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Chapter 12 Introducing and Naming New Products and Brand Extensions.docx

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MKT 510
Ida Berger

MKT510 Innovations In Marketing CHAPTER 12 Introducing and Naming New Products and Brand Extensions NEW PRODUCTS AND BRAND EXTENSIONS  Brand extension: occurs when firm uses established brand name to introduce a new product o Sub-brand: when new brand is combined with existing brand o Parent brand: an existing brand that gives birth to a brand extension o Family brand: parent brand is already associated with multiple products though brand extension  Brand extension falls into two general categories: 1. Line extension: marketers apply parent brand to new product that targets new market segment within a product category the parent brand currently serves 2. Category extension: marketers apply parent brand to enter different product category from the one it currently serves ADVANTAGES OF BRAND EXTENSIONS Facilitate New Product Acceptance  Improve brand image – form similar inferences and expectations about the likely composition and performance of brand extension, based on what they already know about the brand itself and extent to which they feel information is relevant to new product  Reduce risk perceived by customers – established reputation for introducing high-quality products and standing behind them may be important risk-reducer for consumers  Increase probability of gaining distribution and trial – brand reputation key screening criteria of gatekeepers making new- product decisions  Increase efficiency of promotional expenditures – concentrate promotions on only the new product itself  Reduce costs of introductory and follow-up marketing programs – save 40-80% on estimated cost to launch new product  Avoid cost of developing a new brand – global trademark search is a must for any new brand launch or rebranding, and can cost millions of dollars because of shrinking appealing brand names  Allow for packaging and labelling efficiencies – similar or identical packaging and labels for extensions can result in lower production costs  Permit consumer variety-seeking – consumers who need a change can switch without having to leave the brand family Provide Feedback Benefits to the Parent Brand and Company  Clarify brand meaning – extensions clarify meaning of brand and define the kinds of markets in which it competes o Broader brand meaning necessary to avoid “marketing myopia” and do not mistakenly draw narrow boundaries around their brand, either missing market opportunities or becoming vulnerable to well-planned competitive strategies  Enhance the parent brand image – strengthens existing brand association, improving favourability of existing brand association, adding new brand association, or combination of these  Bring new customers to brand franchise and increase market coverage – line extension can benefit parent brand by expanding market coverage  Revitalize the brand – renew interest in and liking for the brand  Permit subsequent extensions – serve as basis for subsequent extensions DISADVANTAGES OF BRAND EXTENSIONS  Can confuse or frustrate consumers – greater product variety may induce shoppers to buy less  Can encounter retailer resistance – number of consumer packaged-goods stock-keeping units (SKUs) outpaces growth of retail space in year-on-year percentage growth  Can fail or hurt parent brand image – linking brand to multiple products, firm increases risk that unexpected problem or tragedy with one product in the brand family can tarnish image or some or all remaining products  Can succeed but cannibalize sales of parent brand – consumers switching from existing offerings of parent brand  Can succeed but diminish identification with any one category – brand extension may obscure brand’s identification with its original categories, reducing brand awareness  Can succeed but hurt the image of parent brand – if brand extension’s attributes or benefit associations are inconsistent or conflicting with corresponding associations for parent brand, they may change their perception of parent brand as a result MKT510 Innovations In Marketing  Can dilute brand meaning – brand extension’s lack of identification with any one category and weakened image may be especially evident with high-quality or prestige brands  Can cause company to forgo the chance to develop a new brand – introducing new brand extension means company forgoes chance of creating new brand, with its own unique image and equity UNDERSTANDING HOW CONSUMERS EVALUATE BRAND EXTENSIONS Managerial Assumptions  Favourable evaluations of extension, four basic conditions must generally hold true 1. Consumers have some awareness of and positive associations about parent brand in memory 2. At least some of these positive associations will be evoked by the brand extension
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