Hello,

I need three responses of at least 150 words each for the below students discussions for this week. Also in the bold below are the questions the students at answering.

Are brand extensions an important brand-growth strategy or can they endanger brands?

Student one:

Many companies have made the decision to leverage their most valuable assets by introducing new products under their strongest brand names. Brand extensions can facilitate a consumer’s acceptance of new products and provide positive feedback to the parent company and brand. The expectations a consumer has about a new product are based on what they know about the parent brand. Companies can reduce the risk of brand extensions by setting up positive expectations (Kotler & Keller, 2016).

Brand extensions can help a company make a name for themselves. For example, Nike was a struggling running shoe company in 1984. They wanted to reinvent themselves and appeal to a new segment of the market so they turned to NBA rookie Michael Jordan to help them create and promote a new shoe line that would become Air Jordan and eventually The Jordan Brand (Air Jordan, 2014). He signed a five-year deal with Nike at $500,000 per year plus stock options and was supposed to sell $4 million worth of shoes by the third year of the deal (Armstrong, 2019). Jordan far surpassed that goal by 1985 when Nike sold $70 million worth of Air Jordan 1s in their first two months on sale. Nike bases the shoes on Michael Jordan and his life and it has proved to be a very smart move on their part. The Jordan Brand became a sub-brand of Nike in 1997 because of its success and strength of the brand (Air Jordan, 2014). More than $2.5 billion of Nike’s annual sales were generated by the Jordan brand as of 2016 and this year it is expected that the Jordan brand will be worth $4.5 billion in annual sales (Armstrong, 2019). The Jordan Brand extension of Nike helped make Nike what it is today.

However, if a company does not go about introducing a brand extension in the right way, then it could endanger the reputation of the parent brand and even lead to brand dilution. It is important for marketers to judge potential brand extensions by how effectively it “leverages existing brand equity from the parent brand” and how effectively it contributes to the parent brand’s equity (Kotler & Keller, 2016). Companies need to make sure that a brand extension will be successful and boost their reputation and sales before they introduce it to consumers or they could be putting their brand(s) in danger.

Sources:

Air Jordan Shoes HQ. (2014). Air Jordan brand history. Retrieved from http://airjordanshoeshq.com/air-jordan-brand-history/.

Armstrong, M. (2019). These 13 athletes won the most lucrative endorsement deals. Go BankingRates. Retrieved from https://www.gobankingrates.com/making-money/wealth/biggest-sports-endorsement-deals/#3.

Kotler, P., & Keller, K. (2016). Marketing management (15th ed.). Upper Saddle River, New Jersey: Pearson Prentice Hall.

Student two:

Many companies begin offering a certain product or service (or a set of products or services). Once they are established in their market, some companies choose to extend their brand and explore other markets. Brand extensions can be an effective strategy for growth when a company really knows their customers and the limitations of their brand (Halve, 2013). Companies who are able to extend their brand successfully do so with minimal costs, since “brand extensions build on existing equity and are less expensive to launch” (Halve, 2013). Companies also have less risk extending their brand because they already have a demographic that is loyal to them.

For example, Johnson & Johnson began their company with publishing Modern Methods of Antiseptic Would Treatment, a text that became “one of the standard teaching texts for antiseptic surgery” (Company History, 2019). This lead to the production of commercial first aid kits. However, Johnson & Johnson became synonymous with much more than medicinal items. Through the years, it has launched dental floss, mouthwash, shampoos, toothpaste, a vast array of skincare products and, in 2017, acquired a biotech company (Company History, 2019).

However, brand extensions could be detrimental to a company’s image and ultimately could lead to a loss of confidence in the company. Companies who believe the logic that follows one product instantly will work for another often suffer failures when attempting to extend their brand. For example, Pond’s successfully sold a Dreamflower Talc whose marketing was about being fresh and clean. Pond’s believed they could use this same marketing for a toothpaste, however that product never really became successful.

Does brand extensions help a company’s growth or detriment the company? Depending on how successful the extension, it could do either.

References

Company History. (2019, June 18). Retrieved from Johnson & Johnson: http://www.jnj.ch/en/about-us/company-history.html

Halve, A. (2013, January 21). Brand extension: Good or bad? Retrieved from Business Standard: https://www.business-standard.com/article/manageme…

Student three:

Brand extensions are beneficial to the brand-growth strategy and also have their disadvantages. Since the brand is well known, doing a brand extension increases its image. This makes the launching of new products less expensive since the product is being launched under an entirely known brand. Since the brand is well known, marketing and advertising of the new product would require less effort to make it known (Doraiswamy & Watchravesringkan, 2016, p. 101). Consumers also have the opportunity to buy a variety of products from the same brand if they are loyal customers, thus contributing to brand growth.

The disadvantage of using the brand extension is that there is the risk of the new product generating negative feedback due to less than desired quality by loyal customers which can negatively impact the image of the brand. When this happens, the brand as a whole will be damaged, and any other good products in the market will lose its value. There is also the risk of the brand extension failing due to lack of competitive edge over the competitive brand. If this happens, brand growth will be hampered. In the case of brand extension in unrelated markets, the reliability of the brand name will be lost (Doraiswamy & Watchravesringkan, 2016, p. 101). Therefore, for this not to happen, thorough research needs to take place to ensure the right product categories are established.

REFERENCE

Doraiswamy, D., & Watchravesringkan, K. (2016). Assessing the Impact of Brand Extensions on Brand Concept and Brand Equity. doi:10.31274/itaa_proceedings-180814-1499

Product Pricing Strategies. (2016). doi:10.4135/9781473954519

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