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Professor Sandra Milberg Line Extension Brand Extension Brand Equity Sub-Branding Co-Branding Building Brand Equity: Extension Strategies
Managerial Questions :
Managerial Questions When considering entering a new product category, two important questions: 1. Should the firm use a brand extension strategy or a new brand strategy? 2. If the firm chooses to use a brand extension strategy, under what conditions will extensions be successful in capturing sufficient market share?
Why Extensions? :
Why Extensions? Managers use extension strategies under the assumption that brand associations (e.g., quality, reliability, status) and affect (attitudes) will transfer to the extension.
Benefits of Extensions :
Benefits of Extensions Reduce risk perceived by customers Increase the probability of distribution and trial Increase efficiency of promotional expenditures Reduce costs of introductory programs Avoid cost of developing a new brand Create opportunities to extend into more distant product categories Build equity
Line Extensions :
Line Extensions Horizontal: the brand extends to new varieties of the product. E.g., Soprole peach, pineapple, strawberrry yogurt. Vertical: the brand extends up or down in terms of product quality. E.g., Gato Negro, Gato Premium.
Line Extensions :
Line Extensions Price Quality Downward Stretch Upward Stretch Two - way stretch
Sub-Branding Strategy :
Sub-Branding Strategy Using a new brand name in conjunction with a family brand name to introduce new products. Examples: Courtyard by Marriott Technics by Panasonic Levis Dockers Milo de Nestle
Example of Strategies :
Example of Strategies Parent Brand: Salomon (ski-equipment) Line Extension: New type of skis Brand (Category) Extension: Salomon tennis racquet Sub-Brand: Avenger by Salomon Co-Brand: ingredient brand for grip, frame, or strings (Wilson and Goodyear rubber on soles of ProStaff Classic tennis shoes)
Licensing :
Licensing Involves contractual arrangements whereby firms can use names, logos, characters, and other facets of other brands to market their products. Essentially, a firm i s renting another brand to contribute to the brand equity of their own product.
Slide 18:
Steps to Successfully Introduce Brand Extensions Define actual and desired customer knowledge of the brand Identify possible extension candidates Evaluate extension candidate potential Customer, Competition, Company Design marketing campaign to launch extension Evaluate extension success and effects on parent brand equity
Slide 20:
Possible Extensions for the Lubriderm Brand Nivea Cream BRAND DEFINITIONS RELATED CATEGORIES moisturizer lotion medicinal purity body care pump bottle fragrance Soap - face cream skin cream sunburn - after-shave - baby antiseptic - first-aid - hemorrhoid cream cotton - gauze - sterile pads emery boards - muscle toner - cotton swabs liquid hair net - mustard - glass cleaner perfume - room deodorizer - deodorant
Slide 26:
Favorable Brand Extension Attitudes Necessary Conditions Consumers have awareness of and positive associations to the brand Some of the positive brand associations will be evoked by the extension Negative parent brand associations are not transferred to the extension Negative associations are not created by the extension
Slide 27:
Steps to Successfully Introduce Brand Extensions Define actual and desired customer knowledge of the brand Identify possible extension candidates Evaluate extension candidate potential Customer, Competitor, Company Design marketing campaign to launch extension Evaluate extension success and effects on parent brand equity
Slide 28:
Brand Extension Positioning Strategies Consistent across all product categories? Variations across product categories? Where can extension position relative to competitors?
Slide 29:
Brand Extension Advertising Strategies Family brand advertising (multiple family products) Individual brand advertising (extension alone) Comparative advertising (competitor brand)
Slide 30:
Steps to Successfully Introduce Brand Extensions Define actual and desired customer knowledge of the brand Identify possible extension candidates Evaluate extension candidate potential Customer, Competitor, Company Design marketing campaign to launch extension Evaluate extension success & effects on parent brand equity
Managerial Question :
Managerial Question ... Under what conditions will extensions be successful?
Slide 32:
Important Factors for Extending BrandsSucessfully Success of Brand Extensions Evaluation Fit Brand Strength BRAND/FIRM CONSUMERS Knowledge Information MARKET EXTENSION Risk Aversion Characteristic and N Competitors POSITIONING Choice Shares Sales Perceived Risk Profit Market Share
Selective Research Findings Line extensions of symbolic brands enjoy greater market success than those of less symbolic brands. Line extensions entering earlier into a product category are more successful than extensions entering later (strong brands only). Earlier line extensions have helped in the market expansion of the parent brand. A brand 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. cont.
Implications :
Implications whether brand extensions produce more positive attitudes and larger choice shares depends on situational factors: brand strength consumer knowledge of the category and competitor brands the product information available at the time of choice.
evaluate much product information and they are competing in a market in which consumers are not familiar with existing brands. Implications: Extension Information
Slide 45:
Steps to Successfully Introduce Brand Extensions Define actual and desired customer knowledge of the brand Identify possible extension candidates Evaluate extension candidate potential Customer, Competitor, Company Design marketing campaign to launch extension Evaluate extension success & effects on parent brand equity
Sub-Branding Strategy :
Sub-Branding Strategy Using a new brand name in conjunction with a family brand name to introduce new products. Examples: Nestl Chocapic Nescaf Tradicin Levis Dockers Milo de Nestle
Sub-Branding :
Sub-Branding Why use it? Parent brand assures quality. E.g., Nestl Chocapic Differentiate product lines (quality, styles, price levels, etc.). E.g., Nescaf Cup Colombie vs Tradicin Facilitate introduction of new products. Protect the parent brand from negative feedback.
The Linkage :
The Linkage Is the benefit of the name recognition equal? Is the meaning the same? Is there a fit between the names and businesses? Transferability of skills and assets Complementarity Functionality What are their negatives? Is there support beyond the name?
Relationship Traps :
Relationship Traps Attempting to develop too many partners Choosing poorly Allocating too few resources Forgetting about cultural compatibility Not developing a long-term financial relationship
familiar brands experience equal effects. Both product and brand fit affect attitudes toward the alliance. Prior attitudes toward the partner brands affect attitudes toward the alliance. more
Managerial Question :
Managerial Question To enter a new product category, when should the firm use a brand extension strategy or a new brand strategy?
Slide 63:
Market too small Poor product-company fit Not new or not different No real benefit Poor positioning versus competition Inadequate support from distribution channels Forecasting error Poor timing Urban and Hauser (1993), Design and Marketing of New Products Reasons for New Product Failure
Slide 64:
Competitive response Major shifts in technology Changes in customers tastes Changes in environmental constraints Poor repeat purchase Poor after-sales service Lack of coordination of organizational functions Conflicts among organizational functions Urban and Hauser (1993), Design and Marketing of New Products Reasons for New Product Failure
Research Findings :
Research Findings There is some evidence that in the short-term brand extensions are more successful in capturing market share but this advantage seems to disappear in the long- term.
Research Findings :
Research Findings Whether brand extensions produce more positive attitudes and larger choice shares than new brands depends on situational factors: the product information available at the time of choice the fit between the brand and the new product category more
Research Findings :
Research Findings When consumers are unlikely to evaluate attribute information carefully, managers entering product categories where there is: good fit with the existing brand may want to use a brand extension strategy poor fit may want to develop new brands more
Research Findings :
Research Findings When consumers are likely to evaluate attribute information carefully, branding strategy may have little impact on initial appeal. Managers may want to choose branding strategies on the basis of other dimensions: using an extension strategies to take advantage of cost efficiencies use new brand to avoid image dilution. more
Conclusion :
Conclusion The answer to the question as to whether to enter a market with a new brand or brand extension is it depends on: Consumer behavior Characteristics of the market Tradeoffs between the risks and benefits associated with the use of brand extensions.