Brand Management and Strategies Lecture 4, Chapters 12, 13 Wed. Feb.

17, 2-5 pm
 Agenda

Review Brand Value Chain Model

Chapter 12: Brand Extensions
Chapter 13: Managing Brands over time
Video Case: Lotusland Winery
In Class Exercise
 Chapt. 12 Brand Extensions -Definitions

• Brand Extensions (BE): “is when a firm uses an

established brand name to introduce a new product“
(Keller, 2003, p. 577)

• 2 categories of BE exist:
– Line extension: The 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
e.g. Different product form or size, ingredient, variety or
flavour
– Category extension: The parent brand is used to enter a
different product category from that currently served by
the parent brand
 Facts about BE
• Supermarkets contain more than 40,000 products up
from only 7,000 in the 1960‘s
• Most new products are line extensions – typically 80-
90% in one year
• Many of the most successful new products are
extensions
 Facts about BE

• In the US market in 2005, only, 5% of new food and

household products were new brands, ten years ago
this number was 20% (Musante, 2007, p 59)

Mass retailers are limiting their shelf space to new

brands while extending shelf space for house brands
 Parent Brand Strength
• Consumers transfer parent brand trust to products when
consumers trust a brand and perceive it as safe; they
also perceive that purchasing that brand’s products as
being without risk (Keller, 1998)

• Reast (2005) suggested a positive relationship exists

between brand trust and acceptance of brand extension
. . . trust in _____________ and ________________
 Parent Brand Strength
• Consumer perception toward a parent brand positively
impacts on their perception of an extension (Bhat and
Reddy, 2001), and there is better transfer of perception
toward extension product categories with stronger rather
than weaker category-dominate brand affect* (Herr et al.,
1996)

Brand affect: I feel good/happy when I use this brand;

sense of pleasure
 Parent Brand Extensions
• Consumers’ brand trust and band affect combine and
positively influence consumers’ attitudes towards brand
extensions

• Before engaging in parent brand extensions, firms must

1.engage in activities that increase consumers’ trust;
example: presenting a professional image; deploying
quality guarantees, exhibiting corporate commitment

2. induce special affect in consumers to build a feeling of

brand dependence
 Parent Brand Extensions
• “only when consumers perceive that a parent brand is
trustworthy or affective will brand extension have a good
chance of success” (Wu and Yen, 2007, p. 339)

Neutrogena – from soap to shampoos… lipsticks

Neutrogena's main rivals are P&G's Olay, Beiersdorf's Nivea and Unilever's
Dove, as well as L'Oreal's Plenitude in the anti-aging segment.
 Evaluating BE Opportunities

Evaluate extension success and Define actual and desired consumer

effects on parent brand equity knowledge about the brand

7. 1.

Design marketing campaign Evaluate the Potential of

to launch extension the Extension Candidate
6. 2. on similarity and overall fit

5.
Consider possible 3. Evaluate Extension
competitve advantages as Candidate on three factor
perceived by consumers 4. model: salience, favorability,
and possible reactions uniqueness
initiated by consumers
Evaluate Extension Candidate on four
factor model: compelling, relevance,
consistency and strength
 Advantages of BE

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 cost of introductory and follow-up
marketing programs
• Avoid cost of developing new brand
• Allow for packaging and labelling efficiencies
• Permit consumer variety-seeking
 Advantages of BE
Provide Feedback Benefits to the Parent
Brand and Company
• Clarify Brand Meaning
e.g. Expansion of Brand Meaning
Brand Original Product Extension Product New Brand Meaning
Weight Watchers Fitness centers Low-calorie foods Weight loss and maintenance

• Enhance the parent company Brand Image

• Bring new customers into brand franchise and increase
market coverage
• Revitalize the brand
• Permit subsequent extensions
 Disadvantages of BE

• Can confuse or frustrate consumers

• Can encounter retailer resistance

– Crest comes in 42 varieties

• Can fail and hurt parent Brand Image

• Can succeed but cannibalise sales of parent brand
– Coke sales came solely from Coke in 1980
– Even though sales are the same today,
other extensions contribute
 Disadvantages of BE
• Can succeed but diminish identification with any
one category
• Can succeed but hurt the image of parent brand
• Can cause the company to forgo
the chance to develop a new brand
                                                   

• Can dilute Brand Meaning

 When Brand Extensions Go Bad
ref: http://www.fastcompany.com/magazine/109/next-brand-extensions.html

Sylvester Stallone pudding

High Protein Pudding is a healthy alternative to many other snack foods or
protein bars," says Instone, the company behind the custard.
Harley-Davidson cake-decorating kit
About 20% of Harley 's revenues come from parts, accessories, apparel, and
stuff like the "Xtreme Image cake-decorating kit." The kit is part of the brand's
push to attract female riders.
Everlast fragrance and grooming line
Everlast began selling cologne and deodorant under the label "Original 1910"
in 2007. CEO Seth Horowitz says, "Our brand core is boxing, and our core
values are individuality, strength, determination, and empowerment.”
 Consumer Evaluation of BE
• Creating Extension Equity
– A positive image of an extension depends on three
consumer-related factors
1) Salience of brand associations
2) Favourability of inferred associations in extension context
3) Uniqueness of associations in category compared to
competitors

• Contributing to Parent Brand Equity

– Extensions must strengthen or add strong, favourable and
unique associations to the parent brand
– Effects on brand knowledge depends on how compelling,
relevant, consistent and strong the extension evidence is
 Conclusion
• Brand extensions are the most common way of bringing
new products to the market

• Brand extensions are successful if they are able to

achieve their own brand equity as well as contribute to
the equity of the parent brand
Chapter 13 Managing Brands over Time
 Chapter 13 Managing Brands over Time
• Reinforcing Brand Equity

Brand Consistency: critical to maintaining the strength and

favourability of brand associations

“being consistent in managing brand equity may require

numerous tactical shifts and changes in our order to
maintain the strategic thrust and direction of the brand” ref
text p.549
Goal: Continuity preserved in brand meaning over time
 Protecting Brand Equity

Fortifying versus Leveraging

- activities that - introducing numerous

maintain or enhance brand brand extensions
awareness and image - ↓ advertising
expenses
-↑ price premiums

“Smith Corona never realized they were in the document

business, not the typewriter business. If they had understood that, they
would have moved into software” ref: Auerbach (1995) Wall Street Journal p.A4
 Revitalizing Brands
• Expanding Brand Awareness
- increase the breadth of the brand awareness;
↑ usage; find new uses; speed up replacement times

Improving Brand Image

-repositioning the brand “try them again for the first
time”; changing brand elements ‘KFC’
Adjustments to the Brand Portfolio

• Migration Strategies
BMW 3 – 5 – 7 series

• Acquiring New Customers

‘Old Spice’ Old Spice High Endurance Red Zone

• Retiring Brands
-reduce the number of product types or varieties
-reduce levels of support £ £ £ £
Orphan brand: once popular, now dying out

Spin off

Discontinue
Group Exercise: Lotusland

1. Suggest three key future branding strategies

for the winery.
-use pictures in your presentation
Additional References:

Wu, C.; Yen, Y. (2007) ‘How the Strength of parent brand associations
influence the interaction effects of brand breadth and product
similarity with brand extensions; Journal of Product and Brand Management,
16, 5, p 334-341

Musante, M. (2007). ‘Brand portfolio influences on vertical brand extension

evaluations, Innovative Marketing, 3, 4, p 59-65

Sjodin, H., (2006). ‘Financial Assessment of brand extensions’, Brand

Management, 14, 3, p 223-231

Volckner, F., Sattler, H. ‘Drivers of Brand Extension Success’,

Journal of Marketing, April, Vol 70, p 18-34

Pullig, C., Simmons, C. J., Netemeyer, R. G. (2006). ‘Brand Dilution: When Do New
Brands Hurt Existing Brands?’, Journal of Marketing, April, Vol 70,
p 52-66.

Polonsky, M., Jevons., C., (2009). Global branding and strategic CSR: an overview of three
types of complexity, International Marketing Review. London: Vol. 26, Iss. 3; p. 327