Product and Brand Management Branding Strategy Brand Extensions

Deepak Sirdeshmukh 2010

MANAGING THE PRODUCT/BRAND MIX

Through growth, retrenchment, and acquisition, most companies accumulate an assortment of products/brands, typically spanning multiple product markets. The product/brand mix is the term that refers to the complete assortment of products that a company offers. Characterizing the product/brand mix Width: The number of product lines that a company offers. The number of variants for given product.

Line length: Total number of items in a product line. Depth: Consistency: The relationship between product lines.

Colgate-Palmolive Product Assortment

WIDTH

LENGTH

DEPTH

?
Regular Waxed Mint Waxed CONSISTENCY

ABBs BRAND PORTFOLIO

BRANDING STRATEGY OPTIONS BRAND HIERACHY LEVELS

Corporate Branding Using the company name as an overall brand (General Motors, Sony, Dell) Family Branding Using a blanket family brand - using brand extensions (Buick, Tropicana (Seagrams brand)) Individual Branding Developing unique brand names for new products using individual brand names (Fritos, Tide) Using Modifiers to brands Applying a qualifier to a brand (Ultra, Lite, LS/ES) Firms often use a combination of the above branding alternatives.

Brand Extensions
Brand extension strategy: Using an established brand in one product category to launch or endorse a new product in a different product category. Examples:
Procter & Gamble extended the Olay brand to facial cleansing cloths, as well as to multivitamins. The Ferrari brand has been extended to motorcycles as well as to laptops.

Some well known brand extensions

Story from this week According to IRI, Brand Extensions dominated in a recessionary economy
Campbell's Select Harvest soup, Bud Light Lime beer, Arnold Select Sandwich Thins bread, Green Giant Valley Fresh Steamers frozen prepared vegetables, and Dreyer's/Edy's Fun Flavors ice cream were the leading entries in Information Resources Inc.'s roster of top new food/beverage consumer packaged goods of 2009, based on sales during their first full year on the market. Contrary to the historical pattern, in which "new food brands have outperformed brand extensions," 2009 was a year in which brand extensions dominated the ranks of "New Product Pacesetters." (That's a class whose criteria include "at least $7.5 million in yearone sales across food, drug and mass channels (excluding Walmart). Ninety-three percent of the foods/beverages qualifying as Pacesetters last year were brand extensions. Looking at the data another way, new brands of foods/beverages had average year-one sales of $15 million last year, while new brand extensions averaged $28 million. The report suggests that the economy played a role in boosting brand extensions and tamping down wholly new brands.
Adapted from a story in Advertising Age, March 22, 2010

The Logic For Brand Extensions

Brand extensions are based on the logic 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

Advantages of Brand Extensions: For the extension product

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 brands Allow for packaging and labeling efficiencies Permit consumer variety seeking

Advantages of Extensions: For the parent brand

Extensions can also provide feedback benefits to the parent brand and the company as a whole: 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

Disadvantages of Extensions
Extensions have risks - they can fail. Extensions can potentially result in the following other costs: Cannibalize sales of the parent brand (when cannibalization is not intended) 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)

Predicting how consumers will evaluate a brand extension

Core Value Propositions Core Skills
PARENT BRAND

Core Benefits

Core Attributes, Feeling

1. What are all the salient associations evoked by the brand?

Predicting how consumers will evaluate a brand extension

Core Value Propositions Core Skills
PARENT BRAND

+ -? + -? + - ?

Core Benefits

Core Attributes, Feeling

+ - ?

2. What are the dominant associations? (Note, the brands strategy will drive these associations) 3. How favorable are the dominant associations?

Predicting how consumers will evaluate a brand extension

Do they share desired value propositions ?

Do they share manufacturing competencies?

PARENT BRAND EXTENSION PRODUCT

Do they share desired value benefits?

Do they share desired value attributes?

Does the consumer find a fit between the dominant associations and the extension product? That is - does this make sense

Launch options for the brand extension: Based on earlier assessments

Product Attribute 1 Product Attribute 2
Parent Brand

Customer (Benefit) Need 1 Customer (Benefit) Need 2 Customer (Benefit) Need 3

Customer (Value) Goal 1 Customer (Value) Goal 2

Product Attribute 3 Product Attribute 4

Attribute Based Extension: Godiva

Benefit Based Extension: Dannon

Values Based Extension: Rolex

Brand Extension

Additional considerations beyond consumer judgments

Assessments of the viability of a brand extension strategy should go beyond consumer acceptance or even desires. Overall assessments should include a strategic analysis of the overall value of a brand extension strategy in terms of company profitability and strategic position. The framework developed in the next section helps conduct such a strategic analysis.

Beyond Fit: A Comprehensive Process for Assessing Whether to Extend the Parent Brand to a New Line of Business
Do we have a strong brand? At what level?
Parent brand equity Brand Equity Strength Brand Equity Drivers

Beyond Fit: Comprehensive Process for Assessing Whether to Extend the Parent Brand to a New Line of Business
Do we have a strong brand? At what level?
Parent brand equity Brand Equity Strength Brand Equity Drivers Parent brand extension product relationship

Will the extension make sense to the customers in this segment ?

Perceived value of extension

Beyond Fit: Comprehensive Process for Assessing Whether to Extend the Parent Brand to a New Line of Business
Do we have a strong brand? At what level?
Parent brand equity Brand Equity Strength Brand Equity Drivers Parent brand extension product relationship

Will the extension make sense to the customers in this segment ? Can the extension compete with (beat) the incumbent brand?

Perceived value of extension

Perceived value of alternatives

Incremental value promised by the extension

Beyond Fit: Comprehensive Process for Assessing Whether to Extend the Parent Brand to a New Line of Business
Do we have a strong brand? At what level?
Parent brand equity Brand Equity Strength Brand Equity Drivers Parent brand extension product relationship

Will the extension make sense to the customers in this segment ? Can the extension compete with (beat) the incumbent brand?

Perceived value of extension

Perceived value of alternatives

Incremental value promised by the extension

Performance of the extension product

Can we deliver on customer expectations?

Customer satisfaction

Beyond Fit: Comprehensive Process for Assessing Whether to Extend the Parent Brand to a New Line of Business
Do we have a strong brand? At what level?
Parent brand equity Brand Equity Strength Brand Equity Drivers Parent brand extension product relationship

Will the extension make sense to the customers in this segment ? Can the extension compete with (beat) the incumbent brand?

Perceived value of extension

Perceived value of alternatives

Feedback effect of extension performance

Incremental value promised by the extension

Performance of the extension product

Can we deliver on customer expectations?

Operating costs

Customer satisfaction

Does success of the extension benefit the brand?

Retention costs Customer equity

Long term profitability

Insights Needed For Assessing Brand Extension Decision

Assessment Stage
Parent Brand Equity Parent Brand Equity

Insights Necessary
Customer based brand equity measures Brand loyalty, vulnerability indices Value drivers in extension product market Parent brand-extension relationship assessment (ex: product, technology, benefit similarities) Product complementarity assessment Consumer loyalties in extension product market Consumer switching cost assessment Competitor brand value analysis Internal cost analyses Customer equity in extension product market Net equity of customers for complementary product bundle Brand profitability analysis Assessment of extensions impact on the brands position Impact on brands strategic path

Parent Brand - Extension Parent Brand - Extension Relationship Relationship

Incremental Consumer Value Incremental Consumer Value

Projected Profitability Projected Profitability

Impact on Parent Brand Impact on Parent Brand