The Risks

7 important questions on The Risks

Why were the financial performance metrics that were used in this article risk and returns?

Because managers and investors want to maximise return whilst minimising risks and brand architecture influences this.

What is Brand Reputation Risk which also manifests as a Spillover Risk?

The deterioration of a brand's standing and esteem value that is caused by negative information about the brand, business practices or the management team.

What is a Brand Dilution Risk?

Decrease of a meaning that differentiates a brand from its competition. This will lead to brand equity erosion (customer base reduces because of brand switching and lower price premiums).
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How does Brand Dilution Risk occur?

If a corporate brand stretches too much through line or category extensions, it distances from what makes a brand special in the consumer's mind which leads to the meaning of the brand losing clarity.

What is a Brand Cannibalisation Risk which is also a Spillover Risk?

Customers of a product go to another product within the same firm, this will lead to a loss of sales, revenues or margins.

What is a Brand Stretch Risk?

When an organisation is not flexible enough to take advantage of new market opportunities, technologies or change towards the taste of consumers by offering new products.

What is an idiosyncratic risk?

Risk belonging to firm-specific circumstances and characteristics, more personal to firms for example the choice of a brand architecture.

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