Line Extensions Essay Example

By offering a line extension the company is taking less of a risk than introducing a brand new product. Coke took less of a risk by developing Vanilla Coke. The Coke name is well established and adding a new flavor may add market share and increase profitability. There are several components for adding a line extension. First timeliness of adding this new product, understanding the consumer choice, thinking beyond purchase intent, looking at data for existing product sand is there a consumer driven need for this product? These are all the means necessary for its success.

The paper will examine the components of line extensions and theories for success and failure.

Literature Review In studying more than 300 brand extensions, it was determined that there are types of Brand Extensions. First, a similar product in a different form for the original parent product such a Jell-O pudding pops versus traditional Jell-O pudding. Second, a change in the original product flavor such as Cherry Coke. Third, when a brand owns an attribute of feature that can be extended.

For example, the brand name Arm and Hammer stretching to the toothpaste and deodorant market.

Fourth, the use of the brands reputation and expertise in the marketplace assists in helping customers choose. Gerber has done a great job adding baby clothes and baby toys to their existing product line of baby foods. Fifth, some brand extensions are a natural fit to adding certain products.

For example, Buttons pasta added tomato paste and sauces to their product line. Sixth, some brand extensions are vertical extensions of what they currently offer to launch products in different forms like the Toll

House pre made cookie dough instead of just the chocolate morsels.

Seventh, many brand extensions represent a marketers effort to sell something else to its customer base such as VISA traveler's checks. Lastly, certain brands convey status and create an image. This branding can create a lifestyle or a badge identifying themselves with the product.

Harley Davidson has done this well with clothes, housewives and many other products. (www. Overextension. Org) Models and Theories In the 1 990 Brand Extension model by Asker and Keller provided a consumer behavior and conceptual framework for line extensions using three dimensions to measure the fit for extension and its potential for success.

First, two product classes (the extension and parent brand) need to be complementary in satisfying the customer specific needs.

Secondly, the substitution of two products that have the same user purpose could potentially replace one another. Third, the ability of the manufacturer to make a product that is similar and could substitute for the original product. (www. Wisped. Org/wick/Brand_extension). "A successful and lasting brand extension must have three things: a logical fit with the parent brand; leverage for competitive advantage, and the opportunity enhance the brand and produce sales.

" (www. Questionnaires. Com) There are several reasons why companies rely on line extensions as part of their marketing strategies. Line extensions provide a wide variety of good under a single name brand and manufacturers us this as a short-term competitive edge to increase the rand's control over limited shelf space. An example of a successful line extensions campaigns is Auditors Cool Ranch Chips whose sales rose to more than $1 billion. They have since added on

more than 14 other varieties.

Categorization Theory Categorization theory is a fundamental theory to explore the effects of brand extensions.

Consumers are faced with thousands of product choices. Through their research it was found that initially the consumer is confused but in order to make Sense Of all the choices they categorize by brand association and images that they have seen and used through previous past experiences. The consumer can evaluate the extension brand by its parent brand.

If they like the parent brand and have had pleasant past experiences it helps narrow down their choices. Consumers can judge an extension brand by his category memory. They categorize this new information into a brand or specific class label thus already forming a bond with that product line.

According to New Products and the Pivotal Consumer by Catalina, service line extensions impact your brand. With 27% of sales off brand's new product line extension, and 42% of purchases by existing brand buyers, cannibalize ales of the brands' other products (Catalina, 2012).

You need to properly leverage brands and select line extensions that are targeted to specific moments in people's lives and actually change their behavior. Marketers need to identify a core group of people who will try and adopt line extension in to their lives.

Choice data: This data is consumer relevant that provides clear results allowing a business to make decision that that goes beyond standard methods. It uses multiple types of data including rating frequency, ranking, and consumer choice. It incorporates flexible measures and most relevant customer ideas. It is used for looking at new item line extensions and rationalizing current portfolios.

(Handball, 2013).

Successful Line Extensions For an extension to be successful there needs to be some logical connection with the original. A weak or nonexistent association can result in diluting and damaging the parent brand.

Some examples of successful line extensions are: Cataracts coffee which added ice cream to its repertoire and Quaker branched off to granola bars. They key is to leverage existing customers that already have your brand loyalty and increase profits with a new product offering.

To line extend or not to line extend that is the question.... To use line extensions or not is unclear in the literature and points to opposing viewpoints. Authors Asker and Keller (1990) found that there is no significant evidence that brand names can be diluted by unsuccessful line extensions.

Whereas, Reorder-John (1993) found that the dilution effects does occur when there is inconsistency of the product category, marketing messages, and lack of similarity and familiarity. In addition, Martinez and De Cornerstone (2004) "classify the brand image in two types: the general brand image and the product brand image. They suggest that if the brand name is strong enough as Nikkei or Sony, the negative impact has no specific damage on general brand image and the dilution effect is greater on product brand image than on general brand image".

Consequently, consumers may maintain their belief about the attributes and feelings about the parent brand, however their study does show that "brand extension dilutes the brand image, changing the beliefs and association in consumers' mind". (Martinez, 2004) The review of literature showed both points of view and it was difficult to ascertain what was correct. According to Kellogg think

tank report extending brand allows the product to stay up to date and responds to the ever changing tastes and expectations of the consumer.

Brand extensions prove to be more economical because you can showcase more than one brand at a time in a commercial or print add. The consumer does not need to be introduced to a new name. Brand extension is the only way of defending a brand at risk in a basic market. It gives access to reinforcement of the capital image. For example Kellogg produces many different types of corn flakes.

The new variety does not take away from the original product adjust it enhances it giving the consumer more options. According to the article: How far is too far with brand and line extensions?

Many line extensions are successful in the short term not in the long term. Line extensions undermine the position of the base brand. The author states that most line extensions are not profitable. The same hold true in the case of Budweiser.

In 1981 Budweiser added the line extension Bud Light. It was successful at first and took seven years to see that it was eating away at its overall market share. According to the author Rise, 'line extensions have a hockey stick effect, short term you get the blade and score a few goals. Long term you get the shaft. En extensions are unstable over the long haul and will damage your core brand" (Rise, 2009). Brand Extension Failure The perfect example of brand extension failure still holds true today.

The "New Coke" debacle in 1985. Coca-Cola underestimated the power Of its first brand. They

not only extended the brand of Coke but, decided to do away with the original and replace it with New Coke. This decision has since been referred to as "the biggest marketing blunder of all time".

A large percentage of the IIS boycotted the new product. It took less than three months to bring back the original.

This mistake damaged all brand equity and took many years and millions to recover. A poll of 1 1 ,OHO Decade readers identified the ten worst brand extensions for 201 3 listed in order of most votes are as follows: l.

Virgin Water Purifier (Steve Win) 2. Sensation Outerwear 3. Smith and Wesson Apparel 4. Chicken Soup for the Dog Lover's Soul 5. Arizona Nachos n' Cheese Dip 6. Dry.

Pepper Marinade 7. Snooker's Super Tan (from the Jersey Shore Series) Kid's furniture 9. Eva Longhorn's She Steakhouse For Women 8. Paula Eden 10 Zippy The Woman Perfume (shaped like a Zippy lighter) Choices, Choices, Choices.

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Consumers have so many choices. In a given supermarket there are 285 varieties of soup, 175 salad dressings, 75 types of tea, and 230 different types of soups most of which are line extensions. All these choices cause a crunch in store shelf space. Wall-Mart is threatening to dump brands that are not top sellers to replace them will their cheaper store brands. Due to the tough economic times shoppers are buying less and looking for a bargain.

They have even found that 77% of customers are sticking to less expensive private labels (Civilian, 2010). Too many choices can paralyze a person's decision making.

In 1995 Sheens eyeliner did the Jam study

to prove this point. She set up a booth of jam samples in a California gourmet market. Every few hours they switched up the selection of offering 6 jams or 24 jams choices. On average a customer tasted two jams.

They found that 60% of customers were drawn to the large assortment of the 24 jam display but only 3% actually bought the product. Whereas only 40% came to the smaller display of 6 jams however 30% purchased the jams. The research shows that an excess of choices often leads to us being less satisfied once we actually decide. Leaving a nagging feeling you could have done better.

According to author Wallace too many choices causes paralysis. Too many choices can be overwhelming.

According to the research you should not offer between 5 and 9 choices. Too many consumer choices could not be more obvious than in the toothpaste business. With 102 new choices hitting shelves in 2001 and 69 and 2011 consumers are more than overwhelmed. Stores are trying to simplify. In January of 2011 there were 352 types or sizes Photostats which was down from 412 in March of 2008.

Procter and Gamble states that is significantly reducing the number of oral care products it makes. Wee have mom to realize that fewer is betted' (Bryon, 2011 Supernal a supermarket giant has capped the number of package sizes and flavor variations. The director of Supernal feels that most customers won't be able to tell the difference between the six variations of mint. With toothpaste having the strongest brand loyalty in stores and 93% of US adults using toothpaste there is little room to

recruit new users. So for toothpaste line extending is a powerful way to retain and hopefully recruit customers from your rival companies.

In the TED talk with Barry Schwartz he stated that the overwhelming choices reduce paralysis rather than liberation.

He gives an example of voluntary retirement plans from Vanguard for every 10 mutual funds offered the rate of participation went down 2%. He relates this to the overwhelming options to choose from and the person's fear of picking the wrong one. Therefore the person never makes a decision and loses out on the employer matching benefit. Schwartz believes more choices equates to less satisfaction.

Adding of options increases expectations and the consumer will forever we waiting for the best when it could be right in front of them.

Another example was used that supports this view point. New York City has the highest rate of bachelors per capita in the East Coast. There are so many beautiful women to choose from so it is hard to make a decision and settle. It is suggested that bachelor could always be wondering if he picked the best, most beautiful woman. Conclusion The literature concluded that in most cases too many choices were not in the best interest of the parent brand.

Believe that there is a down side to line extensions if the new product is not well received or if there is a dilution of the product.

Extended a parent brand leaves potential for failure and may damage the original products within the brand. There is also a possibility for competition between the parent product and the line extensions. The line extension product must clearly

differentiate itself from its parent product. Many authors suggest is can dilute the main product. It can offer too many choices to the customer, confuse and paralyze consumers and ultimately leave the customer feeling less satisfied with their decision.

In the short term success can be seen however, in the long run it seems to cannibalize the parent product reabsorbing the gained market share.