Module 11 Flashcards
New Products & Brand Extensions
As background, first consider the sources of growth for a firm.
One useful perspective is
Ansoff’s product/market expansion grid.
Ansoff’s Growth Share Matrix
Current Products & Current Markets: Market Penetration Strategy
New Products & Current Markets: Product Development Strategy
New Markets & Current Products: Market Development Strategy
New Markets & New Products: Diversification: Diversification Strategy
When a firm introduces a new product, it has three choices for branding it:
- It can develop a new brand, individually chosen for the new product
- It can apply, in some way, one of its existing brands
- It can use a combination of a new brand and an existing brand
A brand extension occurs when
a firm uses an established brand name to introduce a new product (approaches 2 or 3).
When a new brand is combined with an existing brand (approach 3), the brand extension can also be a
sub-brand.
An existing brand that gives birth to a brand extension is the
parent brand.
If the parent brand is already associated with multiple products through brand extensions, then it may also be called a
family brand.
Brand Extensions fall into two general categories:
Line Extension
Category Extension
Line Extension:
Marketers apply the parent brand to a new product that targets a new market segment within a product category the parent brand currently serves. A line extension often adds a different flavor or ingredient variety, a different form or size, or a different application for the brand.
Category Extension:
Marketers apply the parent brand to enter a different product category from the one it currently serves.
Typically __ to __ of new products in any one year are line extensions.
80% - 90%
Many of the most successful new products are
extensions.
Well-known branding expert, Edward Tauber, identifies seven general strategies for establishing a category — or what he calls a franchise-extension:
- Introduce the same product in a different form.
- Introduce products that contain the brand’s distinctive taste, ingredient, or component.
- Introduce companion products for the brand.
- Introduce products relevant to the customer franchise of the brand.
- Introduce products that capitalize on the firm’s perceived expertise.
- Introduce products that reflect the brand’s distinctive benefit, attribute, or feature.
- Introduce products that capitalize on the distinctive image or prestige of the brand.
Another term for category
franchise-extension
For most firms, the question is not whether to extend the brand, but
when, where, and how to extend it.
Advantages of Extensions:
Facilitate new product acceptance
Provide feedback benefits to the parent brand and company
Facilitate New Product Acceptance
- Improve brand image.
- Reduce risk perceived by customers.
- Increase the probability of gaining distribution and trial.
- Increase efficiency of promotional expenditures.
- Reduce costs of introductory and follow-up marketing programs.
- Avoid cost of developing a new brand.
- Allow for packaging and labeling efficiencies.
- Permit consumer variety-seeking.
Brand inferences improve
strength, favorability, and uniqueness of the extension’s brand associations.