Product and Brand Management

Branding Strategy
Brand Extensions

Deepak Sirdeshmukh
2010
 MANAGING THE PRODUCT/BRAND MIX

ƒ Through growth, retrenchment, and acquisition, most

companies accumulate an assortment of products/brands,
typically spanning multiple product markets.

ƒ The product/brand mix is the term that refers to the

complete assortment of products that a company offers.

Characterizing the product/brand mix

ƒ Width: The number of product lines that a

company offers.
ƒ Line length: Total number of items in a product line.
ƒ Depth: The number of variants for given product.
ƒ Consistency: The relationship between product lines.
 Colgate-Palmolive Product Assortment
WIDTH

LENGTH

DEPTH

?
CONSISTENCY
Regular
Waxed
Mint Waxed
ABB’s BRAND PORTFOLIO
BRANDING STRATEGY OPTIONS – BRAND
HIERACHY LEVELS
Corporate Branding
Using the company name as an overall brand
(General Motors, Sony, Dell)
Family Branding
Using a blanket family brand - using brand
extensions (Buick, Tropicana (Seagram’s brand))
Individual Branding
Developing unique brand names for new products –
using individual brand names (Fritos, Tide)
Using Modifiers to brands
Applying a qualifier to a brand (Ultra, Lite, LS/ES)
Firms often use a combination of the above
branding alternatives.
 Brand Extensions

ƒ Brand extension strategy: Using an

established brand in one product
category to launch or endorse a new
product in a different product category.
ƒ Examples:
ƒ Procter & Gamble extended the Olay brand
to facial cleansing cloths, as well as to
multivitamins.
ƒ The Ferrari brand has been extended to
motorcycles as well as to laptops.
Some well known brand extensions
 Story from this week – According to IRI, Brand
Extensions dominated in a recessionary economy

ƒ Campbell's Select Harvest soup, Bud Light Lime beer, Arnold Select
Sandwich Thins bread, Green Giant Valley Fresh Steamers frozen
prepared vegetables, and Dreyer's/Edy's Fun Flavors ice cream were
the leading entries in Information Resources Inc.'s roster of top new
food/beverage consumer packaged goods of 2009, based on sales
during their first full year on the market.

ƒ “ Contrary to the historical pattern, in which "new food brands have

outperformed brand extensions," 2009 was a year in which brand
extensions dominated the ranks of "New Product Pacesetters."
(That's a class whose criteria include "at least $7.5 million in year-
one sales across food, drug and mass channels (excluding
Walmart).”

ƒ Ninety-three percent of the foods/beverages qualifying as

Pacesetters last year were brand extensions.

ƒ “Looking at the data another way, new brands of foods/beverages

had average year-one sales of $15 million last year, while new brand
extensions averaged $28 million.”

ƒ The report suggests that the economy played a role in boosting

brand extensions and tamping down wholly new brands.

Adapted from a story in Advertising Age, March 22, 2010

 The Logic For Brand Extensions

• Brand extensions are based on the logic

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
 Advantages of Brand Extensions:
For the extension product

• 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 brands
– Allow for packaging and labeling efficiencies
– Permit consumer variety seeking
 Advantages of Extensions:
For the parent brand
• Extensions can also provide “feedback” benefits to the
parent brand and the company as a whole:
– 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

• Extensions have risks - they can fail.

• Extensions can potentially result in the following other
costs:
– Cannibalize sales of the parent brand (when
cannibalization is not intended)
– 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)
Predicting how consumers will evaluate a brand
extension

Core Value Propositions

Core Skills

PARENT
BRAND
Core Benefits

Core Attributes, Feeling

1. What are all the salient associations evoked by the brand?

Predicting how consumers will evaluate a brand
extension

Core Value Propositions + -?

Core Skills + -?

PARENT
BRAND
Core Benefits
+ - ?

Core Attributes, Feeling + - ?

2. What are the dominant associations? (Note, the brand’s

strategy will drive these associations)
3. How favorable are the dominant associations?
Predicting how consumers will evaluate a brand
extension

Do they share desired value propositions ?

Do they share manufacturing competencies?

PARENT EXTENSION
BRAND PRODUCT

Do they share desired value benefits?

Do they share desired value attributes?

Does the consumer find a “fit” between the

dominant associations and the extension product?
That is - “does this make sense”
 Launch options for the brand extension:
Based on earlier assessments
Product
Attribute 1
Customer
Product (Benefit) Need 1 Customer
Attribute 2 (Value) Goal 1
Customer
Product (Benefit) Need 2 Customer
Parent Brand Attribute 3 (Value) Goal 2
Customer
Product (Benefit) Need 3
Attribute 4

Benefit Based Values Based

Attribute Based
Extension: Extension:
Extension: Godiva
Dannon Rolex

Brand Extension
Additional considerations beyond consumer
judgments

• Assessments of the viability of a brand extension

strategy should go beyond consumer acceptance –
or even desires.
• Overall assessments should include a strategic
analysis of the overall value of a brand extension
strategy in terms of company profitability and
strategic position.
• The framework developed in the next section helps
conduct such a strategic analysis.
 Beyond Fit: A Comprehensive Process for Assessing Whether to
Extend the Parent Brand to a New Line of Business
Do we have a
strong
Parent brand equity
brand? At
what level?
Brand Equity Brand Equity
Strength Drivers
 Beyond Fit: Comprehensive Process for Assessing Whether to Extend the
Parent Brand to a New Line of Business
Do we have a
strong
Parent brand equity
brand? At
what level?
Brand Equity Brand Equity Parent brand – extension
Strength Drivers product relationship
Will the
extension make
sense to the
customers in this
segment ? Perceived value
of extension
 Beyond Fit: Comprehensive Process for Assessing Whether to Extend the
Parent Brand to a New Line of Business
Do we have a
strong
Parent brand equity
brand? At
what level?
Brand Equity Brand Equity Parent brand – extension
Strength Drivers product relationship
Will the
extension make
sense to the
customers in this
segment ? Perceived value Perceived value of
of extension alternatives

Can the extension

compete with
(beat) the Incremental
incumbent brand? value promised
by the extension
 Beyond Fit: Comprehensive Process for Assessing Whether to Extend the
Parent Brand to a New Line of Business
Do we have a
strong
Parent brand equity
brand? At
what level?
Brand Equity Brand Equity Parent brand – extension
Strength Drivers product relationship
Will the
extension make
sense to the
customers in this
segment ? Perceived value Perceived value of
of extension alternatives

Can the extension

compete with
(beat) the Incremental Performance of
incumbent brand? value promised the extension
by the extension product

Can we deliver on
Customer
customer
satisfaction
expectations?
 Beyond Fit: Comprehensive Process for Assessing Whether to Extend the
Parent Brand to a New Line of Business
Do we have a
strong
Parent brand equity
brand? At
what level?
Brand Equity Brand Equity Parent brand – extension
Strength Drivers product relationship
Will the
extension make
sense to the
customers in this
segment ? Perceived value Perceived value of
of extension alternatives

Can the extension

compete with
(beat) the Feedback Incremental Performance of
incumbent brand? effect of value promised the extension
extension by the extension product
performance

Can we deliver on
Customer
customer
satisfaction
expectations?

Operating costs
Does success of Retention costs Long term
the extension profitability
Customer equity
benefit the brand?
 Insights Needed For Assessing Brand Extension Decision

Assessment Stage Insights Necessary

ƒ Customer based brand equity measures

Parent
Parent Brand
Brand Equity
Equity
ƒ Brand loyalty, vulnerability indices

ƒ Value drivers in extension product market

Parent
Parent Brand
Brand -- Extension
Extension ƒ Parent brand-extension relationship
Relationship
Relationship assessment (ex: product, technology, benefit
similarities)
ƒ Product complementarity assessment
ƒ Consumer loyalties in extension product
Incremental
Incremental Consumer
Consumer Value
Value market
ƒ Consumer switching cost assessment
ƒ Competitor brand value analysis

ƒ Internal cost analyses

ƒ Customer equity in extension product market
Projected
Projected Profitability
Profitability
ƒ Net equity of customers for complementary
product bundle

ƒ Brand profitability analysis

ƒ Assessment of extension’s impact on the
Impact
Impact on
on Parent
Parent Brand
Brand brand’s position
ƒ Impact on brand’s strategic path