Advantages of Extensions

1. Advantages of Extensions • Extensions can potentially provide the following benefits to facilitate new product acceptance: • Reduce risk perceived by customers & distributors • Decrease cost of gaining distribution & trial • Increase efficiency of promotional expenditures • Avoid cost (and risk) of developing new names • Allow for packaging and labeling efficiencies • Permit consumer variety seeking

2. Advantages of Extensions • Besides facilitating new product acceptance, extensions can also provide “feedback” benefits to the parent brand and the company as a whole • Enhance the parent brand image • Improve strength, favorability, and uniqueness of brand associations • Improve perceptions of company credibility • Convey broader brand meaning to consumers • Clarify core benefit proposition and business definition of the company • Bring new customers into the franchise and increase market coverage

3. Disadvantages of Extensions • Extensions have risks, too. Certainly, they can fail. • Moreover, extensions can potentially result in the following costs: • Cannibalize sales of the parent brand • Hurt the image of the parent brand • If the extension fails • Even if the extension is successful • Forego the chance to develop a new brand name or market the parent brand differently (opportunity cost)

4. Brand Extensions Assumptions • In introducing a brand extension, it is typically assumed that: • Consumers have some awareness of and positive associations about the brand in memory • Some of these positive associations are evoked by the brand extension • Negative associations are not transferred from the parent brand • Negative associations are not created by the brand extension

5. When are Brand Extensions Appropriate? • Brand extensions are more likely to be favorably evaluated by consumers if they see some basis of “fit” or similarity between the proposed extension and parent brand. • It is important that the extension achieve some brand equity and contribute to the equity of the parent brand. Therefore, the extension must also have a sufficiently high level of awareness and some strong, favorable, and unique associations. • The major mistake in evaluating extension opportunities is failing to take all of consumers’ brand knowledge structures into account. • Often, marketers mistakenly focus on one or so brand associations and ignore other potentially important brand associations in the process.

6. Colgate Pain killers • Colgate started making and marketing pain killers • Inspite of being a trusted brand when it came to mouth hygen, consumers did not buy Colgate pain killers • There was no fit between mouth health and pain killers

7. Model of Extension Evaluations Creating extension equity depends on 3 factors: • Salience of parent brand associations in extension context • Favorability of any inferred associations in the extension context • Uniqueness of any inferred associations in the extension context

8. Model of Extension Feedback • Effects of an extension on parent brand equity depends on 4 factors: • How compelling the evidence is concerning the corresponding attribute or benefit association in the extension context • How relevant or diagnostic the extension evidence is concerning the attribute or benefit for the parent brand • How consistent the extension evidence is with the corresponding parent brand associations. • How strong existing attribute or benefit associations are held in consumer memory for the parent brand

9. Evaluating Brand Extension Opportunities • A useful baseline case to study is when consumers evaluate brand extensions based on the extension itself with no other information • Create mental map of parent brand & identify key sources of equity. • Identify possible extension candidates on basis of parent brand associations and overall similarity or fit of extension to parent brand. • Evaluate candidate potential for a) extension equity according to the three-factor model and b) extension feedback effects according to the four-factor model. • Consider possible competitive advantages as perceived by consumers and possible reactions initiated by competitors.