New Products & Brand Extensions

Question 1

3 branding approaches when a firm introduces a new product

Answer 1

Develop a brand
Apply one of its existing brands
Use a combination of new and existing

Question 2

Line extension

Answer 2

Applying an existing brand name to a new product in the same product category

Question 3

Category extension

Answer 3

Applying an existing brand name to a new product in a different product category

Question 4

Ansoff’s growth matrix

Answer 4

Current markets - New markets
Current products - New products

Composed of 4 strategies ;
Market penetration strategy (CM-CP)
Product development strategy (CM-NP)
Market development strategy (NM-CP)
Diversification strategy (NM,NP)

Question 5

Advantages of extensions

Answer 5

Facilitate new product acceptance
Provide feedback benefits to a parent brand

Question 6

Ways extensions facilitate new product acceptance

Answer 6

Improve brand image
Reduce risk perceived by customers
Increase probability of gaining distribution and trial
Increased efficiency of promotional expenditures
Reduce costs of marketing programs
Avoid costs of developing new brand
Allow for logistical efficiencies (packaging, labelling)
Clarify brand meaning
Enhance parent brand image

Question 7

Disadvantages of brand extensions

Answer 7

Can confuse consumers
Can encounter retailer resistance
Can fail and hurt parent brand image
Can cannibalize sales of parent brand
Diminish identification with any one category
Can dilute brand meaning
Can cause the company to forgo the chance to develop a new brand

Question 8

3 steps on how consumers evaluate brand extensions

Answer 8

Managerial assumptions
Brand extensions and brand equity
Vertical brand extensions

Question 9

Managerial assumptions

Answer 9

Consumers have some awareness of and positive associations about the parent brand in memory, which can be evoked by brand extensions
Negative associations are not transferred from the parent brand
Negative associations are not created by the brand extension

Question 10

Brand extensions and brand equity

Answer 10

Creating a positive image for an extension depends on:
Level of parent brand salience
How favourable any inferred associations are
How unique any inferred associations are

Question 11

Vertical brand extensions

Answer 11

Same brand, same product category
Up = deluxe
Down = basic

Question 12

Horizontal brand extension

Answer 12

Same brand, new product category