As background, first consider the sources of growth for a firm. One useful perspective is Ansoff’s product/market expansion grid, also known as the growth matrix. As in Figure  12-1, we can categorize growth strategies according to whether they rely on existing or new products, and whether they target existing or new customers or markets. Branding Brief 12-1 describes McDonald’s growth strategies along these lines.

Although existing products can further penetrate existing customer markets or push into additional ones (the focus of Chapter 13), new-product introductions are often vital to the long-run success of a firm. A discussion of all the issues in effectively managing the development and introduction of new products is beyond the scope of this chapter. Here we’ll simply address some brand equity implications of new products.1

First we’ll establish some terminology. When a firm introduces a new product, it has three choices for branding it:

1. It can develop a new brand, individually chosen for the new product.

2. It can apply one of its existing brands.

3. It can use a combination of a new brand and an existing brand.

A brand extension occurs when a firm uses an established brand name to introduce a new product (approach 2 or 3). As we noted in Chapter 11, when a new brand is combined with an existing brand (approach 3), the brand extension can also be a sub-brand. An existing brand that gives birth to a brand extension is the parent brand. If the parent brand is already associated with multiple products through brand extensions, then it may also be called a family brand.

Brand extensions fall into two general categories:2

• Line extension: Marketers apply the parent brand to a new product that targets a new market segment within a product category the parent brand currently serves. A line extension often adds a different flavor or ingredient variety, a different form or size, or a different application for the brand (like Head & Shoulders Dry Scalp shampoo).

• Category extension: Marketers apply the parent brand to enter a different product category from the one it currently serves (like Swiss Army watches).

The vast majority of new products in any one year are brand extensions. In 2009, 93 percent of the new food or beverage products with first-year sales that exceeded $7.5 million were brand extensions. Some notable food or beverage launches that year were Campbell’s Select Harvest soups, Bud Light Lime beer, Arnold Select Sandwich Thins rolls, and Kellogg’s FiberPlus snack bars.3 Some successful nonfood or beverage launches were Tide Total Care liquid laundry detergent, Quilted Northern Ultra Plush toilet paper, Gillette Venus Embrace razor, and Bounty ExtraSoft paper towels. All these new products were launched as extensions.4

Nevertheless, many new products are still introduced each year as new brands. A slew of new technology brands have recently begun to make their mark, such as SurveyMonkey online survey tool, Spotify music Web site, Lookout mobile security software, and Twilio voice and text messaging application facilitator. Dropbox makes downloadable software that lets users digitally store and share documents for a fee. New brands are not restricted to technology, however—consider the Chobani story.

Chobani

In just a few short years, Chobani yogurt has challenged long-time market leaders Yoplait and Dannon and has become the number-one brand in the exploding Greek-style yogurt category. It even topped a January 2012 IRI InfoScan review of retail yogurt sales. Called “strained” yogurt in other parts of the world because it is typically strained in a cloth or paper bag or filter to remove the whey, Greek-style yogurt has a consistency between that of yogurt and cheese, but with yogurt’s distinctive sour taste. Greek-style yogurt now makes up 25 percent of all U.S. yogurt sales, with Chobani enjoying 60 percent of those sales. The brand was started by a Turkish immigrant, Hamdi Ulukaya, who came to the United States to go to college in 1994. Intrigued when an old Kraft yogurt factory in upstate New York came up for sale, he and his initial team spent a year and a half tinkering with the product. The first Chobani yogurt was introduced in 2007. Sales exploded, especially after the brand was picked up BJ’s Wholesale Club and Costco in 2009, and in less than five years, it had become a rapidly growing $700 million business. In 2011, the company made its first acquisition, an Australian dairy firm called Bead Foods, as a first step toward international distribution.5

Even in a product category as simple and established as hamburgers—U.S. consumers eat 13 billion burgers a year, 4.3 for every man, woman, and child—new brands can appear. Forbes magazine dubbed Denver-based Smashburger as one of the most promising U.S. companies on the basis of its “thoughtful product design and deft execution,” and the fact that it offered “more interesting fare and a (small) dash of ambience at a reasonable price premium.” And Shake Shack’s updated “roadside burger stand” now brings in almost a third of the profits of Union Square Hospitality Group, which owns three of the Zagat Guide’s top five dining establishments in Manhattan!6

Despite such success stories, most new products are branded and launched as extensions. To understand why, we’ll next outline some of the main advantages and disadvantages of brand extensions.

For most firms, the question is not whether to extend the brand, but when, where, and how to extend it. Well-planned and well-implemented extensions offer a number of advantages that we can broadly categorize as those that facilitate new-product acceptance and those that provide feedback benefits to the parent brand or company as whole (see Figure 12-2).

Facilitate New-Product Acceptance

The high failure rate of new products has been well documented. Marketing analysts estimate that only 2 of 10 new products will be successful, or maybe even as few as 1 of 10. Brand extensions can certainly suffer some of the same shortcomings as any new product. Nevertheless, a new product introduced as a brand extension may be more likely to succeed, at least to some degree, because the advantages we describe below work to increase acceptance.

Improve Brand Image

As we saw in Chapter 2, one of the advantages of a well-known and well-liked brand is that consumers form expectations of its performance over time. They can form similar inferences and expectations about the likely composition and performance of a brand extension, based on what they already know about the brand itself and the extent to which they feel this information is relevant to the new product.7

These inferences may improve the strength, favorability, and uniqueness of the extension’s brand associations. For example, when Sony first introduced its laptop and personal computer tailored for multimedia applications, Vaio, consumers may have been more likely to feel comfortable with its anticipated performance because of their experience with and knowledge of other Sony products than if Sony had branded it as something completely new.

Reduce Risk Perceived by Customers

One research study found that the most important factor for predicting initial trial of a new product was the extent to which it connected to a known family brand.8 Extensions from well-known corporate brands such as General Electric, Hewlett-Packard, Motorola, or others may communicate longevity and sustainability. Although corporate brands can lack specific product associations because of the breadth of products attached to their name, their established reputation for introducing high-quality products and standing behind them may be an important risk-reducer for consumers.9

Perceptions of corporate credibility—in terms of the firm’s expertise and trustworthiness—can be valuable associations in introducing brand extensions.10 Similarly, although widely extended supermarket family brands such as Betty Crocker, Green Giant, Del Monte, and Pepperidge Farm may lack specific product meaning, they may still stand for product quality in the minds of consumers and, by reducing perceived risk, facilitate the adoption of brand extensions.

Increase the Probability of Gaining Distribution and Trial

The potential for increased consumer demand for a new product introduced as an extension may convince retailers to stock and promote it. One study indicated that brand reputation was a key screening criteria of gatekeepers making new-product decisions at supermarkets.11

Increase Efficiency of Promotional Expenditures

From a marketing communications perspective, one obvious advantage of introducing a new product as a brand extension is that the introductory campaign does not have to create awareness of both the brand and the new product but instead can concentrate on only the new product itself.12

Several research studies document this benefit. One study of 98 consumer brands in 11 markets found that successful brand extensions spent less on advertising than comparable new-name entries spent.13 Another comprehensive study found similar results, indicating that the average advertising-to-sales ratio for brand extensions was 10 percent, compared with 19 percent for new brands.14

Reduce Costs of Introductory and Follow-Up Marketing Programs

Because of these push and pull considerations in distribution and promotion, it has been estimated that a firm can save 40–80 percent on the estimated $30–$50 million it can cost to launch a new supermarket product nationally in the United States. Other efficiencies can result after the launch. For example, when a brand becomes associated with multiple products, advertising can be more cost-effective for the family brand as a whole.

Avoid Cost of Developing a New Brand

Developing new brand elements is an art and a science. To conduct the necessary consumer research and employ skilled personnel to design high-quality brand names, logos, symbols, packages, characters, and slogans can be quite expensive, and there is no assurance of success. As the number of available—and appealing—brand names keeps shrinking, legal conflicts grow more likely. To avoid these, a global trademark search is a must for any major new brand launch or rebranding, and it can cost millions of dollars.

Allow for Packaging and Labeling Efficiencies

Similar or identical packages and labels for extensions can result in lower production costs and, if coordinated properly, more prominence in the retail store where they can create a “billboard” effect. For example, Stouffer’s offers a variety of frozen entrees with identical orange packaging that increases their visibility when they are stocked together in the freezer. Coca-Cola soft drinks and Pepperidge Farm cookies achieve a similar effect.

Permit Consumer Variety-Seeking

If marketers offer a portfolio of brand variants within a product category, consumers who need a change—because of boredom or satiation—can switch without having to leave the brand family. A complement of line extensions can also encourage customers to use the brand to a greater extent or in different ways. Even to compete effectively in some categories, marketers may need to have multiple items that together form a cohesive product line. A company that seems to offer something for everyone is L’Oréal.

L’OrÉal

Concentrating solely on beauty and personal care since its founding in 1907, L’Oréal has become a global powerhouse through its extensive brand portfolio. The firm has products for virtually every channel, price point, and market. Garnier is its fast-growing mass brand. L’Oréal Paris is at the higher end of the mass range, combining sophisticated cosmetics at accessible price points. Lancôme is the premium luxury brand. L’Oréal adheres to a strict channel exclusivity strategy. Professional products (Matrix and Redken) are sold at hair salons, consumer product brands (Maybelline and Garnier) at retail stores, including drug stores and food stores, luxury products (Biotherm and Lancôme) at specialty stores or department stores, and active cosmetic brands (La Roche-Posay) at dispensing dermatologists and pharmacies. L’Oréal also owns two retail chain brands—Kiehl’s and the Body Shop. Geographically, the company casts a wide net. Many of its brands are sold in as many as 130 countries; Lancôme is sold in 160. Recently, L’Oréal has placed much importance on emerging markets, China and India in particular, and it aims to double its existing customer base of 1 billion customers worldwide by 2021. The firm invests heavily in research and development (earmarking approximately 3 percent of net sales) in the belief that science and technology and the quality of its products are the keys to success. Roughly 15–20 percent of the product lines turn over in any given year, due to product improvements or the launch of new products. The company’s first CMO, Marc Speichert, was hired from Colgate in part to orchestrate marketing across the wide variety of brands. He is also putting more emphasis on digital and mobile strategies to engage customers but without abandoning the traditional magazine print ads that have served beauty brands well through the years.15

Provide Feedback Benefits to the Parent Brand

Besides facilitating acceptance of new products, brand extensions can also provide positive feedback to the parent brand in a number of ways.

Clarify Brand Meaning

Extensions can help clarify the meaning of a brand to consumers and define the kinds of markets in which it competes, an important first step in the brand architecture process. Thus, through brand extensions, Hunt’s means “tomato,” Clairol means “hair coloring,” Gerber means “baby care,” and Nabisco means “baked cookies and crackers.” Figure 12-3 shows how other brands that have introduced multiple brand extensions have broadened their meaning to consumers.

As Chapter 11 noted, broader brand meaning often is necessary so that firms avoid “marketing myopia” and do not mistakenly draw narrow boundaries around their brand, either missing market opportunities or becoming vulnerable to well-planned competitive strategies. Thus, as Harvard’s Ted Levitt pointed out in a pioneering article, railroads are not just in the “railroad” business but are also in the “transportation” business.16

Thinking more broadly about product meaning can easily inspire different marketing programs and new-product opportunities. For example, when Steelcase introduced the slogan, “A Smarter Way to Work,” it reflected the fact that the company had defined its business not as manufacturing desks, chairs, file cabinets, and credenzas but as “helping to enhance office productivity.” For some brands, creating broader meaning is critical and may be the only way to expand sales.

Brand	Original Product	Extension Products	New Brand Meaning
Weight Watchers	Fitness centers	Low-calorie foods	Weight loss and maintenance
Sunkist	Oranges	Vitamins, juices	Good health
Kellogg’s	Cereal	Nutri-Grain bars, Special K bars	Healthy snacking
Aunt Jemima	Pancake mixes	Syrups, frozen waffles	Breakfast foods

In some cases, it is advantageous to establish a portfolio of related products that completely satisfy consumer needs in a certain area. For example, many specific-purpose cleaning products have broadened their meaning to be seen as multipurpose, including Lysol, Comet, and Mr. Clean. Similarly, the $245 billion enterprise software market is characterized by a few megabrands like Oracle and SAP that compete in multiple segments with multiple product offerings. Although at one time these different brands were limited to a few specific products, they have broadened their meaning through brand extensions and acquisitions to represent “complete business software solutions.”17

Enhance the Parent Brand Image

According to the customer-based brand equity model, one desirable outcome of a successful brand extension is that it may enhance the parent brand image by strengthening an existing brand association, improving the favorability of an existing brand association, adding a new brand association, or a combination of these.

One common way a brand extension affects the parent brand image is by helping clarify its core brand values and associations. Core brand associations, as we defined them in Chapter 3, are those attributes and benefits that come to characterize all the products in the brand line and, as a result, are those with which consumers often have the strongest associations. For example, Nike has expanded from running shoes to other athletic shoes, athletic clothing, and athletic equipment, strengthening its associations to “peak performance” and “sports” in the process.

Another type of association that successful brand extensions may improve is consumer perceptions of the company’s credibility. For example, one research study showed that a successful corporate brand extension led to improved perceptions of the expertise, trustworthiness, and likability of the company.18

Choosing to launch a new product or service with a completely new brand name means forgoing these feedback benefits. In the late 1990s, with the advent of the Internet, several firms introduced online versions of their services under a separate brand name. For example, Bank One, a leading brand at the time, opened its online bank services under the Wingspan brand name. Besides increasing the difficulty and expense of launching a new brand, these companies also lost the opportunity to modernize the parent brand image and improve its technological credentials. In many cases, the new ventures failed and their capabilities were folded back into the parent organization.

Bring New Customers into the Brand Franchise and Increase Market Coverage

Line extensions can benefit the parent brand by expanding market coverage, such as by offering a product benefit whose absence may have prevented consumers from trying the brand. For example, when Tylenol introduced a capsule form of its acetaminophen pain reliever, it was able to attract consumers who had difficulty swallowing tablets and might have otherwise avoided the brand.

Creating “news” and bringing attention to the parent brand may benefit the family brand as a whole. Through the skillful introduction of extensions, Tide as a family brand has managed to maintain its market leadership and actual market share—roughly 40 percent in the United States—from the 1950s to the present. Ocean Spray has successfully introduced a wide range of extensions to offer consumers more ways to enjoy cranberries.

Ocean Spray

The growers’ cooperative Ocean Spray Cranberries, Inc., found itself in a difficult position around 2004. With growth in carbonated beverages slowing, Coca-Cola and PepsiCo began to move aggressively into noncarbonated drinks, including juices. Ocean Spray contemplated selling the brand to PepsiCo, but ultimately the coop voted to remain independent. To remain competitive with these larger players, however, Ocean Spray has continued to introduce a number of brand extensions, supported by well-integrated marketing campaigns. Its expanded product mix now includes regular, diet, and light versions of many of its popular cocktail, juice drink, and blends beverages; Craisins dried cranberries and trail mix; cranberry sauce; fresh fruit; and fruit-flavored snacks. The coop has introduced new flavor varieties based on blueberry and cherry and a line of energy juice drinks and sparkling beverages. Its “Straight from the Bog” ad campaign showed two folksy farmers waist-deep in a cranberry bog humorously extolling the virtues of various Ocean Spray products. The campaign was reinforced by a host of events, promotions, and other PR activities.19

Source: Courtesy of Ocean Spray Cranberries, Inc.

Revitalize the Brand

Sometimes brand extensions can be a means to renew interest in and liking for the brand. A classic example is with the General Motors luxury brand nameplate Cadillac, whose sales were fading fast by the end of the 1990s. At that time, many marketing experts put the brand on life support and predicted its demise. The introduction of the sleek CTS sedan in 1999—backed by a powerful Led Zeppelin soundtrack in the launch ads—signaled that things were changing for the brand. The follow-up introduction of the flashy, muscular Escalade SUV, however, completely transformed the brand’s image. Seen as urban and edgy, the Escalade further modernized the aging brand, making it more contemporary and relevant.20

Permit Subsequent Extensions

One benefit of a successful extension—especially a category extension—is that it may serve as the basis for subsequent extensions. Consider how Billabong transcended its surfer origins to introduce products that tapped into related lifestyle activities.

Billabong

The Billabong brand was established in 1973 by Gordon Merchant, who wanted to create a brand that had “functional products for surfers to help us better enjoy our sport.” During the 1970s and 1980s, Billabong established its brand credibility with the young surfing community as a designer and producer of quality surf apparel. In the early 1980s, it began to sell its products in Japan, Europe, and the United States through licensees. In the late 1980s and early 1990s, the brand extended into other youth-oriented areas, such as snowboarding and skateboarding, but sticking to its core brand proposition: contemporary, relevant, innovative products of consistent high quality. In 2004, the company launched an entirely new brand called Honolua Surf Co., inspired by Hawaiian surf styles. Later years saw various brand acquisitions too: Nixon Inc., a premium watch and accessories maker in the surf, skate, and snowboard markets; Von Zipper edgy eyewear and goggles, Element shoes, Kustom footwear, and Mrs. Palmers surf wax and accessories. As a result of its consistent growth, Billabong was ranked the eighth most valuable brand in Australia, with an estimated value of $1.1 billion.21

Source: Martin Berry/Alamy

Despite their potential advantages, brand extensions have a number of disadvantages (see Figure 12-4).

Can Fail and Hurt Parent Brand Image

The worst possible scenario for an extension is not only to fail, but to harm the parent brand image in the process. Unfortunately, these negative feedback effects can sometimes happen.

Consider General Motors’ experience with the Cadillac Cimarron. This model, introduced in the early 1980s, was a “relative” of models in other GM lines, such as the Pontiac 2000 and Chevrolet Cavalier. The target market was less-affluent buyers who were seeking a small luxury car but could not really afford a full-size Cadillac. Not only was the Cadillac Cimarron unsuccessful at generating new sales with this market segment, but existing Cadillac owners hated it. They felt it was inconsistent with the large size and prestige image they expected from Cadillac. As a result, Cadillac sales dropped significantly in the mid-1980s. Looking back, one GM executive offered the following insights:27

The decision was made purely on the basis of short-sighted profit and financial analysis, with no accounting for its effect on long-run customer loyalty or, if you will, equity. A typical financial analysis would argue that the Cimarron will rarely steal sales from Cadillac’s larger cars, so any sale would be one that we wouldn’t have gotten otherwise. The people who were most concerned with such long-range issues raised serious objections but the bean counters said, “Oh no, we’ll get this many dollars for every model sold.” There was no thinking about brand equity. We paid for the Cimarron down the road. Everyone now realizes that using the model to extend the name was a horrible mistake.

Even if an extension initially succeeds, by linking the brand to multiple products, the firm increases the risk that an unexpected problem or even a tragedy with one product in the brand family can tarnish the image of some or all the remaining products. The Audi is a classic example.

Audi

Starting in 1986, the Audi 5000 car suffered a tidal wave of negative publicity and word-of-mouth because it was alleged to have a “sudden acceleration” problem that resulted in an alarming number of sometimes fatal accidents. Even though there was little concrete evidence to support the claims, Audi, in a public relations disaster, attributed the problem to the clumsy way U.S. drivers operated the car, and U.S. sales declined from 74,000 in 1985 to 21,000 in 1989. As might be expected, the damage was most severe for the Audi 5000, but the adverse publicity also spilled over to the 4000 model. The Quattro was affected to a lesser extent, perhaps because it was distanced by its distinct branding and advertising strategy.28

Understanding when unsuccessful brand extensions may damage the parent brand is important, and later in the chapter we’ll develop a conceptual model to address the topic and describe some important findings. On a more positive note, however, one reason an unsuccessful brand extension may not necessarily damage the parent brand is the very reason the extension may have been unsuccessful in the first place—hardly anyone may even have heard of it! Thus, the silver lining when a brand extension fails to achieve sufficient brand awareness or distribution is that the parent brand is more likely to survive unscathed. But as we’ll argue below, product failures in which the extension is found to be inadequate on the basis of performance are more likely to hurt perceptions of the parent brand than these “market” failures.

Can Cause the Company to Forgo the Chance to Develop a New Brand

One easily overlooked disadvantage of brand extensions is that by introducing a new product as a brand extension, the company forgoes the chance to create a new brand, with its own unique image and equity. For example, consider the benefits Disney enjoyed from introducing Touchstone Pictures films, which attracted an audience interested in more adult themes and situations than its traditional family-oriented releases, or the boost Levi’s earned from Dockers pants, which attracted a segment looking for casual pants. Amazon’s runaway success with Kindle suggests another example.

Kindle

Amazon revolutionized book retailing with the launch of its online book-selling service, “Earth’s Largest Bookstore.” The company has transcended its bookseller roots and now sells millions of goods and services of all kinds, from simple toys to high-definition televisions, as it continues to fine-tune its appealing combination of wide selection, helpful service, and low prices. Years of product development led to the launch of the revolutionary Kindle e-reader, with which customers could also shop for and purchase e-books and other digital media via wireless networking. Consistent with Amazon’s business strategy, Kindle was priced increasingly lower with each successive generation. Subsequent models were also thinner and lighter than previous versions, with faster page turns, sharper resolution, and improved readability. When Apple launched its iPad in April 2010 and many forecast the demise of the Kindle, sales of the e-reader in fact accelerated. Amazon’s sales of e-books quickly eclipsed those of hardcover and paperback books. By the end of 2011, Amazon was selling over 1 million products in the Kindle family per week. The brand’s success had paved the way for the company to extend it into the red-hot tablet market. Kindle Fire became Amazon’s most successful new product launch ever and was the most popular gift and top best seller for the 2011 holiday season. With Kindle, Amazon has established a classic power brand with many growth opportunities.32

Source: Kristoffer Tripplaar/Alamy

These brands all created their own associations and image and tapped into markets completely different from those that currently existed for other brands sold by the company. Thus, introducing a new product as a brand extension can have significant and potentially hidden costs in terms of the lost opportunities of creating a new brand franchise. The extension’s brand positioning may be less flexible, too, given that it has to live up to the parent brand’s promise and image. The positioning of a new brand, in contrast, could be introduced and updated in the most competitively advantageous way possible.

What determines whether a brand extension is able to capitalize on potential advantages and avoid, or at least minimize, potential disadvantages? Figure 12-5 displays some examples of successful and unsuccessful brand extensions through the years. Note how even leading marketing companies have sometimes failed despite their best intentions when launching a brand extension.

This section examines how consumers evaluate brand extensions and develops some ideas to help marketing managers better forecast and improve the odds for success of a brand extension.33

Brand Extensions and Brand Equity

An extension’s ultimate success will depend on its ability to both achieve some of its own brand equity in the new category and contribute to the equity of the parent brand.

Creating Extension Equity

For the brand extension to create equity, it must have a sufficiently high level of awareness and achieve necessary and desired points-of-parity and points-of-difference. Brand awareness will depend primarily on the marketing program and resources devoted to spreading the word about the extension. As Chapter 11 described, it will also obviously depend on the type of branding strategy adopted: The more prominently we use an existing brand that has already achieved a certain level of awareness and image to brand an extension, the easier it should be to create awareness of and an image for the extension in memory.

Initially, whether we can create a positive image for an extension will depend on three consumer-related factors:

1. How salient parent brand associations are in the minds of consumers in the extension context; that is, what information comes to mind about the parent brand when consumers think of the proposed extension, and the strength of those associations.

2. How favorable any inferred associations are in the extension context; that is, whether this information suggests the type of product or service the brand extension would be, and whether consumers view these associations as good or bad in the extension context.

3. How unique any inferred associations are in the extension category; that is, how these perceptions compare with those about competitors.

As with any brand, successful brand extensions must achieve desired points-of-parity and points-of-difference. Without powerful points-of-difference, the brand risks becoming an undistinguished “me-too” entry, vulnerable to well-positioned competitors.34 Tauber refers to “competitive leverage” as the set of advantages that a brand conveys to an extended product in the new category, that is, “when the consumer, by simply knowing the brand, can think of important ways that they perceive that the new brand extension would be better than competing brands in the category.”35 This appeared to be the case with the UK launch of the Dettol Easy Mop disposable mop system, an extension of Reckitt-Benckiser’s Dettol household cleaner brand, which leveraged the familiar Dettol brand in outselling other entrants into the category.36

At the same time, marketers must also establish any required points-of-parity. The more dissimilar the extension product is to the parent brand, the more likely that points-of-parity will become a positioning priority, and the more important it is to make sure that category POPs are sufficiently well established. Consumers might have a clear understanding of the extension’s

intended point-of-difference because it uses an existing brand name. What they often need reassurance about, however—and what should often be the focus of the marketing program—is whether the extension also has the necessary points-of-parity.

For example, Nivea became a leader in the skin cream category by creating strong points-of-difference on the benefits of “gentle,” “mild,” “caring,” and “protective,” which consumers value in many categories. Through skillful product development and marketing, the Nivea brand was successfully expanded across a wide variety of skin care and personal care product categories. When it leveraged its brand equity into categories such as deodorants, shampoos, and cosmetics, Nivea found it necessary to establish category points-of-parity before it could promote its points-of-difference. These were of little value unless consumers believed its deodorant was strong enough, its shampoo would produce beautiful enough hair, and its cosmetics would be colorful enough. Once points-of-parity were established, Nivea’s core brand associations could be introduced as compelling points-of-difference.

Contributing to Parent Brand Equity

To contribute to parent brand equity, an extension must strengthen or add favorable and unique associations to the parent brand and not diminish the strength, favorability, or uniqueness of any existing associations. The effects of an extension on consumer brand knowledge will depend on four factors:

1. How compelling the evidence is about the corresponding attribute or benefit association in the extension context—that is, how attention-getting and unambiguous or easily interpretable the information is. Strong evidence is attention-getting and unambiguous. Weak evidence may be ignored or discounted.

2. How relevant or diagnostic the extension evidence is for the attribute or benefit for the parent brand, that is, how much consumers see evidence on product performance or imagery in one category as predictive of product performance or imagery for the brand in other categories. Evidence will affect parent brand evaluations only if consumers feel extension performance is indicative of the parent brand in some way.

3. How consistent the extension evidence is with the corresponding parent brand associations. Consistent extension evidence is less likely to change the evaluation of existing parent brand associations. Inconsistent extension evidence creates the potential for change, with the direction and extent of change depending on the relative strength and favorability of the evidence. Note, however, that consumers may discount or ignore highly inconsistent extension evidence if they don’t view it as relevant.37

4. How strongly existing attribute or benefit associations are held in consumer memory for the parent brand, that is, how easy an association might be to change.

Feedback effects that change brand knowledge are thus most likely when consumers view information about the extension as equally revealing about the parent brand, and when they hold only a weak and inconsistent association between the parent brand and that information.38 Note that negative feedback effects are not restricted to product-related performance associations. As we saw earlier, if a brand has a favorable prestige image association, then consumers may disapprove or even resent a vertical extension (a new version of the product at a lower price). Michelin is a premium brand that has extended carefully.

Michelin

From its travel roots, Michelin, famous for the safety and dependability for its tires, has extended its brand into a variety of different categories. The company has long published guidebooks, the Red Guides to hotels and restaurants and the Green Guides for tourism. It has also published a series of road maps for locales and regions all over the world. More recently, a new division called Michelin Lifestyle began to sell additional licensed merchandise in four distinct areas: (1) tire accessories, such as foot pumps, floor mats, and windshield wipers; (2) “high-specification lifestyle products,” such as bicycle helmets, scuba suits, and golf balls; (3) clothing and accessories featuring Michelin’s brand mascot Bibendum; and (4) safety products developed with other companies, including ear plugs, safety goggles, and gloves. Michelin intended these brand extensions to “enhance the value of our brand and add emotional-type values, not just functionality, and reach out to…a new generation that doesn’t yet associate with us.” Still, Michelin Lifestyle management was careful not to stretch the brand too far by moving into “fragrances and other things that have some legitimacy for a lifestyle brand. There still has to be an authentic Michelin reason for everything.”39

Academic research and industry experience have revealed a number of principles governing successful brand extensions. Marketers must consider their strategies carefully by systematically following the steps listed in Figure 12-6 and using managerial judgment and marketing research to help make each of these decisions.

Evaluate the Potential of the Extension Candidate

In forecasting the success of a proposed brand extension, marketers should assess—through judgment and research—the likelihood that the extension will realize the advantages and avoid the disadvantages of brand extensions, as summarized in Figures 12-2 and 12-4. As with any new product, analysis of the 3 Cs—consumer, corporate, and competitive factors—as well as category factors can be useful.

Consumer Factors

To evaluate the potential of a proposed brand extension, we assess its ability to achieve its own brand equity, as well as the likelihood that it can affect the parent brand’s existing brand equity. First, marketers must forecast the strength, favorability, and uniqueness of all associations to the brand extension. In other words, what will be the salience, favorability, or uniqueness of parent brand associations in the proposed extension context? Similarly, what will be the strength, favorability, and uniqueness of any other inferred associations? The three-factor model of extension evaluations and the four-factor model of extension feedback effects can provide guidance in studying consumer reactions.

To narrow down the list of possible extensions, we often need consumer research (see Chapter  10 for a review). We can ask consumers directly for their brand permission (“How well does the proposed extension fit with the parent brand?” or “Would you expect such a new product from the parent brand?”). We can even ask what products they believe are currently attached to the brand: If a majority of consumers believe a proposed extension product is already being sold under the brand, there would seem to be little risk in introducing it, at least based on initial consumer reaction.

To understand consumers’ perceptions of a proposed extension, we can use open-ended associations (“What comes into your mind when you think of the brand extension?” or “What are your first impressions on hearing that the parent brand is introducing the extension?”), as well as ratings scales based on reactions to concept statements. An interesting new statistical approach uses Bayesian factor analysis to separate brand and category effects to better assess brand fit.47

Common pitfalls include failing to take all consumers’ brand knowledge structures into account. Often marketers mistakenly focus on one or perhaps a few brand associations as a potential basis of fit and ignore other, possibly more important, brand associations in the process.

BIC

By emphasizing inexpensive, disposable products, the French company Société Bic was able to create markets for nonrefillable ballpoint pens in the late 1950s, disposable cigarette lighters in the early 1970s, and disposable razors in the early 1980s. It unsuccessfully tried the same strategy in marketing Bic perfumes in the United States and Europe in 1989. The perfumes—two for women (“Nuit” and “Jour”) and two for men (“Bic for Men” and “Bic Sport for Men”)—were packaged in quarter-ounce glass spray bottles that looked like fat cigarette lighters and sold for $5 each. The products were displayed on racks in plastic packages at checkout counters throughout Bic’s extensive distribution channels, which included 100,000 or so drugstores, supermarkets, and other mass merchandisers. At the time, a Bic spokeswoman described the new products as extensions of the Bic heritage—“high quality at affordable prices, convenient to purchase, and convenient to use.”48 The brand extension was launched with a $20 million advertising and promotion campaign containing images of stylish people enjoying themselves with the perfume and using the tag line “Paris in Your Pocket.” Nevertheless, Bic was unable to overcome its lack of cachet and negative image associations; failing to achieve a critical point-of-parity, the extension fell short.

Another major mistake in evaluating brand extensions is overlooking how literal consumers can be in evaluating brand extensions. Although consumers ultimately care about benefits, they often notice and evaluate attributes—especially concrete ones—in reacting to an extension. Brand managers, though, tend to focus on perceived benefits in predicting consumer reactions, and, as a result, they may overlook some potentially damaging attribute associations.

Corporate and Competitive Factors

Marketers must take not only a consumer perspective in evaluating a proposed brand extension, but also a broader corporate and competitive perspective. How effectively are the corporate assets leveraged in the extension setting? How relevant are existing marketing programs, perceived benefits, and target customers to the extension? What are the competitive advantages to the extension as consumers perceive them, and possible reactions initiated by competitors as a result?

One of the biggest mistakes marketers make in launching extensions is failing to properly account for competitors’ actions and reactions.49 Too many extension products and too strongly entrenched competition can put a strain on company resources. Arm & Hammer’s brand extension program met major resistance in categories such as deodorants when existing competitors fought back.

Brand counterextensions—whereby a competing brand in the extension category chooses to launch its own extension into the parent brand’s category—can pose a significant threat. The introduction of Hershey’s strawberry syrup was followed by Smucker’s chocolate syrup; Dixie paper plates was followed by Chinet paper cups. A successful extension can reduce the perceived fit between categories, making it easier for a brand to counterattack.50

Category Factors

Marketers must determine the optimal product line strategy for their brand. To do so, they need a clear understanding of the market and the cost interdependencies between products.51 This in turn means examining the percentage of sales and profits contributed by each item in the product line and its ability to withstand competition and address consumer needs.

A product line is too short if the manager can increase long-term profits by adding items; the line is too long if the manager can increase profits by dropping items.52 Increasing the length of the product line by adding new variants or items typically expands market coverage and therefore market share, but it also increases costs. From a branding perspective, longer product lines may decrease the consistency of the associated brand image if all items use the same brand.

Reddy, Holak, and Bhat studied the determinants of line extension success using data on 75 line extensions of 34 cigarette brands over a 20-year period.53 Their major findings indicate that:

• Line extensions of strong brands are more successful than extensions of weak brands.

• Line extensions of symbolic brands enjoy greater market success than those of less symbolic brands.

• Line extensions that receive strong advertising and promotional support are more successful than those extensions that receive meager support.

• Line extensions entering earlier into a product subcategory are more successful than extensions entering later, but only if they are extensions of strong brands.

• Firm size and marketing competencies also play a part in an extension’s success.

• Earlier line extensions have helped in the market expansion of the parent brand.

• Incremental sales generated by line extensions may more than compensate for the loss in sales due to cannibalization.

Despite the pitfalls of line extensions and the many considerations necessary to properly manage extensions, the allure of line extensions for companies remains strong, primarily due to the cost and risk incurred in launching an entirely new brand. One report showed that line extensions take half as long to develop, cost far less to market, and enjoy twice the success rate of major new brand launches.54

Design Marketing Programs to Launch Extension

Too often companies use extensions as a shortcut means of introducing a new product and pay insufficient attention to developing a branding and marketing strategy that will maximize the equity of the brand extension as well as enhance the equity of the parent brand. As is the case with a new brand, building brand equity for a brand extension requires choosing brand elements, designing the optimal marketing program to launch the extension, and leveraging secondary associations.

Choosing Brand Elements

By definition, brand extensions retain one or more elements from an existing brand. They do not have to leverage only the brand name but can use other brand elements too. For example, Heinz and Campbell Soup have implemented package designs that distinguish different line extensions or brand types but reveal their common origin at the same time.55

Sometimes packaging is such a critical component of brand equity that it is hard to imagine an extension without it. Brand managers are in a real dilemma in such cases, because if they choose the same type of packaging, they run the risk that the extension will not be well distinguished. If they use different packaging, they may leave a key source of brand equity behind.

A brand extension can retain or modify one or more brand elements from the parent brand as well as adopt its own brand elements. In creating new brand elements for an extension, marketers should follow the same guidelines of memorability, meaningfulness, likeability, protectability, adaptability, and transferability that we described in Chapter 4 for the development of any brand.

New brand elements are often necessary to help distinguish the brand extension and build awareness and image. As Chapter 11 noted, the relative prominence of existing parent brand elements and new extension brand elements will dictate the strength of transfer from the parent brand to the extension, as well as the feedback from the extension to the parent brand.

Designing Optimal Marketing Program

The marketing program for a brand extension must consider the same guidelines in building brand equity that we described in Chapters 5 and 6. Consumer perceptions of value must guide pricing decisions, distribution strategies must blend push and pull considerations, and the firm must integrate marketing communications by mixing and matching communication options.

When it comes to positioning, the less similar the extension is to the parent brand, the more important it typically is to establish necessary and competitive points-of-parity. The points-of-difference for a category extension in many cases directly follow from the points-of-difference for the parent brand, and consumers readily perceive them. Thus, when Nivea extended into

shampoos and conditioners, deodorants, and cosmetics and other beauty products, its key “gentleness” point-of-difference transferred relatively easily. With line extensions, on the other hand, marketers have to create a new association that can serve as an additional point-of-difference and help distinguish the extension from the parent brand too.

For line extensions, consumers must also understand how the new product relates to existing products in order to minimize possible cannibalization or confusion. For example, when Anheuser-Busch first launched Bud Select, the low-carb beer with no aftertaste was positioned as an “upscale, white-collar brew.” The emphasis on no aftertaste, however, drew an implicit comparison that cast other Anheuser-Busch products in a dim light and caused some consumers to abandon their usual Bud or Bud Light in favor of the new brand. As a result, nearly all of Bud Select’s 1.3 percent share of supermarket sales earned in the month after its launch came at the expense of other Anheuser-Busch beers, which lost a share point during the same period.56

Leveraging Secondary Brand Associations

Brand extensions will often leverage the same secondary associations as the parent brand, although competing in the extension category may require some additional fortification like linking to other entities. A brand extension differs in that, by definition, there is always some leveraging of another brand or company. The extent to which these other associations become linked to the extension, however, depends on the branding strategy the firm adopts and how it brands the extension. As we’ve seen, the more common the brand elements and the more prominence they receive, the more likely it is that parent brand associations will transfer.

Now we turn to some specific guidance about brand extensions. Fortunately, much academic research has focused on this strategy. We summarize some of the important conclusions in Figure 12-7 and describe them in detail in this section.

1. Successful brand extensions occur when the parent brand has favorable associations and consumers perceive a fit between the parent brand and the extension product. To better understand the process by which consumers evaluate a brand extension, many academic researchers have adopted a “categorization” perspective. Categorization research has its roots in psychological research, showing that people do not deliberately and individually evaluate each new stimulus to which they are exposed. Instead, they usually evaluate a stimulus in terms of whether they can classify it as a member of a previously defined mental category.

   We could argue that consumers use their categorical knowledge of brands and products to simplify, structure, and interpret their marketing environment.57 For example, consumers may see brands as categories that over time have acquired a number of specific attributes based on their individual members.58 As Method has expanded its range of cleaning

   1. Successful brand extensions occur when the parent brand is seen as having favorable associations and there is a perception of fit between the parent brand and the extension product.

   2. There are many bases of fit: product-related attributes and benefits as well as non-product-related attributes and benefits related to common usage situations or user types.

   3. Depending on consumer knowledge of the product categories, perceptions of fit may be based on technical or manufacturing commonalities or more surface considerations such as necessary or situational complementarity.

   4. High-quality brands stretch farther than average-quality brands, although both types of brands have boundaries.

   5. A brand that is seen as prototypical of a product category can be difficult to extend outside the category.

   6. Concrete attribute associations tend to be more difficult to extend than abstract benefit associations.

   7. Consumers may transfer associations that are positive in the original product class but become negative in the extension context.

   8. Consumers may infer negative associations about an extension, perhaps even based on other inferred positive associations.

   9. It can be difficult to extend into a product class that is seen as easy to make.

   10. A successful extension can not only contribute to the parent brand image but also enable a brand to be extended even farther.

   11. An unsuccessful extension hurts the parent brand only when there is a strong basis of fit between the two.

   12. An unsuccessful extension does not prevent a firm from backtracking and introducing a more similar extension.

   13. Vertical extensions can be difficult and often require sub-branding strategies.

   14. The most effective advertising strategy for an extension is one that emphasizes information about the extension (rather than reminders about the parent brand).

   15. Individual differences can affect how consumers make an extension decision, and will moderate extension effects.

   16. Cultural differences across markets can influence extension success.

   products, consumers might develop stronger brand associations to “modern designs” and “environmentally friendliness.”

   In this categorization perspective, if consumers saw a brand extension as closely related or similar to the brand category, they could easily transfer their existing attitude about the parent brand to the extension. If they were not as sure about the similarity, they might evaluate the extension in a more detailed, piecemeal fashion. In this case, the strength, favorability, and uniqueness of salient brand associations would determine how they viewed the extension.59

   Thus, a categorization view considers consumers’ evaluations of brand extensions to be a two-step process. First, consumers determine whether there is a match between what they know about the parent brand and what they believe to be true about the extension. Then, if the match is good, consumers might transfer their existing brand attitudes to the extension.

   Consistent with these notions, Aaker and Keller collected consumer reactions to 20 proposed extensions from six well-known brands and found that both a perception of fit between the original and extension product categories and a perception of high quality for the parent brand led to more favorable extension evaluations.60

   A number of subsequent studies have explored the generalizability of these findings to markets outside the United States. Based on a comprehensive analysis of 131 brand extensions from seven such replication studies around the world, Bottomly and Holden concluded that this basic model clearly generalized, although cross-cultural differences influenced the relative importance attached to the model components.61

   Thus, in general, brand extensions are more likely to be favorably evaluated by consumers if they see some bases of fit or congruity between the proposed extension and parent brand.62 A lack of perceived fit may doom a potentially successful brand extension. Interestingly, moderately incongruent extensions can evoke more favorable extension evaluations than highly congruent extensions under certain specialized situations, such as when consumers are highly involved and the extension is otherwise undifferentiated from competitors.63

2. There are many bases of fit: both product-related and non-product-related attributes and benefits may influence extension fit. Any association about the parent brand that consumers hold in memory may serve as a potential basis of fit. Most academic researchers assume consumers’ judgments of similarity are a function of salient shared associations between the parent brand and the extension product category. Specifically, the more common and the fewer distinctive associations that exist, the greater the perception of overall similarity, whether based on product- or non-product-related attributes and benefits.64 Consumers may also use attributes for a prototypical brand or a particular exemplar as the standard of reference for the extension category and form their perceptions of fit with the parent brand on that basis.

   To demonstrate how fit does not have to be based on product-related associations alone, Park, Milberg, and Lawson have distinguished between fit based on “product-feature similarity” (as described earlier) and “brand-concept consistency.”65 They define brand con cepts as the brand-unique image associations that arise from a particular combination of attributes, benefits, and the marketing efforts used to translate these attributes into higher-order meanings (such as high status). Brand-concept consistency measures how well the brand concept accommodates the extension product. The important point these researchers make is that different types of brand concepts from the same original product category may extend into the same category with varying degrees of success, even when product-feature similarity is high.

   Park and his coauthors further distinguish between function-oriented brands, whose dominant associations relate to product performance (like Timex watches), and prestige- oriented brands, whose dominant associations relate to consumers’ expression of self-concepts or images (like Rolex watches). Experimentally, they showed that the Rolex brand could more easily extend into categories such as grandfather clocks, bracelets, and rings than the Timex brand; however, Timex could more easily extend into categories such as stopwatches, batteries, and calculators. In the former case, high brand-concept consistency for Rolex overcame a lack of product-feature similarity; in the latter case, product-feature similarity favored a function-oriented brand such as Timex.

   Broniarczyk and Alba provide another compelling demonstration of the importance of recognizing salient brand associations. A brand that may not even be as favorably evaluated as a competing brand in its category may be more successfully extended into certain categories, depending on the particular parent brand associations involved. For example, although Close-Up toothpaste was not as well liked by their sample as Crest, a proposed Close-Up breath mint extension was evaluated more favorably than one from Crest. But a proposed Crest toothbrush extension was evaluated more favorably than one from Close-Up.66

   Broniarczyk and Alba also showed that a perceived lack of fit between the parent brand’s product category and the proposed extension category could be overcome if key parent brand associations were salient and relevant in the extension category. For example, Froot Loops cereal—which has strong brand associations to “sweet,” “flavor,” and “kids”—was better able to extend to dissimilar product categories such as lollipops and popsicles than to similar product categories such as waffles and hot cereal, because of the relevance of its brand associations in the dissimilar extension category. The reverse was true for Cheerios cereal, however, which had a “healthy grain” association that was relevant only in similar extension product categories.

   Thus, extension fit is more than just the number of common and distinctive brand associations between the parent brand and the extension product category.67 These research studies and others demonstrate the importance of taking a broader perspective of categorization and fit. For example, Bridges, Keller, and Sood refer to “category coherence.” Coherent categories are those whose members “hang together” and “make sense.” According to these authors, to understand the rationale for a grouping of products in a brand line, a consumer needs “explanatory links” that tie the products together and summarize their relationship. The physically dissimilar toy, bath care, and car seat products in the Fisher-Price product line can be united by the link “products for children.”68

   Researchers have also explored other, more specific, aspects of fit. Boush provides experimental data about the robustness and context sensitivity of fit judgments.69 Similarity judgments between pairs of product categories were found to be asymmetrical, and brand name associations could reverse the direction of asymmetry. For example, more subjects agreed with the statement “Time magazine is like Time books” than with the statement, “Time books are like Time magazine,” but without the brand names (just using “books” and “magazines”), the preferences were reversed. Smith and Andrews surveyed industrial goods marketers and found that the relationship between fit and new product evaluations was not direct; it was mediated and influenced by customers’ confidence that a firm could provide a proposed new product.70

3. Depending on their knowledge of the product categories, consumers may perceive fit based on technical or manufacturing commonalities, or on surface considerations such as necessary or situational complementarity. Consumers can also base fit on considerations other than attributes or benefits. Taking a demand-side and supply-side perspective of consumer perceptions, Aaker and Keller showed that perceived fit between the parent brand and the extension product could be related to the economic notions of substitutability and complementarity in product use (from a demand-side perspective), as well as to the firm’s perceived grasp of the skills and assets necessary to make the extension product (from a supply-side perspective).

   Thus, Honda’s perceived expertise in making motors for lawn mowers and cars may help perceptions of fit for any other machinery with small motors that Honda might want to introduce. Similarly, expertise with small disposable products offers numerous opportunities for Bic. On the other hand, some extension examples have little manufacturing compatibility but greater usage complementarity, such as Colgate’s extension from toothpaste to toothbrushes or Duracell’s extension from batteries to flashlights.

   These perceptions of fit, however, may depend on how much consumers know about the product categories. As Muthukrishnan and Weitz demonstrated, “expert” consumers are more likely to use technical or manufacturing commonalities to judge fit, considering similarity in terms of technology, design and fabrication, and the materials and components used in the manufacturing process. Less knowledgeable “novice” consumers, on the other hand, are more likely to use superficial, perceptual considerations such as common package,

   

   shape, color, size, and usage.71 They may see a basis of fit between tennis racquets and tennis shoes rather than between tennis racquets and golf clubs, despite the fact that the latter actually share more manufacturing commonalities. The effects for more knowledgeable consumers were reversed, because they recognized the technical synergies in manufacturing tennis racquets and golf clubs.

   Zhang and Sood showed a similar pattern of knowledge effects based on age. Children— who have less brand knowledge than adults—were more likely to evaluate extensions on the basis of surface cues (such as brand name linguistic characteristics of an extension, for example whether a brand name rhymed or not) while adults were more likely to use deep cues (like category similarity between the parent brand and extension category).72

4. High-quality brands stretch farther than average-quality brands, although both types have boundaries. Consumers often see high-quality brands as more credible, expert, and trustworthy. As a result, even if they believe a relatively distant extension does not really fit with the brand, they may be more willing to give a high-quality brand the benefit of the doubt than a brand they see as average in quality.73

   Thus, one important benefit of building a strong brand is that it can extend more easily into more diverse categories.74 Fedorikhin, Park, and Thomson found that if consumers had a high degree of attachment with a brand, they were willing to pay more for an extension, recommend it to others, and forgive any mishaps.75 Similarly, Yeung and Wyer showed that if a brand evokes a strong positive emotional reaction, consumers are likely to be less influenced by the fit of the extension.76

   Regardless, all brands have boundaries, as a number of observers have persuasively argued by pointing out ridiculous, and even comical, hypothetical brand extension possibilities. As Tauber once noted, few consumers would want Jell-O shoelaces or Tide frozen entrees!

5. A brand that consumers see as prototypical for a product category can be difficult to extend outside the category. As a caveat to the conclusion above, if consumers see a brand as exemplifying a category too strongly, it may be difficult for them to think of it in any other way. Numerous examples exist of category leaders that have failed in introducing brand extensions.77

   Bayer, a brand synonymous with aspirin, ran into a stumbling block introducing the Bayer Select line of specialized nonaspirin painkillers.78 Chiquita was unsuccessful in its attempt to move beyond its strong “banana” association with a frozen juice bar extension.79 Country Time could not overcome its “lemonade” association to introduce an apple cider. Perhaps the most extreme examples are brands that lost their trademark distinctiveness and became a generic term for the category, such as Thermos and Kleenex. To illustrate the difficulty a prototypical brand may have in extending, consider the experiences of Clorox.

   Clorox

   Clorox is a well-known brand whose name is virtually synonymous with bleach. In 1988, Clorox took on consumer goods giants Procter & Gamble and Unilever by introducing the first bleach with detergent. After pouring $225 million into the development and distribution of its detergent products over three years, Clorox was able to achieve only a 3 percent market share. Despite being beaten to market, P&G subsequently introduced Tide with Bleach and was able to achieve a 17 percent share. Reluctantly, Clorox chose to exit the market. Its failure can certainly be attributed in part to the fact that consumers could think of Clorox only in a very limited sense as a bleach product. In a combined “laundry detergent with bleach” product, too, they see laundry detergent as the primary ingredient and bleach as secondary. As a result, in this market we might expect a laundry detergent extension such as Tide with Bleach to have an advantage over a bleach extension such as Clorox. On the other hand, Clorox has successfully extended its brand into household cleaning products like toilet bowl cleaners, where the bleach ingredient is seen as more relevant.80

   

   Source: Keri Miksza

   The relationship between primary and secondary ingredients Clorox may have encountered might also explain why Aunt Jemima was successful in introducing a pancake syrup extension from its well-liked pancake mix product, but syrup maker Log Cabin was less successful in introducing a pancake mix extension: pancake mix is seen as a more dominant ingredient than pancake syrup in breakfast pancakes.

6. Concrete attribute associations tend to be more difficult to extend than abstract benefit associations. The limits to market leaders’ extension boundaries may be more rigid because many market leaders have strong concrete product attribute associations. These may even be reinforced by their names, like Liquid Paper, Cheez Whiz, and Shredded Wheat.81 La-Z-Boy, for example, has struggled some to expand its strong usage imagery outside the narrow product line of recliners.

   Concrete attribute associations thus may not transfer as broadly to extension categories as more abstract attribute associations.82 For example, the Aaker and Keller study showed that consumers dismissed a hypothetical Heineken popcorn extension as potentially tasting bad or like beer, and a hypothetical Crest chewing gum extension as tasting unappealing or like toothpaste. In each case, consumers inferred a concrete attribute association for an extension that was technically feasible, even though common sense might have suggested that, logically, a manufacturer would not likely introduce a product with such an attribute.

   More abstract associations, on the other hand, may be more relevant across a wide set of categories because of their intangible nature. For example, Aaker and Keller also showed that the Vuarnet brand had a remarkable ability to transfer to a disparate set of product categories, such as sportswear, watches, wallets, and even skis. In these cases, complementarity may have led consumers to infer that the extension would have the “stylish” attribute associated with the Vuarnet name, and they valued such an association in the different contexts.

   We should note several caveats, however. First, parent brands’ concrete attributes can transfer to some product categories.83 A concrete attribute that is highly valued in the extension category because it creates a distinctive taste, ingredient, or component can often make the extension successful. According to Farquhar and Herr, such extensions might include Tylenol sinus medication, Oreo cookies and cream ice cream, and Arm & Hammer carpet deodorizer.84

   Second, abstract associations may not always transfer easily. This second caveat emerged from a study conducted by Bridges, Keller, and Sood, who examined the relative transferability of product-related brand information when it was represented either as an abstract brand association or as a concrete brand association. For example, one such comparison contrasted the relative transferability of a watch brand characterized by dominant concrete attribute associations such as “water-resistant quartz movements, a time-keeping mechanism encased in shockproof steel covers, and shatterproof crystal,” with that of a brand characterized by dominant abstract attribute associations such as “durable.”

   Although these authors expected the abstract brand representation to fare better, they found that, for several reasons, the two types of brand images extended equally well into a dissimilar product category—handbags. Perhaps the most important reason was that consumers did not believe the abstract benefit would have the same meaning in the extension category (durability does not necessarily “transfer” because durability for a watch is not the same as durability for a handbag).85

   Finally, Joiner and Loken, in a demonstration of the “inclusion effect” in a brand extension setting, showed that consumers often generalized possession of an attribute from a specific category (like Sony televisions) to a more general category (say, all Sony products) more readily than they generalized the attribute from the specific category (Sony televisions) to another specific category (Sony bicycles). The effect was greater the more the specific extension category was typical of the general category (Sony cameras are more typical than Sony bicycles).86

7. Consumers may transfer associations that are positive in the original product class but become negative in the extension context. Because they have different motivations or use the product differently in the extension category, consumers may not value a brand association as highly as the original product. For example, when Campbell test-marketed a tomato sauce with the Campbell’s name, it flopped. Apparently, Campbell’s strong associations to soup signaled to consumers that the new product would be watery. To give the product more credibility, Campbell changed the name to the Italian-sounding “Prego,” and the product has gone on to be a long-term success.

8. Consumers may infer negative associations about an extension, perhaps even based on other inferred positive associations. Even if consumers transfer positive associations from the parent brand to the extension, they may still infer other negative associations. For example, the Bridges, Keller, and Sood study showed that consumers who thought a proposed handbag extension from a hypothetical maker of durable watches also would be durable also assumed it would not be fashionable, helping to contribute to low extension evaluations.87

9. It can be difficult to extend into a product class that consumers see as easy to make. Consumers may dismiss some seemingly appropriate extensions if they see the product as comparatively easy to make and brand differences are hard to come by. Then a high-quality brand may seem incongruous; alternatively, consumers may feel the extension will attempt to command an unreasonable price premium and be too expensive.

   For example, Aaker and Keller showed that hypothetical extensions such as Heineken popcorn, Vidal Sassoon perfume, Crest shaving cream, and Häagen-Dazs cottage cheese received relatively poor marks from experimental subjects in part because all brands in the extension category were seen as being about the same in quality, suggesting that the proposed brand extension was unlikely to be superior to existing products.

   When consumers see the extension category as difficult to make, on the other hand, such that brands can vary a great deal in quality, an extension has a greater opportunity to differentiate itself, although consumers may also be less sure what the exact quality level of the extension will be.88

10. A successful extension can not only contribute to the parent brand image but also enable a brand to extend even farther. An extension can help the image of the parent brand by improving the strength, favorability, or uniqueness of its associations.89 For example, Keller and Aaker, as well as Swaminathan, Fox, and Reddy, showed that when consumers did not already have strongly held attitudes, the successful introduction of a brand extension improved their choice and evaluations of a parent brand they originally perceived to be of only average quality.

    If an extension changes the image and meaning of the brand, subsequent extensions that otherwise might not have seemed appropriate to consumers may make more sense and appear to be a better fit. Keller and Aaker showed that by taking little steps, that is, by introducing a series of closely related but increasingly distant extensions, marketers may insert brands into product categories that would have been much more difficult, or perhaps even impossible, to enter directly.90

    A successful extension thus helps brands grow in three important ways:

    1. By establishing a new market for the brand,

    2. By strengthening existing markets for the brand, and

    3. By opening up the possibility of additional new markets for the brand to subsequently enter.

    For example, when Toyota launched the successful Prius hybrid gasoline–electric car, it not only cast a positive halo on the Toyota corporate brand as a whole as innovative and environmentally concerned, but it also paved the way for the introduction of a whole family of four different Prius models.

    Similarly, when Apple introduced the iPod and iTunes digital music systems, they quickly became the market leader, representing one of the company’s most successful new products ever. It also provided a halo effect that significantly boosted sales for the company’s existing computer and software products. Finally, it made it easier for the company to introduce the iPhone smartphone and perhaps even the iPad tablet computer.

    Different factors affect the success of multiple extensions. Boush and Loken found that consumers evaluated far extensions from a “broad” brand more favorably than from a “narrow” brand.91 Dacin and Smith have shown that if the perceived quality levels of different members of a brand portfolio are more uniform, then consumers tend to make higher, more confident evaluations of a proposed new extension.92 They also showed that a firm that had demonstrated little variance in quality across a diverse set of product categories was better able to overcome perceptions of poor extension fit. It is as if consumers in this case think, “Whatever this company does, it tends to do well.”

    In an empirical study of 95 brands in 11 nondurable consumer goods categories, Sullivan found that, in terms of stages of the product category life cycle, early-entering brand extensions did not perform as well, on average, as either early-entering new-name products or late-entering brand extensions.93

    Shine, Park, and Wyer demonstrate an interesting brand synergy effect of multiple extensions. The simultaneous introduction of two brand extensions (e.g., two digital cameras) had an effect on consumer evaluations of the extensions independent of their similarity or fit to the parent brand (e.g., Xerox). Consumers appear to view a related set of products from a single manufacturer as inherently appealing.94 Mao and Krishnan point out that consumers may form their perceptions of extension fit very differently when a brand operates in multiple product domains.95

11. An unsuccessful extension hurts the parent brand only when there is a strong basis of fit between the two. The general rule of thumb emerging from academic research and industry experience is that an unsuccessful brand extension can damage the parent brand only when there is a high degree of similarity or fit—for example, in the case of a failed line extension in the same category.

    Roedder John and Loken found that perceptions of quality for a parent brand in the health and beauty aids area decreased with the hypothetical introduction of a lower-quality extension in a similar product category (shampoo). Quality perceptions of the parent brand were unaffected, however, when the proposed extension was in a dissimilar product category (facial tissue).96

    Similarly, Keller and Aaker, as well as Romeo, found that unsuccessful extensions in dissimilar product categories did not affect evaluations of the parent brand.97 When the brand extension is further removed, it seems easier for consumers to compartmentalize the brand’s products and disregard its performance in what is seen as an unrelated product category.

    Additional research reinforces and amplifies this conclusion. Roedder John, Loken, and Joiner found that dilution effects were less likely to be present with flagship products; they occurred with line extensions but were not always evident for more dissimilar category extensions.98

    Gürhan-Canli and Maheswaran extended the results of these studies by considering the moderating effect of consumer motivation and extension typicality.99 In high-motivation conditions, they found that incongruent extensions were scrutinized in detail and led to the modification of family brand evaluations, regardless of the typicality of the extensions. In low-motivation conditions, however, brand evaluations were more extreme in the context of high (than low) typicality. Because consumers considered the less typical extension an exception, it had reduced impact.

    Consistent with these high-motivation findings, Milberg and colleagues found that negative feedback effects were present when (1) consumers perceived extensions as belonging to product categories dissimilar from those associated with the family brand, and (2) extension attribute information was inconsistent with image beliefs that consumers associated with the family brand.100

    In terms of individual differences, Lane and Jacobson found some evidence of a negative reciprocal impact from brand extensions, especially for high-need-for-cognition subjects, but did not explore extension similarity differences.101 Kirmani, Sood, and Bridges found dilution effects with owners of prestige-image automobiles when low-priced extensions were introduced, but not with owners of nonprestige automobiles or nonowners of either automobile.102

    Finally, Morrin examined the impact of brand extensions on the strength of parent brand associations in memory. Two computer-based studies revealed that exposing consumers to brand extension information strengthened rather than weakened parent brand associations in memory, particularly for parent brands that were dominant in their original product category. Higher fit also resulted in greater facilitation, but only for nondominant parent brands. Moreover, the advertised introduction of an extension did not improve memory of the parent brand as much as the same level of advertising directly promoting the parent.103

12. An unsuccessful extension does not prevent a firm from backtracking and introducing a more similar extension. The Keller and Aaker study also showed that unsuccessful extensions do not necessarily prevent a company from retrenching and later introducing a more similar extension. The failure of Levi’s Tailored Classics is instructive in that regard.

    Levi’s Tailored Classics

    In the early 1980s, Levi Strauss attempted to introduce a Tailored Classics line of men’s suits, targeted to independent-thinking “clotheshorses,” dubbed “Classic Individualists.” Although the suit was not supposed to need tailoring, to allow for the better fit necessary for these demanding consumers, Levi designed the suit slacks and coat to be sold as separates. It chose to price these wool suits quite competitively and to distribute them through its existing department store accounts, instead of the specialty stores where the classic individualist traditionally shopped. Despite a determined marketing effort, the product failed to achieve its desired sales goals. There were problems with the chosen target market, distribution channels, and product design, but perhaps the most fundamental problem was the lack of fit between the Levi’s informal, rugged, outdoor image and the image the company sought from its suits. Despite the ultimate withdrawal of the product, Levi Strauss later was able to execute one of the most successful apparel launches ever—Dockers pants—an extension much closer in fit and more strongly sub-branded.104

    As these experiences with brand extensions illustrate, failure does not doom a firm never to be able to introduce any extensions—certainly not for a brand with as much equity as Levi. An unsuccessful extension does, however, create a “perceptual boundary” of sorts, in that it reveals the limits of the brand in the minds of consumers.

13. Vertical extensions can be difficult and often require sub-branding strategies. Some academic research has investigated vertical extension. In an empirical study of the U.S. mountain bicycle industry, Randall, Ulrich, and Reibstein found that brand price premium was positively correlated with the quality of the lowest-quality model in the product line for the lower-quality segments of the market; for the upper-quality segments of the market, brand price premium was also significantly positively correlated with the quality of the highest-quality model in the product line. They concluded that these results suggest managers wishing to maximize the equity of their brands should offer only high-quality products, although overall profit maximization could dictate a different strategy.105

    Hamilton and Chernev show that upscale extensions increase the price image of a brand and downscale extensions decrease its price image when consumers are browsing or just looking around, but that does not necessarily apply when consumers are actively looking to make a purchase. In the latter case, the effects can even be reversed: upscale extensions may actually decrease price image and downscale extensions increase it if consumers have an explicit buying goal.106

    Kirmani, Sood, and Bridges examined the “ownership effect”—whereby owners have more favorable responses than nonowners to brand extensions—in the context of brand line stretches. They found that the ownership effect occurred for upward and downward stretches of nonprestige brands (like Acura) and for upward stretches of prestige brands (like Calvin Klein and BMW). For downward stretches of prestige brands, however, the ownership effect did not occur because of owners’ desires to maintain brand exclusivity. In this situation, a sub-branding strategy protected owners’ parent brand attitudes from dilution.107

14. The most effective advertising strategy for an extension is one that emphasizes information about the extension (rather than reminders about the parent brand). A number of studies have shown that the information provided about brand extensions, by triggering selective retrieval from memory, may frame the consumer decision process and affect extension evaluations. In general, the most effective strategy appears to be one that recognizes the type of information already salient for the brand in the minds of consumers when they first consider the proposed extension, and that highlights additional information they would otherwise overlook or misinterpret.

    Aaker and Keller found that elaborating briefly on specific extension attributes about which consumers were uncertain or concerned led to more favorable evaluations. Bridges, Keller, and Sood—as well as Klink and Smith—found that providing information could improve perceptions of fit when consumers perceived low fit between the brand and the extension, either by reinforcing an overlooked basis of fit or by addressing a distracting negative association.108

    Lane found that repeating an ad that evoked primarily benefit brand associations could overcome negative perceptions of a highly incongruent brand extension. Moreover, for moderately incongruent brand extensions, even ads that evoked peripheral brand associations (say, via brand packaging or character) could improve negative extension perceptions with sufficient repetition.109

    Research has also explored several other aspects of extension marketing programs. Sood and Keller found that “branding effects” in terms of inferences based on parent brand knowledge operated both in the absence and presence of product experience with an extension, although they were less pronounced or, in the case of an unambiguous negative experience, even nonexistent.110

    In considering the effects of retailer displays, Buchanan, Simmons, and Bickart found that evaluations of a high-equity brand could be diminished by an unfamiliar competitive brand when (1) a mixed display structure led consumers to believe the competitive brand was relevant and useful for judging the high-equity brand, (2) the precedence given to one brand over another in the display made expectations about brand differences or similarities more evident to consumers, and (3) the unfamiliar competitive brand disconfirmed these expectations.111

15. Individual differences can affect how consumers make an extension decision and will moderate extension effects. Consumers vary in their short-term or long-term motivation, ability, and opportunity to evaluate an extension in a number of important ways. Researchers have shown how these differences can affect extension fit and evaluations, as follows.

    Monga and John demonstrate that one important individual difference in extension evaluations is whether consumers are analytical or holistic thinkers. Analytic thinkers focus more on comparing specific attributes or benefits of the parent brand and extension; holistic thinkers focus more on comparing overall attitudes and judgments of the parent brand and extension. Analytical and holistic thinkers both gave prestige brands permission to extend widely, but holistic thinkers gave functional brands much greater permission to extend than analytical thinkers.112

    Similarly, Yorkston, Nunes, and Matta show that consumers known as incremental theorists, who believe the personality traits of a brand are malleable, are more accepting of brand extensions than consumers known as entity theorists, who believe a brand’s traits are fixed.113

    Another important individual difference relates to self-construal, or how people view and make sense of life and their life.114 A person with an independent self-construal is more concerned with the uniqueness of individuals; a person with an interdependent self- construal is more concerned with relationships between and among individuals.

    In a branding context, Ahluwalia posited that a consumer with an interdependent self-construal should be better able to uncover the possible relationships among a brand extension and its parent brand and thus have higher perceptions of extension fit and favorability. In her study, these effects were observed as long as consumers with interdependent self-construal were sufficiently motivated.115

    Similarly, Puligadda, Ross, and Grewal argue that brand-schematic consumers are more likely than others to process or organize information according to their brand knowledge. Brand-aschematic consumers, on the other hand, use other information such as product characteristics or attributes as a frame of reference. Brand schematic consumers were shown to be more likely to see the similarity in a brand extension concept.116

    Another important individual difference between consumers is what academics call regulatory focus. This deals with motivation and how people go about pursuing their goals. Individuals with a prevention focus are concerned with negative outcomes and avoiding losses via safety, security, responsibility, and so on. Individuals with a promotion focus are concerned with positive outcomes, seeking gains and pleasure and avoiding missed opportunities.117

    Yeo and Park showed that consumers who are focused on prevention tend to judge dissimilar extensions less favorably than consumers who focus on promotion, due to their different interpretations of risk.118 Relatedly, Chang, Lin, and Chang showed that promotion-focused consumers are more likely to focus abstractly on the overlap in benefits in judging an extension, whereas prevention-focused consumers are more likely to focus concretely on sheer category similarity.119

    Temporal factors can affect extension evaluations. Barone, Miniard, and Romeo experimentally demonstrated that positive mood led consumers to think more positively of extensions they viewed as moderately similar to a brand they valuated favorably (as opposed to very similar or dissimilar).120

16. Cultural differences across markets can influence extension success. Building in part on branding research on individual differences, much recent research has explored how different cultures respond differently to brand extensions. Monga and John, as well as Ng and Houston, have shown that consumers from Eastern cultures (such as China) have a more holistic style of thinking and perceive higher levels of extension fit than do consumers from Western cultures (like the United States) who have a more analytical style of thinking.121

    Dilution effects for a typical or similar extension that fails also can vary by culture and consumer motivation: Consumers from Eastern cultures exhibit significantly greater dilution when their motivation is high; consumers from Western cultures exhibit significantly greater dilution when their motivation is low.122

    Additionally, Torelli and Ahluwalia show that cultural congruency can aid culturally consistent brand extensions over and beyond the effects of perceived fit. They note that a cultural congruent brand extension might be something like Sony electric car; a culturally incongruent car might be something like Sony cappuccino-macchiato maker. According to the research, beyond the inherent levels of fit that any electronic manufacturer might enjoy with an electric car, Sony would be expected to get an extra boost in fit and evaluations because of its Japanese country of origin and Japan’s strong association with electronics.123