Chapter 6 - Brand Extension

What could motivate firms to extend brands?

1. Existing market saturation 2. Decreasing brand loyalty 3. Brand in need of refreshing 4. Competitor brands offer similar attributes 5. Global aspirations 6. Growing communications reach - internet

What 2 main things does brand extension aim to accomplish?

1. Grow the value of the extended brand 2. Help the new product's market acceptance

Pros of brand extension as brand value growth are:

1. Increases value by extending reach of the brand 2. Adds desirable associations of size to brand identity, image and personality

Cons of brand extension as new product acceptance are:

1. Limited innovation and uniqueness compared to new brand 2. Brand fit has to be strong to create acceptance

What are two ways to achieve brand extension?

1. Line extension - Adds a different variety, form, size or application for the brand 2. Category extension - Marketers apply the parent brand to enter a different product category from the one it currently serves

Cons of brand extension as brand value growth are:

1. New product failure will generate negative feedback on established brand 2. A bad fit may dilute brand equity

Pros of brand extension as new product acceptance are:

1. Strong rand will reduce perceived risk and increase willingness to try 2. Established brands will yield spillover goodwill 3. New product has access to distribution channels 4. Introduction campaign will be less costly

When should a sub brand or a new brand be used?

A sub brand uses the same name but with added suffixes to indicate new characteristics. Therefore it remains close to the identity of the original brand. Therefore, sub brands are useful if the product does not differ too far from the original brand or products. In this case, creating or acquiring a new brand is appropriate so the identity, image and personality of the established brand does not create unwanted preconceptions of the new product.

What is brand extension?

Brand extension is when a firm uses an established brand to introduce a new product in a different product category.

Describe the term co branding and explain its benefits and limitations

Co branding is the practice of combining two independant brands into a single product or promotion. This helps to share overflowing benefits and draw on the identity, image and personality of the other brand. It also helps to access a larger market as they combine each others interested customers and shares the costs. However, they also share reputation which can damage the brand and in reality it is often hard to find two brands that are mutually beneficial for each other.

How does the level of involvement affect new product acceptance?

In low involvement purchases, established brands will simply be less necessary because purchases are less risky and impulse trials are more common. However, established brands will have a greater initial awareness and increase likelihood to impulse buys. In high involvement purchases, the brand extension serves as a guarantee one expects.

How does the type of product category affect new product acceptance?

In utilitarian 'think' products, functional risk is important for new product acceptance. Market saturation and routine purchases mean new entrants need to offer an incentive to switch An established brand, especially if the product is a close fit to existing brand, helps to reduce psychological risk and increase willingness to try. Whereas, symbolic 'feel' products are more reliant on reducing psychological risk and enhancing self expression.

Explain what the brand-product fit is and how it affects brand extendibility:

The brand product fit refers to the degree to which the new product category and features are reflective of parent identity, image and personality. A good fit is likely to increase the chance of the extension being a success. This is because the competencies are perceived to be similar and so functional risk is reduced in the same way as existing products.

What factors affect the extendibility of a brand?

The brand's identity, image and personality sets the limits of how far a brand can be extended. These factors are also affected by additional factors such as customer segments, distribution channels, quality level and technology. Therefore, the more narrowly defines a brand's competencies and product markets are, the less room there is for a brand extension.

What is umbrella branding and how can it benefit and disadvantage brands?

Umbrella branding means using one overriding brand name for multiple products with sub brands under the main umbrella brands. They are also know as master or family brands. This is good in that there is one recognisable brand which increases perceived risk reduction and benefits from positive associations of size. However, bad spillover from sub brands have a more widespread effect and it limits how much a firm can differentiate from one identity, image and personality. Works well for Virgin more often than not.

Having a product that does not fit with the other products does not garuntee failure. What is example of when seemingly unrelated extension has been successful.

Yamaha, the musical instrument and equipment firm, also produce successful motorbikes. They are not linked through products as the technology is not especially related and they do not have a personality that can tie together industries like Virgin do with Richard Branson, and yet they are successful.

However these pros and cons of brand extension also need to be considered in relation to:

1. Alternative options, such as buying a new brand or concentrating on existing market allegiance. 2. The fit between the new product and the brand and their other products and how this affects identity, image, personality