Write 700 – 1000 word fictional (but critical) essay of the use of Halo effect using a known organization or brand that has been extended into other areas? Why did they do it? What are the risks affecting this venture and possibly tarnishing the halo that is being extended? Can you think of any situation that could cause a negative halo effect?
Eric Hiu Fung Tse- AD 610- Week4 – Assignment
Table of Content
Virgin Records: 1
Executive Summary. 3
What is Halo Effect in Branding or Marketing?. 3
Virgin Records Halo Marketing Case. 4
Virgin Cola. 4
Lessons Learned. 5
Risks about Negative Halo. 6
In brand marketing, a halo effect is one where the perceived positive features of a particular item extend to a broader brand. However it is not always the case. Virgin is one company that seems to be able to apply its brand name to almost anything but it was not fully successful in some of the cases. A good example is Virgin Cola, and Virgin Clothing. For Virgin Cola, the competition is so severe that there is no way Virgin can win the distribution from Coke and Pepsi.
In fact there some say that Virgin break all the rules of the Ansoff matrix that they should have failed more often. All these difficulties can be explained by negative Halo effect and there are so many risks for Virgin being over Halo. However, the important point is that, far from breaking the rules, they have observed the most important rule: understand the challenge and the risk, and aim to minimize the risk when away from home territory. In Virgin’s case, it is a combination of the brand halo, risk management, meticulous market research and their use of expert partners and suppliers that gives them their success. This illustrates risk management in handling marketing and branding risks.
What is Halo Effect in Branding or Marketing?
In brand marketing, a halo effect is one where the perceived positive features of a particular item extend to a broader brand. It has been used to describe how the iPod has had positive effects on perceptions of Apple’s other products.(Wilcox Joe) The effect is also exploited in the automotive industry, where a manufacturer may produce an exceptional halo vehicle in order to promote sales of an entire marque. Modern cars often described as halo vehicles include the Dodge Viper, Ford GT, and Acura NSX.
Virgin Records Halo Marketing Case
Virgin is one company that seems to be able to apply its brand name to anything. Although Richard Branson’s empire began as a record label, signing groundbreaking acts such as the Sex Pistols, the Virgin name has been extended to the airways, cola, and a host of other Virgin companies. Companies effectively pass the “halo” from one well-renowned and excellent product on to another, thereby maximizing the value of the name. (Carroll 2012)
Virgin Cola was set up during the early 1990s in conjunction with Cott, a Canadian company that specializes in bottling own-label drinks. Cott was looking for a major international brand that could have global appeal.
Within a few months of its release, Virgin Cola had a 50% market share in the outlets that sold it. It went on to be launched inFrance,Belgium,SwitzerlandandSouth Africa. In its first year more than 500 million units were sold worldwide. However, its popularity soon waned.
It is also served on Virgin Atlantic flights, and at Virgin Cinemas. It was previously sold in the on-board shops on Virgin Trains but this is no longer the case. The Gulliver’s Kingdom chain of theme parks in theUKalso sells post mix Virgin cola.
Although it was priced 15–20 per cent lower than the two leading brands, not enough consumers were being won over. Part of the problem was distribution. Coca Cola and Pepsi managed to block Virgin from getting crucial shelf space in half theUK’s supermarkets. Meanwhile, Coke doubled its advertising and promotion budget. As Rob Baskin, Coca-ColaUSA’s spokesman said: ‘We take all competition seriously.’
Ultimately, Coca Cola and Pepsi’s hold on the market has proven too strong and Virgin Cola failed to make a serious dent in their worldwide sales. Even on Virgin’s home turf, theUK, the brand struggled to gain 3 per cent of the market and it has never made a profit. (Author, 2006)
Strong brands depend on exploiting competitors’ weaknesses. ‘We often move into areas where the customer has traditionally received a poor deal, and where the competition is complacent,’ Branson once said, explaining Virgin’s brand strategy. However, Pepsi and Coca Cola are anything but complacent. Distribution is everything. If you can’t get the product on the shelves, it will never outsell its competitors. . (Author, 2006)
Risks about Negative Halo
The Ansoff matrix shows how risk increased as a business moved from a growth strategy based on penetration into one based on market extension, or the yet more risky territory of new product development, or beyond that, diversification. The moral of the matrix is not that you should avoid growth strategies based on anything but penetration, but that you should aim to reduce the risks of other strategies by whatever means are appropriate: market research, pilot trials, joint ventures, etc. A key means of reducing the risks involved in such growth strategies is branding. (Cheverton, 2000)
The brand halo works as it sounds – providing a prefabricated protective surround to the new venture, and so easing its way, even when the new venture might be as unconnected from the previous ones as cola is from airlines or mobile phones from cinemas. The halo also allows the marketer to infuse the new venture with the brand values (hopefully saintly) of the existing ones. The ability to transfer brand values in this way is a huge importance, but it must be done well, and it must be appropriate to the circumstances. (Cheverton, 2000)
Some say that Virgin break all the rules of the Ansoff matrix, that moving from record label to airline to hotelier to colar producer to financial services to rail operator is diversification with a vengeance and that they should have failed more often. The point is that, far from breaking the rules, they have observed the most important rule: understand the challenge and the risk, and aim to minimize the risk when away from home territory. In Virgin’s case, it is a combination of the brand halo, risk management, meticulous market research and their use of expert partners and suppliers that gives them their success. (Cheverton, 2000)
Author. (2006). Brand Extension Failures: Virgin Cola. A brand too far http://brandfailures.blogspot.com
Carroll. (2012). AD 610 Course Notes: Enterprise Risk Management and Business
Peter Cheverton. (2000). Key marketing skills: a complete action kit of strategies, tools & techniques for success marketing
Wilcox, Joe (2008). “The iPhone Halo Effect”. Apple Watch – eweek.com
Eric Tse, Richmond Hill, Toronto
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