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New Products and Brand Extensions

Brand extensions allow firms to grow by leveraging existing brand equity. There are four main strategies for growth: market penetration, market development, product development, and diversification. Brand extensions introduce new products under an established brand name. There are advantages like reduced risk and costs, but also disadvantages if the extension fails or cannibalizes the parent brand. Effective extensions maintain a fit with the parent brand and contribute positively to the overall brand equity.

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103 views11 pages

New Products and Brand Extensions

Brand extensions allow firms to grow by leveraging existing brand equity. There are four main strategies for growth: market penetration, market development, product development, and diversification. Brand extensions introduce new products under an established brand name. There are advantages like reduced risk and costs, but also disadvantages if the extension fails or cannibalizes the parent brand. Effective extensions maintain a fit with the parent brand and contribute positively to the overall brand equity.

Uploaded by

tintingem
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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New products and brand

extensions

1
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

4
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

5
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

6
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

9
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

10
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

11
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)
12
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

13
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

14
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

15

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