NEW PRODUCTS AND BRAND EXTENSIONS

ByNavneet Agrawal

OverviewNew Product & Brand Extension

AdvantagesDisadvantagesHow Consumers Evaluate Extensions?

THE FASCINATING WORLD OF BRANDS

What Is A “Brand”A BRAND is symbolic

embodiment of all the information connected to a Company, Product or Service.

It serves to create associations and expectations from products made by a producer, in the mind of the consumer.

The key objective being “to create a Relationship of TRUST with its consumers”.

New Product & Brand Extensions

New Product –Branding Decisions

A new brand – individually chosen for the new product.

An existing brand name applied in some way.

A combination of a new brand with an existing brand.

BRAND EXTENSIONSA Brand Extension occurs when

a firm uses an established brand name to introduce a new product (approaches 2 or 3)

When a new brand is combined with an existing brand (approach 3), the brand extension can also be a sub-brand.

BRAND EXTENSIONSAn 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.

Types of Brand Extension

LINE EXTENSIONThe parent brand is used to

brand a new product that targets a new market segment with in a product category currently served by the parent brand.

A line extension often adds a different flavor or ingredient variety, a different form or size, or a different application for the brand.

Coke’s Line Extension

Head

&Shoulder’s

Extension

CATEGORY EXTENSIONThe parent brand is used to enter

a different product category from that currently served by the parent brand.

ITC’s Category Extension

Why Brand Extensions?Leveraging brand equity/value by introduction of

logical & complementary new product categories E.g HPProduct Innovation to surpass consumer

expectationsIt increases awareness of the brand nameIncreases profitability from offerings in more

than one product category.(widening the net to catch new consumers.)

It’s a great way to reinforce a brand, reach out to new customers, create a BUZZ

ADVANTAGES OFBRAND EXTENSIONS

Advantages Of Brand Extensions

Improve brand image Reduce risk perceived by Customers Permit consume variety-seeking

Advantages Of Brand ExtensionsClarify brand meaning

Brand Original Product

Extension Products

New Brand

Meaning

Weight Watchers

Fitness Centre

Low-calorie foods

Weight loss &

maintenance

Sunkist Oranges Vitamins, juices

Good health

Kellogg’s Cereal Nutri-grain bars,

Special K bars

Health snacking

Aunt Jemima

Pancake mixes

Syrups, frozen waffles

Breakfast foods

Advantages Of Brand Extensions Increase the probability of gaining

distribution and trial Increase efficiency of promotional

expenditures Reduce costs of introductory &

follow-up marketing programs (save 40-80%)

E.g. Apple iPods Avoid costs of developing a new

brand Allow for packaging & labeling

efficiencies

Advantages Of Brand Extensions

Enhance the parent brand image Bring new customers into brand

franchise and increase market coverage

Revitalize the brand Permit subsequent extensions

DISADVANTAGES OFBRAND EXTENSIONS

Disadvantages Of Brand Extensions

Can fail & hurt parent brand image Xerox Computers-synonymous with

copiers & no one believed they could make computers

Can succeed but cannibalize sales of parent brand

Amul Butter-”reduced salt butter” is slowly eating up Amul normal butter

Disadvantages Of Brand Extensions Can succeed but diminish

identification with any one category

Can succeed but hurt the image of parent brand

Disadvantages Of Brand Extensions Can confuse or frustrate consumers

Can encounter retailer resistance

Can dilute brand meaning Can cause the company to forgo the chance to develop a new brand

When are Brand Extensions Appropriate?When Prior Brand equity existsConsumer must see some

“connection” between the proposed extension and the parent brand.

The proposed extension contributes to and reinforces the overall brand equity of the parent brand.

How Consumers Evaluate Extensions

Conditions For Evaluating Consumer’s Brand Extension

Consumers have some awareness & positive associations about the parent brand

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

Negative association are not transferred from the parent brand

Negative associations are not created by the brand extension

Evaluating Brand Extension Opportunities

Define actual & desired consumer knowledge

Identify possible extension candidates

Evaluate potential of the extension candidate

Evaluate potential candidate feedback effects

Consider possible competitive advantages & reactions

Design marketing campaign

Evaluate extension success & effects on parent brand equity

Thank You