Brand Strategy Decision

A company has five choices when it comes to brand strategy. The company can introduce line extensions (existing brand name extended to new sizes or flavors in the existing product category), brand extensions (brand names extended to new-product categories), multibrands (new brand names introduced in the same product category), new brands (new brand name for a new category product), and co-brands (brands bearing two or more well-known brand names).

Line Extensions Line extensions introduce additional items in the same product category under the same brand name, such as new flavors, forms, colors, added ingredients, and package sizes. Dannon introduced several Dannon yogurt line extensions, including fat-free "light" yogurt and dessert flavors such as "mint chocolate cream pie." The vast majority of new products are actually line extensions.

Line extension involves risks and has provoked heated debate among marketing professionals.14 On the downside, extensions may lead to the brand name losing its specific meaning; Ries and Trout call this the "line-extension trap."15 A consumer asking for a Coke in the past would receive a 6.5-ounce bottle. Today the seller will have to ask: New, Classic, or Cherry Coke? Regular or diet? With or without caffeine? Bottle or can? Sometimes the original brand identity is so strong that its line extensions serve only to confuse and do not sell enough to cover development and promotion costs. For example, A-1 poultry sauce flopped because people identify A-1 with beef.

However, the success of a new line extension sometimes hurts other items in the line. Although Fig Newton's cousins Cranberry Newtons, Blueberry Newtons, and Apple Newtons all sell well for Nabisco, the original Fig Newton now seems like just another flavor. A line extension works best when it takes sales away from rivals, not when it deflates or cannibalizes the company's other items.

On the upside, line extensions have a much higher chance of survival than do brand-new products. In fact, some marketing executives defend line extensions as the best way to build a business. Kimberly-Clark's Kleenex unit has had great success with line extensions. "We try to get facial tissue in every room of the home," says one Kimberly-Clark executive. "If it is there, it will get used." This philosophy led to 20 varieties of Kleenex facial tissues, including a line packaged for children.

Brand Extensions A company may use its existing brand name to launch new products in other categories. Autobytel.com, a pioneer of Internet-based car sales, used brand extensions to introduce automotive financing, insurance, and car repairs on its Web site. A recent trend in corporate brand-building is corporations licensing their names to manufacturers of a wide range of products—from bedding to shoes. Harley-Davidson, for example, uses licensing to reach audiences that are not part of its core market, with branded armchairs for women and branded a Barbie doll for the future generation of Harley purchasers.16

Brand-extension strategy offers many of the same advantages as line extensions—but it also involves risks. One risk is that the new product might disappoint buyers and damage their respect for the company's other products. Another is that the brand name may be inappropriate to the new product—consider Bic perfume, a classic failure because buyers did not associate the Bic brand with fragrance products. A third risk is brand dilution, which occurs when consumers no longer associate a brand with a specific product or highly similar products.

Multibrands A company will often introduce additional brands in the same product category. Sometimes the firm is trying to establish different features or appeal to different buying motives. Multibranding also enables the company to lock up more distributor shelf space and to protect its major brand by setting up flanker brands. For example, Seiko uses one brand for higher-priced watches (Seiko Lasalle) and another for lower-priced watches (Pulsar) to protect its flanks. Ideally, a company's brands within a category should cannibalize the competitors' brands and not each other. At the very least, net profits from multibrands should be larger despite some cannibalism.17

New Brands When a company launches products in a new category, it may find that none of its current brand names are appropriate. If Timex decides to make toothbrushes, it is not likely to call them Timex toothbrushes. Yet establishing a new brand name in the U.S. marketplace for a mass-consumer-packaged good can cost anywhere from $50 million to $100 million, making this an extremely critical decision.

Co-brands A rising phenomenon is the emergence of co-branding (also called dual branding), in which two or more well-known brands are combined in an offer. Each brand sponsor expects that the other brand name will strengthen preference or purchase intention. In the case of co-packaged products, each brand hopes it might be reaching a new audience by associating with the other brand.

Co-branding takes a variety of forms. One is ingredient co-branding, as when Volvo advertises that it uses Michelin tires or Betty Crocker's brownie mix includes Hershey's chocolate syrup. Another form is same-company co-branding, as when General Mills advertises Trix and Yoplait yogurt. Still another form is joint venture co-branding, as in the case of General Electric and Hitachi lightbulbs in Japan and the MSNBC Web site from Microsoft and NBC. Finally, there is multiple-sponsor co-branding, as in the case of Taligent, a technological alliance of Apple, IBM, and Motorola.18

Many manufacturers make components—motors, computer chips, carpet fibers—that enter into final branded products, and whose individual identity normally gets lost. These manufacturers hope their brand will be featured as part of the final product. Intel's consumer-directed brand campaign convinced many people to buy only PCs with "Intel Inside." As a result, many PC manufacturers buy chips from Intel at a premium price rather than buying equivalent chips from other suppliers.

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