Lecture 11 - Introducing & Naming New Products and Brand Extensions

Enhance the Parent Brand Image

•One common way that a brand extension affects the parent brand image is by helping to clarify its core brand values and associations.

Disadvantages of Brand 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

Contributing to Parent Brand Equity

-How compelling the evidence is concerning the corresponding attribute or benefit association in the extension context -How relevant or diagnostic the extension evidence is concerning 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 feedback effects that change brand knowledge are most likely when consumers view information about the extension is equally revealing about the parent brand, and when they hold only a weak and inconsistent association between the parent brand and that information

Edward Tauber; 7 general strategies for establishing a category, or a "franchise extension"

1. Introduce the same product in a different form. Example: Ocean Spray Cranberry Juice Cocktail 2. Introduce products that contain the brand's distinctive taste, ingredient, or component. Example: Philadelphia cream cheese salad dressing 3. Introduce companion products for the brand. Example: Coleman camping equipment 4. Introduce products relevant to the customer franchise of the brand. Example: Gerber insurance 5. Introduce products that capitalize on the firm's perceived expertise. Example: Honda lawn mowers 6. Introduce products that reflect the brand's distinctive benefit, attribute, or feature. Example: Lysol's "deodorizing" household cleaning products 7. Introduce products that capitalize on the distinctive image or prestige of the brand. Example: Calvin Klein clothes

When a firm introduces a new product, it has three choices for branding it:

1. It can develop a new brand, individually chosen for the new product 2. It can apply, in some way, one of its existing brands 3. It can use a combination of a new brand and an existing brand

Vertical Brand Extensions

An upward extension can improve brand image, as a more premium version of a brand often brings with it positive associations •One of the biggest risk factors of a vertical extension is that it will succeed but cannibalize sales of the parent brand. •EX: Philip Morris launched Marlboro Basic to compete with Monarch, a discount brand, and Philip Morris' operating profit plummeted 46% while profitability fell across the tobacco industry. Marriott also uses different brand names to avoid problems of vertical brand extensions. Very successful

category extension

Applying a brand to enter a different product category from the one it currently serves

If a firm introduces a new product, but uses an established brand name, this is called a ____

Brand Extension

A Honda lawn mower is an example of a ____

Category extension

Improve Brand Image

Consumers can make inferences and form expectations about the likely composition and performance of a new product, based on what they already know about the brand itself and the extent to which they feel this information is relevant to the new product

Avoid Cost of Developing a New Brand

Developing a new brand element is an art and a science. Quite expensive with no assurance of success.

Can Confuse or Frustrate Consumers

Different varieties of line extensions may confuse and perhaps even frustrate consumers about which version of the product is the "right one" for them.

Can Succeed But Cannibalize Sales of Parent Brand

Even if sales of a brand extension are high and meet targets, this revenue may have resulted merely from consumers switching to the extension from existing product offerings of the parent brand — in effect cannibalizing the parent brand. Ex) Coke to Diet Coke, taking sales

Clarify Brand Meaning

Extensions help to clarify the meaning of the brand to consumers and define the kinds of markets in which it competes. Ex) Crayola

Advantages of brand extensions

Facilitate new product acceptance Provide feedback benefits to the Parent brand

Increase the Probability of Gaining Distribution & Trial

Increase in consumer demand for a new product makes it easier to convince retailers to stock and promote it.

Which of the following is not a general strategy for establishing a category extension, as proposed by Edward Tauber?

Introduce a different product in the same form

Increase Efficiency of Promotional Expenditures

It is easier to add a link to a new product from a brand already existing in the memory than it is to first establish the brand in memory and then also link the new product to it.

Two general categories of brand extensions are:

Line and category extensions

Can Succeed But Hurt the Image of the Parent Brand

Miller Brewing ex). It has often been argued that the early success of Miller Lite only exacerbated the tendency of consumers to think of Miller High Life as 'watery" tasting and not a full-bodied beer

vertical brand extension

Offering a modified product with an existing brand to more premium or more value-conscious segments

line extension

Offering a modified product within a product category currently served

Permit Consumer Variety-Seeking

Offering a portfolio of brand variants within a product category for the consumer who needs a change.

Brand extensions provide all of the following feedback benefits to the parent company EXCEPT:

Permit consumer variety-seeking

Allow for Packaging and Labeling Efficiencies

Similar or virtually identical packages and labels for extensions can result in lower production costs and if coordinated properly, can create a "billboard" effect. Ex) Stouffers, Coca-Cola

Revitalizing the Brand

Sometimes brand extensions can be a means to renew interest in and liking for the brand •Ex) Old Spice had to wrestle with the problem of being seen by young males as "your father's aftershave." To revitalize the brand, P&G launched a new campaign backed by heavy spending, eliminating the trademark "whistling sailor" character, replacing it with contemporary men.

Can Fail & Hurt Parent Brand Image

The worst possible scenario for an extension is not only to fail, but to harm the parent brand image in the process.

When a brand extension is extended up into more premium market segments or down into more value-conscious segments, this is called a_____

Vertical Extension

Managerial Assumptions

We can expect consumers to use their existing brand knowledge, as well as what they know about the extension category, to try to infer what the extension product might be like. 1.Consumers have some awareness of and positive associations about the parent brand. 2.At least some of these positive associations will be evoked by the brand extensions. 3.Negative associations are not transferred from the parent brand. 4.Negative associations are not created by the brand extensions.

Reduce Costs of Introductory and Follow-up Marketing Programs

When a brand becomes associated with multiple products, advertising can be more cost effective for the family brand as whole.

It has been estimated that a firm can save

•40-80% on the estimated $30-50 million it can cost to launch a new supermarket product nationally in the U.S.

Identify Possible Extension Candidates

•Although consumers are generally better able to react to an extension concept than to suggest one, it may still be instructive to ask consumers what products the brand should consider offering if it were to introduce a new product.

Extension guidelines based on academic research

•Broniarczyk and Alba provide another compelling demonstration of the importance of recognizing salient brand associations. •They show that a brand that may not even be as favorably evaluated as a competing brand in its category may be more successfully extended into certain categories, depending on the particular parent brand associations involved. •EX: Although Close-Up toothpaste was not as well-liked by their sample as Crest toothpaste, a proposed Close-Up breath mint extension was evaluated more favorably than one from Crest.

Bring New Customers Into the Brand Franchise and Increase Market Coverage

•EX: When Tylenol introduced a capsule form of its acetaminophen pain reliever, it was able to attract consumers who had difficulty swallowing tablets and might have otherwise avoided the brand. •Snapple strove to renew its customers' interest and engagement in the brand, as well as attract new customers, with the 2004 introduction of its Snapple Lip Slicks fruit-flavored lip balm.

Reduce Risks Perceived by customers

•Extensions from well-known corporate brands such as General Electric, Hewlett-Packard, Motorola, or others may communicate longevity and sustainability. •Although corporate brands can lack specific product associations because of the breadth of products attached to their name, their established reputation for introducing high-quality products and standing behind them may be an important risk-reducer for consumers.

Permit Subsequent Extensions

•In 2004, Billabong launched an entirely new brand called Honolua Surf co. inspired by Hawaiian surf styles. •As a result of its consistent growth, Billabong was ranked as the seventh most valuable brand in Australia, with an estimated value of $1.1 billion.

Can Encounter Retailer Resistance

•Many retailers often feel that many line extensions are "me too" products that duplicate existing brands in a product category and should not be stocked even if there were space. •Many brands now come in a multitude of different forms: •Crest comes in 42 varieties •Head & Shoulders boasts more than 30 varieties •American Express has over 20 different card types

Define Actual & Desired Consumer Knowledge About the Brand

•Profiling actual and desired knowledge structures helps to identify possible brand extensions as well as to guide decisions that contribute to their success. Because the introduction of an extension can change brand meaning, it can affect consumer response to all subsequent marketing activity as well.

Creating Extension 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 and contribute to the equity of the parent brand. •As with any brand, successful brand extensions must achieve desired points of parity and points of difference. 1. How salient parent brand associations are in the minds of consumers in the extension context. 2. How favorable any inferred associations are in the extension context. 3. How unique any inferred associations are in the extension category.

Can Dilute Brand Meaning

•To protect their brands from dilution, many fashion companies seeking to grow through brand extensions are now forging exclusive licensing partnerships with a single retailer. •EX: Target has exclusive deals with Todd Oldham, Mossimo, and Isaac Mizrahi •These licenses allow the licensor to better control the inventory, avoid discounts, and most importantly, protect the brand.

advertising-to-sales ratios for brand extensions

•was 10%, while for new brands it was 19%.

Provide Feedback Benefits To The Parent Brand And Company

1. Clarify brand meaning. 2. Enhance the parent brand image 3. Bring new customers into the brand franchise and increase market coverage. 4.Revitalize the brand. 5. Permit subsequent extensions.

Brand Extension checklist

1.Does the parent brand have strong equity? 2.Is there sufficient transfer to the extension? 3.Is extension consistent with brand vision and essence? 4.Is it a logical fit that will make sense to target market(s)? Many more

Sub-brand

a new brand combined with an existing brand

Parent Brand

an existing brand that gives birth to a brand extension

brand extension

firm uses an established brand name to introduce new products

Can Cause the Company to Forego the Chance to Develop a New Brand

introducing a new product as a brand extension, the company forgoes the chance to create a new brand, with its own unique image and equity. EX) Disney introduced Touchstone, Levis introduced Dockers

family brand

parent brand associated with multiple products through brand extensions

Can Succeed But Diminish Identification With Any One Category

the brand may not be strongly identified with any one product... brand extensions may obscure the identification of the brand with its original categories, reducing brand awareness Ex) Pepperidge farms food. Scott Paper products

Successful new products that are extensions

•Mr. Clean windshield wash •Apple's iPod digital digital music player •Starbuck's coffee liqueur •Iams pet insurance