Branding Strategy Insider

Exploring Premium Brand Extension

Regular readers of Branding Strategy Insider know we welcome and answer marketing questions of all types. Today, Eugene, a marketer in London, England writes…

"Dear Derrick and Brad, I really enjoy Branding Strategy Insider, thanks for the resource. My question is  how to measure the Halo effect a premium brand extension can have on the rest of the range, and the Halo effect mechanics."  

Eugene, thanks for the compliment and your question. Regarding the Halo effect a premium brand extension can have on the rest of the range, following are things to consider:

• One cannot add a significantly more premium or inexpensive product within a brand’s range without encountering credibility problems. This is especially true if one is trying to move a lower cost brand into a more premium market segment. This is why Toyota has the Lexus brand and Honda has the Acura brand. Even Marriott’s association with the Ritz Carlton brand (as its parent company, even though they are not linked in an identity system) could lead people to think less of Ritz Carlton compared to the (luxury only) Four Seasons brand, for instance.
• Adding a more expensive product at the top of a brand’s price range may increase people’s propensity to buy a higher priced (but not necessarily the highest priced) product within the range. They may think, “I cannot afford the most expensive product, but I can afford the second most expensive one.” Adding a more expensive product to the top of a brand’s price range may also increase the average perceived value of products in the category. (Investigate reference pricing. I cover this concept in greater detail in my book Brand Aid.)

Did You Know? - May 21

•    It costs 7 times more to get a new consumer for the brand than it does to get a current consumer to make an incremental purchase.

•    In some sectors, an increase in the consumer base by just one percent is otherwise equivalent to a 10 percent cost reduction.

•    Depending on the category, a 5% increase in customer loyalty will lift the lifetime profits per customer by up to 95%.

•    Increasingly, brands are shifting their focus from penetration to usage.  Greater success comes from getting a larger portion of a smaller segment’s business (versus getting more consumers to buy your brand).  This can be accomplished in many ways, including offering more and different products and services that deliver against your brand’s promise.

Sponsored By: Brand Aid

Did You Know? - December 29

Well-known brands activate positive emotional responses in our brains. -- Researchers used functional magnetic resonance imaging (fMRI) to study areas of the brain affected by visual stimuli associated with strong and weak brands. -- "Brain branding" is an interdisciplinary approach to improve understanding of how the mind perceives and processes brands.

Source: Radiological Society of North America

Sponsored By: Brand Aid

Did You Know? - September 15th

•    There is a direct correlation between advertising spending, brand awareness, and market share (given that the brand’s distribution is equal to that of other brands in the category and consumers like the brand’s point of difference).  In fact, James Gregory and the Corporate Branding Partnership (and others) have linked advertising spending with increases in sales, earnings, market share, and stock price.

•    A brand’s perceived quality increases with increases in advertising impressions, regardless of message.

Sponsored By: Marketers Seeking Employment

Did You Know? - September 8th

In his white paper, “Communication as Value Builder,” Dr. David Jensen, Senior Vice President with Ketchum in Atlanta, cites a 1998 study by the Wirthlin Group, which concludes that:

• “Companies with good reputations are 7 times more likely to command premium prices for their products and services.
• 5 times more likely to have their stock recommended
• 4 times more likely to be recommended as a good place to work
• 3 times more likely to be recommended as a joint venture partner
• 1.5 times more likely to receive the benefit of the doubt.”

Sponsored By: Brand Aid

Did You Know? - August 5th

Regarding customer loyalty, what should newer, faster growing brands focus on as an indicator of brand health and what should more established brands watch for as an indicator of brand health?

Newer, faster growing brands should focus on the number of new loyal customers, while more established brands should track the number of lost loyal customers.

Sponsored By: Brand Aid

Did You Know? July - 21st

Did you know that through carefully researched consumer insight, John Deere was able to significantly increase sales of its lawn tractors? Most men really admired the brand but believed that it was “too much for them.” They could never justify buying it for themselves. Here’s the insight. When their wives were made aware that 8 out of 10 men would prefer a John Deere lawn tractor if given the option, sales significantly increased. The way in was through the gift giver.

Source: Barry Krause, President of Publicis & Hal Riney Chicago in his presentation “Advertising Agency’s View on Corporate Branding” at the American Management Association’s “Corporate Branding: Leveraging Your Company’s Key Intangible Asset” conference in San Francisco on February 24, 1999.

Sponsored By: Brand Aid

Did You Know? July - 14th

• “Purchase intent” tends to be inflated for declining brands and understated for emerging brands.

• Advertising is often most effective in increasing share of market when brands are so similar that the advertising message is the primary source of differentiation.

(Source: Ehrenberg, John, Neil Barnard and John Scriven, “Differentiation or Salience.” Journal of Advertising Research November December 1997, p.12.)

Sponsored By: Brand Aid

Did You Know? - May 21st

The memory of images decays less rapidly than the memory of words.  The implication is that pictures are often more effective than words.  The more effective option is “dual coding” or the use of visual and verbal cues together.  The most effective option is when the visual and verbal cues are designed to say the same thing, or when they are completely redundant.

Other aids to memory include:

·Communicating the most important points first and last in the overall communication

·Repeating a key point again and again in a communication

·Presenting the key point in a catchy song, phrase, or slogan that the customer will repeat over and over again in his or her memory

·Presenting the communication in the atmosphere, environment, or mood in which you intend the customer to recall the communication

Sound remains in our short-term memory over 5 times longer than images do.  That is why sound is an even better aid to memory. (Source: Williams, Roy H., Secret Formulas of the Wizards of Ads, Bard Press 1999, p. 93.) 

Scent, however, is one of the best aids to memory.  Cinnabon has figured this out, as you would know if you’ve shopped malls in which their stores are located.

Did You Know? - May 11th

Allstate, in its brand identity project, was able to achieve significant cost savings by standardizing 278 different Thank You note formats to one format.

Source: Jody Mack, Senior Corporate Identity Manager, Allstate