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.
Perceptions of corporate credibility – in terms of expertise and trustworthiness can be a valuable association in
introducing brand extensions.
Increase in consumer demand for a new product makes it easier to
convince retailers to stock and promote it.
It is easier to add a link to a new product from a brand already existing in the memory than it is to
first establish the brand in memory and then also link the new product to it.
When a brand becomes associated with multiple products, advertising can be more
cost effective for the family brand as whole.
Developing a new brand element is an art and a science.
Quite expensive with no assurance of success.
Similar or virtually identical packages and labels for extensions can result in
lower production costs and if coordinated properly, can create a “billboard” effect.
Permit Consumer Variety-Seeking by
offering a portfolio of brand variants within a product category for the consumer who needs a change.
Provide Feedback Benefits To The Parent Brand And Company
- Clarify brand meaning.
- Enhance the parent brand image.
- Bring new customers into the brand franchise and increase market coverage.
- Revitalize the brand.
- Permit subsequent extensions.
Extensions help to clarify the meaning of the brand to consumers and
define the kinds of markets in which it competes.
Extensions help to clarify the meaning of the brand to consumers and define
the kinds of markets in which it competes.
Enhance the Parent Brand Image by
strengthening existing brand associations, improving the favorability of existing brand, adding a new brand associations, or a combination of these.
Line extension can benefit the parent brand by
expanding market coverage.
Sometimes brand extensions can be a means to
renew interest in and liking for the brand.
A successful extension may serve as
the basis for subsequent extensions.
Disadvantages of Brand Extensions
I. Can Confuse Or Frustrate Consumers
II. Can Encounter Retailer Resistance
III. Can Fail And Hurt Parent Brand Image
IV. Can Succeed But Cannibalize Sales of Parent Brand
V. Can Succeed But Diminish Identification With Any One Category
VI. Can Succeed But Hurt The Image of the Parent Brand
VII. Can Dilute Brand Meaning
VIII. Can Cause The Company To Forego Chance To Develop New Brand
Managerial Assumptions:
to analyze potential consumer response to a brand extension, a baseline case is used to provide the cleanest test of the extension concept itself, and gives managers guidance about whether to proceed with an extension concept and, if so, what type of marketing program they might need.
Brand Extensions and Brand Equity:
the ultimate success of an extension will depend on its ability to both achieve some of its own brand equity in the new category and contribute to the equity of the parent brand.
Vertical Brand Extensions:
scenario where the brand is either extended up into more premium market segments or down into more value-conscious segments. These are a common means of attracting new groups of consumers.
We can expect consumers to use their existing brand knowledge, as well as what they know about the extension category, to try to infer what the extension product might be like.
In order for these inferences to result in favorable evaluations of an extension, four basic conditions must generally hold true:
- Consumers have some awareness of and positive associations about the parent brand.
- At least some of these positive associations will be evoked by the brand extensions.
- Negative associations are not transferred from the parent brand.
- Negative associations are not created by the brand extensions.
Creating Extension Equity:
For the brand extension to create equity, it must have a sufficiently high level of awareness and achieve necessary and desired points of parity and points of difference.
Initially, creating a positive image for an extension will depend primarily on three consumer-related factors:
i. How salient parent brand associations are in the minds of consumers in the extension context.
ii. How favorable any inferred associations are in the extension context.
iii. How unique any inferred associations are in the extension category.
Contributing To Parent Brand Equity:
To contribute to parent brand equity, an extension must strengthen or add favorable and unique associations to the parent brand and not diminish the strength, favorability, or uniqueness of any already existing associations for the parent brand.
The effects of an extension on consumer brand knowledge will depend on four factors:
i. How compelling the evidence is about the correspondence attribute or benefit association in the extension context.
ii. How relevant or diagnostic the extension evidence is for the attribute or benefit for the parent brand.
iii. How consistent the extension evidence is with the corresponding parent brand associations.
iv. How strongly existing attribute or benefit associations are held in consumer memory for the parent brand.
The central logic behind vertical extensions is that
the equity of the parent brand can be transferred in either direction in order to appeal to consumers who otherwise would not consider the parent brand.
Vertical extensions can confer a number of the advantages of brand extensions. An upward extension can improve
brand image, as a more premium version of a brand often brings with it positive associations.
Vertical extensions can also be susceptible to many of the disadvantages of brand extensions…
a vertical extension to a new price point, either higher or lower, can confuse or frustrate consumers who have learned to expect a certain price range from a brand.
Despite the problems inherent in vertical extensions, many companies, like Marriott have succeeded in
extending their brands to enter new markets across a range of price points.
Academic research and industry experience have revealed a number of principles governing successful brand extensions. Marketers must consider their strategies carefully by
systematically following the steps listed in the Brand Extension Checklist and use managerial judgment and marketing research to help make each of these decisions.
Brand Extension Checklist
- Does the parent brand have strong equity?
- Is there sufficient transfer to the extension?
- Is extension consistent with brand vision and essence?
- Is it a logical fit that will make sense to target market(s)?
- Will it create strong competitive positioning in new category?
- Will it avoid creating negative associations in new category?
- What implications will the extension have on brand equity?
- Does it minimize downside risk and dilution?
- Does it offer additional extension opportunities?
- Will extension have necessary points of parity and points of difference?
- How can the marketing program enhance extension equity?
- Do the organizational skills and resources required to develop extension exist or can they be obtained?
- How should extension feedback effects to the parent brand best be managed?
