To Brand or To Extend?
Snapple, Gatorade, and Coca-Cola; three popular beverage drinks with brand value that numbers in the millions if not billions. Organizations strive to find products like these which can bring in not only significant profits, but a sustained competitive advantage. A simple way to test how valuable these brands are; compare the likelihood of you to buy a can labeled Coca-Cola and a can labeled Soda.
While it is great to introduce a new bestseller brand, can it be as valuable to sell an associated or extended brand? Can Coca-Cola sell a version of itself that will also make millions of dollar? Here is a big surprise for 2009, 93% of the best-selling new brands were not “new brands” but “extended brands”. Do you remember Bud Light Lime Beer, Campbell's Select Harvest Soup, and Dreyer's/Edy's Fun Flavors Ice Cream? These products were some of the industry leaders for product revenue [for newly introduced products] and they are certainly not unknown names to the consumer.
Studies from the Information Research Institute supports these findings as 46% of firms prefer to use extended brands for new products in order to capitalize on brand equity [and reduce advertisement costs to build product awareness]. Very much like “replacement R&D” in SABRE, organizations are touting this strategy with an additional knowledge in mind; consumers value health-conscious products and convenience-related products.
While “to brand or to extend” is the question, any good marketing plan must not only be strategically sound, but environmentally as well. A strategy that does not match the environment is bound to fail.
http://www.adweek.com/aw/content_display/news/client/e3i121152486b7856cddad1cfc160daf2e5
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I agree that in some cases, it is more beneficial to use extended brands to leverage their brand equity. However, it is also to keep in mind cases such as the Black & Decker one which we studied earlier this semester. The brand, Black & Decker, was associated with too many negative associations and attitudes that the company had to drop the brand from the Professional-Tradesmen segment and use the DeWalt brand instead, which proved to be successful. So, deciding whether to brand or extend draws in so many other factors, those of which include considering the 5 C's and 4 P's.
ReplyDeleteI think Brand Equity is so critical component of a firm's marketing strategy. Retailers are not the only players who place brandiing at the forefront of their strategy; many hospitals, NGO's, and even government agencies take particular care to their reputation and the use of brand as leverage during negotiations. I will speak more about that in my upcoming blogs. Extensions, however, is more important once a firm has established its place within a segment.
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