Brand Elasticity and Extension

MCAworks Opinion: To Create or Extend: The New Product Branding Dilemma

Your company’s new product development team has identified an exciting opportunity. With positive customer research feedback, the product is in final development and slated for upcoming launch. But a key decision must be made: Do you leverage an existing brand or create one dedicated to the new product? Much is at stake here, starting with the ability to generate rapid awareness and trial while maximizing the opportunity’s return on investment. How should this decision be made? What criteria should be used to determine the optimal branding approach?

When it comes to branding new products or services, a lively debate on whether to create a new brand or extend an existing brand typically ensues. Proponents of the “new brand” school argue that a brand should own a singular benefit in the minds of target customers; brand extension, therefore, only serves to weaken existing brand equity. Adherents of the “brand extension” doctrine argue that the cost of establishing a new brand outweighs the potential benefits, thereby making brand extension the best option, if at all possible. In truth, neither side is wholly right or wholly wrong. Both make valid arguments that make sense—just not for every situation.

The question “should we create a new brand or extend an existing brand?” is best answered on a case-by-case situational basis, with the right choice dependent on five key variables, some of which are internally-driven while others are market-driven:

Internally-driven variables:

1. Fit between existing brand equities and new offering benefits (including those of potential future offering line extensions)
2. Investment dollars available
3. Time horizon for achieving internal ROI benchmarks

Market-driven variables:

4. Competitive landscape
5. Trade/channel dynamics

MCAworks has developed a “short-list” of considerations for evaluating these variables and making the right brand choice. It is important to remember that none of the above variables are static. In particular, brand strength and equity are apt to change over time. An opportunity that may be a poor brand fit today (and therefore a poor candidate for brand extension) may be a better fit at a future point in time. Managers can impact brand capacity for extension by gradually extending the brand into new areas. As a result, what may be outside the box today in terms of brand extend-ability could very well seem logical in the future.

The decision to extend an existing brand or build a new brand is a difficult one. Both options have their merits under certain circumstances. Through analysis of key variables, managers can make the choice best suited to addressing both internal needs and marketplace dynamics.

Contact Sean Folan or AnnaMaria Turano for more information.