Download - Lecture 4 Brand Extension
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Agenda
• Brand Extension – Definition– Advantages – Disadvantages
• Evaluation of Brand Extension Opportunities– 5 Steps of Introducing Brand Extensions
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Growth Share Matrix
Ansoff,I.(1987) “Corporate Strategy”, McGraw-Hill
Market Penetration Strategy
Product Development Strategy
Market Development Strategy
Diversification Strategy
ProductsExisting
Existing
New
New
Markets
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Market Penetration
• Same segment • Same products
– Increase customers number
– Increase purchased quantity
– Increase purchase frequency
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Market Development
• New segment• Same product
assortment
– New segment of the market
– Geographical expansion
£24.50
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Product Development
• Same segment • New product
– New packaging– New product
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Diversification
• New market • New products
– Related diversification – Vertical integration– Unrelated diversification
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Growth Share Matrix
Ansoff,I.(1987) “Corporate Strategy”, McGraw-Hill
Market Penetration Strategy
Product Development Strategy
Market Development Strategy
Diversification Strategy
ProductsExisting
Existing
New
New
Markets
![Page 10: Lecture 4 Brand Extension](https://reader035.vdocuments.mx/reader035/viewer/2022062310/56815d63550346895dcb6a36/html5/thumbnails/10.jpg)
New Product Development
• Branding Strategies
– New brand for the new product
– Existing brand for the new product
– A combination of a new brand and an existing brand
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Definition
• A brand extension occurs when a firm attach established brand names to new products, taps into consumers favourable associations with the brand name in an attempt to create financial value for the firm.
Lane & Jacobson (1995) “Stock market reactions to brand extension announcements: The effects of brand attitude and familiarity”, Journal of Marketing, 59(1), pp. 63-77
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Brand Extension
• Brand Extension Strategies
– 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
– Category Extension• Marketers apply the parent brand to enter a
different product category from the one it currently serves
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Pros & Cons
• Advantages of Brand Extensions
– Facilitate New Product Acceptance
– Provide Feedback Benefits to the Parent Brand and Company
Keller (2008) Chpt 12
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Pros & Cons
• Facilitate New Product Acceptance
– Improve Brand Image
– Reduce Risk Perceived by Customers
– Increase the Probability of Gaining Distribution and Trial
– Permit Consumer Variety-Seeking
Keller and Aaker (1992), “The Effects of Sequential Introduction of Brand Extensions,,” Journal of Marketing Research, 29() pp. 35-50
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Pros & Cons
• Facilitate New Product Acceptance
– Increase Efficiency of Promotional Expenditure
– Reduce Costs of Introductory and Follow-Up Marketing Programs
– Avoid Cost of Developing a New Brand
– Allow for Packaging and Labelling EfficienciesSullivan (1992), “Brand Extensions: When to Use Them,” Management Science, 38(6), pp. 793-806
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Pros & Cons• Provide Feedback Benefits to the Parent
Brand– Clarify Brand Meaning
– Enhance the Parent Brand Image
– Bring new customers into brand franchise and increase market coverage
– Revitalise the brand
– Permit subsequent extensionsKeller and Aaker (1992), “The Effects of Sequential Introduction of Brand Extensions,,” Journal of Marketing Research, 29() pp. 35-50
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Pros & Cons
• Disadvantages of Brand Extensions
– Can confuse or frustrate consumers
– Can encounter retailer resistance
– Can fail and hurt parent brand image
– Can succeed but cannibalise sales of parent brand
Keller (2008) Chpt 12
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Pros & Cons
• Disadvantages of Brand Extensions
– Can succeed but diminish identification with any one category
– Can succeed but hurt the image of parent brand
– Can dilute brand meaning
– Can cause the company to forgo the chance to develop a new brand
Sullivan (1990), “The Impact of Brand Extensions on Parent Brand Memory Structures and Retrieval Processes,” Journal of Business, 63(3), pp. 309-329
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5-Step ModelDefine Consumer Knowledge
Identify Possible Extensions
Evaluate the Potential of the Extensions
Design Marketing Programs to Launch Extension
Evaluate Extension Success and Effects on Parent Brand Equity
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Step 1
• Define Actual and Desired Consumer Knowledge about the Brand
– Understanding the consumers, including needs/wants/motivations/attitudes.
– Understand the parent brand, including the brand awareness/brand association/brand positioning/brand meaning
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Step 2
• Identify Possible Extension Opportunities
– Line Extension– Category Extension
• Would our customers think the parent brand fit with the new product category?
• Would the resources of our firm and the meaning of the brand meet the expectations?
• Is it easy for our competitors to copy?
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Step 3
• Evaluate the Potential of the Extension Candidate
– Consumer Factors• Strength• Favourability• Uniqueness• Compelling• Relevance• Consistency• Salience
Brand Extension Equity: Brand Awareness
Contribution to Parent Brand Equity: Consumer Feedback
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Step 3
• Evaluate the Potential of the Extension Candidate– Firm and Competitive Factors
• How effectively are the corporate assets leveraged in the extension setting?
• How relevant are existing marketing programs, perceived, benefits, and target customers to the extension?
• What are the competitive advantages to the extension as consumers perceive them?
• What are the possible reactions initiated by competitors as a result?
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Step 4
• Design Marketing Programs to Launch Extension
– Choosing Brand Elements• Packaging
– Designing Optimal Marketing Program• Brand Positioning
– Leveraging Secondary Brand Associations
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Step 5• Evaluate Extension Success and Effects
on Parent Brand Equity– Customer Segmentation– Consumer Desires– Pricing Breadth– Excess Capacity– Short-term Gain– Competitive Intensity– Trade Pressure
Quelch & Kenny (1994) “Extend Profits, Not Product Lines”, Harvard Business Review, 72(5), pp. 153-160