Lecture 4

Brand Extension
Dr. Lucy Ting
Lucy.Ting@manchester.ac.uk

Agenda
Brand Extension
Definition
Advantages
Disadvantages

Evaluation of Brand Extension

Opportunities
5 Steps of Introducing Brand Extensions

What is Brand Extension?

Growth Share Matrix

Existing

Existing

Products

New

Market
Penetration
Strategy

Product
Development
Strategy

Market
Development
Strategy

Diversification
Strategy

Markets

New

Ansoff,I.(1987) Corporate Strategy, McGraw-Hill

Market Penetration
Same segment
Same products
Increase
customers number
Increase
purchased quantity
Increase purchase
frequency

Market Development
New segment
Same product
assortment
New segment of
the market
Geographical
expansion
24.50

Product Development
Same segment
New product
New packaging
New product

Diversification
New market
New products
Related diversification
Vertical integration
Unrelated diversification

Growth Share Matrix

Existing

Existing

Products

New

Market
Penetration
Strategy

Product
Development
Strategy

Market
Development
Strategy

Diversification
Strategy

Markets

New

Ansoff,I.(1987) Corporate Strategy, McGraw-Hill

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

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

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

Pros & Cons

Advantages of Brand Extensions
Facilitate New Product Acceptance
Provide Feedback Benefits to the Parent
Brand and Company

Keller (2008) Chpt 12

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

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 Efficiencies
Sullivan (1992), Brand Extensions: When to Use Them, Management Science, 38(6),
pp. 793-806

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 extensions
Keller and Aaker (1992), The Effects of Sequential Introduction of Brand Extensions,,
Journal of Marketing Research, 29() pp. 35-50

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

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

Brand Extension Opportunities

Keller (2008) Chpt 12

5-Step Model
Define 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

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

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?

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

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?

Step 4
Design Marketing Programs to Launch
Extension
Choosing Brand Elements
Packaging

Designing Optimal Marketing Program

Brand Positioning

Leveraging Secondary Brand Associations

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