To facilitate
the discussion, it is useful to establish some terminology. When a firm
introduces a new product, it has three main choices as to how to brand it:
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 with an existing brand.
A brand
extension is when a firm uses an established brand name to introduce a new
product. When a new brand is combined
with an existing brand, the brand
extension can also be called a sub-brand. An existing brand that gives
birth to a brand extension is referred to as the parent brand. If the
parent brand is already associated with multiple products through brand extensions,
then it may also be called a family brand. Brand extensions can be
broadly classified into two general categories:
Line extension: The
parent brand is used to brand a new product that targets a new market segment
within a product category currently served by the parent brand. A line
extension often involves a different flavor or ingredient variety, a different
form or size, or a different application for the brand (e.g., Head & Shoulders Dry Scalp shampoo).
Category extension:
The parent brand is used to enter a different product category from that
currently served by the parent brand (e.g.. Swiss Army watches).
Most new
products are line extensions—typically 80 percent to
90 percent in any one year. Moreover, many of the most successful new
products, as rated by various sources, are extensions (e.g., Microsoft Xbox
videogame system, Apple iPod digital music player, and BMW mini automobile).
Nevertheless, many new products are introduced each year as new brands (e.g.,
Gleevec oncology drug, ReplayTV digital video recorders, and Harmony low-fat
cereal).
Extensions can
come in all forms. One well-known branding expert, Edward Tauber, identifies
the following seven general strategies for establishing a category—or what he calls a franchise—extension
1. Introduce the same product in a different
form. Examples: Ocean Spray
Cranberry Juice Cocktail and Jell-0 Pudding Pops
2. Introduce products that contain the brand's
distinctive taste, ingredient, or component. Examples: Philadelphia cream cheese salad dressing and Haagen-Dazs cream
liqueur
3. Introduce companion products for the brand. Examples: Coleman camping equipment and Duracell Durabeam flashlights
4. Introduce products relevant to the customer
franchise of the brand.
Examples: Gerber insurance and Visa traveler's checks
5. Introduce products that capitalize on the
firm's perceived expertise.
Examples: Honda lawn mowers and Canon photocopy machines
6. Introduce products that reflect the brand's
distinctive benefit, attribute, or feature. Example: LysoFs "deodorizing" household cleaning products and
Ivory's "mild" cleaning products
7. Introduce products that capitalize on the
distinctive image or prestige of the brand. Examples: Calvin Klein clothes and accessories and Porsche sunglasses
Brand
extension strategies are considered more systematically later in this chapter.
Next, however, some of the main advantages and disadvantages of brand
extensions are outlined.
Advantages Of
Extensions
The high
failure rate of new products is well documented. Marketing analysts estimate
that perhaps only 2 of 10 new products will be successful, or maybe
even as few as 1 of 10. As noted previously, new products can fail
for a number of reasons. Robert McMath, who oversees a collection of over 75,000 once-new consumer products called the New
Products Showcase and Learning Center in Ithaca, New York, identifies nine main
reasons for product failure
1. The
market was too small (insufficient demand for type of product).
2. The
product was a poor match for the company.
3. The product was justified on inadequate or
inaccurate marketing research, or the company ignored research results.
4. The company was too early or too late in
researching the market (failure to capitalize on its marketing window).
5. The product provided insufficient return on
investment (poor profit margins and high costs).
6. The
product was not new or different (a poor idea that really offered nothing new).
7. The
product did not go hand in hand with familiarity.
8.
Credibility was not confirmed on delivery.
9.
Consumers could not recognize the product.
For most
firms, the question is not whether the brand should be extended, but when,
where, and how the brand should be extended. Extensions can certainly suffer
from some of the same shortcomings faced by any new product. Nevertheless a new
product, introduced as an extension, may be more likely to succeed, at least to
some degree, because it offers the advantages described in the following
subsections. Well-planned and well-implemented extensions offer a number of
advantages to marketers. These advantages can broadly be categorized as those
that facilitate new product acceptance and those that provide feedback benefits
to the parent brand or company as whole.
Improve Brand Image
One of the
advantages of a well-known and well-liked brand is that consumers form
expectations over time concerning its performance. Similarly, with an
extension, consumers can make inferences and form expectations as to the likely
composition and performance of a new product based on what they already know
about the brand itself and the extent to which they feel this information is
relevant to the new product These inferences may improve the strength,
favorability, and uniqueness of the extension's brand associations. For
example, when Sony introduced a new personal computer tailored for multimedia
applications, Vaio, consumers may have been more likely to feel comfortable
with its anticipated performance because of their experience with and knowledge of other Sony products than if the
product had been branded by Sony as something completely new.
Reduce Risk
Perceived by Customers
One research
study examining factors affecting new product acceptance found that the most
important factor for predicting initial trial of a new product was the extent
to which a known family brand was involved Extensions from well-known corporate
brands such as General Electric, Hewlett-Packard, Motorola, or others may
communicate longevity and sustainability. Although corporate brands may lack
specific product associations because of the breadth of products attached to
their name, their established reputation for being able to introduce quality
products and stand behind them may be an important risk-reducer for consumers
Thus, perceptions of corporate
credibility—in terms of expertise and
trust-worthiness—can be valuable
associations in introducing extensions Similarly, although widely extended
supermarket family brands such as Betty Crocker, Green Giant, Del Monte, and
Pepperidge Farm may lack specific product meaning, they may still stand for
product quality in the minds of consumers and, by reducing perceived risk,
facilitate the adoption of extensions.
Increase
the Probability of Gaining Distribution and Trial
Because of the
potentially increased consumer demand resulting from introducing a new product
as an extension, it may be easier to convince retailers to stock and promote
an extension. For example, one study indicated that brand reputation was a key
screening criteria of gatekeepers making new product decisions at supermarkets
Increase Efficiency of Promotional Expenditures
From a
marketing communications perspective, one obvious advantage of introducing a
new product as an extension is that the introductory campaign does not have to
create awareness of both the brand and the new product but instead can concentrate
on only the new product itself. In general, it should be easier to add a link
from a brand already existing in memory to a new product than it is to first
establish the brand in memory and then also link the new product to it. As a
dramatic illustration of the marketing communication efficiencies of
extensions, when General Mills launched its fourth Cheerios extension, Frosted
Cheerios, the brand was able to achieve a 0.44
percent market share in the extremely competitive cereal category in its very
first week of sales with essentially no advertising or promotion. Solely
on the basis of its name and product concept, demand for the sweetened oat
cereal was so high that most supermarkets were forced to limit the number of
boxes that could be purchased.
Several
research studies document this extension benefit. One study of 98 consumer brands in 11 markets found that successful extensions spent less on advertising
than did comparable new-name entries. A comprehensive study by Indiana
University's Dan Smith found similar results, indicating that the
average advertising to sales ratio for extensions was 10 percent, compared with 19
percent for new brands. His study identified some underlying factors moderating
this extension advantage. The difference in advertising efficiency between
extensions and new brands was shown to increase as the fit with other products
affiliated with the parent brand increased, as the new product's relative price
compared with that of competitors increased, and as distribution intensity
increased. On the other hand, the difference in advertising efficiency between
extensions and new brands was shown to decrease when the new product was
composed primarily of search attributes (i.e., when product quality could be
Judged through visual inspection), as the new product became established in the
market, and as consumers' knowledge of the new product category increased.
Reduce Cost
of Introductory and Follow-Up Marketing Programs
Because of these
push and pull considerations in distribution and promotion, it has been
estimated that a firm can save 40 percent
to 80 percent on the estimated $30 million to
$50 million it can cost to launch a new supermarket product nationally
in the United States. Moreover, other efficiencies can result after the launch.
As one such example, when a brand becomes associated with multiple products,
advertising can become more cost-effective for the family brand as a whole. For
example, in 1988, Jaguar introduced its
first substantially improved automobile model in
16 years, adopting new technology to improve reliability although still
retaining the classic Jaguar look. The resulting marketing program, which
included a lavish ad campaign, increased demand for all new Jaguars.
Even older Jaguars found their resale market value enhanced.
Avoid Cost
of Developing a New Brand
Developing new
brand elements is an art and science. To conduct the necessary consumer
research and employ skilled personnel to design high-quality brand names,
logos, symbols, packages, characters, and slogans can be quite expensive, and
there is no assurance of success. As the number of available— and appealing—brand
names keeps shrinking, legal conflicts are more likely to result. Despite the
fact that it had conducted a trademark search, Cosmair's L'Oreal division was
successfully sued for $2.1 million when a
court decided that the name it had chosen to introduce a new green and purple
hair dye, Zazu, infringed on the name of a line of shampoos sold by a Hinsdale,
Illinois, hair-styling salon called ZaZu Designs.
Allow for
Packaging and Labeling Efficiencies
Similar or
virtually identical packages and labels for extensions can result in lower
production costs and, if coordinated properly, more prominence in the retail
store by creating a "billboard" effect. For example, Stouffer's
offers a variety of frozen entrees with identical orange packaging that
increases their visibility when stocked together in the freezer. A similar
billboard effect is evident with other supermarket brands, such as Coca-Cola
soft drinks and Campbell soup.
Permit
Consumer Variety-Seeking
By offering
consumers a portfolio of brand variants within a product category, consumers
who need a change—because of boredom,
satiation, or whatever—can switch to a
different product type if they so desire without having to leave the brand
family Even without such underlying motivations, by offering a complement of
line extensions, customers may be encouraged to use the brand to a greater extent
or in different ways than otherwise might have been the case. Moreover, to even
effectively compete in some categories, it may be necessary to have multiple
items that together form a cohesive product line.
Clarify
Brand Meaning
Extensions
can help to clarify the meaning of a brand to consumers and define the kinds of
markets in which it competes. Thus, through extensions, Hunts means
"tomato," Clairol means "hair coloring," Gerber means
"baby care," Nabisco means "baked cookies and crackers,"
and Chun King means "Chinese food" to consumers. Figure 12-3 shows how other brands that have
introduced multiple extensions may have broadened their meaning with consumers.
Broader brand
meaning often is necessary so that firms avoid "marketing myopia" and
do not mistakenly draw narrow boundaries around their brand and either miss
market opportunities or become vulnerable to well-planned competitive
strategies Thus, as Harvard's Ted Levitt pointed out in a pioneering article,
railroads are not just in the "railroad" business but also the
"transportation' business In other words, railroads do not necessarily
compete with other railroads so much as with other forms of transportation (e g , cars and planes) Thinking more broadly about
product meaning can easily result in different marketing progiams and new
product opportunities For example, Steelcase's one-time slogan, "A Smarter
Way to Work," reflected the fact that the company defines its business not
as manufacturing desks, chairs, file cabinets, and credenzas but as
"helping to enhance office productivity" For some brands, creating
broader meaning is critical and may be the only way to expand sales In some cases, it is advantageous to
establish a portfolio of related products that completely satisfy consumer needs
in a certain area. For example, the $3
billion oral care market is characterized by a number of mega-brands (e.g.,
Colgate and Crest) that compete in multiple segments with multiple product
offerings. Although these different brands were limited to a few specific
products at one time, they have broadened their meaning through extensions to
represent "complete oral care." Similarly, many specific-purpose
cleaning products have broadened their meaning to become seen as multipurpose
(e.g., Lysol, Comet).
Enhance the
Parent Brand Image
According to
the customer-based brand equity model, one desirable outcome of a successful
extension is that it may enhance the parent brand image by strengthening an
existing brand association, improving the favorability of an existing brand
association, adding a new brand association, or a combination of these.
One common
way that an extension affects the parent brand image is by helping to clarify
its core brand values and associations. Core brand values are those
attributes and benefits that come to characterize all the products in the
brand line and, as a result, are those with which consumers often have the
strongest associations. For example, Nike has expanded from running shoes to
other athletic shoes, athletic clothing, and athletic equipment, strengthening
its associations to "peak performance" and "sports" in the
process.
Another type
of association that may be improved by successful extensions is consumer
perceptions of the credibility of the company behind the extension. For
example, Keller and Aaker showed that a successful corporate extension led to
improved perceptions of the expertise, trustworthiness, and likability of the
company. In the late 1990s, several firms
chose to introduce online versions of their services under a separate brand
name (e.g., Bank One chose to launch its online bank as Wingspan). Besides
increasing the difficulty and expense of launching a new brand, such companies
also lost the opportunity to modernize the parent brand image and improve its
technological credentials. In many cases, these ventures failed and their
capabilities were folded back into the parent organization.
Bring New Customer into the Brand Franchise and
Increase Market Coverage
Line extensions can benefit the
parent brand by expanding market coverage, for example, by offering a product
benefit whose lack may have heretofore prevented consumers from trying the
brand. For example, when Tyienol introduced a capsule form of its acetaminophen
pain reliever, it was able to attract consumers who had difficulty swallowing
tablets and therefore might have otherwise avoided the brand.
By creating
"news" and bringing attention to the parent brand, its sales may also
increase. For example, although the market share of regular powdered Tide—which once was at 27 percent—had slipped to 21 percent in the early 1980s, the introduction of Liquid Tide and Multi-Action Tide (a
combined detergent, whitener, and fabric softener) resulted in market share
increases of 2 percent to 4 percent for the flagship Tide parent brand
by 1986. Remarkably, through the skillful
introduction of extensions, Tide as a family brand has managed to maintain its
market leadership and a market share of roughly
50 percent from the 1950s to the
present.
Revitalize the
Brand
Sometimes extensions can be a means to renew interest and liking for the
brand.
Permit
Subsequent Extensions
One benefit
of a successful extension is that it may serve as the basis for subsequent
extensions. For example, Goodyear's successful introduction of its Aquatred
tires sub-brand led to the introduction of Eagle Aquatred for performance
vehicles with either wider wheels (e.g., the Ford Mustang) or a luxury image
(e.g., the Cadiltdi Seville).
Disadvantages Of Extensions
Despite these
potential advantages, extensions have a number of disadvantages
Can Confuse or Frustrate
Consumers
Different
varieties of line extensions may confuse and perhaps even frustrate consumers
as to which version of the product is the "right one" for them. As a
result, they may reject new extensions for tried and true favorites or
all-purpose versions that claim to supersede more specialized product versions.
Moreover, because of the large number of new products and brands continually
being introduced, many retailers do not have enough shelf or display space to
stock them all. Consequently, some consumers may be disappointed when they are
unable to find an advertised extension if a retailer is not able to or is
unwilling to stock it. If a firm launches extensions that consumers deem
inappropriate, they may question the integrity and competence of the brand.
Can Encounter Retailer Resistance
On average,
the number of consumer packaged-goods stock-keeping units (SKUs) grew 16 percent each year from 1985 to 1992,
whereas retail shelf space expanded only 15
percent each year during the same period. Many brands now come in a multitude
of different forms. For example, Campbell has introduced a number of different
lines of up—including Condensed, Home
Cookin', Chunky, Healthy Request, Select, Simply Home, and Ready-to-Serve
Classic—and offers more than 100 flavors in all.
As a result,
it has become virtually impossible for a grocery store or supermarket to offer all
the different varieties available across all the different brands in any
one product category. Moreover, retailers often feel that many line extensions
are merely "me-too"" products that duplicate existing brands in
a product category and should not stocked even if there were space. Attacking
brand proliferation, a year-long Food Marketing Institute (FMI) study showed
that retailers could reduce their SKUs by 5 percent
to 25 percent in certain product
categories without hurting sales or consumer perceptions of the variety offered
by their stores The FMI "product variety" study commended that
retailers systematically identify duplicated and slow-moving items eliminate
them to maximize profitability. The Science of Branding summarizes one perspective on how to reduce brand proliferation
and simplify marketing.
Can Fail
and Hurt Parent Brand Image
The worst possible scenario
with an extension is that not only does it fail, but it also harms the parent
brand image somehow in the process. Unfortunately, these negative feedback
effects can sometimes happen.
Consider General
Motors's experience with the Cadillac Cimarron This model reduced in the early 1980s, was a "relative" of models in
other GM lines, such as the Ponitiac 2000
and Chevrolet Cavalier. The target market was less-affluent buyers seeking
small luxury car who wanted, but could not really afford, a full-size Cadillac.
Nor was the Cadillac Cimarron unsuccessful at generating new sales with this
market 'segment, but existing Cadillac owners hated it. They felt it was
inconsistent with the large size and prestige image they had expected from
Cadillac. As a result, Cadillac sales dropped significantly in the mid-1980s. Looking back, one GM executive
offered following insights:
The decision was made purely on the
basis of shortsighted profit and financial analysis, with no accounting for its
effect on long-run customer loyally or, if you will, equity. A typical
financial analysis would argue that the Cimarron would rarely steal sales from
Cadillac's larger cars, so any sale would be one that we wouldn't have gotten otherwise.
The people who were most concerned with such long-range issues raised serious
objections but the bean counters said, "Oh no, we'll get this many dollars
for every model sold." There was no thinking about brand equity. We paid
for the Cimarron down the road. Everyone now realizes that using the model to
extend the name was a horrible mistake.
Even if an extension initially succeeds, by linking the brand to
multiple products, the firm increases the risk that an unexpected problem or
even tragedy with one product in the brand family can tarnish the image of some
or all of the remaining products. For example, starting in 1986, the Audi
5000 car suffered from a tidal wave of negative publicity and word of
mouth because it was alleged to have a "sudden acceleration " problem
that resulted in an alarming number of fatal accidents. Even though (here was
little concrete evidence to support the claims (resulting in Audi, in a public
relations disaster, attributing the problem to the clumsy way that Americans
drove the car), Audi's U.S. sales declined from
74,000 in 1985 to 21,000 in 1989.
As might be expected, the damage was most severe for sales of the Audi 5000, but the adverse publicity also spilled
over to affect the 4000 model and, to a
lesser extent, the Quattro model. The Ouattro might have been relatively more
insulated from negative repercussions because it was distanced from the 5000 by virtue of its more distinct branding
and advertising strategy.
Understanding
when unsuccessful extensions may damage the parent brand is important. On a
more positive note however, it should be
recognized that one reason why an unsuccessful extension may not necessarily damage the parent brand is for the very
reason that the extension may have been unsuccessful in the first place—hardly anyone may have even heard of it. Thus,
the silver lining in the case when an extension fails as a result of an
inability to secure adequate distribution or to achieve sufficient brand
awareness is that the parent brand is more likely to survive relatively
unscathed. Product failures in which the extension is found to be inadequate in
some way on the basis of performance are more likely to negatively affect
parent brand perceptions than these "market" failures.
Can Succeed but Cannibalize
Sales of Parent Brand
Even if sales
of an extension are high and meet targets, it is possible that this revenue
may have merely resulted from consumers switching to the extension from existing
product offerings of the parent brand—in
effect cannibalizing the parent brand by decreasing its sales. Line extensions
are often designed to establish points of parity with current offerings
competing in the parent brand category, as well as to create additional points
of difference in other areas (e.g., low-fat versions of foods). These types of
line extensions may be particularly likely to result in cannibalization. Often,
however, such intrabrand shifts in sales are not necessarily undesirable
because they can be thought of as a form of "preemptive cannibalization."
In other words, consumers might have switched to a competing brand instead of
the line extension if it had not been introduced into the category.
For example
Diet Coke's point of parity of "good taste" and point of
difference of "low calories" undoubtedly resulted in some of its
sales coming from regular Coke drinkers. In fact, although U.S. sales of
Coca-Cola's cola products have held steady since
1980, sales in 1980 came from Coke
alone whereas sales today also receive significant contributions from Diet
Coke, Cherry Coke, and uncaffeinated forms of Coke. Without the introduction of
those extensions, however, some of Coke's sales might have gone to competing
Pepsi products or other soft drinks or beverages instead.
Can Succeed but Diminish Identification
with Any One Category
One risk of
linking multiple products to a single brand is that the brand may not be
strongly identified with any one product. Thus, extensions may obscure the identification
of the brand with its original categories, reducing brand awareness. For
example, when Cadbury became linked in the United Kingdom to mainstream food
products such as Smash instant potatoes, marketers of the brand may have run
the risk of weakening its association to fine chocolates. Pepperidge Farm is
another brand that has been accused by marketing critics of having been
extended so much (e.g.. into soups) that the brand has lost its original
meaning as "delicious, high-quality cookies."
The
vociferous business consultants Al Ries and Jack Trout, who in 1981 introduced
the notion of the “line extension trap”, have popularized this potential
drawback. They provide a number of examples of brands that, at the time, they
believed had overextended.
One such example was Scott Paper, which Ries and Trout believe became
overextended when its name was expanded to encompass ScotTowels paper towels,
ScotTissue bath tissue, Scotties facial tissues, Scotkins, and Baby Scot
diapers. Interestingly, in the mid-1990s,
Scott decided to attempt to unify its product line by renaming ScotTowels as
Scott Towels and ScotTissue as Scott Tissue, adding a common look and logo (although some distinct colors)
on both packages as well as their Scott Napkins. In perhaps a risky move, Scott
also decided to phase out local brand names in 80
foreign countries where Scott garnered almost half its sales including Andrex,
its top-selling British bath tissue. Scott's hope was that the advantages of
brand consolidation and global branding would offset the disadvantages of
losing local brand equity.
Some notable—and fascinating—counterexamples
to these dilution effects exist, however, in terms of firms that have branded a
heterogeneous set of products and still achieved a reasonable level of
perceived quality in the minds of consumers for each product. For example,
Yamaha has developed a strong reputation selling an extremely diverse brand
line that includes motorcycles, guitars, and pianos. Mitsubishi uses its name
to brand a bank, cars, and aircraft. Canon has successfully marketed cameras,
photocopiers, and office equipment. In a similar vein, the founder of Virgin
Records, Richard Branson, has conducted an ambitious, and perhaps risky,
extension program. In all these cases, it
seems as if the brand has been able to secure a dominant association to quality
in the minds of consumers without strong product identification that might
otherwise limit it.
Can Succeed but Hurt the Image of
the Parent Brand
If the
extension has attribute or benefit associations that are seen as inconsistent
or perhaps even as conflicting with the corresponding associations for the
parent brand, consumers may change their perceptions of the parent brand as a
result. For example, Farquhar notes that when Domino's Pizza entered into a
licensing agreement to sell fruit-flavored bubble gum a number of years ago, it
ran the risk of creating a "chewiness" association that could
negatively affect its flagship pizza products.
As another
example described Miller Brewing's difficulty in creating a "hearty"
association to its flagship Miller High Life beer brand in, part because of its
clear bottle and other factors such as its advertising heritage as the
"champagne of bottled beer." It has often been argued that the early
success of the Miller Lite light beer extension-market share soared from 9.5 percent in
1978 to 19 percent in 1986—only exacerbated the tendency of
consumers to think of Miller High Life as "watery" tasting and
not a full-bodied beer. These unfavorable perceptions were thought to have
helped to contribute to the sales decline of Miller High Life, whose market
share slid from 21 percent to 12 percent during that same eight-year period.
Can Dilute Brand Meaning
The potential
drawbacks from a lack of identification with any one category and a weakened
image may be especially evident with high quality or prestige brands.
Can Cause the Company to Forgo the Chance to Develop a New Brand
One easily
overlooked disadvantage to extensions is that by introducing a new product as
an extension, the company forgoes the chance to create a new brand with its own
unique image and equity. For example, consider the advantages to Disney of
having introduced Touchstone films, which attracted an audience interested in
movies with more adult themes and situations than Disney's traditional
family-oriented releases; to Levies of having introduced Dockers pants, which
attracted a customer segment interested in casual pants; to General Motors of
having introduced Saturn, which attracted consumers weary of "the same old
cars sold the same old way"; and to Black
& Decker from having introduced DeWalt power tools, which attracted
a higher-end, more skilled market segment.
Each of these
brands created its own associations and image and tapped into markets
completely different from those that currently existed for other brands sold by
the company. Thus, introducing a new product as an extension can have
significant and potentially hidden costs in terms of lost opportunities of
creating a new brand franchise.
Moreover,
there may be a loss of flexibility in the brand positioning for the extension
given that it has to live up to the parent brand promise and image. The positioning
of a new brand could be introduced and updated in the most competitive
advantageous way possible.
