INTRODUCING AND NAMING

NEW PRODUCTS AND BRAND

EXTENSIONS
CHAPTER 12

12.1
 Contents
 New product and brand extension
 Advantages of extensions
 Disadvantages of brand extensions
 Understanding how consumers evaluate brand
extensions
 Evaluating brand extension opportunities
 Extension guidelines based on academic
research
12.2
Section 1
NEW PRODUCT AND BRAND
EXTENSION

12.3
 Leverage the Brand
 In the past, “one brand – one product”
policies.
 Over time, tight economic conditions, a need
for growth, and other factors + Recognizing
the most valuable asset is their brands.
 Firms are seeking to build “power” or “mega”
brands that establish a broad market footprint,
appealing to multiple customer segments with
multiple products all underneath the brand
umbrella. 12.4
Ansoff’s Growth Share Matrix
Current New
Products Products

Current Market Product

penetration development
Markets
strategy strategy

New Market Diversification

development strategy
Markets
strategy

12.5
Options To Introduce A New
Product

Individual Existing Combination

brands brands of new
brand &
existing
brand

12.6
 Brand Extensions
 When a firm uses an established brand name to
introduce a new product
 Brand extension classification
 Line extension
 Using a sub-brand to target a new market segment
within the same product category
 Category extension
 Using the parent brand in a different product category

12.7
 Brand Extension

Category
Line extension
extension

12.8
 General Strategies for Establishing a
Category
Extension (Tauber’s franchise)
Introduce the same product in Introduce products that
a different form. contain the brand’s distinctive
taste, ingredient, or
component.

12.9
 General Strategies for Establishing a
Category
Extension (Tauber’s Franchise)
Introduce companion Introduce products relevant to
products for the brand. the customer franchise of the
brand.

12.10
 General Strategies for Establishing a
Category
Extension (Tauber’s Franchise)

Introduce Introduce Introduce

products that products that products that
capitalize on reflect the capitalize on
the firm’s brand’s the distinctive
perceived distinctive image or
expertise. benefit, prestige of the
attribute, or brand
feature. 12.11
Section 2
ADVANTAGES OF
EXTENSIONS

12.12
Advantages Of Extensions

Facilitate Provide
new feedback
product benefits to
acceptanc parent
e brand

12.13
 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

12.14
Provide Feedback Benefits To Parent
Brand
 Clarify brand meaning
 Enhance the parent brand image
 Bring new customers into brand franchise and
increase market coverage
 Revitalize the brand
 Permit subsequent extensions

12.15
Section 3
DISADVANTAGES OF BRAND
EXTENSIONS

12.16
 Disadvantages of Extensions
 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 the parent brand
 Can dilute brand meaning
 Can cause the company to forgo the chance to develop
a new brand
12.17
Section 4
UNDERSTANDING HOW
CONSUMERS EVALUATE
BRAND EXTENSIONS
12.18
 Understanding How Customers
Evaluate Brand Extensions
 Baseline case: consumers evaluate the brand extension
based only on:
 What they already know about the parent brand and the
extension category.
 Before any advertising, promotion, or detailed product
information is available.
 This baseline case provides the cleanest test of the
extension concept itself, and it gives managers
guidance about whether to proceed with an extension
concept and, if so, what type of marketing program
they may need.
12.19
 Understanding How Customers
Evaluate Brand Extensions
 An extension can be inferred favorably from parent brand
if:
 Consumers have some awareness of and positive associations
about the parent brand in memory
 At least 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
 The more these four assumptions hold true, the more
likely it is that consumers will form favorable attitudes
toward an extension.

12.20
 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.
 Contributes to the equity of the parent brand.

12.21
 Creating Extension Equity
 For the band extension to create equity, it must
have a sufficiently high level of awareness and
achieve necessary and desired points of parity
(POPs) and points of difference (PODs).
 The more prominently we use an existing
brand that has already achieved a certain level
of awareness and image to brand an extension,
the easier it should be to create awareness and
an image for the extension in the memory.
12.22
 Creating Extension Equity
 Creating positive image for an extension will depend
primarily on three consumer-related factors:
1. Salience of parent brand associations in the minds of
consumers in the extension context
2. Favorability of any inferred associations in the extension
context
3. Uniqueness of any inferred associations in the extension
context
 Successful brand extensions must achieve desired
points-of-parity (POP) and points-of-difference (POD)

12.23
 Contributing to Parent Brand
Equity
 To contribute to the parent brand equity, an
extension must:
 strengthen or add favorable and unique
associations to the parent brand and
 not diminish the strength, favorability, and
uniqueness of any already existing associations
for the parent brand.

12.24
 Contributing to Parent Brand
Equity
 The effects of an extension on consumer brand
knowledge will depend on four factors:
 How compelling the evidence is concerning the
corresponding attribute or benefit association in the
extension context
 How relevant or indicative the extension evidence
is for the attribute or benefit for the parent brand.
 How consistent the extension evidence is with the
corresponding parent brand associations
 How strong existing attribute or benefit associations
are held in consumer memory for the parent brand
12.25
 Contributing to Parent Brand
Equity
 According to these factors, feedback effects
that change brand knowledge are most likely
when:
 Consumers view information about the
extension as equally revealing about the
parent brand, and
 When they hold only a weak and inconsistent
association between the parent brand and that
information.

12.26
 Successful Extensions
 Must create points-of-parity and points-of-
difference in extension category
 Must recognize competitive reactions
 Must enhance points-of-parity and points-of-
difference of parent brand
 Must maximize the advantages and minimize
the disadvantages of brand extensions

12.27
 Successful Category Extensions
 Ivory shampoo and conditioner
 Vaseline Intensive Care skin lotion
 Hershey chocolate milk
 Jell-O pudding pops
 Visa traveler’s checks
 Sunkist orange soda
 Colgate toothbrushes
 Mars ice cream bars
 Arm & Hammer toothpaste
 Bic disposable lighters
 Aunt Jemima pancake syrup
 Honda lawn mowers

12.28
 Unsuccessful Category Extensions
 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
12.29
Section 5
EVALUATING BRAND
EXTENSION OPPORTUNITIES

12.30
 Evaluating Brand Extension
Opportunities
1. Define actual and desired consumer
knowledge about the brand (create mental
map and identify key sources of equity)
2. Identify possible extension candidates on
basis of parent brand associations and overall
similarity or fit of extension to the parent
brand.

12.31
 Evaluating Brand Extension
Opportunities
3. Evaluate the potential of the extension
candidate to create equity according to the
three-factor model:
 Salience of parent brand associations
 Favorability of inferred extension associations
 Uniqueness of inferred extension associations.

12.32
 Evaluating Brand Extension
Opportunities
4. Evaluate extension candidate feedback effects
according to the four-factor model:
 How compelling the extension evidence is
 How relevant the extension evidence is
 How consistent the extension evidence is
 How strong the extension evidence is

12.33
 Evaluating Brand Extension
Opportunities
5. Consider possible competitive advantages as
perceived by consumers and possible reactions
initiated by competitors.
6. Design marketing programs to launch extension
 Building brand equity for a brand extension requires
choosing brand elements, designing the optimal
marketing program to launch the extension, and
leveraging secondary associations.
7. Evaluate extension success and effects on parent
brand equity
12.34
 When are brand extensions
appropriate?
 If they see some basis of “fit” or similarity
between the proposed extension and parent
brand
 The major mistake in evaluating extension
opportunities is failing to take all of
consumers’ brand knowledge structures into
account.
 Often, marketers mistakenly focus on only one
brand association and ignore other potentially
important brand associations in the process.
12.35
Section 6
EXTENSION GUIDELINES
BASED ON ACADEMIC
RESEARCH
12.36
 Brand Extension Guidelines - 1
 Successful brand extensions occur when
the parent brand is seen as having
favorable associations and there is a
perception of fit between the parent brand
and the extension product.

12.37
 Brand Extension Guidelines - 2
 There are many bases of fit: product-
related attributes and benefits and well as
non-product-related attributes and
benefits related to common usage
situations or user types.

12.38
 Brand Extension Guidelines - 3
 Depending on consumer knowledge of
the product categories, perceptions of fit
may be based on technical or
manufacturing commonalities or more
surface considerations such as necessary
or situational complementarity.

12.39
 Brand Extension Guidelines - 4
 High-quality brand stretch farther than
average-quality brands, although both
types of brands have boundaries.

12.40
 Brand Extension Guidelines - 5
 A brand that is seen as prototypical of a
product category can be difficult to
extend outside the category.

12.41
 Brand Extension Guidelines - 6
 Concrete attributes associations tend to be
more difficult to extend than abstract
benefit associations.

12.42
 Brand Extension Guidelines - 7
 Consumers may transfer associations that
are positive in the original product class
but become negative in the extension
context.

12.43
 Brand Extension Guidelines - 8
 Consumers may infer negative
associations about an extension, even
based on inferred positive associations.

12.44
 Brand Extension Guidelines - 9
 It can be difficult to extend into a product
class that is seen as easy to make.

12.45
Brand Extension Guidelines - 10
 A successful extension can not only
contribute to the parent brand image but
also enable a brand to be extended even
farther.

12.46
Brand Extension Guidelines - 11
 An unsuccessful extension hurts the
parent brand image only when there is a
strong basis of fit between the two.

12.47
Brand Extension Guidelines - 12
 An unsuccessful extension does not
prevent a firm from backtracking and
introducing a more similar extension.

12.48
Brand Extension Guidelines - 13
 Vertical extension can be difficult and
often require sub-branding strategies.

12.49
Brand Extension Guidelines - 14
 The most effective advertising strategy
for an extension is one that emphasizes
information about the extension (rather
than reminders about the parent brand)

12.50
THE END

12.51