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New products and brand extensions : 

New products and brand extensions Session 8

For today: 

For today Brand extension and new product development In class – Brand Extension December 5th Mary Weisnewski, Methodologie

Overall, what is our goal as brand managers?: 

Overall, what is our goal as brand managers? Create brand equity, of course!! We have talked about creating BE using the IBM How do we sustain it?

Brand Extensions: How does a firm grow?: 

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

Some Terminology: 

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

Categories of Brand Extensions: 

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

Compare these extensions: 

Compare these extensions

Extension Failures: 

Extension Failures Campbell's tomato sauce LifeSavers chewing gum Cracker Jack cereal Harley Davidson wine coolers Hidden Valley Ranch frozen entrees Bic perfumes Ben-Gay aspirin Kleenex diapers Levi's Tailored Classics suits Nautilus athletic shoes Domino's fruit-flavored bubble gum Smucker’s ketchup Fruit of the Loom laundry detergent

Tauber’s strategies for category extensions: 

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

Advantages of Extensions: 

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

Advantages of Extensions: 

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

Disadvantages of Extensions: 

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)

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 Brand Extension Assumptions

When are Brand Extensions Appropriate?: 

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 No dilution of existing SKS

Model of Extension Evaluations: 

Model of Extension Evaluations Creating extension equity depends on 3 factors: Salience of parent brand associations in extension context Favorability of any inferred associations in the extension context Uniqueness of any inferred associations in the extension context

Brand Extension – In class: 

Brand Extension – In class Spend the remaining time coming up with a BE for your brand Get ready to discuss.

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