COURSE TITLE : STRATEGIC BRAND MANAGEMENT Ashesi University COURSE TITLE : STRATEGIC BRAND MANAGEMENT SEMESTER : SECOND, 2010/2011 MODULE 10: Designing and Implementing a Branding Strategy II: Introduction & Naming New Products & Brand Extensions Lecturer: Ebow Spio

Learning Outcomes Appreciate the role of brand extensions in creating, maintaining, and enhancing brand equity. Know the guidelines for introducing and naming of new products and brand extensions Know the role and characteristics of strong brand managers.

Leverage the Brand Firms are seeking to build “power” or “mega” brands that establish a broad market footprint, appealing to multiple customer segments with multiple products all underneath the brand umbrella.

Ansoff’s Growth Share Matrix Current Products New Markets Market penetration strategy Product development strategy Market development strategy Diversification strategy Ansoff’s Growth Share Matrix seeks to demonstrate how a firm can grow its business.

Brand Extensions When a firm uses an established brand name to introduce a new product Brand extension classification Line extension Using a sub-brand to target a new market segment within the same product category. A line extension often adds a different flavour, or ingredient variety, different form or size Category extension Using the parent brand in a different product category Brand extensions, which apply an established brand name to a new product in the same product category (line extension) or in a different product category (category extension) has been fueled in part by the rising cost of introducing new brands and by the growing realization among companies that their brand investments can be leveraged. Brand extensions can facilitate new product acceptance by reducing consumers’ perceived risk, raising the probability of gaining distribution and trial, increasing the efficiency of promotional expenditures, lowering the costs of marketing programs, eliminating new brand development costs, allowing for packaging and labeling efficiencies, and permitting consumer variety seeking. They can provide feedback benefits to the parent brand by clarifying the meaning of a brand, enhancing the parent brand image, attracting new customers to the brand franchise, and thereby expanding market coverage, revitalizing the brand, and facilitating subsequent extensions. However, brand extensions are not a risk-free strategy. They can confuse or frustrate consumers, encounter retailer resistance, hurt the parent brand image if they fail, cannibalize sales of the parent brand, diminish the parent brand’s identification with any one category, create unfavorable associations for the parent brand if they succeed, dilute the overall meaning of the parent brand, and eliminate the opportunity to develop a new brand with its own unique image and equity. The best brand extensions not only create equity for the new product, but also add to the equity of the parent brand. All else being equal, an extension will be more successful if consumers perceive that the parent brand and the extension product fit together in some way. 75

General Strategies for Establishing a Category Tauber’s Franchise—Extension Introduce the same product in a different form. Example: Key Powder (i.e. Key Soap is the parent brand) Introduce products that contain the brand’s distinctive taste, ingredient, or component. Example: Omo Stain Remover Bar (i.e. Omo Detergent Powder is the parent brand) Introduce companion products for the brand. Example: Coleman camping equipment Introduce products relevant to the customer franchise of the brand. Example: Visa’s Travelers’ Cheque Introduce products that capitalize on the firm’s perceived expertise. Example: Honda lawn mowers Introduce products that reflect the brand’s distinctive benefit, attribute, or feature. Example: Lysol’s “deodorizing” household cleaning products Introduce products that capitalize on the distinctive image or prestige of the brand. Example: Calvin Klein clothes Many factors have led to aggressive line extension strategies, including customer segmentation, pricing breadth, excess capacity, competitive intensity, and trade pressure. Some of the risks of brand proliferation include: weaker line logic, lower brand loyalty, poorer trade relations, and increased costs. Recommendations to companies seeking effective product-line strategies include: improve cost accounting, allocate resources to winners, research consumer behavior, work with channel partners, and manage deletions.  

Advantages of Extensions Facilitate new product acceptance Improve brand image Reduce risk perceived by customers Increase the probability of gaining distribution and trial Increase efficiency of promotional expenditures Reduce costs of introductory and follow-up marketing programs Avoid cost of developing a new brand Allow for packaging and labeling efficiencies Permit consumer variety seeking 75

Advantages of Extensions (Cont.) Provide feedback benefits to parent brand Clarify brand meaning Enhance the parent brand image Bring new customers into brand franchise and increase market coverage Revitalize the brand Permit subsequent extensions 76

Disadvantages of Extensions Can confuse or frustrate consumers Can encounter retailer resistance Can fail and hurt parent brand image Can succeed but cannibalize sales of parent brand Can succeed but diminish identification with any one category Can succeed but hurt the image of the parent brand Can dilute brand meaning Can cause the company to forgo the chance to develop a new brand 77

Understanding How Customers Evaluate Brand Extensions Managerial assumptions Consumers have some awareness of and positive associations about the brand in memory At least 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 79

Creating Extension Equity Salience of parent brand associations in the minds of consumers in the extension context Favorability of any inferred associations in the extension context Uniqueness of any inferred associations in the extension context

Contributing to Parent Brand Equity How compelling the evidence is concerning the corresponding attribute or benefit association in the extension context How relevant or diagnostic the extension evidence is concerning the attribute or benefit for the parent brand How consistent the extension evidence is with the corresponding parent brand associations How strong existing attribute or benefit associations are held in consumer memory for the parent brand

Successful Extensions Must create points-of-parity and points-of-difference in extension category Must recognize competitive reactions Must enhance points-of-parity and points-of-difference of parent brand Must maximize the advantages and minimize the disadvantages of brand extensions

Successful Category Extensions Ivory shampoo and conditioner Vaseline Intensive Care skin lotion Visa traveler’s checks Sunkist orange soda Colgate toothbrushes Mars ice cream bars Bic disposable lighters Honda lawn mowers

Unsuccessful Category Extensions LifeSavers chewing gum Harley Davidson wine coolers Bic perfumes Kleenex diapers Levi’s Tailored Classics suits Domino’s fruit-flavored bubble gum Fruit of the Loom laundry detergent

Evaluating Brand Extension Opportunities Define actual and desired consumer knowledge about the brand Identify possible extension candidates Evaluate the potential of the extension candidate The likelihood that the extension will realize the advantages and avoid the disadvantages of brand extensions. As with any new product, analysis of consumer, corporate, and competitive factors can be useful. A firm engaging in a brand extension strategy should 1) define actual and desired consumer knowledge about the brand, 2) identify possible extension candidates, 3) evaluate the potential of each candidate, 4) evaluate extension feedback effects, 5) consider possible competitive advantages and reactions, 6) design a marketing program to launch the extension, and 7) evaluate the success of the extension and its impact on the equity of the parent brand.

Evaluating Brand Extension Opportunities Design marketing programs to launch extension Building brand equity for a brand extension requires choosing brand elements, designing the optimal marketing program to launch the extension, and leveraging secondary associations. Evaluate extension success and effects on parent brand equity

When are brand extensions appropriate? If they see some basis of “fit” or similarity between the proposed extension and parent brand The major mistake in evaluating extension opportunities is failing to take all of consumers’ brand knowledge structures into account. Often, marketers mistakenly focus on only one brand association and ignore other potentially important brand associations in the process. 80

Guidelines for brand extensions Successful brand extensions occur the parent brand has favourable associations and consumers perceive a fit between the parent brand and the extension product There are many bases of fit : product –related attributes and benefits, as well as non-product –related attributes and benefits relate to common usage situations or user types Depending on their knowledge of the product categories, consumers may perceive fit based on technical or manufacturing commonalities, or on surface considerations such as necessary or situational complementarity High quality brands stretch farther than average-quality brands, although both types have boundaries A brand that consumers see as prototypical for a product category can be difficult to extend outside the category

Guidelines for brand extensions 6. Concrete attribute associations tend to be more difficult to extend than abstract benefit associations 7. Consumers may transfer associations that are positive in the original product class but become negative in the extension context. 8. Consumers may infer negative associations about an extension, perhaps event basedon other inferred positive associations 9. It can be difficult to extend into a product class that consumers see as easy to make

Guidelines for brand extensions 10. A successful extension can not only contribute to the parent brand image but also enable a brand to extend even further 11. An unsuccessful extension hurts the parent brand only when there is a strong basis of fit between the two. 12. An unsuccessful brand extension does not prevent a firm from backtracking and introducing a more similar extension. 13. Vertical extension can be difficult and often require sub-branding strategies. 14. The most effective advertising strategy for an extension is one that emphasizes information about the extension (rather than reminders about the parent brand)

Key Points Extensions can be either introduced in a product category currently served by the parent brand (i.e., line extension) or a completely different product category (i.e., category extension). 2. Extensions allow firms to reduce the costs of brand-building advertising campaigns and of educating consumers about specific product attributes. 3. The risks of brand extensions include dilution of the brand name and negative feedback effects on existing products. 4. The best extensions are those where the parent brand name helps the new product and the new product helps the parent brand.

Tutorial How successful do you predict these recently proposed extensions will be? Why? a. Evian (famous for water) and high-end spas b. Starbucks (famous for coffee) and film production & promotion 2. Consider the following brands and discuss the extendibility of each: Harley-Davidson, Red Bull, Tommy Hilfiger, Ashesi University College, UT Financial Services, Databank, Devtraco

Characteristics of Strong Brands Managers Understand brand meaning and market appropriate products in an appropriate manner Properly position the brand Provide superior delivery of desired benefits Employ a full range of complementary brand elements and supporting marketing activities Embrace integrated marketing communications and communicate with a consistent voice Measure consumer perceptions of value and develop a pricing strategy accordingly Establish credibility and appropriate brand personality and imagery Maintain innovation and relevance for the brand Strategically design and implement a brand hierarchy and brand portfolio Implement a brand equity management system to ensure that marketing actions properly reflect the brand equity concept