MGMC11H3 Chapter Notes - Chapter 12: Brand Equity, Brand Awareness, Prestige Brands

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MGMC11 – Chapter 12: Introducing and Naming New Products and Brand Extensions:
New Products and Brand Extensions:
-Ansoff’s product/market expansion grid (growth matrix)  categorizing growth
strategies according to whether they rely on existing/products and whether
they target existing/new customers or markets
- New-product intros are often vital to the LR success of a firm
- Introducing a new product, choices for branding it:
oDevelop a new brand, individually chosen for the new product
oApply one of its existing brands
oUse a combination of a new brand and an existing brand
-Brand extension – firm uses an established brand name to introduce a new product (approach 2/3)
oLine 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
Often adds a different flavour/ingredient variety, different form/size, or a different application
for the brand
oCategory extension – marketers apply the parent brand to enter a different product category from the
one it currently serves
-Sub-brand – when a brand extension of a new brand is combined with an existing brand (approach 3)
-Parent brand – an existing brand that gives birth of a brand extension
-Family brand – parent brand is associated with multiple products through brand extensions
Advantages of Extensions:
- Advantages can be categorized as:
oFacilitate new-product acceptance
oProvide feedback benefits to the parent brand or company as a whole
- Facilitate new-product acceptance:
oImprove brand image
Form expectations of a brand extension’s performance over time based on what is already
known about the brand itself and noting relevancy of this info to the new product
May improve strength, favourability, and uniqueness of the extension’s brand associations
oReduce risk perceived by consumers
Predicting initial trial of a new product depends on the extent to which it is connected to a
known family brand
May communicate longevity & sustainability with established reputation (corporate credibility)
oIncrease the probability of gaining distribution and trial
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Increased consumer demand for a new product as an extension may convince retailers to stock
and promote it
oIncrease the efficiency of promotional expenditures
Introductory campaign does not have to create awareness of both the brand and the new
product
Concentrate on only on product itself
oReduce costs of introductory and follow-up marketing programs
Push and pull strategies  firm can save 40-80% costs to launch a product in the U.S.
Advertising can be more cost-effective for the family brand as a whole
oAvoid cost of developing a new brand
Consumer research and employing skilled personnel to design the brand is expensive &
uncertain for success
oAllow for packaging and labelling efficiencies
Similar/identical packages and labels result in lower production costs and may create more
prominence in the retail store (billboard effect)
oPermit consumer variety-seeking
Consumers who need a change can switch without having to leave the brand family
Complement of line extensions  encourage customer use
Competing effectively  multiple items that together form a cohesive product line
- Provide feedback benefits to the parent brand:
oClarify brand meaning
Define the kinds of markets in which brands competes in
Broader brand meaning often is necessary so that firms avoid “marketing myopia” and do not
draw narrow boundaries around their brand
Broader product meaning can inspire different marketing programs and new-product
opportunities, or a way to expand sales
Establish a portfolio of related products that completely satisfy consumer needs in a certain area
oEnhance the parent brand image
Help clarifying its core brand values and associations
Core brand associations  attributes and benefits that come to characterize all the products in
the brand line and are those with which consumers often have the strongest associations
May improve consumer perceptions of company’s credibility
oBring new customers into brand franchise and increase market coverage
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Offering a product benefit whose absence may have prevented consumers from trying the
brand
Creating “news” & bringing attention to parent brand may benefit family brand as a whole
oRevitalize the brand
Renew interest in and liking for the brand
oPermit subsequent extensions
Disadvantages of Brand Extensions:
-Can confuse or frustrate consumers
oWhich version of the product is the “right one” for consumers
oGreater product variety may induce shoppers to buy less
oMay reject new extensions for tried and true favs or all-purpose versions that supersede specialized
product versions
oRetailers do not have enough shelf space or display for new products and brands
oConsumers deem inappropriate  may question integrity and competence of the brand
-Can encounter retailer resistance
oStock-keeping units (SKUs) numbers and own-brand or private-label goods outgrow retail space annually
oVirtually impossible for retailers to offer all the different varieties available
oMany line extensions are “me-too” products  duplicate existing brands in a product category
oCould reduce SKUs by 5-25% without hurting sales or consumer perceptions of the variety offered
oProduct variety study  retailers systematically identify duplicated and slow-moving items and eliminate
them to max profitability
-Can fail and hurt parent brand image
oLinking the brand to multiple products can increase the risk of an unexpected problem/tragedy with one
product in the brand family can tarnish the image of some or all the remaining products
-Can succeed but cannibalize sales of parent brand
oSuccess may result from consumers switching from existing offerings of the parent brand
oLine extensions designed to establish POPs with current offerings in the parent brand category especially
oSome sales from intra-brand shifts may not be undesirable  pre-emptive cannibalization
Consumers might switch to a competing brand instead
-Can succeed but diminish identification with any one category
oToo many products to a single brand  identification of the brand will diminish with any one product
Reduces brand awareness
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