Successful Brand Extension

1. Successful Brand Extension March 2014 American Marketing Association

2. American Marketing Association SUBSECTION TITLE 2 Brand Extendibility Hall of Shame Unfortunately, brand extendibility examples like the ones below are far more common than we realize Burger King Boxers Harley Davidson PerfumeHooters Air Dr. Pepper Marinade Chicken Soup for Dog Lovers Arizona Tea Nachos ‘n Cheese Dip

3. American Marketing Association SUBSECTION TITLE 3 The Case for Brand Growth Why So Many Brand Extensions Fail Identifying Market Needs Developing Inspiring Solutions Determining Brand Relevance Executing with Excellence

4. American Marketing Association SUBSECTION TITLE 4 Brand Extendibility Defined The Case for Brand Growth Brand extendibility is one of three ways to drive organic growth, representing essentially the intersection of an established brand and new product or service development Existing Brands Brand Extendibility Base Business New Products New Brands Sources of Organic Growth

5. American Marketing Association SUBSECTION TITLE 5 The Need for Growth The Case for Brand Growth Driving business growth through new products and services is a a top priority for CEOs 0 20 40 60 Product/Service Innovation Increase Share in Existing Markets Mergers & Acquisition New Geographic Markets New JV/Strategic Alliances % of U.S. CEOs Citing Area as a Source for Growth Source: PwC 17th Annual Global CEO Survey (2014) 36 37 14 10 3

6. American Marketing Association SUBSECTION TITLE 6 The Elusive Nature of Growth The Case for Brand Growth …Yet over half of CEOs feel they need to change/improve their capabilities in this area Source: PwC 17th Annual Global CEO Survey (2014) 0 20 40 60 No Need to Change Considering or Planning Change Change is Underway or Complete % of U.S. CEOs Citing Their Product Development & Innovation Capabilities as Follows 20 54 26

7. American Marketing Association SUBSECTION TITLE 7 Various Types of Growth The Case for Brand Growth Growth can be divided into two broad categories—organic and inorganic. Both categories have well-defined sub-strategies and tactics for driving desired results

8. American Marketing Association SUBSECTION TITLE 8 The Benefits of Brand-driven Growth The Case for Brand Growth Brand-driven growth (brand extendibility) tends to be more incremental than merely driving base business, and less expensive and risky than launching new brands Products&Services Brands ExistingNew Existing New Market Penetration Brand Extendibility Portfolio Extendibility New Product Development Higher Risk Typically Less Impactful

10. American Marketing Association SUBSECTION TITLE 10 Just the Facts… Why So Many Brand Extensions Fail Although a desirable means for driving business growth, successfully extending existing brands (even very strong ones) is not easy 0 20 40 60 80 100 Brand Extension Failure Rate* Brand Extension 3-year Survival Rate** Brand Extendibility Track Record *Ernst & Young, 2003; **David Talyor, Brand Stretch (2004) 84 54

11. American Marketing Association SUBSECTION TITLE 11 Top Barriers to Successful Brand Extendibility Why So Many Brand Extensions Fail When brand extendibility fails it can often be attributed to one or more of the following… No Meaningful Market Need Demand There is a Need, but the Solution is Uninspiring Supply There is a Need and an Inspiring Solution, but the Brand is Wrong Brand Relevance Everything Makes Sense Strategically, but the Execution is Poor Execution

12. American Marketing Association SUBSECTION TITLE 12 1) No Meaningful Market Need (Demand) Why So Many Brand Extensions Fail When there is no customer need for a new product or service, and little ability to create the need, a brand extension has very little chance for success Demand Supply Brand Relevance Execution Track plant growth and watch an entire growing cycle in seconds! PlantCamTM Example !   Addressing the need is not profitable Underlying Components: !   No need; difficult to create need !   Satisfactory solutions already exist !   The unmet need is too niche

13. American Marketing Association SUBSECTION TITLE 13 2) Uninspiring Product or Service Solution (Supply) Why So Many Brand Extensions Fail Even with an identified customer need, if the proposed solution is uninspiring or otherwise sub-optimal, the brand extension will struggle to succeed Smokeless Cigarettes… “produced a flavor and a smell so offensive that it left users retching…” Example Demand Supply Brand Relevance Execution !   “Flavor of the Day” offering Underlying Components: !   Solution not aligned with need !   Lack of imagination/creativity !   “Side effects” or other drawbacks

14. American Marketing Association SUBSECTION TITLE 14 3) Lack of Brand Relevance Why So Many Brand Extensions Fail When there is an identified need—and an attractive solution to address it—there still needs to be a solid fit with brand under which the product or service is launched EBay selling goods at fixed prices made no sense for the brand or to consumers… EBay Express was a confusing and contradictory concept Example Demand Supply Brand Relevance Execution !   Base brand “baggage” Underlying Components: !   Lack of credibility !   Inconsistent persona !   Contradictory price/value relationship

15. American Marketing Association SUBSECTION TITLE 15 4) Poor Execution Why So Many Brand Extensions Fail Even when everything makes sense strategically, poor execution will almost always doom a brand extension to failure Example Demand Supply Brand Relevance Execution Community-specific news, information and engagement platform… •  Flawed business model •  Overly-ambitious launch •  Poor content quality !   Lack of clarity on goals/path forward Underlying Components: !   Lack of senior-level commitment !   Culture gets in the way !   Capabilities are not up to par

17. American Marketing Association SUBSECTION TITLE 17 Developing an Outside-In Perspective Identifying Market Needs The outside-in perspective is important as always. Business objectives for brand extendibility should guide exactly who’s perspectives “outside” matter most Primary Objective: More Deeply Penetrate Existing Base Solicit Input and Participation from Current Customers Primary Objective: Acquire New Customers for the Brand Solicit Input and Participation from Current & Prospective Customers Primary Objective: Fail Miserably in Brand Extendibility Solicit Input and Participation from Only Senior Management

18. American Marketing Association SUBSECTION TITLE 18 Start Specific… Go Broad Identifying Market Needs A common mistake during needs identification is to focus too narrowly on the category in question, without enough consideration to the broader context Personal Values Relaxation/Recharging Role of Friends & Family in Life Movies on DVD/Blu-ray Role of Entertainment in Life Home Entertainment Dimensions for Understanding Consumers Attitudes Toward Free Time Broad Specific

19. American Marketing Association SUBSECTION TITLE 19 The Latency Effect Identifying Market Needs Although “talking to the customer” is important, it’s not as simple as merely asking them what they want/need “If I had asked customers what they wanted, they would have told me a faster horse.” −Henry Ford !   Customers are often unaware they even have a particular need (latent) !   Customers may be aware of a need, but have trouble articulating it (tacit) !   Some of the most successful new products and brand extensions in history were not inspired by an articulated customer need None of these products addressed a widely recognized problem that any of us had

20. American Marketing Association SUBSECTION TITLE 20 The Importance of Precision Identifying Market Needs Especially when attempting to identify problems, it is important to be very specific about the nature of the problem, and what in particular needs to be addressed “If you don’t know where you’re going, any road will take you there.” −Lewis Carroll !   When attempting to understand customer needs, it is important to be as specific and granular as possible !   Big problems and challenges are often comprised of smaller component challenges— each of which has different ideal solutions !   Performance—Is it about productivity? Accuracy? Throughput? Speed? !   Convenience—Is it about speed? Ease? Simplicity? Portability? How can a 9-hour solution solve the problem of dinner preparation taking too long?

21. American Marketing Association SUBSECTION TITLE 21 Beyond Problems… Opportunities Identifying Market Needs Focusing only on solving problems is limiting. Many successful new products do not solve a problem…they create an opportunity or deliver a better experience “Effective innovators don’t wait for problems to arise. They fix what isn’t broken and improve things that have no apparent deficit.” −Dennis Stauffer, Thinking Clockwise While the world is full of problems, it’s also full of opportunities…many of which do not solve a particular problem !   Uncovering opportunities that are not inherently problem-solving in nature requires a different approach !   It’s less about asking customers what they think/want… !   It’s more about observing what customers actually do— “and connecting the dots” Consumers weren’t exactly sitting around thinking to themselves, “Gee, if only I had a tablet…”

22. American Marketing Association SUBSECTION TITLE 22 A Reality Check Identifying Market Needs When seeking to identify unmet needs it is important to consider your core competencies. Identifying needs that you have little chance for successfully addressing is futile Brand Extendibility Playing Field Market Opportunity Company Capabilities

23. American Marketing Association SUBSECTION TITLE 23 Cost-effective, DIY Techniques Identifying Market Needs There are a number of techniques that are designed specifically to uncover customers’ unmet needs, and ultimately, business growth opportunity Bulletin Boards/ Threaded Discussions Community-building threaded discussions in which we can observe consumer-to- consumer (or B2B customer- to-customer) dialogue Be Your Own Ethnographer/ Day-in-the-Life Observation Spend a day in the customer’s shoes. Shadow and observe them closely. Selectively ask “why” questions to understand underlying motivations

25. American Marketing Association SUBSECTION TITLE 25 Sources of Inspiration Developing Inspiring Solutions Inspiration to fuel potential solutions can come from numerous, diverse sources Core Competencies Cross-BU Collaboration R&D and Contracted Partnerships Supplier Collaboration Company R&D Vendors Universities JVs/Alliances Analogies & Metaphors Product / Technology Business Model Levers Best Practices Case Studies Delivery Channels Service Models Business Model Functional Attributes Emotional Benefits Core Values Personality Brand Levers Brand Customer Insights Global Trends Need Platforms Digital Ideation Customer Participation Customer

26. American Marketing Association SUBSECTION TITLE 26 Defining Your Frame of Reference Developing Inspiring Solutions When thinking about potential solutions, it is important to consider and define your brand’s frame of reference (What business is it in? What business should it be in?) Workout T-shirts Sporting Goods Athletic Apparel Lifestyle & Fitness Health & Wellness Pedometers Running Shoes Jerseys Shorts Socks Sweatshirts Footballs Golf Clubs Hockey Skates Basketballs Tennis Balls Soccer Nets Knee Bands Trail Maps Hiking Gear Mountain Climbing Camping Gear Prepared Meals Physician Network Wellness Website Nutrition Plans Fitness Bands Heart Monitors

27. American Marketing Association SUBSECTION TITLE 27 Identify Ways to Cluster Developing Inspiring Solutions Look for ways to logically bundle products, categories, industries and sectors… Original Accessories •  Mobile •  merchandise Gaming Hardware •  Consoles, devices, PCs •  Gaming gear Home Appliances •  Sci Fi inspired smart appliances Ready to Assemble •  Changeable Living Spaces HH of tomorrow Architectural Lighting •  Illuminated wallpaper Technology enabled apparel & jewelry •  Multi-function wearable device Multiple IPTV channels Service Provider Content Extensions •  ringtones & Ring backs •  Wallpaper •  Text Alerts Hotels & Resorts •  Fantasy Destinations Amusement Parks / •  Fantasy Destinations •  Arcades / FECs •  Conventions Gaming Software •  Video Games, Online Games, Mobile Games, Computer games •  Interactive Role Play Game •  Creativity Game Home Storage, Org. Products, & accessories Audio Video Equipment •  Media Wall •  Immersion pods Internet / Digital Music Distribution & Downloads UGC •  Online story-building Aggregation Cable TV Broadcast TV Production & Distribution Motion Picture Production & Distribution (long format) Travel Services •  Staged events Leisure MusicMedia Consumer Products (non-retailing) Commemorative Products Television Film & Video Book Publishing Periodicals •  Online story- building Trading Cards & Comic Books Digital Content Distribution Publishing Consumer Electronics Toys & Games House wares Home Furniture Lighting Appliances Apparel & Jewelry Lodging Entertainment Restaurant & Cafes Training Services (support) Mobile

28. American Marketing Association SUBSECTION TITLE 28 The Power of Convergence Developing Inspiring Solutions An effective way of inspiring new thinking is to consider how one new solution can address multiple needs (i.e., that are currently being addressed through multiple solutions

29. American Marketing Association SUBSECTION TITLE 29 Cross-Pollinating the Unlikely Developing Inspiring Solutions To simulate lateral, out-of-the-box thinking, it is also useful to combine things that are typically thought to be completely unrelated to see where the combination leads you Mash-ups + Using the same design as a weed whacker with a motor on one end and an impeller at the other, a miniature computer-controlled heart pump has been designed to help patients waiting on the transplant list. How Would X Approach Y? + If Google were in the business of manufacturing nuts and bolts, how would they go about it? In what ways would their nuts and bolts be different from others on the market today? Why would they be different and better?

31. American Marketing Association SUBSECTION TITLE 31 Brand Extendibility Footprint Determining Brand Relevance A Brand Extendibility Footprint defines what your brand stands for today across multiple dimensions, and helps you determine where it can potentially go (and not go) in the future Brand Footprint Dimension 1 Dimension 3 Dimension 2 Dimension 4 Dimension 5 Dimension 6 Dimension 7 Dimension 8

32. American Marketing Association SUBSECTION TITLE 32 Illustrative Dimensions/Axes Determining Brand Relevance Categories Spices Seasonings Appetizers Main EntreesSide Dishes Segments Toddlers Young Kids Tweens Young AdultsTeens Price Points Entry Value Mid-Price LuxuryHigh-End Occasions Breakfast Snack Mini-Meal DinnerLunch Emotions Meditative Calming Relaxing StimulatingEnergizing

33. American Marketing Association SUBSECTION TITLE 33 Example—Extending Along Categories Determining Brand Relevance Categories Desktop Software Cloud Solutions Subscriptions / Licenses Value-added Reseller Consultative Services TODAY Not doing today, but there is high customer permission…seen primarily as new platforms Credible “stretch;” but would likely require some convincing Off-brand; Not able to span from a ‘mass’ to ‘custom’ Company: Financial Planning Software Developer

34. American Marketing Association SUBSECTION TITLE 34 Example—Extending Along Occasions Determining Brand Relevance Everyday/ Routine Crunched for Time Portable/ On-the-Go Seek Different Experience Special Occasion TODAY Lack of drive-thru window makes these occasions a bit more challenging, but still have ‘permission’ Basic food fare makes this a big stretch; would need to significantly alter cuisine/ menu offering Off-brand; Highly functional nature of brand is a disconnect Occasions Company: ‘Fast Casual’ Restaurant Chain

35. American Marketing Association SUBSECTION TITLE 35 The Power of the Intangibles Determining Brand Relevance In general, extending across intangible dimensions such as emotional benefits, persona, etc. gives the brand more permission and leeway to extend in a meaningful way “At Caterpillar, we build the machines that help our customers build a better world. The boots and shoes we build are made with the same commitment.” “Excellence is a continual quest at the Tata group and Tata companies are supported in their efforts to achieve world-class standards in all aspects of operations...”

37. American Marketing Association SUBSECTION TITLE 37 What About Execution? Executing with Excellence “I’m all in favor of it!” —John McKay Head Coach of the 0-14 Tampa Bay Buccaneers (1976) …when asked how he felt about his team’s execution

38. American Marketing Association SUBSECTION TITLE 38 The Four C’s of Execution Executing with Excellence Executing with Excellence CULTURE CLARITYCAPABILITY COMMITMENT Every aspect of the brand extension/launch needs to be clearly articulated, leaving nothing no ambiguity or room for misinterpretation Internal Brand, Marketing, Insights, Sales, and Product Development functions need to be staffed by capable talent with relevant experience Senior management has to believe in brand extensions, and financially and publically back their marketplace launch and ongoing support The organization’s values, visions, norms, systems, beliefs, and habits all tend to influence the extent to which it executes successfully

39. American Marketing Association SUBSECTION TITLE 39 Commitment Executing with Excellence The top two reasons brand extendibility—and growth in general—do not succeed relate to senior management commitment and level of support 1 Success has not been defined and agreed upon upfront and at the top – failing to set up adequate expectations and measures for evaluation 2 Incorrect level of support – insufficient funds are allocated at critical moments of the development process 3 Financial performance is inconsistent with general financially accepted results in the company – resulting in misguided financial assessment 4 Use of incorrect testing methodology – either through erroneous results or testing wrong measure results in early failure determination 5 Organizational misalignment – structure or lack of staff capabilities and seniority hinder the process

40. American Marketing Association SUBSECTION TITLE 40 •  Bureaucratic •  Short-term focused •  Fear •  Hierarchical •  Slow-moving •  Lacking shared purpose •  Rule-oriented •  Cautious •  Reactive •  Inefficient •  Stressful •  Trust •  Open to new ideas •  Willingness to experiment •  Disciplined execution •  Risk-taking •  Diversity of thinking •  Passion •  Collaboration •  Flexible •  Team-oriented •  Achievement-oriented Culture Executing with Excellence Closely related to senior management commitment, cultural dynamics also impact the extent to which brand extendibility is successful Inhibit Growth/Expansion Facilitate Growth/Expansion

41. American Marketing Association SUBSECTION TITLE 41 Clarity Executing with Excellence It is important to have complete clarity on the process to be followed, the roles of each team member, and the ways key decisions will be made Process Maps Role Descriptions Decision Rights

42. American Marketing Association SUBSECTION TITLE 42 Capability Executing with Excellence It is important to ensure your company has the right capability in place, by critical function Level 1 Basic Level 2 Competent Level 3 Proficient Level 4 Advanced Level 5 World Class Company Benchmark —Illustrative— Strategic Planning R&D Sales/ Channels Manufacturing Marketing Innovation

43. American Marketing Association SUBSECTION TITLE 43 1603 Orrington Ave. Suite 600 Evanston, IL 60201 T 312.239.8985 mduckler@fullsurge.com www.fullsurge.com

Successful Brand Extension

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Successful Brand Extension