Building Brand Equity: Successful

Extension Strategies
Line Extension Brand Extension

Brand Equity
Professor Sandra Milberg

Sub-Branding Co-Branding
Leveraging Brand Equity

One of the most important

changes in the market is the
proliferation of brand
extensions.
 Why Extensions?

• Managers use brand extension

strategies under the assumption that
brand associations (e.g., quality,
reliability, status) and affect (attitudes)
will transfer to the brand extension.
 Benefits of Extensions
• Facilitate new Product Acceptance
• Reduce risk perceived by customers
• Increase the probability of distribution and trial
• Increase efficiency of promotional expenditures
• Reduce costs of introductory/follow-up programs
• Avoid cost of developing a new brand
• Create opportunities to extend into more distant product
categories
• Build equity
 Line Extension Strategy
When a brand is used to brand
a new product that targets a
new market segment within a
product category currently
served by the parent brand.

(e.g., Coca-Cola diet, Colgate

for Kids, Colgate Gel)
Brand (Category) Extension Strategy

Effort to use a successful brand

name to introduce new
products in a different product
category.

(e.g., Honda motorcycles, Sony

video camera, Colgate
toothbrush)
Sub-Branding Strategy

Using a new brand name in

conjunction with a family brand
name to introduce new products.
(e.g., Courtyard by Marriott,
Technics by Panasonic, Lexmark
Printer by IBM, Levi’s Dockers)
Co-Branding/Brand Alliance
Strategies
When two or more brand
names are attached to a
product.

(e.g., United Airlines Visa

credit card, Compaq computers
with Intel microprocessors
“inside”)
 Example of Strategies
• Parent Brand: Salomon (ski-equipment)
• Line Extension: New type of skis
• Brand (Category) Extension: Salomon
tennis racquet
• Sub-Brand: Avenger by Salomon
• Co-Brand: ingredient brand for grip, frame,
or strings (Wilson and Goodyear rubber on
soles of ProStaff Classic tennis shoes)
 Licensing
Involves contractual arrangements whereby
firms can use names, logos, characters, and
other facets of other brands to market their
products. Essentially, a firm is “renting”
another brand to contribute to the brand equity
of their own product.
 Why License Your Brand?
• Generate extra profit and revenues through royalties
paid (2-10 percent of wholesale price) without
inventory, accounts receivables, and manufacturing)

• Increase brand exposure

• Enhance brand image

Disney: King of Licensing
Products: e.g., books, toys,
clothing, software

There are 3 billion

entertainment-based impressions
of Mickey Mouse received by
children in one year, equivalent
to 10 million impressions a day.
 Steps to Successfully Introduce Brand Extensions

• Define actual and desired customer knowledge of the brand

• Identify possible extension candidates

• Evaluate extension candidate potential

• Design marketing campaign to launch extension

• Evaluate extension success and effects on parent brand equity

 Brand Knowledge
Price
Brand
Recognition Packaging
Brand
Non-
Awareness Brand Recall User Imagery
product
related
Usage Imagery
BRAND Attribute Product
KNOWLEDGE Types of brand related
association
Attitudes
Brand Favorability
Image of brand
Functional
association
Benefits
Strength of brand
Experiential
association Symbolic
Uniqueness of
07/16/24
brand association
 Steps to Successfully Introduce Brand Extensions

• Define actual and desired customer knowledge of the brand

• Identify possible extension candidates

• Evaluate extension candidate potential

• Design marketing campaign to launch extension

• Evaluate extension success and effects on parent brand equity

 Hypothetical Brand Extensions

Nikon film
Nestle beer
Disney daycare centers
Haagen-Dazs chocolate syrup
Heineken popcorn
Colgate chewing gum
Fisher-Price baby shampoo
Band-Aid razors
 Possible Extensions of Vaseline Intensive Care Brand
BRAND DEFINITIONS RELATED CATEGORIES

moisturizer Soap - face cream - skin cream

lotion sunburn - after-shave - baby

Vaseline medicinal antiseptic - first-aid - hemorrhoid cream
Intensive
purity cotton - gauze - sterile pads
Care
body care emery boards - muscle toner - cotton swabs

pump bottle liquid hair net - mustard - glass cleaner

baby care diapers - powder - oil

fragrance perfume - room deodorizer - deodorant

 Category Extension Strategies
1. Introduce the same product in a different form
examples: Ocean Spray Cranberry Juice Cocktail, Jello Pudding Pops
2. Introduce products containing the brand’s distinctive taste, etc.
examples: Haagen-Dazs Cream liqueur, Philadelphia Cream Cheese salad dressing
3. Introduce companion products for the brand
examples: Coleman camping equipment, Duracell Durabeam flashlights
4. Introduce products relevant to customer franchise of the brand
examples: Visa Traveler’s Checks, Gerber baby bottles
5. Introduce products capitalizing on the firm’s perceived expertise
examples: Honda motorcycles, Canon photocopy machines
6. Introduce products that reflect the brand’s distinctive benefit,
attribute or feature owned: ex: Ivory soap, Ivory shampoo (Mild and Pure)
7. Introduce products capitalizing on image or prestige of the brand
examples: Calvin Klein clothes, Porsche sunglasses
 Steps to Successfully Introduce Brand Extensions

• Define actual and desired customer knowledge of the brand

• Identify possible extension candidates

• Evaluate extension candidate potential

• Design marketing campaign to launch extension

• Evaluate extension success and effects on parent brand equity

 Consumer Evaluations of Brand Extensions

Casio Watch Rolex Watch

Casio Kitchen Timer Casio Calculator Rolex Bracelet Wallet

 Consumer Evaluations of Brand Extensions
Evaluation of
Brand Extension

Perceived fit of
Brand Extension

Product-level Concept
Similarity Consistency
Perception Perception

comparison comparison
Existing Brand Brand
“Brand X”
“Brand X” Extension Extension
concept
product Products Products
 Favorable Brand Extension Attitudes

Necessary Conditions
• Consumers have awareness of and positive associations to the brand

• Some of the positive brand associations will be evoked by the extension

• Negative parent brand associations are not transferred to the extension

• Negative associations are not created by the extension

 Steps to Successfully Introduce Brand Extensions

• Define actual and desired customer knowledge of the brand

• Identify possible extension candidates

• Evaluate extension candidate potential

• Design marketing campaign to launch extension

• Evaluate extension success and effects on parent brand equity

 Brand Extension Positioning Strategies

• Consistent across all product categories?

• Variations across product categories?

 Brand Extension Advertising Strategies

• Family brand advertising (multiple family products)

• Individual brand advertising (extension alone)

• Comparative advertising (competitor brand)

 Steps to Successfully Introduce Brand Extensions

• Define actual and desired customer knowledge of the brand

• Identify possible extension candidates

• Evaluate extension candidate potential

• Design marketing campaign to launch extension

• Evaluate extension success and effects on parent brand equity

 Managerial Questions

... Under what conditions will

extensions be successful in capturing
sufficient market share?
 Determinants of Brand Extension Success in
Competitive Markets

Brand Extension
Characteristics

Parent Brand
Brand Extension
Characteristics Success

Consumer • Evaluations
Characteristics • Choice

Market
Characteristics
 Determinants of Extension Success
• Extension Characteristics
• Level of fit between the extension and the parent brand
• Parent Brand Characteristics
• Brand Strength: Familiarity, Favorability, Quality
• Consumer Characteristics
• Product Category Knowledge
• Risk Aversion (Sensitivity)
• Market Characteristics
• Number of competitors
• Market Growth
• Dominant brands
 Examples of Category
Extensions
“SUCCESSFUL”
Ivory shampoo & conditioner
Vaseline Intensive Care skin lotion
Nestle Chocolate Milk
Bic disposable lighters
Jell-O Pudding Pops
Sunkist Orange Soda
Colgate Toothbrushes
Honda lawnmowers
“UNSUCCESSFUL”
Campbell’s tomato sauce
LifeSavers chewing gum
Dunkin’ Donuts cereal
Bic perfumes
Harley Davidson wine coolers
Xerox computers
Kleenex Diapers
Domino’s fruit-flavored bubble gum
 Selective Research Findings
• Successful brand extensions occur when the parent brand is seen
as having favorable associations (strong vs. weak brands) and
there is a perception of fit between the parent brand and the
extension.
• There are many bases of fit: product-related attributes and
benefits, common usage situations or usage types.
• Depending on consumer knowledge of categories, perception of fit
may be based on technical or manufacturing commonalties or more
surface considerations such as necessary or situational
complementarily.
• High-quality brands may stretch farther than average-quality,
although both types of brands have boundaries.
 t .
Selective Research Findings co n

• Line extensions of symbolic brands enjoy greater market success

than those of less symbolic brands.
• Line extensions entering earlier into a product category are
more successful than extensions entering later (strong brands
only).
• Earlier line extensions have helped in the market expansion of the
parent brand.
• A brand seen as prototypical of a product category can be
difficult to extend outside the category.
• Concrete attribute associations tend to be more difficult to extend
than abstract benefit associations.
 ore
m
Selective Research Findings
• Consumers may transfer associations that are positive in the
original product class, but become negative in the extension.
• A successful extension contributes to the parent brand AND
enables a brand to be extended even farther.
• An unsuccessful extension does not prevent a firm from
“backtracking” and introducing a more similar extension.
• The most effective advertising strategy for an extension may
be one that emphasizes information about the extension
(rather than reminders about the parent brand).
• Vertical extensions can be difficult and may require sub-branding.
 Provide Feedback Effects - Benefits to Parent Brand

• Clarify brand meaning

• Enhance the parent brand image
• Bring new customers into brand franchise and increase
market coverage
• Revitalize the brand
• Permit subsequent extensions
• Expand brand meaning
 Expanding brand meaning through extensions
Original Extension New Brand
BRAND Product products meaning
Weight Fitness Centers Low-calorie Weight loss
Watchers Foods & maintenance

Sunkist Oranges Vitamins, juices Good health

Crayola Crayons Markers, paints, pens Colorful crafts

pencils, clay for kids

Aunt Pancake Syrups, frozen Breakfast

Jemima Mixes waffles foods
 Disadvantages of Brand Extensions

• Can confuse or frustrate consumers

• Can fail and hurt parent brand image
• Can succeed but diminish identification with any one
category
• Can dilute brand meaning
• Can forgo the chance to develop a new brand
• Can damage company credibility
 Negative Feedback Effects...
…of Inconsistent Attribute Information:
• family brand image beliefs will be diluted when extension
attributes are inconsistent with those beliefs
• family brand attitudes will be negatively affected when extension
attributes are inconsistent with family brand image beliefs

…and Product Category Similarity:

• family brand attitudes will be negatively affected by extensions
perceived to be highly dissimilar to current brand products
 Sub-Branding Strategy

Using a new brand name in conjunction with a

family brand name to introduce new products.
(e.g., Courtyard by Marriott, Technics by
Panasonic, Lexmark Printer by IBM, Levi’s
Dockers)
 Sub-Branding
…and PARENT BRAND EVALUATIONS
Compared to a direct branding extension strategy, sub-
branding reduces the negative effects associated with
brand extensions that exhibit:
• inconsistent attribute information and /or
• low product category similarity

…and BRAND EXTENSION EVALUATIONS

Compared to a direct branding strategy, sub-branding enhances
evaluations of brand extensions exhibiting low product category
similarity with the product category associated with the family
brand.
Building & Managing Strategic Alliances

Co-Branding
 Co-Branding/Brand Alliance
Strategies
When two or more brand names are attached
to a product.

(e.g., United Airlines Visa credit card,

Compaq computers with Intel microprocessors
“inside”)
 What Is a Strategic Alliance?

• “A strategic alliance is a relationship

between parties in which they
cooperate to produce more value to
a market transaction. The
partnership requires sharing risks
and benefits.”
 Types of Strategic Alliances

• Alliances with Businesses

– Partners
– Competitors
– Suppliers
 Keys to Developing Business Alliances
• Shared Objectives
– What does each party want to achieve?
• Mutual Needs Build Commitment
– Equal dependency between parties.
• Risk Sharing
• Relationships
– Analogous to successful marriages
• Mutual Reliability and Vulnerability
– Conduct affects both players.
 Business Alliances Tradeoffs
Equal Control

Low High
Commitment Commitment

Unequal Control
Do You Need a Dance Partner?
Why or Why Not?
 Who Offers Strategic Synergy?

• Take the Market’s Perspective

• Take the Partner’s Perspective
• Strengthen You - Strengthen Them
• Assess Availability of Key Resources
• Make Sure They Can Teach You
• Teamwork Skills Drawn from Both
• Do Their Problems Become Yours?
 “It’s Nice to Share”…but...

Competency When to Share

• Core • Never
• May share application
results
• Important Non-core • Combined Value
Exceeds Separate
Worth
• Can trust partner to
protect
 Relationship Traps

• Attempting to develop too many partners

• Choosing poorly
• Allocating too few resources
• Forgetting about cultural compatibility
• Not developing a long-term financial relationship
• Developing relationships with customers/businesses
is a skill in and of itself - develop and nurture these
skills or you risk losing your valuable business
 m ore Selective Research Findings:
Brand Alliances
• Brand alliances significantly affect attitudes toward each of the
partnered brands, even when a brand has engaged in many prior
alliances.
• Spillover effects do not affect the partners equally: brands
less familiar than their partner experience stronger effects,
while two highly familiar brands experience equal effects.
• Both product and brand fit affect attitudes toward the alliance.
• Prior attitudes toward the partner brands affect attitudes
toward the alliance.
Brand Extension Effects on
Sources of Brand Equity ...
• Increased Awareness
• Enhanced Image or Image Change
(Strengthen or Expand)
• Attitude Changes (Favorability)
• Changes in Customers’ Responses
to Marketing Initiatives
 Brand Knowledge
Price
Brand
Recognition Packaging
Brand
Non-
Awareness Brand Recall User Imagery
product
related
Usage Imagery
BRAND Attribute Product
KNOWLEDGE Types of brand related
association
Attitudes
Brand Favorability
Image of brand
Functional
association
Benefits
Strength of brand
Experiential
association Symbolic
Uniqueness of
07/16/24
brand association
Extension Effects on Brand
Equity Outcomes...
• Latent Value (Extendibility)
• Sales
• Market Share
• Share of Customer
• Stock Prices
 Relationships Among Marketing Inputs and the
Sources and Outcomes of Brand Equity

Source of Brand Brand Equity

Marketing
Equity Outcomes
Strategies
(knowledge)
 Traditional Individual Brand Management

Top Management

Brand 1 Brand 2 Brand 3 Brand 4

Consumer 1 Consumer 2 Consumer 3 Consumer 4

 Consumer Portfolio Management
Top Management

Consumer 1 Consumer 4
Consumer 2 Consumer 3

Brand 1 Brand 2 Brand 3 Brand 4

 Consumer Portfolio Extension Management
Top Management

Consumer 1 Consumer 4
Consumer 2 Consumer 3

Extension 1 Extension 2 Extension 3 Extension 4

 Implications for Brand Loyalty
…What are the implications of brand
extensions for the concept and
measurement of brand loyalty?

In the context of brand extensions are

consumers brand loyal across product
categories (independent of category)
or is brand loyalty limited to a specific
product category (dependent on
category)?
 Managerial Questions
…To enter a new product category,
should the firm use a brand extension
strategy or a new brand strategy?

Specifically,

In a competitive environment which

branding strategy, extension or new brand,
performs better and when?
 Benefits of New Brands
• Novelty (excitement)
• Spread risks
• Avoid diluting the images of existing brands
• Permit consumer variety-seeking
• Take advantage of opportunities in “distant”
product categories
 Issues
• There is some evidence that in the short-
term brand extensions are more successful
in capturing market share but this
advantage seems to disappear in the long-
term.
• Experimental work has not tested whether
a brand extension strategy is superior to a
new brand strategy.
 Research Findings
Whether brand extensions produce more
positive attitudes and larger choice shares
depends on situational factors:

• the product information available at

the time of choice
• the fit between the brand and the
new product category
 Research Findings (cont.)
When consumers are unlikely to evaluate
attribute information carefully, managers
entering product categories where there
is:

• good fit with the existing brand may

want to use a brand extension strategy.
• poor fit may want to develop new
brands
 Research Findings (cont.)
When consumers are likely to evaluate
attribute information carefully, branding
strategy may have little impact on initial
appeal. Managers may want to choose
branding strategies on the basis of other
dimensions:

•using an extension strategies to take

advantage of cost efficiencies
•use new brand to avoid image dilution.
 Research Findings (cont.)

• In contrast to new brands, brand

extensions can compensate for deficits in
fit by way of brand familiarity and
reputation (strength), two factors likely to
mitigate perceived risks.