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Building a Brand - Managing Extensions and Across Brands

This article discusses the benefits and drawbacks of brand extensions and provides guidelines on when and how to extend a brand. It also highlights potential problems and offers strategies for managing extensions effectively.

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Building a Brand - Managing Extensions and Across Brands

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  1. Professor Carl Mela Marketing 460 Product Management Fuqua School of Business Brand Management System On Building A Brand Managing Across Brands Product Lines Global Communities Summary 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 • http://www.godiva.com/icecream/default.asp • http://www.disneyweddings.go.com/site/gate/index.jsp • 28% failure rate • Ernst and Young

  4. Brand Extensions

  5. 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

  6. Why Extend? • Benefits parent brand and firm • Enhance image • Attracts new customers

  7. Why Not Extend • Effects on Brand • Retailer resistance • Failure hurts parent brand • Displace shelf space of core brand only to be lost forever if failure • Weakens associations of parent • Forego chance to develop new brand • Cannibalization • Reduced focus on star brands

  8. Pepsi Twist -55.7% in 2004 Vanilla Coke -50.3% in 2004 Diet Coke Lemon -41.7% in 2004 Evidence of Problems

  9. Evidence of Problems • About 40% of extensions sales come from parent brand • Roughly 30% of extensions simply replace shelf space of parent items

  10. Evidence of Problems • Cannibalized spend leads to cannibalized volume

  11. 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) • Lose opportunities for new brands

  12. Moral • Extensions are often disasters • Offer well differentiated, unique extension • Do not starve support to parent

  13. 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) • Barbie Clothing • Kids: http://www.sanei.net/barbiekids/ • Adult: http://www.barbie-japan.com/fashion/wear.html

  14. Living in a World of Extensions

  15. Summary • Brand Extensions • Very alluring • Cheap, effective • But be wary • Adverse effects on parent brand • Process • List associations of parent • Assess forward and backward fit • Develop programs

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