New Products and Brand Extensions

When a firm introduces a new product, it has three main choices as to how to brand it:

  1. It can develop a new brand, individually chosen for the new product.
  2. It can apply, in some way, one of its existing brands.
  3. It can use a combination of a new brand with an existing brand.

A brand extension is 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 called a sub-brand. An existing brand that gives birth to a brand extension is referred to as 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.

In 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. A line extension often involves a different flavor or ingredient variety, a different form or size, or a different application for the brand (e.g., Head & Shoulders Dry Scalp shampoo). Most new products are line extensions—typically 80 percent to 90 percent in any one year. Moreover, many of the most successful new products, as rated by various sources, are extensions (e.g., Microsoft Xbox video game system, Apple iPod digital music player, and BMW mini automobile).

Extensions can come in all forms. One well-known branding expert, identifies the following seven general strategies for establishing a category—or what he calls a franchise—extension

  1. Introduce the same product in a different form. Examples: Ocean Spray Cranberry Juice Cocktail and Jell-0 Pudding Pops
  2. Introduce products that contain the brand’s distinctive taste, ingredient, or component. Examples: Philadelphia cream cheese salad dressing and Haagen-Dazs cream liqueur
  3. Introduce companion products for the brand. Examples: Coleman camping equipment and Duracell Durabeam flashlights
  4. Introduce products relevant to the customer franchise of the brand. Examples: Gerber insur­ance and Visa traveler’s checks
  5. Introduce products that capitalize on the firm’s perceived expertise. Examples: Honda lawn mowers and Canon photocopy machines
  6. Introduce products that reflect the brand’s distinctive benefit, attribute, or feature. Example: LysoFs “deodorizing” household cleaning products and Ivory’s “mild” cleaning products
  7. Introduce products that capitalize on the distinctive image or prestige of the brand. Examples: Calvin Klein clothes and accessories and Porsche sunglasses

Advantages of Brand Extensions

For most firms, the question is not whether the brand should be extended, but when, where, and how the brand should be extended. Extensions can certainly suffer from some of the same shortcomings faced by any new product. Nevertheless a new product, introduced as an extension, may be more likely to succeed, at least to some degree, because it offers the advantages described in the following subsections. Well-planned and well-implemented extensions offer a number of advantages to marketers. These advantages can broadly be categorized as those that facilitate new product acceptance and those that provide feedback benefits to the parent brand or company as whole.

1. Improve Brand Image

One of the advantages of a well-known and well-liked brand is that consumers form expectations over time concerning its performance. Similarly, with an extension, consumers can make inferences and form expectations as to the likely composition and performance of a new product based on what they already know about the brand itself and the extent to which they feel this information is rele­vant to the new product. These inferences may improve the strength, favorability, and uniqueness of the extension’s brand associations. For example, when Sony introduced a new personal computer tailored for multimedia applications, Vaio, consumers may have been more likely to feel comfortable with its anticipated performance because of their experience with and knowledge of other Sony products than if the product had been branded by Sony as something completely new.

2. Reduce Risk Perceived by Customers

One research study examining factors affecting new product acceptance found that the most important factor for predicting initial trial of a new product was the extent to which a known family brand was involved. Extensions from well-known cor­porate brands such as General Electric, Hewlett-Packard, Motorola, or others may communicate longevity and sustainability. Although corporate brands may lack spe­cific product associations because of the breadth of products attached to their name, their established reputation for being able to introduce quality products and stand behind them may be an important risk-reducer for consumers. Thus, perceptions of corporate credibility—in terms of expertise and trust-worthiness—can be valuable associations in introducing extensions. Similarly, although widely extended supermarket family brands such as Betty Crocker, Green Giant, Del Monte, and Pepperidge Farm may lack specific product meaning, they may still stand for product quality in the minds of consumers and, by reducing perceived risk, facilitate the adop­tion of extensions.

3. Increase the Probability of Gaining Distribution and Trial

Because of the potentially increased consumer demand resulting from introducing a new product as an extension, it may be easier to convince retailers to stock and pro­mote an extension. For example, one study indicated that brand reputation was a key screening criteria of gatekeepers making new product decisions at supermarkets

4.Increase Efficiency of Promotional Expenditures

From a marketing communications perspective, one obvious advantage of introducing a new product as an extension is that the introductory campaign does not have to create awareness of both the brand and the new product but instead can con­centrate on only the new product itself. In general, it should be easier to add a link from a brand already existing in memory to a new product than it is to first establish the brand in memory and then also link the new product to it. As a dramatic illustra­tion of the marketing communication efficiencies of extensions, when General Mills launched its fourth Cheerios extension, Frosted Cheerios, the brand was able to achieve a 0.44 percent market share in the extremely competitive cereal category in its very first week of sales with essentially no advertising or promotion. Solely on the basis of its name and product concept, demand for the sweetened oat cereal was so high that most supermarkets were forced to limit the number of boxes that could be purchased.

Several research studies document this extension benefit. One study of 98 con­sumer brands in 11 markets found that successful extensions spent less on adver­tising than did comparable new-name entries. A comprehensive study by Indiana University’s Dan Smith found similar results, indicating that the average advertising to sales ratio for extensions was 10 percent, compared with 19 percent for new brands. His study identified some underlying factors moderating this extension advan­tage. The difference in advertising efficiency between extensions and new brands was shown to increase as the fit with other products affiliated with the parent brand increased, as the new product’s relative price compared with that of competitors increased, and as distribution intensity increased. On the other hand, the difference in advertising efficiency between extensions and new brands was shown to decrease when the new product was composed primarily of search attributes (i.e., when product quality could be Judged through visual inspection), as the new product became established in the market, and as consumers’ knowledge of the new product category increased.

5. Reduce Cost of Introductory and Follow-Up Marketing Programs

Because of these push and pull considerations in distribution and promotion, it has been estimated that a firm can save 40 percent to 80 percent on the estimated $30 mil­lion to $50 million it can cost to launch a new supermarket product nationally in the United States. Moreover, other efficiencies can result after the launch. As one such example, when a brand becomes associated with multiple products, advertising can become more cost-effective for the family brand as a whole. For example, in 1988, Jaguar introduced its first substantially improved automobile model in 16 years, adopt­ing new technology to improve reliability although still retaining the classic Jaguar look. The resulting marketing program, which included a lavish ad campaign, increased demand for all new Jaguars. Even older Jaguars found their resale market value enhanced.

6. Avoid Cost of Developing a New Brand

Developing new brand elements is an art and science. To conduct the necessary consumer research and employ skilled personnel to design high-quality brand names, logos, symbols, packages, characters, and slogans can be quite expensive, and there is no assurance of success. As the number of available— and appealing—brand names keeps shrinking, legal conflicts are more likely to result. Despite the fact that it had conducted a trademark search, Cosmair’s L’Oreal division was successfully sued for $2.1 million when a court decided that the name it had chosen to introduce a new green and purple hair dye, Zazu, infringed on the name of a line of shampoos sold by a Hinsdale, Illinois, hair-styling salon called ZaZu Designs.

7. Allow for Packaging and Labeling Efficiencies

Similar or virtually identical packages and labels for extensions can result in lower production costs and, if coordinated properly, more prominence in the retail store by creating a “billboard” effect. For example, Stouffer’s offers a variety of frozen entrees with identical orange packaging that increases their visibility when stocked together in the freezer. A similar billboard effect is evident with other supermarket brands, such as Coca-Cola soft drinks and Campbell soup.

8. Permit Consumer Variety-Seeking

By offering consumers a portfolio of brand variants within a product category, con­sumers who need a change—because of boredom, satiation, or whatever—can switch to a different product type if they so desire without having to leave the brand family Even without such underlying motivations, by offering a complement of line exten­sions, customers may be encouraged to use the brand to a greater extent or in different ways than otherwise might have been the case. Moreover, to even effectively compete in some categories, it may be necessary to have multiple items that together form a cohesive product line.

9. Clarify Brand Meaning

Extensions can help to clarify the meaning of a brand to consumers and define the kinds of markets in which it competes. Thus, through extensions, Hunts means “tomato,” Clairol means “hair coloring,” Gerber means “baby care,” Nabisco means “baked cookies and crackers,” and Chun King means “Chinese food” to consumers. Figure 12-3 shows how other brands that have introduced multiple extensions may have broadened their meaning with consumers.

Broader brand meaning often is necessary so that firms avoid “marketing myopia” and do not mistakenly draw narrow boundaries around their brand and either miss market opportunities or become vulnerable to well-planned competitive strategies Thus, as Harvard’s Ted Levitt pointed out in a pioneering article, railroads are not just in the “railroad” business but also the “transportation’ business In other words, rail­roads do not necessarily compete with other railroads so much as with other forms of transportation (e g , cars and planes) Thinking more broadly about product meaning can easily result in different marketing programs and new product opportunities For example, Steelcase’s one-time slogan, “A Smarter Way to Work,” reflected the fact that the company defines its business not as manufacturing desks, chairs, file cabinets, and credenzas but as “helping to enhance office productivity” For some brands, creat­ing broader meaning is critical and may be the only way to expand sales In some cases, it is advantageous to establish a portfolio of related products that completely satisfy consumer needs in a certain area. For example, the $3 billion oral care market is characterized by a number of mega-brands (e.g., Colgate and Crest) that compete in multiple segments with multiple product offerings. Although these differ­ent brands were limited to a few specific products at one time, they have broadened their meaning through extensions to represent “complete oral care.” Similarly, many specific-purpose cleaning products have broadened their meaning to become seen as multipurpose (e.g., Lysol, Comet).

10. Enhance the Parent Brand Image

According to the customer-based brand equity model, one desirable outcome of a successful extension is that it may enhance the parent brand image by strengthening an existing brand association, improving the favorability of an existing brand association, adding a new brand association, or a combination of these.

One common way that an extension affects the parent brand image is by helping to clarify its core brand values and associations. Core brand values are those attributes and benefits that come to characterize all the products in the brand line and, as a result, are those with which consumers often have the strongest associations. For example, Nike has expanded from running shoes to other athletic shoes, athletic clothing, and athletic equipment, strengthening its associations to “peak performance” and “sports” in the process.

Another type of association that may be improved by successful extensions is consumer perceptions of the credibility of the company behind the extension. For example, Keller and Aaker showed that a successful corporate extension led to improved perceptions of the expertise, trustworthiness, and likability of the company. In the late 1990s, several firms chose to introduce online versions of their services under a separate brand name (e.g., Bank One chose to launch its online bank as Wingspan). Besides increasing the difficulty and expense of launching a new brand, such companies also lost the opportunity to modernize the parent brand image and improve its technological credentials. In many cases, these ventures failed and their capabilities were folded back into the parent organization.

11. Bring New Customer into the Brand Franchise and Increase Market Coverage

Line extensions can benefit the parent brand by expanding market coverage, for example, by offering a product benefit whose lack may have heretofore pre­vented consumers from trying the brand. For example, when Tyienol introduced a capsule form of its acetaminophen pain reliever, it was able to attract consumers who had difficulty swallowing tablets and therefore might have otherwise avoided the brand.

By creating “news” and bringing attention to the parent brand, its sales may also increase. For example, although the market share of regular powdered Tide—which once was at 27 percent—had slipped to 21 percent in the early 1980s, the introduction of Liquid Tide and Multi-Action Tide (a combined detergent, whitener, and fabric soft­ener) resulted in market share increases of 2 percent to 4 percent for the flagship Tide parent brand by 1986. Remarkably, through the skillful introduction of extensions, Tide as a family brand has managed to maintain its market leadership and a market share of roughly 50 percent from the 1950s to the present.

12. Revitalize the Brand

Sometimes extensions can be a means to renew interest and liking for the brand.

13. Permit Subsequent Extensions

One benefit of a successful extension is that it may serve as the basis for subsequent extensions. For example, Goodyear’s successful introduction of its Aquatred tires sub-brand led to the introduction of Eagle Aquatred for performance vehicles with either wider wheels (e.g., the Ford Mustang) or a luxury image (e.g., the Cadiltdi Seville).

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