Brand development versus new product development ...

Brand development versus new product development: towards a process model of extension decisions Tim Ambler, Chris Styles

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This article considers the managerial processes that lead to the launch of successful line and brand extensions. It seeks to clarify the role, if any, that brand equity considerations have in the extension decision process. A case study approach is used. Data relating to 11 extension launches was collected from major fast-moving customer goods (FMCG) manufacturers in Europe, the USA, and Australia by The Boston Consulting Group (BCG). The output of the analysis is a set of propositions about the extension process, summarized in the form of a process model. The overall conclusion is that extension decisions are more about brand development than new product development.

Marketing Intelligence & Planning

1996] 10–19

14/7 [

© MCB University Press

ISSN 0263-4503]

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Introduction

Launching brand and line extensions has become a popular growth strategy, particularly in mature fast-moving consumer goods (FMCG) categories. With the huge costs and risks involved in launching new brands, many of which fail, extending an existing brand is seen by many as a more cost efficient and lower risk method of launching new products (Economist, 1991; Tauber, 1981; McWilliam, 1993; ). It has been argued that because an extension has a well established brand positioning to draw on, its chance of success is increased (Aaker and Keller, 1990; Boush and Loken, 1991; Sunde and Brodie, 1993). The popularity of brand and line extensions among practitioners over the last decade, and consequently as subjects for research amongst academics, has coincided with the emergence of the brand equity concept. The two have been linked: a brand’s equity has an impact on the success of extensions (Rangaswamy et al., 1993; Shocker and Weitz, 1988), and extensions in turn have an impact on a brand’s equity (Dacin and Smith, 1994; Keller and Aaker, 1992). Given the prevalence and importance of extensions, we need to understand how successful extensions come to market. The purpose of this paper is to explore the managerial processes that lead to the launch of successful brand and line extensions and establish the role, if any, that brand equity considerations have in the decision process. The study involved the collection and analysis of 11 case studies of successful extensions from nine major FMCG companies in Europe, the USA and Australia. The output is a process model of extension development which we contrast with traditional new product development models. Our conclusion is that bringing new products onto the market as extensions should be viewed more as a process of brand development than new product development.

Definitions and classifications

As a first step, we need to have a clear understanding of the concepts we are discussing.

We begin, therefore, by defining the core concepts of “brand”, “brand extension” and “line extension”. Defining a brand

Styles and Ambler (1995) identified two approaches to defining a brand. The first is the traditional product plus definition which views branding as an addition to the product. The brand is seen primarily as an identifier. Thus, in the new product development processes typically found in textbooks, the branding decision is one of the last decisions to be made. The second approach is the holistic view. Under this approach the focus is on the brand itself, which encompasses much more than just the product. The brand is considered to be the sum of all elements of the marketing mix: product is just one element, alongside price, promotion and distribution. The holistic approach defines a brand as “the promise of the bundles of attributes that someone buys and that provides satisfaction … The attributes that make up a brand may be real or illusory, rational or emotional, tangible or invisible” (Ambler, 1992). These attributes emanate from all elements of the marketing mix and all the brand’s product lines. The holistic view seems more relevant to the current environment dominated by brand and line extensions, as it takes into consideration all the different product lines which come under a single brand umbrella, i.e. a brand is made up of all its brand and line extensions, and the marketing activities that surround them, in addition to the original product line. Brand extensions versus line extensions

Tauber (1981) categorizes a firm’s growth opportunities using two dimensions: product category, and brand name used. The resulting matrix is shown in Figure 1. The key distinction in the matrix is between brand extension and line extension. A survey of the trade and academic literature reveals that each concept has been given a variety of definitions and that the terms are often used interchangeably. In the trade press, for example, the launch of a new range of flavours by the premium ice-cream brand Haagan-Dazs (i.e. same brand, same category)

Tim Ambler and Chris Styles Brand development versus new product development: towar ds a process model of extension decisions

Figure 1

Tauber’s (1981) growth matrix

In line with Tauber’s (1981) matrix, we will use the following definitions: • involve the use of an established brand name to enter a product category (Aaker and Keller, 1990). Examples include Sony’s mobile telephones (vs. televisions and stereos), Virgin cola (vs. records and airline) and Persil dishwashing liquid (vs. clothes detergent). in contrast, involve the use • of an established brand name for a new offering in the same product category (Reddy ., 1994). Examples would include Diet Coke, Ariel Color, Tide Liquid and Mercedes “S” class. While these classifications and definitions are quite clear in theory, the boundaries are much less clear in practice. For example, Sony’s range of mobile telephones would not be considered brand extensions if Sony’s market was defined more broadly as “consumer electronics”. Diet Coke could be placed in a new, more narrow category of “diet drinks”, “colas”, or “carbonated soft drinks” etc. Category definition, therefore, plays an important role. For research purposes, category definition is sometimes driven by the data being used, e.g. A.C. Nielsen data (Hardie, 1994). Brand extensions

Product category

Marketing Intelligence & Planning 14/7 [1996] 10–19

New

Brand name Existing

New

Existing

New brand

Flanker

new

Line extensions,

Brand extension

Line extension

et al


Note that Tauber uses the term " new product" wher e we have used "new brand", and "franchise extension" wher e we have used "brand extension".

was labelled the brand’s first “brand extension” (Dwek, 1993). In contrast, the launch of P&G’s Oil of Ulay Hydra-Gel, a moisturizer like the original range of products (i.e. also same brand, same category) was labelled a “line extension”. There is also some variation in the academic literature. Doyle’s (1994) definitions are as follows: A brand extension means using a brand name successfully established for one segment or channel to enter another one in the same broad market. Brand stretching means transferring the successful brand name to quite different markets.

In contrast, Kotler’s (1991) definition of brand extension is all encompassing: A brand extension strategy is any effort to extend a successful brand name to launch new or modified products or lines.

Extensions in practice Benefits and risks

The decision to launch a brand or line extension has both risks and benefits associated with it. These are summarized in Table I. On balance, there is limited evidence that brand extensions in particular have a higher success rate than new brands. One study, in a single firm, found that of products launched

Table I

Risk/benefit analysis of extensions

Factors affected by benefit/risk Efficiency benefits Effectiveness benefits

Risks to the extension Risks to the brand

Benefits/risks Lower cost to build-up awar eness Lower cost to achieve tar get trial levels Communication efficiencies as profile of whole brand lifted Higher acceptance of extension from established brand associations e.g. quality Brand positioning can be str engthened Creation of “mega-brand” (increased bargaining power with retailers) Effective defence against rivals Lack of funds allocated to launch (benefits overestimated) Over-estimation of benefits Poor “fit” with existing brand Brand dilution Cannibalization of existing lines Inter twined reputations of various lines Logistics/manufacturing inef ficiencies [

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six years earlier, 30 per cent of the new brands still existed compared to 50 per cent of brand extensions (Economist, 1990). Sullivan (1992) suggests that the maturity of a market may be an intervening variable. She found that the probability of a brand extension surviving more than six years could be as high as 93 per cent when the extension is launched into a mature market, as opposed to 75 per cent for new brands. However, this position is reversed in younger markets.

new category is quite different from the original. Thus, “opportunities to exploit a brand’s value are not limited to similar extension categories” (p. 227). A clear example of this is Virgin. Further, Dacin and Smith (1994) found Marketing Intelligence & that quality can be more important than fit. Planning As such, their results also suggest that 14/7 [1996] 10–19 extendibility is not necessarily bounded by fit. They conclude that a brand can be gradually extended into more diverse categories as long as a high degree of quality is maintained across extensions. As this happens, fit Successful extensions and “fit” becomes less important and the brand Most research on successful extensions becomes more extendible. relates specifically to brand extensions. For The two studies (Hardie, 1994; Reddy et al., example, Aaker and Keller (1990) and Sunde 1994) that have examined the success of line and Brodie (1993) concluded that consumers’ extensions found that share performance is acceptance of a brand extension increases if: positively related three factors: first, the parent brand is perceived as being of 1 the strength of to the parent brand; high quality; second, there is a perception of 2 similarity to other items in the parent “fit” between the new product category and brand; and the brand; and, third the category is seen as 3 the amount of advertising and promotion “difficult to make”, i.e. some expertise is support. needed. The issue of fit has also been explored by Park et al. (1991). Their research supported Brand equity the notion that, in evaluating brand extenA key objective of this paper is to assess the sions, consumers consider the perceived role of brand equity in the extension decision degree of fit between the extension and the process. The actual term “brand equity” brand. This fit relates to product feature simi- began to be used widely by US advertising larity (attributes, usage occasions, etc.) and practitioners in the early 1980s (Barwise, brand concept consistency, i.e. unique 1993) and was then taken up by academics. abstract meanings. The most positive evalua- The literature which has emerged suggests tions of brand extensions are given to those two distinct approaches to the definition and that have a high degree of fit on both dimenmeasurement of brand equity (Ambler and sions. Styles, 1994): bottom line or financial evaluation approaches on the one hand, which focus more on the value of the brand asset; and “…the probability of a brand extension surviving more than six consumer-based approaches on the other, years could be as high as 93 per cent when the extension is which focus more on the asset itself. This is a launched into a mature market, as opposed to 75 per cent for new primary source of confusion surrounding the brands…” concept – the distinction between assets and their valuation is not always clear. An asset However, the difficulty with the concept of fit such as a house may have many different is determining which conceptual dimension valuations, depending on the circumstances of the brand to base the extension on. and assumptions used for valuation, e.g. for McWilliam (1993) found that despite large sale, purchase, insurance, probate. The variaamounts of consumer research, these key tions of valuation neither change the asset dimensions may not be discovered until after itself nor deny its existence. the launch and subsequent failure of the To some extent, managers choose between extension. The concept of fit may in fact be taking profits today or storing them for the used more often by managers after launch as future. Brand equity is essentially that store a post-rationalization of success or failure of profits to be realized at a later date. Our (Barwise, 1993). definition, following Srivastava and Shocker While a number of other studies also sup(1991), of brand equity is as follows: port the notion of fit being important to brand Brand equity is the aggregation of all accumulated attitudes and behavior patterns in extension evaluation (Aaker and Keller, 1990; the extended minds of consumers, distribuBoush and Loken, 1991), recent research has tion channels and influence agents, which suggested that consumer acceptance can still will enhance future profits and long term be obtained without a close fit. For example, cash flow. Broniarczyk and Alba (1994) found that brand specific associations that are relevant to a The key elements of this definition are as new category can be leveraged even if the follows: [ 12 ] Tim Ambler and Chris Styles Brand development versus new product development: towar ds a process model of extension decisions

4 Marketing strategy development; 5 Business analysis (financial); 6 Physical product development (includes branding decision); 7 Market testing; Marketing Intelligence & 8 Commercialization. Planning 14/7 [1996] 10–19 According to Booz et al. (1982), the most successful new product innovators: first, make a consistent commitment of resources to new product development; second, design a new Brand equity and brand extensions product strategy that is linked to their strateOne stream of brand equity research has focused on brand extensions (Barwise, 1993). gic planning process; and third, establish Part of this work has explored the impact of a formal and sophisticated organizational arrangements for managing the new product brand’s equity on its extendibility, with the development process. general conclusion being that the firm can Cooper and Kleinschmidt (1990) examined leverage a brand’s existing equity in new past studies of new product success and concategories (Shocker and Weitz, 1988). ducted their own study of 200 moderate to high technology new product launches to “...The job of the brand manager is to maximize both profits and identify common success factors. The numbrand equity, not just sales, market share and short-term profits ber one success factor was unique superior alone...” product – products with a high product advantage succeeded 98 per cent of the time. Other success factors were process oriented, includResearch within this stream has found that ing: having a well-defined product concept highly valued brands (i.e. those with higher brand equity) extend more successfully (Ran- prior to development; achieving technological and marketing synergy; and ensuring gaswamy et al., 1993). Other research has quality execution at all stages of the process. looked at the reverse relationship: the effect of brand extensions on brand equity. As one In another study, successful product would expect, the findings are that successful launches in the electronics industry were brand extensions can have a positive effect on examined (Madique and Zirger, 1984). The the core brand, i.e. build brand equity (Dacin results suggested that success was greater and Smith, 1994; Keller and Aaker, 1992). Con- when there was: a deeper understanding of versely, poor brand extensions can “dilute” a customer needs; a higher performance-to-cost brand and its equity (Loken and John, 1993). ratio; an early introduction relative to comThere seems therefore to be a reciprocal rela- petitors; a high contribution margin; greater tionship between brand equity and brand cross-functional teamwork during the develextensions. opment process; more time spent announcing and launching the product; and greater top The new product development process management support for the project. Developing brand or line extensions is one Of note is that the focus so far has been on type of new product development (NPD). NPD product development from the “product plus” in general is a very expensive activity for branding perspective i.e. a product is develfirms to undertake. For example, Procter & oped which is branded at a later stage. We Gamble’s research and development costs wish to consider whether this process is during 1993/1994 were just over US$1 billion appropriate for new products launched as (Procter & Gamble, 1994). The process is also brand and line extensions, where the brand is high risk. Some estimates put the failure rate already established. of new products between 75 per cent and 80 per cent (Clancy and Shulman, 1991; Cooper and Kleinschmidt, 1991). Finding ways to The research questions improve the chance of success, therefore, is important. One approach is to look at improv- The purpose of this study is to examine the process of how FMCG extensions are brought ing the development process. The development process typically outlined to market, or: how do managers successfully extend FMCG brands? Specifically, we explore in marketing texts tends to follow a normathe following questions: tive decision sequence. Kotler’s (1991) eight• What are the main drivers behind line and point sequence is well-known: brand extensions? 1 Idea generation; 2 Idea screening; • How are extension decisions integrated 3 Concept development and testing; with the routine planning process? [ 13 ]



• it follows the holistic approach to branding; • “extended minds” such as automatic ordering programmes and other systems are included; and • this definition distinguishes the asset from its valuation. The job of the brand manager is to maximize both profits and brand equity, not just sales, market share and short-term profits alone.

Tim Ambler and Chris Styles Brand development versus new product development: towar ds a process model of extension decisions Marketing Intelligence & Planning 14/7 [1996] 10–19

• What are the key decision criteria for exten- 1 Category/brand definition and sion decisions? background: • What data are used in extension forecasting? • category background; • Who are the key players involved in the • description of extension concept and process? original brand; • success of launch. 2 Company policy/philosophy on brand and Methodology line extensions. 3 Description of the extension development Research approach and design process: Given the lack of research in the area, this • source/driver of idea; study is aimed at theory development as • key roles in the extension process; opposed to theory extension. It is therefore • decision process methodology/criteria. inductive in nature. The approach used is 4 The planning process. methodology based on the 5 Conclusions: originally developed by the two sociologists • What would you have done differently? Glaser and Strauss (1967). The approach can • What was the key to success? be summarized as: “… a qualitative research • What was the key motivator behind method that uses a systematic set of procelaunching the extension? dures to develop an inductively derived 6 Decision process flow chart. grounded theory about a phenomenon” (Strauss and Corbin, 1990, p. 24). Although The use of a global firm of management conoriginating in sociology, this method has sultants had the following advantages: been applied in a number of other disciplines • interviewers were trained and experienced including management studies (e.g. Hamel, in interviewing managers; 1991; Mintzberg, 1978; Pettigrew, 1979). In this • it gave the study access to an international study a number of cases were examined using pool of extensions; the same unit of analysis, i.e. a single brand • using a high profile and well-respected firm or line extension and the decision process known for conducting bench-marking studassociated with its launch. Such a multiple ies facilitated access and co-operation; and case design follows a replication logic, • the consultants were familiar with the counwhereby each case is analogous to a single tries, markets and respondents, and thus experiment. Achieving similar results for were able to verify data as it was collected. each case suggests replication, akin to The cases included in the study were not achieving similar results over a number of necessary from client firms of BCG. experiments (Yin, 1994). Details of the individual cases cannot be given because of confidentiality. However, a Cases summary of the pool of cases can be given as Eleven extensions were studied. They were selected on the basis of being successful line follows: • all extensions were from FMCG categories or brand extensions launched over the past and included food, cleaning products and five years. We only chose successful cases in cosmetics; FMCG categories given our goal of replica• there were eight line extensions and three tion, i.e. finding replications of the processes brand extensions (in this research we did used for successful FMCG extensions. Cases not seek to contrast the differences between were also selected according to access. To them); build each case, in-depth interviews were • nine out of the 11 extensions were launched conducted with the brand/marketing manwithin the previous two years (1992-1994); ager or other key executive responsible for the launch. The sensitivity of the information • the extensions came from Spain, Germany, the USA, Australia and Italy; and involved numerous constraints. The data for each case were collected with • according to objective measures (market share, sales growth, profit) given to the interthe assistance of The Boston Consulting viewers, all extensions had been successful. Group (BCG). Senior BCG consultants identified possible cases, made approaches and conducted the interviews. Each interview Results and discussion followed a semi-structured format that was piloted with the first case and refined thereThe main findings from the cases are disafter. Part of the interview involved develop- cussed below. For each of the specific research ing a flow chart of the overall extension devel- questions, the data were analysed for opment process. The interview structure was common themes or patterns, with the goal being replication and the establishment of as follows:


grounded theory

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generalizable theoretical propositions. As will be seen, this was achieved in some manner for all five of the specific research questions. The main drivers behind extension decisions The major drivers or motivations for the extensions varied widely. Some came about as a result of detecting a consumer trend or need. For example, one of the brand extensions was launched as a result of market research conducted as part of a standard category review. It revealed a consumer need that the current brand (and the firm’s other brands in the category) could not meet. The category team were aware of a product marketed by the company elsewhere in the world that would be suitable, and hence the project began. In two cases, the extension was driven by competition. In one of these, management had observed a firm in another category extend its brand into their own category with a product that had lower efficacy than their own, but was succeeding largely because of cosmetic benefits. This prompted the development of a new line extension to regain this segment. Some other extensions were technology driven. In two cases the brands benefited from

“...In all 11 cases, the process used to plan and develop extensions was independent of the official planning process which develops financial information and budgets...” the firm’s substantial R&D investment and activity in specialized technology centres. From these centres came new technologies which were first matched to consumer needs, and then matched to an existing brand. In one of these cases the role of brand/marketing managers was largely implementation, i.e. bringing the product to market. The remaining drivers included the desire to exploit fully an existing brand name, widen the applications of a particular product from industrial use into consumer use, and, in one case, to fill production capacity. We discuss later the relationships between new brands, brand and line extensions. Clearly all new product development (NPD) , by definition, comes to market as one of these three. The purpose of this research was not to contrast the differences between them but to track what actually happened in the eleven cases. The results suggest the following propositions: P1: Brand and line extensions can be successfully used as part of either a growth or defensive strategy.

P2: Brand and line extensions are driven by a variety of factors of which consumer need, competition and technology are most prominent.

Extension decisions and routine planning In all 11 cases, the process used to plan and develop extensions was independent of the official planning process which develops financial information and budgets. In some cases, cross-functional teams were put together for the project and headed by a category manager. In one particular case, three different committees, all outside the standard planning structure, were involved in extension decisions. In another case, the process, led by the brand manager, was totally ad hoc, with the project being developed almost “on the side” by the marketing and technical staff. This may well have been the case for all NPD though that was beyond our study. We were only concerned with the question of whether the routine planning (budgetting) process was driving , and connected with, extension decisions. In most cases, the extension entered into the formal planning process once the extension had been developed and already approved by higher management. Only then did it become part of the official brand plan. As one manager put it: The overall planning process did not interact with the extension, and was generally a recipient of the output of the project.

Those who offered reasons for this put it down to the official planning process being too rigid and standardized for the high levels of uncertainty, creativity and change involved in extension projects. The fact that, even in hindsight, no respondents claimed that formal processes directed the development and launch of the extension is consistent with Cooper and Kleinschmidt’s (1991) finding that ad hoc processes tend to be in use prior to the introduction of more formal systems, such as the stage-gate approach. The proposition suggested by this finding is as follows: P3: Formal planning processes are not geared to handle brand and line extensions until the extensions are fully developed. Decision criteria The criteria by which decisions are made to proceed (or not) with the launch of an extension determine the type of data managers collect and analyse. In our study, two sets of decision criteria emerged in all 11 cases. The first relates to brand equity. Although the [ 15 ]




actual term “brand equity” was explicitly used by only one of the managers interviewed, all mentioned brand equity related considerations. These included: protecting the brand image; rejuvenating the brand; leveraging the brand; needing a strong original brand; being consistent with the brand name; and being careful not to dilute the brand. These brand equity related criteria were usually tested with consumers via concept and/or product tests early in the development process. The second set of criteria were financial. Without exception, profit forecasts had to meet some pre-defined criteria. These were usually in the form of payback periods, ranging from one to five years. All calculated one or all of ROI, break-even/payback periods or NPV. These financial criteria were generally the last “hurdle” for the extension before approval to launch. These results suggest three propositions: P4: Successful extensions are implicitly decided on the basis of brand equity. P5: Successful extensions are explicitly decided against financial returns. P6: Brand equity considerations precede financial considerations in the decision process.

were used to make forecasts for the USA. Similarly, in another case, the management team in Germany were hesitant to launch a line extension until it had been launched in France. Results from France were then used to forecast the German market response. For those firms that could not benefit from having the extension launched in another market, company experience with prior extensions of that or other brands was used for forecasting. In two cases, these two data sources were supplemented by a small test market or pilot launch. These results suggest the following: P7: Consumer research and company experience are the major sources of data for extension forecasting. P8: Qualitative research is more important than quantitative research in testing brand equity related issues with consumers. P9: Market forecasts are not influenced by knowledge or use of generalizable market simulation models.

Key players in the development process In all 11 cases, three functions played key roles: marketing; R&D; and sales. In all but one case, the extension process was led exclusively by the marketing function. This was Research and forecasting in the form of the brand manager, Two major sources of data were used for fore- typically marketing manager, or in one case, which casting. The first was consumer research in was going to lead to a European-wide launch, the form of concept and product tests. These a category manager. In the final case, R&D tests provided managers with an indication played the key role in the product, of “consumer acceptance” and in some cases but then handed it overdeveloping to marketing to brand quantitative “trial potential”. Interestingly, however, qualitative research played a more it and bring it to market. This was one of the prominent role than quantitative research. In cases where the extension was primarily all but one case (where no research at all was technology driven (see earlier). R&D was the second most important funcdone), focus group research was conducted at tion. The technical managers worked closely either the concept and/or the product test with the marketing group on product developstage. In four of the cases, quantitative research was conducted at the product testing ment, consumer testing and refinement. In view of the defensive rationale for some stage. During both concept and product extensions (Hardie, 1994), early involvement research, it seems that brand equity related of sales might be expected, especially in the issues were of greater importance than volume and share forecasting. None of the firms case of category management. Increasing used computer simulations or other general- share of shelf space is one example of this izable market forecasting models e.g. BASES. rationale. In all but one case, however, the sales function was brought into the process at the end to deal with launch issues such as promotions and presentations to the trade. “...In all 11 cases, three functions played key roles: marketing; Thus, though important, sales involvement R&D; and sales. In all but one case, the extension process was led generally appears to be late in the process. exclusively by the marketing function…” Propositions from these findings are as follows (note, however, that the interviewees The second source of data was company expe- were brand/marketing managers who may rience. In some cases the extension had been have overstated their own role): P10: Marketing, R&D and eventually sales launched in another country. For example, one of the line extensions had been launched are the key functions involved in develin Canada, and the results from that launch oping extensions. [ 16 ]




P11: The extension development process is led by the marketing function unless the extension is technology driven.

and Alba, 1994) and issues of quality (Dacin and Smith, 1994), all of which contribute to the brand equity asset. • Marketing leadership. If follows that if brand considerations are paramount, the process will be led by the marketing funcConclusions tion. Brand development is of primary A process model concern to brand and category managers The 11 propositions and the decision flow and it is they who lead R&D in the developcharts that were developed during the interment process. In this way the process is one views can be brought together to form the of brand development as opposed to product overall process model shown in Figure 2. development. It seems that, implicitly at This model differs from traditional text least, managers are recognizing and seekbook models in four important areas: ing to benefit from the reciprocal relation• Antecedents. This model does not start with ship between brand equity and extensions. the traditional “idea generation” stage but • Planning. Although the process described looks more specifically at the strategic and in Figure 2 follows a distinct order, it is other drivers of extensions. It recognizes relatively informal and occurs outside the that ideas are prompted by stimuli within formal planning process. This seems conthe firm (growth or defensive objectives) trary to the Booz, Allen and Hamilton. and outside the firm (consumers and com(1982) conclusions that emphasized the petition). need to link new product strategy with the • Brand equity. This model also reinforces the strategic planning process. There appears holistic approach to branding vs. the prodto be a gap between normative models of uct plus view, i.e. the branding decision is formal planning and successful extension the first decision made rather than one of practice. In fact, based on the comments by the last (e.g. Kotler, 1991). The result is that respondents, it may be that more formal brand equity related issues such as equity procedures could actually hinder the enhancement, dilution, etc. are key considprocess. This can be better understood erations early in the extension development when we consider that the impetus for extensions often comes from unanticipated process. The focus is not so much on the consumer and competitive developments, product itself, but the product in the confor which flexibility to respond in creative text of the overall brand. This suggests an and novel ways is key. enhanced concept of “brand equity fit” that includes not only the standard elements of “fit” such as feature similarity and concep- Managerial implications tual consistency (Park et al., 1991), but also The drivers of extensions are many and short-term pressures can diminish the brand specific associations (Broniarczyk Figure 2

A process model of ex tension decisions

Antecedents

Specific drivers

Brand strategy

• Consumer • Competition • Technology • Other

• Growth • Defence

Brand equity criteria (marketing/R&D)

Decision criteria

Launch

Concept development and testing (qualitative research)

Launch decision • top management

Product development and testing (qualitative and quantitative research)

Incorporate into official planning

Forecasts (marketing) •Consumer r esear ch •Company experience

Financial criteria (marketing) • ROI • Payback • NPV

Launch • Sales function involved

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opportunity for reflection on exactly why the extension is being launched and whether more could be achieved – for the new product and the brand itself. For some companies, a line extension is the shortest distance between two quarterly forecasts. In this research, however, we found that the expected future profits from the extension did not appear in financial plans until after the decisions had been made. One implication is that the extension is being used, in part, as profit assurance. The second implication is that brand equity is a key consideration throughout extension decision making but not always explicitly. The question may be what the brand can do for the new product rather than what the new product can do for the brand.

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