CHP 6: Brand extensions

•How new to the market is the new product? •How fast is the market growing? •How competitive is the market?

Assuming that there is a good product and brand fit, what kind of new products gain most from being supported by an established brand? •Factors to consider:

1. new product acceptance 2. raising parent brand value

Benefits of brand extensions

Brand image.

Both tangible product-related and intangible non-product related associations play a role in image fit.

brand extension is when we introduce a new product line extension is where we introduce new and different versions of the same product

Brand Extension vs line extension

product development

Brand extension correspond to a strategy of _______ in Ansoff's matrix.

•Ex. Ford Focus, a new hybrid car.

Brand extension should not be confused with product line extensions in the same product category (session five).

greater extendibility.

Brands with an identity not tied so closely to a narrow product-market category tend to have ______

•Samsung stays close to its core manufacturing identity (semi-conductors, televisions, mobile phones, and home appliances). Good - but makes it harder to build an attractive consumer brand. •Apple's identity is tied to the "cool" brand: The success of the iPod was followed by iPhone and the iPad - good. •IBM's business-to-business competence did not link up well with the skills needed for consumer sales and distribution channels of the PCs - not good. •Sony, with brand identity in premium consumer electronics, extended into movies, music, and entertainment - not good.

Examples of good and bad extendability:

projective techniques focus groups

How to conduct qualitative research?

passed the first test.

If the brand extension credibly enables reduction of the new and important functional risk, it has

Co-Branding

Instead of introducing new product, an established brand can leverage its strength in a particular market segment by _____ with an existing brand. is the practice of combining two independent brands into a single product or promotion.

dual branding

It is also possible to use _____ with inferred endorsement without the "by": Zanussi - The Electrolux Group.

•1. Less uniqueness compared with a new brand. •2. Brand fit may not be good enough to create acceptance.

New Product Acceptance Cons

•1. A strong endorsing brand will reduce consumers' perceived risk. •2. The product can piggyback on an established brand's distribution. •3. An established brand will yield spillover effects in advertising. •4. The introductory campaign will be less costly.

New Product Acceptance Pros

•1. Bad fit may dilute brand equity by creating negative associations. •2. New product failure will generate negative feedback to parent brand.

Parent Brand Value Growth Cons

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

Parent Brand Value Growth Pros

1. Is the brand well-known with strong reputation? 2. Is the brand's present customers also in the target segment for the new product? 3. Does the brand have a loyal following? 4. Does the brand identity associations fit with the new product category involved? 5. Does the brand have image and personality associations that will be negatives in the new target segment? 6. Is the new product's positioning compatible with the existing brand's?

Several factors determine whether a brand is good for extension.

same name and logo in exactly the same design as the original. Since the associations will be obvious, this approach requires a very close fit between the old and new products.

Several options exist to implement a brand extension. The simplest and most direct way involves using the

brand personality

Since ________ basically transcends the product category, a very strong brand personality can be extended to widely different products.

Yamaha pianos and motorcycles Amazon.com from books to superstore Nokia From paper to cell phones Ericsson Telecom leader, but not for cell phones Marlboro Apparel is a red ocean

Some Unlikely Successes & Surprising Failures

Quantitative analysis

Standard surveys of representative samples of target audience members

•1. confirmation of the brand identity, image and personality that the qualitative research has suggested. •2. checking how respondents think the extended brand would perform in the category. •3. assessing the pros and cons of the extension for the parent brand's equity.

Standard surveys of representative samples of target audience members are used in a second step with three main goals:

Brand extensions involves using an established brand name to endorse a product in another category. This has two benefits: -It helps the new product acceptance -It help to leverage the parent brand equity. The acceptance is stronger when the market segments are similar so customer loyalty can be counted on and the brand identity supports the functional competence in the new category. The more successful brand extensions are those where the brand-product fit is high: -The brand positioning, image associations and brand personality should be similar. Where the parent brand is extended too far, the company may have to introduce a new brand: Panasonic introduced Lumix for its digital camera, and Honda introduced Acura for the performance-luxury segment. Co-branding cuts down costs but can be risky and difficult to manage with the partner. Umbrella branding means the parent brand endorses several sub-brands under its master brand. Some companies avoid umbrellas, maintaining individual brand management and avoiding cost of coordination. Research for brand extensions involves both qualitative research into parent brand meaning, and quantitative research to identify extent of brand acceptance and purchase intentions for an extension.

Summary

u1. A functional segment, where the salient benefits tend to be superior product performance. u2. An emotional based segment, where the primary benefits involve aesthetics, experiential, and other hedonic benefits. u3. A value-based segment, where consumers mainly look for a high performance-to-price ratio.

The P&G "No-Umbrella" Strategy According to its annual report, P&G has found that their CPG (consumer package goods) markets usually fall into three main segments:

Qualitative research.

The first step is to try to find out more precisely what kind of associations the potential parent brand elicits.

positioning of these bands. Within each brand, there are different sizes, versions etc.

The gain: A more precise

likelihood of success.

The issue is whether the brand can contribute to the new product's

intention to trial and purchase

The research should try to elicit some kind of ______ and ______ at different price points, however unreliable such responses may be.

psychological risks and enhance self-expression.

The second question of "fit" involves the brand's ability to reduce ______ The question is whether the brand itself "fits" the new product.

image and personality

This second test is to make sure that the brand _____ are suitable for the new product.

endorsement uhis requires a new brand but with a tagline, as in "NexWatch A Honeywell company"

To accommodate some weaker fits, an alternative would be to use the existing brand as an _____ brand.

increased brand equity, marketing OPEX efficiencies

Umbrella branding pros

others not so successful

Virgin Brand Extensions to Build The Brand some have been successful with virgin atlantic, megastore and mobile

brand's value and equity.

When both tests are passed, the brand extensions will not only help the new product acceptance, but also raise the

X-Box by Microsoft

When the product fit is good but the brand fit is bad, a new brand might be needed to help indicate a new brand personality. Ex:

Armani cologne.

When the product fit is weak, but the brand fit is good, another name may not be needed. Ex:

new brand is called for.

When the product line extension goes too far - when it breaks the limits set by the brand identity, image, and personality - a

the functional "fit" as good.

Where the original product that helped build the brand identity and the new product draw on the same core competence in the company, the chances are that consumers perceive

-There have been successful line extensions: Diet Cola, Coca Cola Zero, Caffeine Free Coke, C2 Coke...). -Coca Cola also owns a large number of brands - Daisani and Kinley in water, Fanta and Sprite in soft drinks, Georgia in coffee (mainly Japan), MinuteMaid ... -Coke also has merchandising items - hats, umbrellas, shirts...not very successful. -One reason: Brand name image and personality "fit" with target, but brand identity is with cola and drinks only.

Why Have Coca Cola Extensions Failed?

brand extension separate brands in these segments

With little evidence of cross-overs between these segments, P&G sees no gain in using ______, but instead introduces

Focus groups

are also common when assessing personality or style of an existing brand or a suggested name.

Projective techniques

are common for this, including in-depth interviews.

•Even if the target customers come from the same segment, if brand loyalty is weak, the drawing power is not very strong.

•3. Does the brand have a loyal following?

•A soap brand such as Dove can be extended into shampoo - but should not be extended into toothpaste since soap in the mouth has a bad association.

•4. Does the brand identity associations fit with the new product category involved?

•If a brand has strong country affiliation (American Express is "American"), is this a positive or negative in the new segment?

•5. Does the brand have image and personality associations that will be negatives in the new target segment?

•A top-of-the-line brand positioning requires strong performance. If the new product has a low position target, the existing brand is likely to be diluted.

•6. Is the new product's positioning compatible with the existing brand's?

"umbrella branding."

•Brand extensions quite naturally lead to what is often called

•In hair care, Garnier Fructis. •In skin care, Garnier Nutritionist. •In this instance, L'Oreal decided to keep the acquired name and position the Garnier brand as a value brand below the "flagship" L'Oreal brand.

•For example, L'Oreal in 1965 acquired another French personal care company, Garnier, which offered products in similar categories to L'Oreal. For example,

•the newer the product is to potential customers. •the slower the market growth is. •the more competitive the market is. •These three factors prove obstacles for the acceptance of the new product without the extension support.

•Generally, the usefulness of a brand extension is greater...

•Need to evaluate the performance of the individual brand managers. •An umbrella hampers managerial initiatives by limiting independence. •Spillover of an accidental product failure can be contained.

•Other companies have decided against using umbrella brands. •Notable examples: P&G and Unilever, large CPG companies whose corporate names are virtually invisible on their products. Reasons:

•First, co-brand only with companies that share complementary values. •Second, co-brand only with products that hold best-in-class status. •Third, retain full review and approval rights on all communications

•Solution by some firms: Co-branding guidelines

wings

•The umbrella brand essentially endorses the sub-brands under its .

character (identity, image, and personality)

Every brand has a boundary beyond which it should not be extended. As we have seen, the brand's _____ sets limits.

brand extension

describes the case where an established brand is used to introduce a new product from a different product category.

Shift the form Transfer a component: Transfer a benefit: Leverage an expertise: Companion products: Leverage the customer base: Leverage a lifestyle: Leverage a celebrity expertise: Leverage a celebrity lifestyle: Change the game by changing a brand image:

10 Examples of Successful Brand Extensions:

•It helps the new product's market acceptance. •It also helps grow the value of the extended parent brand.

A brand extension is supposed to accomplish two things:

-A new product will be more easily accepted if the fit is good. -The parent brand equity will rise further if the fit is good.

A good fit enhances the probability of success, while a lack of fit reduces it:

quantitative and qualitative

Research for Brand Extensions

-Yes: Swiss Army luggage. -No: Nike's casual shoes.

brand image fit examples

-Yes: The Virgin brand, "Excitement, Imagination and Daring." -No: IBM's foray into the personal computer

brand personality fit examples

Both brand logos appear on a product it can involve advertising the two separate brands jointly it can mean that the brands share the same facilities it can involve ingredient branding

co branding options

house of brands

company with a set stand alone of brands -P&G

sub brand

connect to master brand in some way

•Lack of complementary fit will hurt the brand. •Co-brand's problems will spillover to the brand.

cons of co-branding

negative spillovers, brand dillution

cons of endorsed brands

weaker brand loyalty, OPEX inefficient

cons of house of brands

vulnerability, OPEX per brand and sub brand

cons of sub brand

The brand identity

defines the competency of the company and sets the limits for the credibility of the promises.

endorsed brand

endorsed brands by larger brands -marriott

backlash due to the weaker fit.

endorsed brands would weaken the effect, but therefore also avoid a possible negative

-Yes: Dove soap extended to shampoos. -No: Dr. Pepper's marinade.

ex of brand identity fit

Jeep offers a special Eddie Bauer model.

ex of co branding Both brand logos appear on a product

The "Intel inside" campaign.

ex of co branding It can involve "ingredient branding."

Bacardi and Coca-Cola use a co-branding strategy.

ex of co branding It can involve advertising the two separate brands jointly.

Starbucks can be found in Barnes & Noble

ex of co branding It can mean that the brands share the same facilities

•Ex. Swiss Army for luggage. The "Swiss Army" brand was known for knives, then extended into watches, then into luggage.

example of a brand extension

Umbrella branding

means one over-arching name for a set of products, with sub-brands "under" the umbrella. -all strongly attached to the parent brand

The brand-product fit

refers to the degree to which the new product category and product features are reflective of the parent brand identity, image and personality.

•Each of the brands gains goodwill from the partner. •Each of the brands gains potential customers. •Cost savings, especially for the more powerful brand. •Helps a new brand "piggy-back" on a better known brand.

pros of co-branding

faster market penetration quality assurance

pros of endorsed brands

focus on specific markets avoid negative spillovers

pros of house of brands

high visibility parent brand

pros of sub brand

uThe brand identity intended was that the Acura should take on a more European flavor. The common core competence between the brands included advanced design and fun to drive. uThe intended brand image was based on a combination of luxury and performance, an effort to establish a then (1986) relatively new corner of the market, in effect a "blue ocean" strategy. uIn terms of personality traits, it should be more individualistic as opposed to Honda's more family oriented and practical slant. uResearch showed consumers rated the Acura name favorably: uThe "accurate" association aligned with the core competence. uThe name evoked "European/luxury car" associations. uIt was also resolved that there be no Honda and Japanese connection - making this not a true "brand extension."

uHonda was the first Japanese automaker to target the luxury segment. Later, Toyota and Nissan followed suit. uThe basic issue was simple: The Honda brand - and the Japanese country-of-origin - did not have the cachet that competing in the luxury segment would require. uSimply extending the brand name - even with a new sub-brand - seemed insufficient. The research showed the perceptions of the Honda brand, and the contrast with the intended brand characteristics of the higher end model, later named the Acura (see Figure).

Lack of coordination (countered by "category management.") vulnerability

umbrella branding cons

•In hair care: L'Oreal EverPure , L'Oreal VivePro, L'Oreal Kids. •In skin care: L'Oreal RevitaLift and L'Oreal Age Perfect. •In cosmetics: L'Oreal True Match Naturale and L'Oreal Colour Riche.

umbrella branding ex

•As research and common sense say, a weak brand does not add much power over a new brand.

•1. Is the brand well-known with strong reputation?

•If the new product targets another segment, the brand extension encounters new customers who are likely to have less knowledge and affinity with the parent brand.

•2. Is the brand's present customers also in the target segment for the new product?

judging how far a particular brand can be stretched.

•As in all brand extension cases, umbrella branding involves