Strategic Brand Management Building Measuring and Managing Brand

Strategic Brand Management: Building, Measuring, and Managing Brand Equity Fifth Edition, Global Edition Chapter 13 Introducing and Naming New Products and Brand Extensions Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Learning Objectives 13. 1 Define the different types of brand extensions 13. 2 List the main advantages and disadvantages of brand extensions 13. 3 Summarize how consumers evaluate extensions and how extensions contribute to parent brand equity 13. 4 Outline the key assumptions and success criteria for brand extensions Copyright © 2020 Pearson Education Ltd. All Rights Reserved

New Products and Brand Extensions • Three branding approaches available when a firm introduces a new product: 1. Develop a new brand 2. Apply one of its existing brands 3. Use a combination of new and existing Copyright © 2020 Pearson Education Ltd. All Rights Reserved (1 of 2)

New Products and Brand Extensions (2 of 2) • A brand extension occurs when a firm uses an established brand name to introduce a new product – Line extension ▪ Adds a different variety, a different form or size, or a different application for the brand – Category extension ▪ Marketers apply the parent brand to enter a different product category from the one it currently serves Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Figure 13 -1: Ansoff’s Growth Matrix Blank Current Products New Products Current Markets Market Penetration Strategy Product Development Strategy New Markets Market Development Strategy Diversification Strategy Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Advantages of Extensions • For most firms, the question is not whether to extend the brand, but: – When, where, and how to extend it • Advantages in two categories – Facilitate new-product acceptance – Provide feedback benefits to a parent brand Copyright © 2020 Pearson Education Ltd. All Rights Reserved

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 Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Provide Feedback Benefits to the Parent Brand Company • Clarify Brand Meaning • Enhance the Parent Brand Image • Bring New Customers into the Brand Franchise and Increase Market Coverage • Revitalize the Brand • Permit Subsequent Extensions Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Figure 13 -4: Expanding Brand Meaning Through Extensions Brand Original Product Extension Products New Brand Meaning Weight Watchers Fitness centers Low-calorie foods Weight loss and maintenance Sunkist Oranges Vitamins, juices Good health Kellogg’s Cereal Nutri-Grain bars, Special K bars Healthy snacking Aunt Jemima Pancake mixes Syrups, frozen waffles Breakfast foods Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Disadvantages of Brand Extensions (1 of 4) 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 parent brand Can dilute brand meaning Can cause the company to forgo the chance to develop a new brand Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Disadvantages of Brand Extensions (2 of 4) • Can confuse or frustrate consumers – For example, one study found that consumers were more likely to make a purchase after sampling a product (and being given a coupon) when there were six product flavors to sample than when there were 24 • Can encounter retailer resistance – It has become virtually impossible for a store to offer all the different varieties available across all the different brands in any one product category • Can fail and hurt parent brand image – The Audi is a classic example Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Disadvantages of Brand Extensions (3 of 4) • Can succeed but cannibalize sales of parent brand – Diet Coke and regular Coke • Can succeed, but diminish identification with any one category – Gillette introduced Venus (a razor for women); it may have diminished its identification with the target audience of men • Can succeed, but hurt the image of the parent brand – If customers see a brand extension as inconsistent or conflicting with the parent brand customers may change their perceptions of the parent brand Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Disadvantages of Brand Extensions (4 of 4) • Can dilute brand meaning – Gucci • Can cause the company to forego the chance to develop a new brand – Amazon Kindle Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Understanding How Consumers Evaluate Brand Extensions • Managerial Assumptions • Brand Extensions and Brand Equity • Vertical Brand Extensions Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Figure 13 -6: Examples of Category Extensions Successful Category Extensions Unsuccessful Category Extensions Dove shampoo and conditioner Campbell’s tomato sauce Vaseline Intensive Care skin lotion Life. Savers chewing gum Hershey’s chocolate milk Cracker Jack cereal Jell-O Pudding Pops Harley-Davidson wine coolers Visa traveler’s checks Hidden Valley Ranch frozen entrees Sunkist orange soda Ben-Gay aspirin Colgate toothbrushes Kleenex diapers Mars ice cream bars Clorox laundry detergent Arm and Hammer toothpaste Levi’s Tailored Classics suits Bic disposable lighters Nautilus athletic shoes Honda lawn mowers Domino’s fruit-flavored bubble gum Mr. Clean Auto Dry car wash system Smucker’s ketchup Fendi watches Fruit of the Loom laundry detergent Porsche coffee makers Coors Rocky Mountain Spring Water Jeep strollers Cadbury soap Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Managerial Assumptions • Consumers have some awareness of and positive associations about the parent brand in memory • 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 Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Brand Extensions and Brand Equity (1 of 2) • Creating extension equity – Creating a positive image for an extension depends on: ▪ How salient parent brand associations are ▪ How favorable any inferred associations are ▪ How unique any inferred associations are Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Brand Extensions and Brand Equity (2 of 2) • Contributing to parent brand equity – The effects of an extension on consumer brand knowledge depends on: ▪ How compelling the evidence is about the corresponding attribute or benefit association ▪ How relevant or diagnostic the extension evidence is ▪ How consistent the extension evidence is ▪ How strongly existing attribute or benefit associations are Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Vertical Brand Extensions • Vertical brand extensions – Extend a brand up into more premium market segments or down into more value-conscious segments – Common means of attracting new groups of consumers • Logic is equity of parent brand can be transferred to appeal to consumers who otherwise would not consider it Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Evaluating Brand Extension Opportunities • Define Actual and Desired Consumer Knowledge about the Brand • Identify Possible Extension Candidates • Evaluate the Potential of the Extension Candidate • Design Marketing Programs to Launch Extension • Evaluate Extension Success and Effects on Parent Brand Equity Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Figure 13 -9: Brand Extension Guidelines Based on Academic Research (1 of 2) 1. 2. 3. 4. 5. 6. 7. 8. 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 the extension product. There are many bases of fit: product-related attributes and benefits as well as nonproduct-related attributes and benefits related to common usage situations or user types. 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. High-quality brands stretch farther than average-quality brands, although both types of brands have boundaries. A brand that is seen as prototypical of a product category can be difficult to extend outside the category. Concrete attribute associations tend to be more difficult to extend than abstract benefit associations. Consumers may transfer associations that are positive in the original product class but become negative in the extension context. Consumers may infer negative associations about an extension, perhaps even based on other inferred positive associations. Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Figure 13 -9: Brand Extension Guidelines Based on Academic Research (2 of 2) 9. It can be difficult to extend into a product class that is seen as easy to make. 10. A successful extension can not only contribute to the parent brand image but also enable a brand to be extended even farther. 11. An unsuccessful extension hurts the parent brand only when there is a strong basis of fit between the two. 12. An unsuccessful extension does not prevent a firm from backtracking and introducing a more similar extension. 13. Vertical extensions can be difficult and often require sub-branding strategies. 14. The most effective advertising strategy for an extension is one that emphasizes information about the extension (rather than reminders about the parent brand). 15. Individual differences can affect how consumers make an extension decision, and will moderate extension effects. 16. Cultural differences across markets can influence extension success. Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Extension Guidelines Based on Academic Research (1 of 4) 1. Successful brand extensions occur when the parent brand has favorable associations, and consumers perceive a fit between the parent brand the extension product 2. There are many bases of fit; both product-related and nonproduct-related attributes and benefits may influence extension fit 3. Depending on their knowledge of the product categories, consumers may perceive fit based on technical or manufacturing commonalities, or on surface considerations such as necessary or situational complementarity 4. High-quality brands stretch farther than average-quality brands, although both types have boundaries 5. A brand that consumers see as prototypical for a product category can be difficult to extend outside the category Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Extension Guidelines Based on Academic Research (2 of 4) 6. Concrete attribute associations tend to be more difficult to extend than abstract benefit associations 7. Consumers may transfer associations that are positive in the original product class but become negative in the extension context 8. Consumers may infer negative associations about an extension, perhaps even based on other inferred positive associations 9. It can be difficult to extend into a product class that consumers see as easy to make 10. A successful extension can not only contribute to the parent brand image but also enable a brand to extend even farther Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Extension Guidelines Based on Academic Research (3 of 4) 11. An unsuccessful extension hurts the parent brand only when there is a strong basis of fit between the two 12. An unsuccessful extension does not prevent a firm from backtracking and introducing a more similar extension 13. A co-branded brand extension can leverage the success and equity of two brands 14. Both similar and dissimilar brands can partner successfully in a co-branded extension to achieve greater synergies 15. Vertical extensions can be difficult and often require sub-branding strategies Copyright © 2020 Pearson Education Ltd. All Rights Reserved

Extension Guidelines Based on Academic Research (4 of 4) 16. The most effective advertising strategy for an extension is one that emphasizes information about the extension (rather than reminders about the parent brand) 17. Individual differences can affect how consumers make an extension decision and will moderate extension effects 18. Cultural differences across markets can influence extension success Copyright © 2020 Pearson Education Ltd. All Rights Reserved