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Keys To Successful Brand Extensions in Growth Through Brand Extensions10974

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Keys to successful brand extensions

What advice can one give to increase the probability of success of brand extensions? Based on both research and consulting, there do exist key steps and questions in the extension process which require particular attention. Extensions must be evaluated in relation to the brand, consumers and the competition. (See Figure below)

The managerial process of extension evaluation

Think of the big plan first

Extensions used to be managed too much on an ad hoc basis. Every new idea was screened and evaluated, then eventually implemented. Now this era has ended. Brand management entails a long-term vision for the brand itself. There should be a clear statement of where the management wants to lead the brand. The brand wants to be a leader of what? How should we define its leadership – by product? by category? by need? by target? One thing is sure: the ambition must be to construct some kind of leadership.

This long-term vision can be compared to a stairway. It shows the direction of the stairway and the steps to get to the desired position. Each proposal is then evaluated in relationship to this objective. A brand cannot just stretch in all directions, but strategy should guide it. There is for instance a big difference in stating that Tide (Ariel) wants to lead the low-suds detergent market, and that it wants to be the brand for those who take trouble over the care of their textiles.

The limits of consumer research for managing extensions

The role of consumer research is to assess the level of risk. It indicates what difficulty may arise when using the same name on an extension. But research is not management. Brand management needs to integrate all dimensions of the decision. Decisions about extensions will take into account production, financial, strategic and competitive factors, beyond the immediate reaction of consumers. Management is risk taking, a source of competitive advantage. Let us recall that consumers’ reactions to brand extensions are reflections of the past.

They rest on prior learnt associations. They are also short-term oriented. Management of brand extensions is based on a long-term vision. Prior to any extension, one question must be asked: what do we want the brand to look like in the future? Each extension is a step up the stairway to this goal. Consumers have no idea of the stairway.

Framework for evaluating extensions

Are our values here really valued there?

Many extensions fail because someone has overestimated the value of the brand assets in the extension category. Are they really assets there? Do they really have a motivating value? Do they deliver an unprecedented array of benefits? Too often someone overestimates this point, making the assumption that the brand assets are relevant.

For instance, most perfume brands are tempted to launch cosmetic lines, but very few have succeeded. The drivers in the latter market are focused on confidence and hope in research, and this is not what a perfume brand can provide. It has no credentials.

A second key question concerns competition. Does the proposed extension really beat its competition? Too much of extension research is concept testing: it asserts the attractiveness of the concept. However, in stores customers compare offerings, and assess their relative attractiveness.

Certainly an extension may be welcomed in research exercises, but that does not mean it will win out in the purchasing decision. Customers may be reluctant to change their existing purchasing patterns for the new brand and product. At the moment of truth, is curiosity enough? There has to be a strong incentive (perceived difference) or a pioneer effect (acting first).

It is noticeable that Nestea, Nestlé’s entry in the iced tea soft drink market, has not been successful in Europe, despite its strategic alliance with Coca-Cola, which distributes the product and offers it in all the vending machines it controls. However, there is one country where Nestea is leader: Spain. There and only there, Nestea was launched before Lipton’s Ice Tea, and so benefited from the pioneer advantage.

Think of the full marketing mix of the extension

An extension is not simply a new product or service, it entails a full new marketing mix. It requires in fact that the organisation think more about the consumer than the brand. When Nike launched its Nike Women extension, its management was so infatuated with the brand itself that it forgot consumers.

This is why it was a failure: the products (shoes and clothes) had the same design as their male counterparts, and only the sizes were adapted to women. Nike Women was not really a line for women at all. Soon it was discovered that to succeed in this extension, it was first necessary to create relevant products. Female designers were hired to rethink the product offerings.

In Europe, Perrier has always been hampered by its most differentiating attribute, its strong bubbles. This is why Nestlé (which owns the brand) has restored it to growth via two innovations/extensions. The first, called Perrier Fluo, targets young people who perceive Perrier as being the brand of their parents.

It offers a sophisticated taste (for example, peppermint) and finer bubbles, making it easier to drink than the original Perrier. Perrier Fluo also has lower production costs, because the packaging is plastic (rather than glass), and the water used is not taken from the Vergèze spring, the brand’s historic source. The second extension, called Eau de Perrier, targets adult mealtime drinking. To this end, a finer, more elegant bubble was created, and the sparkle of the product was adjusted to make it lighter.

As we can see, extension often takes the form of the adaptation – indeed, sometimes the radical modification – of the product or entire marketing mix. The main and only real reason for extension is growth. Often, the brand needs to go beyond a mere range extension to achieve a significant leap.

Thus, in the United States, Smirnoff – currently the world’s number two spirits producer – decided to enter the store multiples channel in addition to its traditional channel (liquor stores). To do this, it launched a new ready-todrink (RTD) product, Smirnoff Ice, with a low alcohol content, backed by an advertising investment of US $70 million. It has sold more than 30 million cases and produced ‘a positive spillover effect on Smirnoff’s image’. The extension also led to the acquisition of competence in this new distribution channel.

When Ricard launched its own RTD in order to penetrate the nightclubs, discotheques and night bars it had failed to enter with its core (and till that point, only) product, did it think enough of the new consumption situation associated with these places? After midnight, this simple RTD competes with all kinds of cocktails.

It should therefore have been aromatised to better answer the needs of that situation. This extension is consumed in a specific place, at a specific time, and this had implications for the product itself. The same holds true for distribution. Extensions are often ways to get out of the classic distribution channels and become closer to the public’s need.

Extension should meet trade expectations too

In its desire to maintain its dominant share of market in the UK, Smirnoff has shown the way by following a dual strategy. One part is aimed at adults, its present target market, with the introduction of Smirnoff Blue, Smirnoff Lemon and Smirnoff Black for instance, to compete with Absolut and Finlandia.

The other is aimed at the youth market through Smirnoff Mule and later Smirnoff Ice, two ready-mixed drinks which gained high success and were soon imitated. The success of Smirnoff Mule demonstrates that all good innovations must provide value to the distributor and to the consumer.

The strategic goal was to establish these new products among young people for onpremise consumption. On Friday or Saturday nights, many pubs are literally full up and people gather outside them. Smirnoff Mule brings bartenders a faster way to serve clients than a draught beer, with a better margin: they just have to hand the bottle over to customers, without the need for a glass.

Meanwhile, the bottle with its highly visible branding acts as a badge, an identifier for customers, unlike a glass of beer which generally does not carry a brand name. This is a very important motivation for 18–24-yearolds who are insecure about their image. In addition, advertising reinforced the modern status of the new drink. More than £4.5 million was spent on Smirnoff Ice to launch it among young males (Mule having been mostly chosen by females).

The question of resources

The main source of failure of extensions is a lack of resources for the launch. Companies should remember that if an extension is aimed at a different market, its launch should be treated as a new product launch. Unfortunately many companies extend their brand, thinking that it is a way to save money compared with launching a new brand, and that a simple mention at the end of the regular 30-second television ad will suffice.

It might do for a simple line extension, a variant, but not for a brand extension. Companies also hesitate to divert investment from core products to finance an extension. They feel that by doing so they will put their core product at risk from competition. As a consequence, they decide at the last moment not to support the extension with the required budget. This reasoning underestimates the reciprocal spillover effect. Communicating the benefits of a new product has an effect on the sales of the core product. This is one of the virtues of mega-brands covering multiple products: they get re-energised through communication about their new products.

How will the competition react?

Some extensions attack the core market of a competitor. It will react fiercely and at any cost. This is rarely taken sufficiently into account when planning extensions. To sustain long-term competition supposes a long-term commitment, not only at headquarters level, but at the local subsidiary level where budgets are tailored to innovations.

Extending the brand extensions

After a successful line or brand extension is created, one major question that soon arises concerns its geographical extension. In what countries should it be developed? In answering it is important to remember that extensions are often created in response to a specific market problem. For instance Orangina Red (with red oranges and guarana energising ingredients) was created to challenge Coke’s appeal among the major soft drink gulpers, the teens.

Coke’s appeal is based on thrill and mystery: it is a black drink with a secret formula that can be mixed with forbidden (to teens) alcohols. Orangina Red was created to be the more thrilling and adventurous extension of Orangina. However, this logic only applies in countries where Orangina is in fact competing across flavours. In the United States for instance, it held a niche position within the ‘new age’ segment of orange-flavoured drinks. Orangina Red would make no sense there, while Orangina Light would.

Nivea’s sub-brands are not present equally in all countries. The fashionable Nivea Beauty is not sold in the United States, for instance, although in this case it is because the subbrand roll-out strategy has not reached this point.

Another reason for differences between countries is based on the potential of the country and the status of the parent brand within it. For instance, should Evian launch Evian Affinity in Japan or Korea? This extension is in line with the latest Evian positioning based on health, aesthetics and eternal youth, and Evian water is certainly known in Korea and Japan, but it commands a very low market share.

What name for brand extensions?

Why is Chanel’s entry in the cosmetics market called Precision, and why does Biotherm call its entry in the male market Biotherm Homme? Obviously the question of the name cannot be separated from that of the chosen brand architecture. If it is decided to follow an umbrella brand architecture there should be no specific names. Architectures based on source brands and endorsing brands allow for another name.

The naming decision must satisfy two demands. First, it should help the extension succeed. By a name one can underline specific traits or benefits of the extension, or counterbalance possible negative thoughts. Second, it should not dilute the parent brand equity.

Fashion and perfume brands are not that legitimate in the highly scientific cosmetic market, where women are looking for innovative ingredients, not just dreams or fashion. Chanel’s choice of Precision helped bypass the negative prejudice against this type of extension for perfume and couturier brands.

Many years ago, when there was still a lot of male prejudice against cosmetics, Vichy decided to name its male line Basic Homme de Vichy. Men were just not ready to buy Vichy for Men. In fact, at that time Vichy had not repositioned itself on effectiveness and health, but was a mid-range cosmetics line. Now its message is that health is tied up with skin condition.

This message, this vision, has no sex, and is extendable directly to men. In addition the market has changed, and men are more open to buying cosmetic products. Basic Homme de Vichy was renamed Vichy Homme.

The name should also not dilute the parent brand equity. Too often, just because the parent brand is old, or seen as such in public surveys, the extension receives a new brand name, and the parent brand is hidden, in a typical endorsing architecture. This creates a self-fulfilling prophecy: hidden, the parent brand gets older and older in the public perception. The role of new products and brand extension is always to take from the brand equity but also to give to brand equity: imbalanced exchanges should be avoided.

As a rule, and as will be discussed with reference to the multicircular model, the more remote an extension from the brand core values, the more it should have an endorsing architecture and as a result a brand name of its own. The closer it is to the core, the more it should adopt an umbrella architecture, and receive a generic or descriptive name. For instance a prepaid card for mobile phones could be called Mobicard or BT Nomad Card, but surely not Nomad … by BT.

Checking what the extension brings to the brand, its feedback effect

An extension uses brand capital. This is not surprising, since it was created to do so: the brand is a business development tool. It is therefore logical that we should seek to exploit this capital by putting it to productive use in new growth categories. However, we must also ensure a win–win outcome. After all, what does a brand extension really deliver? Sales alone are not enough. The benefits to be derived by the brand from this extension must be clearly specified.

Each extension from Kinder confectionery is aimed at a particular target, age segment or situation of use. Each also gives the brand widened relevance and less of a narrow image. This must be specified clearly in advance, and then measured afterwards.

Of course, we must be all the more careful to avoid any risk of dilution, as can happen when the values associated with the extension category contradict those of the brand, or when it is known that implementing the extension will be risky. After all, the implementation is the part customers see.

 

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