CHAPTER: 12

Introducing and
Naming New
Products
and Brand Extensions
Brand extensions ( done in earlier
chpt)
• Brand extension: When a firm uses an established brand name to introduce a new
product.

• Line extension:
• A)May be a Variant -adds a different variety, a different form or size, or a different application
for the brand eg Maggie masala,chicken, Maggie in different sizes, Lux in different colours, lux
shampoo satchet Or
• B) Vertical line extensions- a different price point catering to a different market segment within
the same product category that it is currently in eg Lux soap to Lux international soap , Maggie
to Maggie wheat atta noodles ( explained later ).

• Category extension: Marketers apply the parent brand to enter a totally different product
category from the one it currently serves. Eg Maggie noodles to Maggie sauces , Lux soap to Lux
shampoo
Advantages of Brand Extensions
( both line extensions and category
extensions)
The high failure rate of new products ( with completely new brand name ) is well
documented .Market analysts estimate only 2 out of 10 or 1 out of 10 will be successful
New products introduced as brand extension may be more likely to succeed ,because of certain
advantages

Facilitate
New-
Product
Acceptance

Provide
Feedback
Benefits to
the Parent
Brand
 Brand extensions facilitate New-
Product Acceptance

Increase the Probability

Increase Efficiency of
Reduce Risk Perceived of Gaining Distribution
Improve Brand Image Promotional
by Customers and Consumer Trial
Expenditures
and purchase

Reduce Costs of
Avoid Cost of
Introductory and Allow for Packaging and Permit Consumer
Developing a New
Follow-Up Marketing Labeling Efficiencies Variety-Seeking
Brand name
Programs
Brand extensions facilitate New-
Product Acceptance ( some points
elaborated)
• Increase Efficiency of Promotional Expenditures- studies show avg advtg to
sales ratio for brand extension was 10% compared to 19% for new brands
• Reduce Costs of Introductory and Follow-Up Marketing Programs- a firm
can save 40 to 80% of the estimated $ 30 to 50 million it costs to launch a
new supermkt product nationally in USA
• Avoid Cost of Developing a New Brand - ie brand elements involves global
trademark search
• Allow for Packaging and Labeling Efficiencies-similar or identical packaging
and labels results in lower production costs and increased prominence in
store due to billboard effect
Brand extensions Provide Feedback
Benefits to the Parent Brand
Enhance the Parent
Clarify Brand Meaning
Brand Image

Bring New Customers

into the Brand
Revitalize the Brand
Franchise and Increase
Market Coverage

Permit Subsequent
Extensions
Provide Feedback Benefits to the
Parent Brand( some points
elaborated )
• Clarify brand meaning-J&J all products stand for baby care
• Enhance the Parent Brand Image- Nike expansion from running shoes to athletic
shoes, clothing , equipment , strengthened associations of peak performance and
sports
• Bring New Customers into the Brand Franchise and Increase Market Coverage- eg
Maggie noodles to Maggie wheat atta noodles. Dabur Real juice vs Active ,Coke 5
rs pack for Rural ,bhujia chotu packs for travel segment /single segment
• Revitalize the Brand - eg Dabur Chawanprash for different segments
• Permit subsequent extensions - Dabur Real , Active ,Wellness .Also ISB to PGP to
PGP pro
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
Disadvantages of Brand Extensions(some points
elaborated )
• Can Confuse or Frustrate Consumers eg 16 varieties of coke , 35 versions of
Crest, overwhelming – study shows that consumers more likely to purchase
after sampling when there were 6 flavours rather than 24 . Consumers reject
new extensions for tried and true favorites or all purpose versions eg Colgate
Total
• Can Encounter Retailer Resistance- as retailers don’t have space.25000 SKUs in
India. Walmart annually drops 20% of its slow moving items . Food mktg institute
study showed retailers can reduce SKUs by 5-25 % without hurting sales or
consumer perceptions of variety. Hence when Heinz culled 40% of its items over
two years , its operating income increased by 18%.
• Can Fail and Hurt Parent Brand Image- e.g Patanjali
• Can Succeed but may Cannibalize Sales of Parent Brand- eg Kodak funtime
cannibalized Kodak gold . Canniblization may be deliberate and desired by
company , especially when higher eg customer migration may be preemptive
or deliberate company strategy eg Maruti 800 to Maruti Alto
Disadvantages of Brand
Extensions(some points elaborated )
CONTD
• Can Succeed but Diminish Identification with any one Category- eg
NMIMS has many schools beyond MBA school ie SBM . But not
necessarily eg Virgin records , airlines ,mobile and not so successful cola,
vodka ,PCs , jeans etc .Yamaha motorcylces, guitars , pianos etc
• Can Succeed but Hurt the Image of the Parent Brand eg Miller Lite led
to decline in mkt share of Miller high life from 21% to 12 % in 8 years as
perceived to be watery
• Can Dilute Brand Meaning or Image eg Gucci overexpansion
• Can Cause the Company to Forgo the Chance to Develop a New Brand
eg Success of Disney through Touchstone pictures ( for adults ) or for
Levis through Docker pants or Amazon through Kindle
Vertical Line Extensions
• Extend the brand up into more premium market segments ( upward
extension ) or down into more value-conscious segments ( downward
extension) , are a common means of attracting new groups of
consumers.
Vertical line extensions ( contd)

Pros and cons

• Pros
• An upward extension can improve brand image, increase profitability
• Extensions in either direction can offer consumers variety, revitalize the
parent brand, permit further extensions in a given direction, get new
customers .
• Cons
• Vertical extension to a new price point, whether higher or lower, can
confuse or frustrate consumers who have learned to expect a certain price
range from a brand.
• Successful downward extension has the possibility of harming the parent’s
brand image by introducing associations common to lower-priced brands.
• It will cannibalize the sales of the parent brand eg Kodak Gold , to tackle
Fuji introduced Kodak Funtime .
Vertical line extensions ( contd)
Naming strategies
• It is possible to use certain brand modifiers to signal a noticeable, although presumably not
dramatic, quality improvement or variety .
• Ultra Dry Pampers, Extra Strength Tylenol, or PowerPro Dustbuster Plus
• Firms often adopt endorser brand strategies to distinguish their lower priced entities, so as
to prevent poor image associations harming the parent brand eg Tractor from house of
Asian paints
• Endorser brand strategies are also used in upward extension cases, as It is difficult to
change people’s impressions of the brand enough to justify a significant upward extension,
eg Xylys from the house of Titan , Orchid by Lakme
• To avoid the potential difficulties associated with vertical line extensions, companies
sometimes elect to use new and different brand names to expand vertically. Eg Gap came up
with Banana republic at 40% premium and Old Navy at 40% discount eg Jaguar , Land rover
are Tata brands
Understanding How Consumers
Evaluate Brand Extensions
• Managerial assumptions

• Brand extensions and brand equity

Managerial Assumptions
• Consumers have some awareness of and positive associations about the parent
brand in memory.

• At least some of these positive associations will be evoked by the brand extension.

• Negative associations are not transferred from the parent brand. Eg Manikchand
Gutka to Manikchand pure drinking water, chawanprash will it be accepted????

• Negative associations are not created by the brand extension which can damage the
mother brand . Eg Colgate entrees ( food) .Ponds toothpaste
Brand Extensions and Brand
Equity
• An extension’s ultimate success 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.
• Thus ,lets study

• Creating extension equity.

• Contributing to parent brand equity.

Brand Extensions and Brand Equity ( contd)
Creating extension equity
• Creation of a positive image is based on three factors:
• Strength/salience /importance of parent brand associations in the extension
context through compulsion of evidence ( proof points) and consistency
( repetition)
• Favorability of any inferred associations in the extension category .
• Uniqueness of inferred associations in the extension category.
Contributing to parent brand equity in positive way
• Relevance of the extension fit-extension will affect parent brand
evaluations positively only if consumers feel extension performance is
indicative of the parent brand in some way.
• If no fit /negative fit , then negative equity eg Patanjali noodles
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.

Evaluating Brand Extension Opportunities( contd)
• Define actual and desired consumer knowledge about the brand
• It’s critical for marketers to fully understand the depth and breadth of awareness of the parent brand,
and the strength, favorability, and uniqueness of its associations.
• Profiling actual and desired brand knowledge structures helps identify possible brand extensions as well as
guide decisions that contribute to their success.
Identify possible extension candidates
• Marketers should consider parent brand associations and product categories that might seem to fit with that
brand image in the minds of consumers.
• Brainstorming is used to generate category extension candidates
• Also do consumer research and ask consumers about their preferences while introducing a new
product.
Evaluating Brand Extension
Opportunities( contd)
• Evaluate the potential of the extension candidate
• Do consumer research to evaluate the extension candidates on Consumer factors- salience ,favorability and
uniqueness and consumers perceptions of fit
• Corporate and competitive factors- risk of counter brand extensions eg Hersheys launch of strawberry syrup
was countered by Smuckers chocolate syrup
• Category factors- a product line is too short if manager can increase long term profits by adding items , but the
line is too long if manager can increase profits by dropping items

Design marketing programs to launch extension

Ensure commonality of associations , brand elements and mktg mix elements between parent brand and category
extension. When line extension , I may need to look at slightly different associations , while retaining some
commonality
Evaluate extension success and effects on parent brand equity
• To help measure the success of the extension, brand-tracking is used based on the customer-based brand equity
model or other key measures of consumer response, centered on both the extension and the parent brand as a whole.
 Research shows (very important )
Line Extensions
• Of Strong brands are more successful than of weak brand
• Of Symbolic brands are more successful than less symbolic brands
• Of Strongly advertised and promoted brands are more successful than less supported brands
• Of strong brand extensions entering earlier in product category are more successful than
extensions entering later
• Also
• Firm size and mktg competencies play a role in extension success
• Line extensions have helped in mkt expansion of parent brand eg coke rs5 ,wheat noodles
• Incremental sales generated by line extensions may more than compensate for the loss in
sale due to cannibalisation
Figure 12-7: Brand Extension Guidelines Based on Academic
Research ( very important and hence explained in detail in later
slides )
Figure 12.7: Brand Extension Guidelines Based on
Academic Research ( very important and hence
explained in detail in later slides )
Figure 12-7: Brand Extension Guidelines Based on
Academic Research ( some points elaborated )
• Point 1 – Categorization perspective eg Dove soap and shampoo
• Point2 - product related /function oriented eg Timex watches all types vs non product related eg usage
type/situation eg Rolex watches , bracelets etc . Or user type J and J eg all products for babies. Consumers seek
explanatory links to tie product together
• Point 3 –Fit could be related to notion of substitutability or complememetary in product use( in demand side) as
well as firm’s perceived skill and expertise ( from supply side ) eg Honda motors for car and lawn mowers is
supply side fit , while Colgate toothpaste and toothbrush is demand side complementarity .Also Demand side
Substitutability eg is Coca Cola , lime , water. Similarly coffee or tea
• Additionally note , Also Aunt Jemima was successful in introducing a pancake syrup extension from its well liked
pancake mix but syrup maker .Log cabin was less successful in introducing a pancake mix extension because
pancake mix is seen as dominant /primary ingredient and syrup as secondary. Same problem with Clorox
bleach maker who took on giant P& G by introducing first detergent with bleach but achieved only 3 % mkt
share after pouring $ 225 million , while P & G achieved 17% mkt share on Tide with bleach .However Clorox
successful in household cleaning products where bleach ingredient is main
• Point 4 - eg Nirma , Sunlight is perceived as low quality vs Surf excel
• Point 5 – eg Burnol, Thermos, Kleenex , Band aid ,Fevicol,,Mseal , Coke are prototypical and hence find it difficult
to extend .
Figure 12-7: Brand Extension Guidelines Based on
Academic Research ( some points elaborated )
• Point 6 –while generally true , some caveats eg abstract associations may not always transfer eg durability in watches
may not be transferable as durability in clothes
• Point 7 - eg Campbell soups strong association resulted in Campbell tomato sauce test mktg flop because perceived as
watery so introduced as Prego
• Point 8- eg Durable handbags may also mean negative associations of non-stylish .McD Pizza did not succeed becos
takes time to make
• Point 9 – Neeta disagrees with the statement that its difficult to extend . My statement is that you are wasting your
brand equity by extending to a mundane category eg Annapoorna salt will be considered as a mundane category to
extend to ,a company has not fortified salt, the way it has fortified Atta
• Point 10 - Success casts a halo effect and helps further extensions eg iPod , iTunes , ……..
• Point 11 – Neeta don’t agree as hurt even more if no fit eg Patanjali
• Point 15- Analytical vs holistic .Both gave prestige brands more permission to extend widely but holistic thinkers gave
functional brands much greater permission to extend . Perception of fit depends on whether expert or whether
novice customer eg tennis rackets and shoes seen more as a fit by novice customers than tennis racquets and golf
balls
• Point 16 – Eastern cultures have more holistic thinking and hence perceive higher levels of extension fit than Western
analytical consumers
 Brand Extension - the good , bad
and ugly
• The Good – the parent brand enhances the extension offering - eg Dove
soap to Dove shampoo etc
• More good – the extension enhances the parent brand eg Virgin records
to airlines . Virgin airlines brand flagship of 300 business
• The bad – the parent brand fails to help or even inhibits the extension eg
Levi Strauss tailored classic line of suits failed, Ponds toothpaste, Colgate
entrees
• The ugly - the extension damages the parent brand eg Gucci ,Lacoste