic approach towards forming and managing a set
of portfolio brands in a coordinated manner (Aaker, 2012). The key elements of these
strategies are scopes and roles of brands and interrelationship of different brands. The
models of the brand portfolio are branded house, the house of brands and house
blends.
The branded house is a single brand across multiple categories and products. The
model focuses only on developing the brand. House of brands model is the combination
of independent and disconnected brands (Kladou and Kehagias, 2014). House blend
model in an architecture based model emphasising on the development of all sub-
brands. Nestle has adopted a house of brands model, where it targets each group of
customers separately and in a unique way. It has the freedom to stretch the existing
brand to cover different target markets. It has the capability to create a distinct corporate
brand.
While creating a brand portfolio, Nestle defines the strategic objectives for each sub-
brand. It focuses on the requirements of customers, develops brands and uses metrics
to measure the performance of a particular brand. It uses a strong sub-brand to
leverage it and introduce other products based on that. It has a simple brand
architecture showing the classification of different product categories and their
respective brands. Nestle uses different visual identity, nomenclature and linkages to
simplify customer offerings.
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2. Provide an illustration of the hierarchy management of brands within
organisations portfolio
Hierarchy of brands of Nestle determines the types and categories of products
available. Its portfolio has around 8,500 brands that are organised by geographical
status. It has created a hierarchy of brands, where every product is linked with minimum
two brands. The geographical criterion of the Nestle has divided into three parts such as
local, regional, and internal. These brands fulfil several roles and functions depending
on customer demand. Around 80% of Nestle’s business activities are brought together
under six main corporate brands such as Nestlé, Nescafé, Buitoni, and many
others (nestle.co.uk, 2019). The product brands of the Company are Kit Kat, San
Pellegrino, Lion, the mineral water namely Perrier and Friskies, Nestlé Pure
Life, and Vittel. Another category of the brand group is a strategic regional brand
including the Nuts bar, Herta cold meats and, Aquarel and Contrex. Another
category is local brands, which are sold as per the country of origin.
Figure 4: hierarchy of brands in Nestle
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NestleCorporatebrandNestlé,Nescafé,Nestea,Maggi,BuitoniandPurina.StrategicInternationalbrandKitKat,Lion,FriskiesandthemineralwatersPerrier,SanPellegrino,VittelandNestléPureLifeStrategicRegionalbrandAquarelandContrex,theNutsbar,andHertacoldmeatsLocalbrandsCailler,Butterfinger,Rossiya,Orion,CajaRoja,SaoLuiz and Star.

(Source: Created by the learner)
In order to identify different brands, the company uses different symbols for different
categories. The reason behind this strategy is that consumers’ expectation from baby
food will differ from the chocolates. Therefore, different logo and symbol will create
different perceptions.
3. Analyse strategies used for managing the equity of the brands within the
organisations portfolio
Several models instruct how to manage the equity of brands through the application of
different strategies.
Brand Asset Valuator
The model comprises four pillars of brand equity such as relevance, esteem,
knowledge, and energised differentiation (Severi and Ling, 2013). The model provides
various comparative measures of the equity value and strategic brand management
tools for brand extension process. It has relation with financial analytic, which can help
in measuring the contribution of a particular brand to the organisation.
Brandz
It involves a number of stages, and each stage has its objective for brand building. The
objectives are presence, relevance, advantage, performance and bonding. Presence
indicates whether consumers know the brand or not. Relevance indicates whether the
brand has the capability to offer something. Performance means the delivering
capability of the brand. Advantage indicates whether the brand can offer better than
others can. Bonding is the ability to build a long-term relationship with customers that
others cannot beat that.
Brand Resonance
Brand resonance involves certain steps for building a brand. It ensures identification of
the brand with consumers’ mind as per their specific needs (Kapferer, 2012). It elicits
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effective consumer response related to their feelings and judgment. It can use customer
response to create a proper relationship between the brand and customers.
Nestle has applied brand resonance model to brand its products. It builds a brand as
per the different expectations and needs of customers. It tries to create the different
perception for different product category through the application of this model. The
strategies adopted by Nestle for managing brand equity are as follows.
Building distinct products
Building and developing distinct products make the organisation more valuable from
others (Stahl et al., 2012). Nestle is able to sell its products in a different approach
through this strategy. With the development of distinct products and brands, the
interests of customers increase to purchase products.
Valuing people
Without focusing on their own profits, nestle values its customers. Fulfilling specific
needs and demands of customers and offering wide ranges of products is the major
objective of the company. Before introducing a new product, Nestle tests on selected
consumers to know its performance. This helps in developing and managing brand
equity.
Communication strategy
Brand equity cannot be managed without the presence of an excellent communication
strategy (Badrinarayanan et al., 2016). Today’s market place demands communication
to be multilingual and culture-sensitive. By adopting an effective communication
strategy, the company is able to build a loyal customer base. Additionally, it uses both
traditional and online platform to communicate the effectiveness of the brand and create
a unique perception in customers’ mind.
Conclusion
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As per the task, Nestle brands its products as per different product categories. It adopts
some useful strategies to manage the brand equity of its products. Brand resonance
model is applied by Nestle to develop strategies for this.
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