Placing Consumer Needs at the Forefront of Your Brand Extension Strategy

The escalating cost of launching successful new brands in a competitive market creates greater pressure to leverage existing brands into new product categories. Brand extensions present Marketers with a new avenue for increasing the value of a brand to a company, depending on consumer acceptance of the brand across categories.

Growing a firm's revenues through brand extensions is not a new or unique proposition. Over 85% of companies plan to grow their existing brands through brand extensions,¹ with the hope of emulating such success stories as the Kraft174 brand's extension into salad dressing and the Dove174 brand's extension into facial care, deodorant and shampoo.

While strong opportunities for brand extensions certainly exist, Marketers must weigh their brand extension options carefully in light of consumers' unmet needs, existing and potential brand perceptions (both positive and negative), and the long-term strategy for the brand. These implications make it necessary for Marketers to identify success criteria for qualifying brand extensions - from a consumer perspective as well as a market perspective.

Brand Extension Critical Success Framework: Recognize Both Consumer and Market Perspectives

Ipsos Marketing, Consumer Goods has identified a framework of success factors to qualify brand extension opportunities (Figure 1). These success factors are drawn from both a consumer and a market perspective to identify the best areas to extend a brand.

Brand Extension Critical Success Framework

Consumer Perspective

Consumer evaluation of parent brand strength and the fit of that brand with the extension category have been identified as critical success factors since David Aaker and Kevin Keller's 1990 work on consumer evaluations of brand extensions.² Brands can be thought of as "filing cabinets" within a consumer's mind that hold their associations and meanings for that brand. The greater a brand's equity or strength, the larger those filing cabinets are; the better the fit of the extension category with the brand, the more likely it will be placed in the filing cabinet. The relationship of strength and the fit is important since a larger filing cabinet can hold a larger and more varied collection of associations. The Dove174 brand's extension into facial care, deodorants, and shampoos, and the Crest174 brand's extension into teeth whitening products (most notably Crest174 Whitestrips174) are examples of strong brands that extended into categories which were a good fit. In other cases, the strength of the brand or the fit may be weak and the result is an extension that never gains a solid position in the market, such as Harley Davidson's venture into perfume and Virgin's foray into the cola market.

Market Perspective

While measurement and interpretation of the consumer perspective is critical, brand extension opportunities need to be considered in the full context of our framework. This means that we must also understand market permeability, or the potential to gain share based on the size and fragmentation of the market, in order to fully understand the economic potential of brand extension opportunities.³ A thorough investigation of organizational capabilities (including culture and resources) also is necessary, as these areas often determine success or failure. For example, some drug manufacturers that are accustomed to working with long innovation and product cycles in a strict regulatory environment find it challenging to extend brands to consumer goods categories where the cycles are shorter and regulation is less strict. Our experience is that often these types of organizational issues are addressed after the economic potential and consumer perspectives are used to identify extension opportunities. While this process has the advantage of not limiting the scope of opportunity investigation, it creates a risk of pursuing opportunities where capabilities do not exist.

Consider the Strategic Implications of Brand Extensions

Current methods of brand extension research, which measure direct and indirect fit, do a good job of identifying existing market categories into which the brand can extend, but are often limited in their strategic application.

There are three strategic applications that an understanding of brand category fit would not address:

• Identifying opportunities that do not align with specific categories
• Understanding and leveraging brand drivers that can best position brand extensions for success
• Identifying competitive brand extension potential

The BRANDStretch methodology developed by Ipsos Marketing, Consumer Goods (Figure 2) addresses these types of strategic questions by focusing the opportunities for extending a brand on the unmet consumer needs that a brand can deliver on. This approach ensures that all potential areas of brand extendibility can be explored, not just areas defined by existing categories. Figure 2 shows how our BRANDStretch approach links existing categories, brands, and the brand's equity associations with consumers' unmet needs to form a more complete, competitive look at potential extendibility areas.

Brand Extendibility Direct/Indirect Fit Quadrant Map

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Concluding Remarks

Identifying opportunities for brand extensions is a vital part of any firm's continuing brand strategy. The consideration of multiple dimensions, including the relationship of categories, brand attributes and consumer needs, is of critical importance in the brand extension process. Equally important is the measurement of a brand's leverage associated with implementing specific brand extensions, frequently referenced in the negative as the risk of parent brand dilution.

Ipsos Marketing's BRANDStretch framework considers both the benefits and drawbacks of brand extensions and provides the market potential for future brand extension opportunities so you can develop a long-term strategy for success.

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¹ Taylor, David. The Brand Gym: A Practical Workout for Boosting Brand and Business. John Wiley & Sons Ltd. 2003.

² Aaker, David A. and Keller, Kevin L. "Consumer Evaluations of Brand Extensions," Journal of Marketing, 54 (1), 27-41. 1990.

³ For more information on market permeability, see Ipsos Marketing's Point of View Caution: Understand the Potential of the Market Before You Enter.