BUSI 520 Week 4 General Discussion Example

General Discussion: Brand Extensions and Brand Equity

BUSI 520 Strategic Marketing Management, General Discussion Thread and Replies

Thread by [Student Name]

The forum topic and the two classmates are composites standing in for the course's own prompts; the textbook and the research cited are real, and the requirements follow Liberty's public course guide for BUSI 520.

Thread

Every successful brand eventually faces the temptation to stretch. Launching a new product under a known name is cheaper than building a new brand, and consumers are more willing to try something from a name they trust. My answer to the forum question is that extensions build brand equity when consumers see a clear fit between the parent brand and the new product, and that they can weaken it when they do not, sometimes damaging what consumers believe about the original products as well.

Kotler and Keller (2016) define brand equity as the added value a brand gives a product, reflected in how consumers think, feel and act toward it. Keller (1993) located brand equity in what consumers remember: a brand has positive customer-based equity when knowing the name changes people's responses to its marketing for the better, compared with identical marketing for a product with no name attached, and that knowledge is made of awareness plus associations that ideally are strong, favorable and unique. An extension borrows from that knowledge, since consumers transfer their associations to the new product, and it also feeds back into it, since the new product adds or changes associations.

The research on what makes that transfer work began with Aaker and Keller (1990), who asked consumers to evaluate hypothetical extensions of well-known brands. They found that the quality consumers attributed to the parent brand carried over to the extension mainly when consumers saw the two as belonging together, either because the products complemented each other, could substitute for one another, or drew on the same skills. Quality alone did not save an extension that seemed to make no sense.

Later work confirmed and refined the finding. Völckner and Sattler (2006) studied more than one hundred extensions of fast-moving consumer goods brands and found that fit between the parent brand and the extension was the most important driver of success, followed by marketing support, retailer acceptance, the parent brand's conviction and its experience with prior extensions. Fit in their study was not only a matter of product similarity; it also involved whether the extension was consistent with the brand's image.

The risk runs the other way too. Loken and John (1993) found that an extension whose attributes were inconsistent with the parent brand's image, such as a gentle brand launching a harsh product, could dilute consumers' beliefs about the parent brand itself. An extension is never just a new product; it is a new statement about what the brand means.

Two examples show the range. Crest's move from toothpaste into teeth-whitening strips extended a brand already associated with oral care and dental science, a close fit on both product and image, and became a major line for the brand. By contrast, extensions that are frequently cited as cautionary tales in marketing courses tend to stretch a brand into a category where its associations become a liability, such as a household-goods brand on a food product, where consumers' associations with cleaning or chemicals transfer in the worst possible way.

For a brand manager, the guidance is clear, although applying it takes discipline, because the pressure to grow revenue quickly pushes managers toward any category where the name might sell. Before extending, map the brand's associations, not only its categories, and ask whether the new product fits what the brand means to consumers. Extensions that fit can strengthen equity by reinforcing core associations and reaching new customers. Extensions that do not fit should either be launched under a new or sub-brand or not launched at all. A sub-brand lets the company use some of its credibility, such as distribution relationships and reputation for quality, while keeping the new product's associations from flowing back into the parent's core meaning. Kotler and Keller (2016) note that the best extensions also give back to the parent brand, so the manager should ask not only whether the brand can carry the product but whether the product can strengthen the brand.

Reply to Jordan

Jordan, your thread on points of parity and points of difference made a strong case that most brands lose by trying to be different in too many ways. Your example of the fast-casual restaurant that advertised fresh ingredients, fast service, low prices and a fun atmosphere all at once, and stood for none of them, was a vivid illustration.

Kotler and Keller (2016) offer a useful test for your argument. Positioning, in their account, starts with a competitive frame of reference, the category and rivals the brand is measured against; then come points of parity, the associations a brand must share with competitors to be credible in that frame; and only then points of difference, the associations that are strong, favorable and unique to the brand. The order matters: a brand must first convince customers it belongs in the category, by matching competitors on the essentials, before its points of difference can count for anything. A restaurant that fails on parity, say on cleanliness or basic speed, will not win customers with a clever difference.

Your thread connects to mine on extensions. Keller and Lehmann (2006), reviewing the research on brands, noted that a brand's associations shape how far it can be extended, which is another way of saying that points of difference travel only to categories where they still matter. When a brand extends into a new category, its points of parity change. Crest's whitening strips had to match the parity points of the whitening category, effectiveness and safety, while carrying Crest's points of difference, dental credibility, into a market where those differences were valuable. Extensions that fail often do so because the parent brand's points of difference become irrelevant or even negative in the new category.

How would you advise your restaurant to choose its single point of difference? I wonder whether customer research, rather than management preference, should decide which of the four claims to keep, since the right difference is the one customers value and competitors cannot easily match.

Reply to Simone

Simone, I enjoyed your thread on blue ocean strategy, and I appreciated that you did not treat it as a magic formula. Your point that most companies keep competing in crowded markets because creating a new one is risky and uncertain was well made.

Kim and Mauborgne (2005) argued that companies can create uncontested market space by simultaneously pursuing differentiation and low cost, eliminating and reducing factors the industry takes for granted while raising and creating factors it has never offered. Their Cirque du Soleil example, which removed star performers and animal acts while adding theatrical storylines, shows how that combination can attract customers who were not buying from the industry at all.

I think your topic connects to brand equity in an interesting way. A blue ocean, once created, attracts imitators, and the creator's main protection is often its brand. Kotler and Keller (2016) note that strong brands give firms some insulation from competitors, and a company that has created a new market space usually has a short window to build the associations that will keep customers loyal once copies arrive. Your example of the meal-kit companies fits this pattern: the category was new, but imitators arrived quickly, and the brands that survived were those that built distinctive associations rather than relying on being first.

Do you think blue ocean strategy gives enough attention to brand building after the ocean is created? It seems to me that the strategy explains how to find uncontested space but says less about how to hold it once competitors notice.

References

Aaker, D. A., & Keller, K. L. (1990). Consumer evaluations of brand extensions. Journal of Marketing, 54(1), 27-41. https://doi.org/10.1177/002224299005400102

Keller, K. L. (1993). Conceptualizing, measuring, and managing customer-based brand equity. Journal of Marketing, 57(1), 1-22. https://doi.org/10.1177/002224299305700101

Keller, K. L., & Lehmann, D. R. (2006). Brands and branding: Research findings and future priorities. Marketing Science, 25(6), 740-759. https://doi.org/10.1287/mksc.1050.0153

Kim, W. C., & Mauborgne, R. (2005). Blue ocean strategy: How to create uncontested market space and make the competition irrelevant. Harvard Business School Press.

Kotler, P., & Keller, K. L. (2016). Marketing management (15th ed.). Pearson.

Loken, B., & John, D. R. (1993). Diluting brand beliefs: When do brand extensions have a negative impact? Journal of Marketing, 57(3), 71-84. https://doi.org/10.1177/002224299305700305

Völckner, F., & Sattler, H. (2006). Drivers of brand extension success. Journal of Marketing, 70(2), 18-34. https://doi.org/10.1509/jmkg.70.2.018