The Use of Brand Extensions
Many companies try to capitalize on their valuable brands by introducing brand extensions, which are new products that are introduced under an existing brand name. Brand extensions come in two different forms:
Line extension – A line extension is a product that is introduced within the same category at the parent brand, such as Oreo cookies and their many different varieties.
Category extension – A category extension is when a product is introduced in a different category than the parent brand. Again, using Oreo, and their ice cream products.
Let's look at Oreo cookies. The original cookie is a classic brand, with decades of brand equity under its belt. They introduced Double Stuff Oreos, which were basically the same cookie, but with double the frosting.
Recently, Oreo has been going crazy with their brand extensions. Consider just a few of their new brand line extensions:
Birthday Cake Oreos
Peanut Butter Oreos
And so many more …
That is quite the variety of cookies!
Oreo also extends products into different product lines. Some of these category extensions are:
Oreo Cookie Pie Crust
Oreo Cookie Ice Cream
Oreo Cookie Ice Cream Bars
Oreo Cookie Yogurt
Oreo Cookie Cereal
And many more …
Because Oreo is such a well-known brand, these extensions are not very risky. And remember, Oreo is simply one brand of global conglomerate Cadbury. However, for a brand with less brand equity, extensions can be much more risky.
Another example of a brand that has many line extensions is Lay's potato chips.
Everyone knows Lay's potato chips, in the yellow chip bag.
You can't just have one, right?
Well, Lay's believes you can't have just one flavor.
In addition to common potato chip flavors, like BBQ and Sour Cream, they also have the following flavors:
Cheddar and Sour Cream
Salt & Vinegar
And many more…
In addition, they had a contest, where they launched a bunch of flavors, and customers we able to vote. Here were some of the choices:
Chicken and Waffles
Cheesy Garlic Bread
The contest was incredibly popular, and was a great marketing idea for Frito Lay, Lay's parent company. It's also a great example of line extensions.
Why Would A Company Extend A Brand?
There are many benefits involved when extending a brand. First, it is much less costly to launch a new product under a successful existing brand, than it is to launch an entirely new brand.
Launching a new brand requires a full marketing and advertising campaign, and all the testing and measuring necessary to determine whether the campaign is working. A brand extension has all of that already built in. So a new brand extension will automatically benefit from the familiar name and existing brand promise.
A well-planned brand extension can benefit from the "Halo Effect", which is when established brand equity automatically carries over the extension. This allows the brand extension to achieve success much quicker than it would have as an original brand.
Brand extensions also benefit from the built-in loyalty of the parent brand, which helps reaffirm the brand promise, and sustain the parent's brand relevance. In addition, brand extensions can help a brand position itself in new categories.
Consider Diet-Coke. As crazy as it may seem now, launching Diet-Coke as a brand extension was a huge risk for Coca-Cola.
Coca-Cola already had a diet soft drink, Tab, in the marketplace. Tab was seen as a competitor of Diet Pepsi, which has been in the market since 1964. But Coca-Cola took the risk, and in 1982 premiered Diet-Coke. It was the first new product to carry the Cola-Cola trademark since 1886, and a huge risk to Coke's brand equity.
Of course, the extension was a huge success. Diet-Coke became incredibly popular, and is now the second most popular soda in the U.S., after Coke.
What Risks Could A Company Face When Extending A Brand?
With branding, nothing is ever guaranteed. It is possible a brand extension is not successful, and worse, that is damages the parent brand in some way.
Poorly executed brand extensions can harm the parent's brand reputation, and brand extensions into categories that do not align with the brand message can cause confusion with loyal customers, potentially causing them to switch to brands that better meet their expectations.
Let's use PepsiCo as our first example.
PepsiCo, the parent company of Pepsi, the cola soft drink with the second largest market share, had two of the most unsuccessful brand extensions in history.
The first was Pepsi AM, a soda brand extension that was intended to be a morning drink, similar to coffee. However, it was the same formula as regular Pepsi, and the only thing that differentiated itself from its parent brand was the design of the can. Needless to say, that failed. If their customer wanted to drink a Pepsi in the morning, they would just drink a regular Pepsi -- no Pepsi AM was needed.
Next, Pepsi launched Crystal Pepsi. This brand extension was similar to regular Pepsi, it was just clear, instead of the typical brown color of cola. It was also caffeine-free, which did separate it from its caffeinated parent, Pepsi.
Pepsi spent millions on the product launch, which included a commercial starring Van Halen that premiered at the Super Bowl. They even gave away free full-sized samples with the Sunday paper. Alas, it was not meant to be. Consumers did not want or need a clear cola, and Crystal Pepsi slowly disappeared the following year.
Both of these extensions were absolute disasters, with both being the butt of jokes for months. Obviously, these are two examples of how poor market research can lead to very unsuccessful brand extensions.
When considering a brand extension, brand managers must be able to answer the following questions:
1. How large is the category and/or segment?
2. Is the category/segment new or growing?
3. Is there room available in the category for the new brand?
4. Does the company have the assets required to compete in the new category?
5. Is there an existing business model that will support entering the new category?
6. How will competitors react to the brand extension?
1. What are the primary benefits of the brand?
2. Does the brand use those benefits in a unique way?
3. Will those benefits be relevant in the new category?
4. Are they relevant enough to set the brand apart from competitors?
5. How would the brand extension affect the parent's brand equity?
Many businesses immediately assume that a brand extension will succeed based on parent brand reputation alone, but this isn't always the case. Here are three ways in which this theory can backfire on the company:
1. Brand Cannibalism This happens when a brand extension doesn't enhance the parent brand, and causes a market shift away from it, or damages its reputation.
2. Brand Dilution Brand Dilution occurs when a brand is simply overextended. An example of brand dilution is Jeep. Jeep has long been respected as a maker of its famous off-road capable Wrangler. Then the Cherokee followed, then the Grand Cherokee. Soon Jeep introduced the Jeep Liberty, and then the Jeep Compass. It was simply too many cars too quickly, and caused Jeep to lose overall market share.
3. Brand Inaction Failure to extend a brand at the right time can lead to brand inaction. Think of Polaroid. They didn't foresee the ending of the instant camera market so soon, and were too late when they tried to extend into the regular camera category.
Using a Brand Extension Strategy
When developing a brand extension strategy, the marketer needs to find out which extension will be able to leverage the existing brand equity in a way that it will match customer perceptions. However, there are also opportunities for extensions into categories that don't seem like a natural fit. To determine the difference, you must understand centralized and decentralized brand extension strategies.
Centralized Brand Strategy
With this strategy, an extension wants to leverage the brand equity of the parent brand, in order to increase revenues for the business. These extensions can be line or category, and this strategy is a great way to increase revenues for a business, provided the brand and its extension are cohesive.
A good example of a company that uses this method is Google. Google has a very strong brand, and all the products and brands it brings fit well in Google's structure.
Decentralized Brand Strategy
With this strategy, the extensions leverage the manufacturing and distribution channels of a brand, but do not share the same brand name. This allows the extension to share the resources of the brand, without causing potential harm to the brand name.
A good example of a decentralized brand strategy is the automaker Toyota, and its subsidiary Scion.
Toyota is one of the largest automobile companies in the world, with several successful brand extensions. When it decided it wanted to launch a new automobile geared for the American youth market, it decided to go with a decentralized strategy.
It didn't want to take the risk of hurting the Toyota brand, plus, they felt the "Generation Y" target would prefer a newer and hip car company.
The same can be said about Smart Cars. Smart Cars are a subsidiary of Daimler-Benz, the parent company of Mercedes-Benz. Daimler wanted to produce a highly efficient micro-car, but knew they couldn't do it under the Mercedes brand.
Each company must decide whether or not they want their extensions distanced from the parent brand or not, and this decision will determine whether the company chooses the centralized or decentralized brand strategy.
There are so many aspects of brand extensions, and many different ways to market them. That said, they're all following the same basic principles.
1. A brand shouldn't be extended unless it has an excellent reputation and positive brand equity.
2. Brand extensions should be a logical fit with brand message.
3. Category extensions must be able to leverage a new category.
4. Any extension that could cause customer confusion should be scrapped.
5. A brand should not be stretched to too many categories, in order to prevent dilution.
6. Brand extensions must make good business and financial sense.
7. Brand extensions that do not create a positive reputation for a brand will not be used.
So, what did you learn in this article?
1. You learned that brand extensions could be very successful to a parent brand, or very damaging.
2. You learned the difference between a line extension and a category extension.
3. You learned about the different type of brand extension strategies, and which one works best for certain brands.
4. You learned which brand extensions have been most successful, and which ones have been complete failures.
Re-branding and Co-branding
In this article, you will be learning about re-branding, which is when a company decides to change an element of the brand. This could mean a new logo, a new name, new packaging, or even something subtler, such as a change in the message the brand is trying to convey.
Re-branding is not an action a marketing department takes lightly. It is a very long and expensive process, and without proper metrics, market research, and consumer feedback, the re-brand could very well be a failure, as well.
So, why would a company decide to re-brand?
There are many reasons why a company might choose to re-brand a product or service, but each of these reasons falls into one of two categories: proactive or reactive. Proactive means the company is re-branding to head off an expected problem in the future, whereas reactive means the company is re-branding to fix a problem that is already affecting the brand.
Marketing departments often use re-branding as a way to thwart any potential threats or negative events in the future. Examples of this type of situation include:
A new line of business
A new audience
To remain relevant
A new line of business - Companies often enter new lines of business, or new markets. When this happens, it is often necessary to re-brand so that the new line fits into the brand identity.
For example, Apple was once called Apple Computer. They produced desktop and laptop computers, as well as software. In 2007, Steve Jobs announced they were dropping the "computer" from their brand, since computers were only one of the many products they sold. Apple was selling iPods, iPhones, and Apple TVs, and the re-brand was necessary to adapt to the evolving company.
A new audience - Often a company wants to re-brand in order to appeal to a new audience.
To remain relevant - As technological advances change many of the products and services in the market, re-branding might be necessary to keep the brand relevant.
Consider The Yellow Pages, and its famous slogan, "Let Your Fingers Do The Walking." That slogan also was one of the most well-known slogans in the world. However, people don't use phone books anymore. We use computers and smartphones to find phone numbers -- physical phone books are now obsolete.
But The Yellow Pages didn't throw in the towel; they just re-branded their product. The Yellow Pages was re-invented, and the new brand was called "YP." The brand now focused on finding phone and address information via the Internet. While the size of their business has decreased, they were able to save it with a proactive re-brand.
Sometimes, companies are forced to re-brand due to an event that is so serious, the existing brand must be changed. Examples of this type of situation include:
Business Change – Such as a merger or acquisition
Business Change – This is most prevalent in the banking and other financial industries, when a company goes through a merger or acquisition.
Legal Problems – Usually legal issues arise when a company has an issue with a trademark. This is one of the many reasons a company must do a full trademark search before branding a product.
Negative Publicity – This is probably the most common reason companies re-brand.
A good example is the Philip Morris companies. Philip Morris is known as one of the largest tobacco companies in the world. When people think Philip Morris, they hear Marlboro, Benson & Hedges, and Virginia Slim cigarettes. They also hear lung cancer, emphysema, and heart attacks.
Philip Morris didn't own just their tobacco companies. The were also the parent company of Kraft Foods, a company that produced such American stalwarts as Oscar Meyer, Velveeta, Jell-O, and of course, Kraft Macaroni & Cheese.
For such a quintessential company as Kraft to be owned by a tobacco company was seen as a potential disaster for the company, and Philip Morris knew it needed to re-brand.
Philip Morris was re-branded as Altria. It was now the parent company of Philip Morris, Kraft, and a few other brands. Now, when people hear the name "Altria," they do not think of cigarettes or tobacco.
When it comes time to re-brand, a company must do extensive research, both qualitative and quantitative, otherwise they could face a potential disaster.
The marketing department must be able to answer the following:
What is the consumer perception of the company?
Does that perception need to change?
How should the perception change?
What is the current equity for the brand?
What does the future hold for the company?
The company must remember that the consumer is responsible for the brand, not the other way around. If a company's logo and branding scheme are not positively reflecting the brand, it is probably time for a re-brand.
Once the decision to re-brand is made, it is time for the marketing team to determine what elements must be changed. These elements could include:
Color – Colors can be extremely defining for a brand. Many brands are recognized for their color, alone.
Font – The lettering and typography used is also very defining as a brand. Think of Coca-Cola and Disney; their fonts are iconic, and again, those brands are known often by font alone.
Slogan – A successful slogan can sell a brand with the slogan alone. A company with a successful slogan wouldn't change it -- and one without a successful slogan would do whatever it takes to get one.
Icon – Using an icon is often successful, especially if the icon becomes as well-known as the brand. Think of the Nike swoosh, or the Apple "apple." These companies don't even need to use their brand name; their icon stands on its own.
When making these changes, the marketing team must keep the consumer in mind, and most importantly, what the consumer wants. When companies have neglected to listen to their customers, they end up with disastrous results.
Here are a few examples where re-branding went terribly wrong.
Tropicana orange juice – When you think of Tropicana, what do you imagine? Do you think of their commercials, with the red and white straw stuck into an orange? With the message being that their juice is so fresh, it is just like sticking a straw in an orange.
PepsiCo, the parent company of Tropicana, felt the product needed a re-brand, to stay current with new and younger customers. The new brand was a disaster. It didn't convey any type of message, and many believed the new design was simply ugly. The public caused such an uproar that PepsiCo reverted back to their original brand after one month.
Radio Shack – Radio Shack has always been one of those stores you never think about -- until you need something only they sell. However, as we headed into the 21st Century, Radio Shack felt it needed its brand to reflect a new, hipper company.
So, they decided to re-brand themselves as "The Shack." It didn't work. The new brand did nothing, but strip away a brand name that had decades of success. In addition, many customers had a very strong emotional connection to Radio Shack, and were upset by the unnecessary change. So, like Tropicana, Radio Shack quickly reverted back to their original brand.
Re-branding is obviously a huge decision for a company to make, and it requires extensive research, as well as an understanding about where the company is, and where it wants to go in the future. If a brand is suffering due to poor quality or bad customer service, a re-brand will not be effective.
Re-branding is when a company decides to change one or several elements of its brand, to meet changing customer wishes. Co-branding is when two (or more) brands come together to produce a new co-branded product.
Co-branding is not a new marketing strategy, and you see examples of co-branding frequently in the marketplace.
Betty Crocker Brownies, with Hershey's Chocolate
The Ford Explorer, Eddie Bauer Edition
Kmart, the Martha Stewart Collection
Lays Potato Chips, with KC Masterpiece BBQ Sauce
Tide Detergent, with Downey Softener
And the list could go on and on.
Why would a company want to co-brand? There are several reasons. First, and most important, is that it is the best way to introduce one company's product to customers who are loyal to another product.
The most well-known example of this strategy is the "Intel Inside" campaign. Before this campaign, most people had no idea what a semiconductor chip was, or why it was important. So in order to increase its brand equity, Intel partnered up with large computer companies, such as IBM, Dell, and Hewlett-Packard. Within a year, Intel had partnered up with almost 300 computer manufacturers.
Now, it is difficult to buy a computer or laptop and NOT see the "Intel Inside" sticker on the computer. By using this co-branding strategy, Intel became a household name.
Another reason to co-brand is for two brands to come together to produce an exponentially more value product. For example, Nike partnered with basketball superstar Michael Jordan, and produced a product that was not only the most popular in its market, it was a product Nike could sell for a premium. The name "Air Jordan" is now synonymous with the best basketball shoes in the marketplace.
As with Air Jordans, many companies co-brand to produce a more profitable product. Consider the Ford Explorer's Eddie Bauer Edition. This premium model had a distinct interior package, and the Eddie Bauer label on the exterior of the SUV. The result of this co-branding was an automobile that was not only a popular model -- it was Ford's most profitable automobile.
Many companies also co-brand simply for additional exposure. This is often the case with co-branded credit cards. There are co-branded credit cards with almost every brand under the sun. You can get a Visa card co-branded with your alma mater, your favorite football team, and even Kim Kardashian!
Others co-brand because the two brands complement each other. For example, Starbucks and Barnes and Noble are a natural fit, since people love to read while they drink coffee. Or FedEx and Kinkos, where people who need to make copies and put together presentations often need to ship those items.
There are dozens of reasons a brand might want to partner with another brand. But a company still has to be careful, as co-branding can be risky, as well. It can dilute a brand, since the brand now must share the spotlight with another brand.
So, what did you learn in this article?
1. You learned what re-branding is, and why companies choose to re-brand.
2. You learned how re-branding can go wrong, and face disastrous circumstances.
3. You learned what companies must consider when deciding whether to re-brand or not.
4. You learned about co-branding, and how a co-branding relationship can benefit a brand.
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