New Products and Brand Extensions Flashcards
Three branding approaches available when a firm introduces a new product
- Develop a new brand
- Apply one of its existing brands
- Use a combination of new and existing
def. Applying an existing brand name to a new product in the same product category
line extension
def. Applying an existing brand name to a new product in a different product category
category extension
what are the two main categories of extension advantages
- Facilitate new-product acceptance
- Provide feedback benefits to a parent brand
describe the extension advantages: facilitate new product acceptance (8)
- 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
describe extension advantages: provide feedback benefits to the parent brand and company (5)
- 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
Disadvantages of Brand Extensions (8)
- Can confuse or frustrate consumers
- Can encounter retailer resistance
- Can fail and hurt parent brand image
- Can succeed but cannibalize sales of parent brand
- Can succeed but diminish identification with any one category
- Can succeed but hurt the image of parent brand
- Can dilute brand meaning
- Can cause the company to forgo the chance to develop a new brand
What are the three key aspects of understanding how consumers evaluate brand extensions
- Managerial Assumptions
- Brand Extensions and Brand Equity
- Vertical Brand Extensions
describe managerial assumptions with regards to evaluating brand extensions
- Consumers have some awareness of and positive associations about the parent brand in memory
- Some of these positive associations will be evoked by the brand extension
- Negative associations are not transferred from the parent brand
- Negative associations are not created by the brand extension
What does creating a positive image for an extension depend on? (3)
- How salient parent brand associations are
- How favorable any inferred associations are
- How unique any inferred associations are
What do the effects of an extension on consumer brand knowledge depends on? (4)
- How compelling the evidence is about the corresponding attribute or benefit association
- How relevant or diagnostic the extension evidence is
- How consistent the extension evidence is
*How strongly existing attribute or benefit associations are
horizontal brand extension
- same product
- new product category
sometimes different is better
vertical brand extension
- same brand
- same product category
being better on objective scale
two kinds of vertical brand extension
- up (deluxe)
- down (basic)
advantages of vertical branding
Simple sales proposition.
- Displaying a stat and noting that it is the best
in the market is simplest way of differentiating a product.
Free promotion in media.
- Often trade magazines and websites will write about the latest product.
Halo effect on other products in the brand’s portfolio
disadvantages of vertical branding
Hard to maintain.
- Competitors may release products that beat brand’s product, and the sales advantage evaporates overnight.
Never a permanent strategy.
- A company cannot be the best forever, so brands need to think about 2.0.
A product may be the best on a feature customers do not care about.
- Often objective measures do not translate to better customer experiences. Sometimes no one cares about the stat a brand is promoting.
advantages of horizontal branding
Customer loyalty. - People will be loyal to a brand that makes
products specifically tailored to their needs.
Market less sensitive to price.
Defensible position.
- While maintaining a technical advantage can be impossible, staking out a unique value proposition can be maintained for decades.
disadvantages of horizontal branding
Horizontal branding requires media spending.
- A brand needs to promote the brand personality and vision they are going for.
Subject to ups and downs of the category.
- If the lifestyle wains in popularity, the brand’s sales will too.
Consumer tastes change.
- Fads die off, and lifestyles change. If a brand’s demand is tied to one of these, then sales may go down if tastes change.
Demographics will force you to change.
- If a horizontal brand is lucky enough to have a long-term appeal, then demographics will force it to rebrand eventually. People will age out of market.
steps in evaluating brand extension opportunities
- define actual and desired consumer knowledge about the brand
- identify possible extension candidates
- evaluate the potential of the extension candidate
- design marketing programs to launch extension
- evaluate extension success and effects on parent brand equity
T or F: brand extension new products have stronger likelihood of success
true
the more dissimilar the product is to the parent brand, the more ________ become positioning
Points of parity
–> points of parity need to be extremely well-established
how do vertical brands differentiate
differentiate as better on an objective scale (ex. fuel efficiency, tech, material, process, etc)
–> objectively better products is goal
how do horizontal brands differentiate
differentiation on somebothing subjective (ex. mini cooper –> style (other ways are design, engineering, marketing))
- ok with being different (sometimes it is better to be different)
- looks at needs of different people
what are some other things to consider regarding brand extensions
- actual and desired consumer knowledge
–> have to know SURF associations of parent brand - think about fit with parent brand –> what things would transfer over
- CBBE model
- leverage secondary associations
