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New products and brand extensions:
New products are often vital to the long run success of a firm. When a firm introduces a new product, it has three choices for branding it:
It can develop a new brand, individually chosen for the new product.
It can apply one of its existing brands.
It can use a combination of a new brand and an existing brand.
A brand extension occurs when a firm uses an established brand name to introduce a new product. When a new brand is combined with an existing brand, the brand extension can also be a sub-brand. An existing brand that gives birth to a brand extension is the parent brand.
If the parent brand is already associated with multiple products through brand extensions, then it may also be called a family brand.
Line extension: Marketers apply the parent brand to a new product that targets a new market segment within a product category the parent brand currently serves. A line extension often adds a different flavour or ingredient variety, a different form or size, or a different application for the brand.
Category extension: Marketers apply the parent brand to enter a different product category from the one it currently serves.
Advantages of brand extensions:
Facilitate new product acceptance/a new prod introduced as a brand ext may be more likely to succeed.
1.Improve brand image (similar expectations about performance) // 2.Reduce risk perceived by customers (Percep of corporate credibility, longevity…)// 3.Increase the profitability of gaining distribution and trial (Brand reputation screening for retailers) // 4.Increase efficiency of promotional expenditures: no need to create awareness of the brand, just the new product // 5.Reduce costs of introductory and follow-up MK programs. // 6.Avoid costs of developing a new brand. No need to develop new brand elements/research. // 7.Allow for packaging and labelling efficiencies. Similar packaging, lower production costs. // 8.Permit consumer variety-seeking. Customer could switch without leaving the brand family.
Provide feedback benefits to the parent brand:
1.Clarity brand meaning: defines the kinds of markets the brand competes. // 2.Enhance the parent brand image. Clarify the core brand values and associations. // 3.Bring new customers into brand franchise and expanding market coverage. // 4.Revitalize the brand/renew interest. // 5.It may serve as a basis for subsequent extensions. Ex: Billabong (from surfing to snowboarding/skating).
Disadvantages:
1.Can confuse or frustrate consumers.(avoid inappropriate launch extensions) // 2.Can encounter retailer resistance. (too many lines would be impossible to be displayed at the grocery). // 3.Can fail and hurt parent brand image.ex: Cadillac Cimarron.// 4.Can succeed but cannibalize sales of parent brand. Ex: Diet Coke. // 5.Can succeed but diminish identification with any one category. Reducing brand awareness/brand identification. // 6.Can succeed but hurt the image of the parent brand. If it’s inconsistent with the associations of the parent brand. // 7.Can dilute brand meaning . Important to establish the brand through a family of brand exten and licensing partnerships with retailers. // 8.Can cause the company to forgo the chance to develop a new brand . Ex: Amazon’s Kindle. The extension may be less flexible, it has to live up to the parent’s promise.
Why are brand extensions necessary? Yes, they are a direct consequence of competition in mature markets and of the fragmentation of media. The only justification for brand extension is growth and profitability. It can increase the power of the band and profitability. Brand extensions allow brands to compete in less saturated markets. The brand image must be able to act as a driver of purchase in the other market.
Extending or not extending?
Principle of growth: Maintains that investments in market penetration or expansion versus product development for a brand should be made according to ROI opportunities.Cisco launching high definition teleconferencing system.
Principle of survival: States that the brand extension must achieve brand equity in their categories/ “me too” extensions must be avoided.
Principle of fit: Fit isthe feeling of perceived similarity between the core product and the extension.
Product related attributes and benefits.
Non-product related attributes and benefit.
*The perceived fit is the main variable to emerge from this pioneering research. It measures the psychological and subjective gap between the extension and the brand’s typical product (its prototype).
Customers’s evaluations of an extension are in the first place influenced by the perceived quality of the parent brand and the perceived degree of fit. Therfore, extensions are not a way of saving weak brands: They must have a reputation for quality before it is possible to attempt brand stretching.
BRAND PRODUCT MATRIX: Is a useful tool to characterise the product and branding strategy of an organisation. Graphical representation of all the brands and products sold by an organisation.
Why having multiple brands per product line?
Serving different segments served: demo-, psycho-, benefit, channel, occasion…)
Balancing prestige & profit: Entry-level brands attract new customers and prestige brands build credibility of the whole portfolio.
Financial risk management: stars build credibility, casho cows bring money, questions marks for experiments, dogs must be eliminated.
Balancing attack-defence: Flagship brands from competition.
Building the market: Multiple entries to grow the product category.
When can brands serve multiple product lines?
Brand specific factors: assess brand territory based on the parent brand identity.
Market factors: Size, growth, product life cycle, seasonality, profits, 5 forces.
Environmental factors: PESTEL