New products and brand

extensions

Session 8

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 For today

 Brand extension and new product

development
 In class – Brand Extension
 December 5th
– Mary Weisnewski, Methodologie

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 Overall, what is our goal as brand
managers?

 Create brand equity, of course!!

– We have talked about creating BE using the IBM

 How do we sustain it?

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 Brand Extensions: How does a firm
grow?

 A firm can:
– Focus on current products and markets
 Market penetration strategy
– Put existing products into new markets
 Market development strategy
– Put new products into existing markets
 Product development strategy
– Put new products into new markets
 Diversification strategy

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 Some Terminology

 Brand Extension - A firm uses an established

Brand name to introduce a new product
– Harley-Davidson clothing
 Sub-Brand - A new Brand is combined with an
existing Brand
– Dockers
 Parent Brand – The pre-existing Brand that gives
birth to the sub-Brand
 Family Brand – Parent Brand of multiple extensions

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 Categories of Brand Extensions

 Line extension
– Parent brand is used to brand a new product that
targets a new market segment within a product
category currently served by the parent brand
 H&S dry scalp shampoo
 Category extension
– Parent brand is used to enter a different product
category from that currently served by the parent brand
 Swiss army watches, Porsche bicycles

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 Compare these extensions

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 Extension Failures

 Campbell's tomato sauce

 LifeSavers chewing gum
 Cracker Jack cereal
 Harley Davidson wine coolers
 Hidden Valley Ranch frozen entrees
 Bic perfumes
 Ben-Gay aspirin
 Kleenex diapers
 Levi's Tailored Classics suits
 Nautilus athletic shoes
 Domino's fruit-flavored bubble gum
 Smucker’s ketchup
 Fruit of the Loom laundry detergent

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 Tauber’s strategies for category
extensions

 Same product in a different form

 Introduce products that contain the Brand’s
distinctive taste, ingredient or component
 Companion products
 Capitalize on the firms perceived expertise
 Distinct benefit, attribute, or feature
 Image or prestige

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 Advantages of Extensions

 Extensions can potentially provide the following

benefits to facilitate new product acceptance:
– Reduce risk perceived by customers & distributors
– Decrease cost of gaining distribution & trial
– Increase efficiency of promotional expenditures
– Avoid cost (and risk) of developing new names
– Allow for packaging and labeling efficiencies
– Variety-seeking

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 Advantages of Extensions

 Enhance the parent brand image

– Improve strength, favorability, and uniqueness of brand
associations
– Improve perceptions of company credibility
 Convey broader brand meaning to consumers
– Clarify core benefit proposition and business definition of the
company
 Bring new customers into the franchise and increase
market coverage

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 Disadvantages of Extensions

 Extensions have risks, too.

– They can fail.
 Moreover, extensions can potentially result in the
following costs:
– Cannibalize sales of the parent brand
– Hurt the image of the parent brand
 If the extension fails
 Even if the extension is successful
– Forego the chance to develop a new brand name
or market the parent brand differently
(opportunity cost)
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 Brand Extension Assumptions

 In introducing a brand extension, it is typically

assumed that:
– Consumers have some awareness of and positive
associations about the brand in memory
– Some of these positive associations are evoked by
the brand extension
– Negative associations are not transferred from the
parent brand
– Negative associations are not created by the brand
extension

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 When are Brand Extensions
Appropriate?

 When Prior BE exists

 Consumers must see some “fit”
between the proposed extension and
the parent brand
 The proposed extension contributes to
the overall brand equity of the parent
brand
– No dilution of existing SKS
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 Model of Extension Evaluations

Creating extension equity depends on 3 factors:

1. Salience of parent brand associations in extension
context
2. Favorability of any inferred associations in the
extension context
3. Uniqueness of any inferred associations in the
extension context

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 Brand Extension – In class

 Spend the remaining time coming up with a

BE for your brand
 Get ready to discuss.

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