Brand Extension: Leveraging Existing Brands for New Offerings | Exercises Brand Management

Brand Management (MKT624) VU

Lesson 21

BRAND EXTENSION

Introduction

With an understanding developed on positioning, this lecture takes us into the area of brand

extension. Although loosely used, the term brand extension comprises of two sub areas – line

extension and brand extension. The latter is generally used in all situations of extensions,

diversifications, or stretch. We have to draw a distinction between the two for a clear

understanding of the concepts.

Concept of positioning clarifies that not one position can satisfy all the varying needs within

the category. Different needs have to be identified toward their fulfillment. To keep up with the

evolution you have to evolve new points of difference. Different needs refer to different

segments and every product has its variants to address to those segmental needs. This holds true

for consumer consumables as well as consumer durables. Regular and mild cigarettes, regular

and fruit yogurt, regular and high fiber cereals, regular and low cholesterol margarine, and

economy and executive models in cars are all examples of product variants in different

segments and categories.

To let the market know that you have something different to offer, you must differentiate

between the existing offering and the new entry. For the new entry meant to address a different

need, you must create a different image reflecting the new promise and must have an evolved

contract in place. You do that in either of the two ways:

A. Staying within the value framework of the original brand, meaning under the same brand

name. You do not go too far away from the core identity.

B. Create a different identity altogether, meaning a new stand-alone brand.

Brand extension

Brand extension is all about the existing brands. As the terminology suggests, we do something

with the existing names for the new offerings. Brand extension, therefore, is the study and

practice of deciding

1. What to do in situations that evolve with changing needs? Examples could be cited of

soups coming into different flavors, biscuits in different tastes and packs, and detergents

in powder and liquid forms.

2. What to do in situations that offer an opportunity to enter a new market altogether?

Examples could be furnished about manufacturers of juices getting into milk and yogurt,

tea getting into soups, chocolate getting into ice cream, and cameras into photocopying

machines etc.

Let’s be clear that we are discussing both situations in relation to using our existing brand name

that is strong. One situation relates getting into variants of the existing product, while other

involves going across the existing business lines into new ones. Both have a common factor

and that is the same brand name. We use the same brand name because it is strong!

Leveraging

The opportunity of using the same brand name for variants or altogether new products takes us

into the domain of leveraging – adding value to the company by capitalizing on the brand as an

asset. Temptation to do so is always huge. We keep the same brand name so that customers can

develop an immediate familiarity with the new introductions – variants or new products. And

that is what leveraging is all about!

Managers feel the need to leverage their brands under the following two different sets of

circumstances:

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Lesson 21 BRAND EXTENSION Introduction With an understanding developed on positioning, this lecture takes us into the area of brand extension. Although loosely used, the term brand extension comprises of two sub areas – line extension and brand extension. The latter is generally used in all situations of extensions, diversifications, or stretch. We have to draw a distinction between the two for a clear understanding of the concepts. Concept of positioning clarifies that not one position can satisfy all the varying needs within the category. Different needs have to be identified toward their fulfillment. To keep up with the evolution you have to evolve new points of difference. Different needs refer to different segments and every product has its variants to address to those segmental needs. This holds true for consumer consumables as well as consumer durables. Regular and mild cigarettes, regular and fruit yogurt, regular and high fiber cereals, regular and low cholesterol margarine, and economy and executive models in cars are all examples of product variants in different segments and categories. To let the market know that you have something different to offer, you must differentiate between the existing offering and the new entry. For the new entry meant to address a different need, you must create a different image reflecting the new promise and must have an evolved contract in place. You do that in either of the two ways: A. Staying within the value framework of the original brand, meaning under the same brand name. You do not go too far away from the core identity. B. Create a different identity altogether, meaning a new stand-alone brand. Brand extension Brand extension is all about the existing brands. As the terminology suggests, we do something with the existing names for the new offerings. Brand extension, therefore, is the study and practice of deciding

What to do in situations that evolve with changing needs? Examples could be cited of soups coming into different flavors, biscuits in different tastes and packs, and detergents in powder and liquid forms.
What to do in situations that offer an opportunity to enter a new market altogether? Examples could be furnished about manufacturers of juices getting into milk and yogurt, tea getting into soups, chocolate getting into ice cream, and cameras into photocopying machines etc. Let’s be clear that we are discussing both situations in relation to using our existing brand name that is strong. One situation relates getting into variants of the existing product, while other involves going across the existing business lines into new ones. Both have a common factor and that is the same brand name. We use the same brand name because it is strong! Leveraging The opportunity of using the same brand name for variants or altogether new products takes us into the domain of leveraging – adding value to the company by capitalizing on the brand as an asset. Temptation to do so is always huge. We keep the same brand name so that customers can develop an immediate familiarity with the new introductions – variants or new products. And that is what leveraging is all about! Managers feel the need to leverage their brands under the following two different sets of circumstances:

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When they are led into genuine situations of satisfying evolving needs, they feel rightly driven to leverage the brand by introducing its variants – light cigarettes and sugar-free chewing gum fall under practice 1 of brand extension discussed above.
When it is attractive to go across category, managers do that with the confidence that their existing brand name is going to add value to their new introduction and will become popular immediately. This relates practice 2 of brand extension. Leveraging without purpose If managers attempt to leverage their brand only because it has high value but it does not really have a specific need to satisfy, then the managers are wandering into the marketing no-man’s land and end up introducing something with no substantive difference. It is merely an exercise toward brand proliferation! This means that brands should be seriously treated as extremely valuable properties and not subjected to meaningless extensions with minor differences. Over-proliferation is a serious threat to a brand’s future. Customers show resentment to brands with no real point of difference^1. Why brand extension? Brand extension is on the rise. Most of the new product launches take place with the existing strong brand names. Cost of launching a new brand in three major markets (US, Europe, and Japan is about US$ 1 billion), whereas launching a product under the same name is a fraction of that cost. It is estimated to be one fifth^2. 30% of new brands survive just about three years, but the rate goes up to 50% if launched under an existing brand name^3. Brand extension, therefore, is cheaper and securer. It looks like a sure way to gain market share and produce visible results. Kinds of extensions There are two kinds of extensions, namely line extension and brand diversification. Brand diversification is in effect brand extension, but this terminology of brand extension somehow is used generically for both types of extensions. You have to make an effort not to be confused by this. Line extension Line extension is basically getting into different versions of the same base product on the same market. A manufacturer of spices getting into more non-traditional spices or recipes and a cheese manufacturer getting into different kinds of packing, portions, slices, and boxes to appeal to different target audiences are examples of this phenomenon. The objective here is to add more depth to your offerings within a definite market. Line extension corresponds to practice 1 of brand extension discussed in the beginning of the lecture. Brand diversification/extension/stretching This refers to stretching your brand into new product fields. Your brand becomes an umbrella covering very different segments and products. A few examples are Mitsubishi, Philips, and GE. Mitsubishi includes shipyards, nuclear plants, cars, hi-fidelity systems, banks, and even food; Philips includes electrical appliances to lighting to sophisticated systems; GE is into Rate of Survival after 3 Years New Brands Existing Brands 30 % 50 % Brands Su rv iva l^ R at e Figure 24

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B 3 B 2 B 1 Brand Extension Across Category Category A Category B Figure 25 Figure 24

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Positive side of line extension As said earlier, each brand starts as a single product and with the passage of time becomes sub- divided into variants that respond to differentiated expectations.

Increases Usage Cola drink is an example, the multiplication of versions has increased its consumer base
- in family size bottle, disposable bottle, can, and returnable bottles all are directed toward increasing usage.
Reinforces Sales With each version designed for one particular usage mode, the brand reinforces its sales with a wider market base. With product variants in the categories of biscuits, cheeses, butters and margarines, and packaged cakes, you extend the market by opening a variety of eating occasions.
Friendly and Caring It shows sensitivity to consumer’s needs and the brand energizes itself by responding to those. In doing so, it maintains an interesting, friendly, and caring character. A small tub of jam or a sachet of powdered milk is an example.
Pushes Boundaries It pushes the boundaries of the market and strengthens the brand’s domination. It increases brand’s visibility through successive launches.
Revitalizes failing Brands Line extension helps ailing and tired brands. It revitalizes many brands by way of introduction of new offerings. Because of the resilience brands have, they bounce back if they are introduced with a new fervor justified by a meaningful point of difference. Brands fail because of price competition. It helps the company launch another version with a lower price.
Maintain relationship between market share and shelf-space share Knowing that customer involvement in consumer items is low, the number of impulse buyers is increasing. Also knowing that shelf space at the retail outlet is limited, it is always good to introduce something by the existing name and keep competition pushed out. Bibliography: 1. Geoffrey Randall: “Branding – A Practical Guide to Planning Your Strategy”; Kogan _Page (55)
Geoffrey Randall: “Branding – A Practical Guide to Planning Your Strategy”; Kogan_ _Page (56)
Geoffrey Randall: “Branding – A Practical Guide to Planning Your Strategy”; Kogan_ _Page (56)
Geoffrey Randall: “Branding – A Practical Guide to Planning Your Strategy”; Kogan_ _Page (57)
Jean-Noel Kapferer: “Strategic Brand Management – Creating and Sustaining Brand_ _Equity Long Term”; Kogan Page (181)
Jean-Noel Kapferer: “Strategic Brand Management – Creating and Sustaining Brand_ Equity Long Term”; Kogan Page (181) Suggested readings: 1. Jean-Noel Kapferer: “Strategic Brand Management – Creating and Sustaining Brand Equity Long Term”; Kogan Page (226-231)

Brand Extension: Leveraging Existing Brands for New Offerings, Exercises of Brand Management

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