Module 11

Question 1

New Products & Brand Extensions

As background, first consider the sources of growth for a firm.
One useful perspective is

Answer 1

Ansoff’s product/market expansion grid.

Question 2

Ansoff’s Growth Share Matrix

Answer 2

Current Products & Current Markets: Market Penetration Strategy

New Products & Current Markets: Product Development Strategy

New Markets & Current Products: Market Development Strategy

New Markets & New Products: Diversification: Diversification Strategy

Question 3

When a firm introduces a new product, it has three choices for branding it:

Answer 3

1. It can develop a new brand, individually chosen for the new product
2. It can apply, in some way, one of its existing brands
3. It can use a combination of a new brand and an existing brand

Question 4

A brand extension occurs when

Answer 4

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

Question 5

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

Answer 5

sub-brand.

Question 6

An existing brand that gives birth to a brand extension is the

Answer 6

parent brand.

Question 7

If the parent brand is already associated with multiple products through brand extensions, then it may also be called a

Answer 7

family brand.

Question 8

Brand Extensions fall into two general categories:

Answer 8

Line Extension

Category Extension

Question 9

Line Extension:

Answer 9

Marketers apply the parent brand to a new product that targets a new market segment within a product category the parent brand currently serves. A line extension often adds a different flavor or ingredient variety, a different form or size, or a different application for the brand.

Question 10

Category Extension:

Answer 10

Marketers apply the parent brand to enter a different product category from the one it currently serves.

Question 11

Typically __ to __ of new products in any one year are line extensions.

Answer 11

80% - 90%

Question 12

Many of the most successful new products are

Answer 12

extensions.

Question 13

Well-known branding expert, Edward Tauber, identifies seven general strategies for establishing a category — or what he calls a franchise-extension:

Answer 13

1. Introduce the same product in a different form.
2. Introduce products that contain the brand’s distinctive taste, ingredient, or component.
3. Introduce companion products for the brand.
4. Introduce products relevant to the customer franchise of the brand.
5. Introduce products that capitalize on the firm’s perceived expertise.
6. Introduce products that reflect the brand’s distinctive benefit, attribute, or feature.
7. Introduce products that capitalize on the distinctive image or prestige of the brand.

Question 14

Another term for category

Answer 14

franchise-extension

Question 15

For most firms, the question is not whether to extend the brand, but

Answer 15

when, where, and how to extend it.

Question 16

Advantages of Extensions:

Answer 16

Facilitate new product acceptance

Provide feedback benefits to the parent brand and company

Question 17

Facilitate New Product Acceptance

Answer 17

1. Improve brand image.
2. Reduce risk perceived by customers.
3. Increase the probability of gaining distribution and trial.
4. Increase efficiency of promotional expenditures.
5. Reduce costs of introductory and follow-up marketing programs.
6. Avoid cost of developing a new brand.
7. Allow for packaging and labeling efficiencies.
8. Permit consumer variety-seeking.

Question 18

Brand inferences improve

Answer 18

strength, favorability, and uniqueness of the extension’s brand associations.

Question 19

Perceptions of corporate credibility – in terms of expertise and trustworthiness can be a valuable association in

Answer 19

introducing brand extensions.

Question 20

Increase in consumer demand for a new product makes it easier to

Answer 20

convince retailers to stock and promote it.

Question 21

It is easier to add a link to a new product from a brand already existing in the memory than it is to

Answer 21

first establish the brand in memory and then also link the new product to it.

Question 22

When a brand becomes associated with multiple products, advertising can be more

Answer 22

cost effective for the family brand as whole.

Question 23

Developing a new brand element is an art and a science.

Answer 23

Quite expensive with no assurance of success.

Question 24

Similar or virtually identical packages and labels for extensions can result in

Answer 24

lower production costs and if coordinated properly, can create a “billboard” effect.

Question 25

Permit Consumer Variety-Seeking by

Answer 25

offering a portfolio of brand variants within a product category for the consumer who needs a change.

Question 26

Provide Feedback Benefits To The Parent Brand And Company

Answer 26

1. Clarify brand meaning. 2. Enhance the parent brand image. 3. Bring new customers into the brand franchise and increase market coverage. 4. Revitalize the brand. 5. Permit subsequent extensions.

Question 27

Extensions help to clarify the meaning of the brand to consumers and

Answer 27

define the kinds of markets in which it competes.

Question 28

Extensions help to clarify the meaning of the brand to consumers and define

Answer 28

the kinds of markets in which it competes.

Question 29

Enhance the Parent Brand Image by

Answer 29

strengthening existing brand associations, improving the favorability of existing brand, adding a new brand associations, or a combination of these.

Question 30

Line extension can benefit the parent brand by

Answer 30

expanding market coverage.

Question 31

Sometimes brand extensions can be a means to

Answer 31

renew interest in and liking for the brand.

Question 32

A successful extension may serve as

Answer 32

the basis for subsequent extensions.

Question 33

Disadvantages of Brand Extensions

Answer 33

I. Can Confuse Or Frustrate Consumers II. Can Encounter Retailer Resistance III. Can Fail And Hurt Parent Brand Image IV. Can Succeed But Cannibalize Sales of Parent Brand V. Can Succeed But Diminish Identification With Any One Category VI. Can Succeed But Hurt The Image of the Parent Brand VII. Can Dilute Brand Meaning VIII. Can Cause The Company To Forego Chance To Develop New Brand

Question 34

Managerial Assumptions:

Answer 34

to analyze potential consumer response to a brand extension, a baseline case is used to provide the cleanest test of the extension concept itself, and gives managers guidance about whether to proceed with an extension concept and, if so, what type of marketing program they might need.

Question 35

Brand Extensions and Brand Equity:

Answer 35

the ultimate success of an extension will depend on its ability to both achieve some of its own brand equity in the new category and contribute to the equity of the parent brand.

Question 36

Vertical Brand Extensions:

Answer 36

scenario where the brand is either extended up into more premium market segments or down into more value-conscious segments. These are a common means of attracting new groups of consumers.

Question 37

We can expect consumers to use their existing brand knowledge, as well as what they know about the extension category, to try to infer what the extension product might be like. In order for these inferences to result in favorable evaluations of an extension, four basic conditions must generally hold true:

Answer 37

1. Consumers have some awareness of and positive associations about the parent brand. 2. At least some of these positive associations will be evoked by the brand extensions. 3. Negative associations are not transferred from the parent brand. 4. Negative associations are not created by the brand extensions.

Question 38

Creating Extension Equity:

Answer 38

For the brand extension to create equity, it must have a sufficiently high level of awareness and achieve necessary and desired points of parity and points of difference.

Question 39

Initially, creating a positive image for an extension will depend primarily on three consumer-related factors:

Answer 39

i. How salient parent brand associations are in the minds of consumers in the extension context. ii. How favorable any inferred associations are in the extension context. iii. How unique any inferred associations are in the extension category.

Question 40

Contributing To Parent Brand Equity:

Answer 40

To contribute to parent brand equity, an extension must strengthen or add favorable and unique associations to the parent brand and not diminish the strength, favorability, or uniqueness of any already existing associations for the parent brand.

Question 41

The effects of an extension on consumer brand knowledge will depend on four factors:

Answer 41

i. How compelling the evidence is about the correspondence attribute or benefit association in the extension context. ii. How relevant or diagnostic the extension evidence is for the attribute or benefit for the parent brand. iii. How consistent the extension evidence is with the corresponding parent brand associations. iv. How strongly existing attribute or benefit associations are held in consumer memory for the parent brand.

Question 42

The central logic behind vertical extensions is that

Answer 42

the equity of the parent brand can be transferred in either direction in order to appeal to consumers who otherwise would not consider the parent brand.

Question 43

Vertical extensions can confer a number of the advantages of brand extensions. An upward extension can improve

Answer 43

brand image, as a more premium version of a brand often brings with it positive associations.

Question 44

Vertical extensions can also be susceptible to many of the disadvantages of brand extensions…

Answer 44

a vertical extension to a new price point, either higher or lower, can confuse or frustrate consumers who have learned to expect a certain price range from a brand.

Question 45

Despite the problems inherent in vertical extensions, many companies, like Marriott have succeeded in

Answer 45

extending their brands to enter new markets across a range of price points.

Question 46

Academic research and industry experience have revealed a number of principles governing successful brand extensions. Marketers must consider their strategies carefully by

Answer 46

systematically following the steps listed in the Brand Extension Checklist and use managerial judgment and marketing research to help make each of these decisions.

Question 47

Brand Extension Checklist

Answer 47

1. Does the parent brand have strong equity? 2. Is there sufficient transfer to the extension? 3. Is extension consistent with brand vision and essence? 4. Is it a logical fit that will make sense to target market(s)? 5. Will it create strong competitive positioning in new category? 6. Will it avoid creating negative associations in new category? 7. What implications will the extension have on brand equity? 8. Does it minimize downside risk and dilution? 9. Does it offer additional extension opportunities? 10. Will extension have necessary points of parity and points of difference? 11. How can the marketing program enhance extension equity? 12. Do the organizational skills and resources required to develop extension exist or can they be obtained? 13. How should extension feedback effects to the parent brand best be managed?