Managing Product Extensions

1. Professor Carl Mela BA 460 Product Management Fuqua School of Business Brand Management System On Building A Brand Managing Across Brands Managing Product Extensions

2. Agenda • Why Extend? • Problems With Extensions • When to Extend? • How to Extend?

3. Brand Extensions • Across lines; across categories • 81% of All New Products

4. Why Extend? • Facilitate new product acceptance • Reduced risk to consumers and trade • More efficient promotions • One stop solutions • Variety seeking and multiple segments • Trading up / converting • Scale economies • Usurp shelf space / please trade • Benefits parent brand and firm • Enhance image • Attracts new customers

5. Problems with Extensions • Effects on Brand • Retailer resistance • Failure hurts parent brand • Weakens associations of parent • Forego chance to develop new brand • Cannibalization • Reduced focus on star brands

6. Problems with Extensions • Effects on Consumer • Confuse customers • Disturb loyalty patterns built over years • Effect on Firm • Copy catting by other brands • Costs (inventory, time, production)

7. When to Extend • The parent brand’s associations are salient, favorable, and unique • There is a “fit” (benefits, technology, etc.) with the parent brand • and Parent is not too prototypical (e.g., detergent w/ Clorox bleach)

8. How to Extend 1. Ascertain what consumers know and like about parent brand. 2. Identify possible pertinent extensions 3. Evaluate extensions Assess what associations port to extension Assess relevant internal (fit) & external (e.g., competition) factors 4. Develop marketing programs & brand elements 5. Measure success and effect on parent

9. How to Extend Super-Brand Comfort Inn adds Sleep and Quality Brand Bundling e.g., Ingredient Brands Brand Bridging e.g, Endorsement Parent Brand Brand Hierarchy Sub-Brand e.g., flavors Ingredient Hierarchy

10. Summary • Brand Extensions • Very alluring • Cheap, effective • But be wary • Adverse effects on parent brand