New products and brand
extensions
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Brand Extensions: How does a firm
grow?
A firm can:
– Focus on current products and markets
Market penetration strategy
– Put existing products into new markets
Market development strategy
– Put new products into existing markets
Product development strategy
– Put new products into new markets
Diversification strategy
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Some Terminology
Brand Extension - A firm uses an established
Brand name to introduce a new product
– Harley-Davidson clothing
Sub-Brand - A new Brand is combined with an
existing Brand
– Dockers
Parent Brand – The pre-existing Brand that gives
birth to the sub-Brand
Family Brand – Parent Brand of multiple extensions
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Categories of Brand Extensions
Line extension
– Parent brand is used to brand a new product that
targets a new market segment within a product
category currently served by the parent brand
H&S dry scalp shampoo
Category extension
– Parent brand is used to enter a different product
category from that currently served by the parent brand
Swiss army watches, Porsche bicycles
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Tauber’s strategies for category
extensions
Same product in a different form
Introduce products that contain the Brand’s
distinctive taste, ingredient or component
Companion products
Capitalize on the firms perceived expertise
Distinct benefit, attribute, or feature
Image or prestige
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Advantages of Extensions
Extensions can potentially provide the following
benefits to facilitate new product acceptance:
– Reduce risk perceived by customers & distributors
– Decrease cost of gaining distribution & trial
– Increase efficiency of promotional expenditures
– Avoid cost (and risk) of developing new names
– Allow for packaging and labeling efficiencies
– Variety-seeking
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Advantages of Extensions
Enhance the parent brand image
– Improve strength, favorability, and uniqueness of brand
associations
– Improve perceptions of company credibility
Convey broader brand meaning to consumers
– Clarify core benefit proposition and business definition of the
company
Bring new customers into the franchise and increase
market coverage
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Disadvantages of Extensions
Extensions have risks, too.
– They can fail.
Moreover, extensions can potentially result in the
following costs:
– Cannibalize sales of the parent brand
– Hurt the image of the parent brand
If the extension fails
Even if the extension is successful
– Forego the chance to develop a new brand name
or market the parent brand differently
(opportunity cost)
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Brand Extension Assumptions
In introducing a brand extension, it is typically
assumed that:
– Consumers have some awareness of and positive
associations about the brand in memory
– Some of these positive associations are evoked by
the brand extension
– Negative associations are not transferred from the
parent brand
– Negative associations are not created by the brand
extension
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When are Brand Extensions
Appropriate?
When Prior BE exists
Consumers must see some “fit”
between the proposed extension and
the parent brand
The proposed extension contributes to
the overall brand equity of the parent
brand
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Model of Extension Evaluations
Creating extension equity depends on 3 factors:
1. Salience of parent brand associations in extension
context
2. Favorability of any inferred associations in the
extension context
3. Uniqueness of any inferred associations in the
extension context
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