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Unformatted text preview: Introduction Red Bull Cola is one example of brand extension, and my knowledge is that it is not doing well. I think this illustrates the key issues when coming up with successful brand extensions today. Red Bull Cola as a concept needs to fit the category. As I mentioned in the last class that we went through, brand extensions often fail because while there is a logical connection at the level of the beverage company connection, there isnt a competitive value added with this that would make me switch from the existing cola brands to this new entry, and that is what we call in this class leverage, the idea that you need to bring something extra to the category, something that no other brand has, something that enough desire, and something that is highly connected to the brand. So what is Red Bull known for? Red Bull is known for mystery, adventure, and elements like that. And yet, this Red Bull Cola does not capture that. It is just your average cola. When Powerade came up with the hotel, people said what is the connection here? When Powerade came up with a training camp for athletes or something like that, then we will see the logical connection so this fits. At minimum, you need to have an extension that has that fit. But even if you have fit, it is not enough. And the reason why 70% of brand extensions fail is because they do not bring in new value added with the brand extension. Dell is a computer company that wants to launch a smart phone, and logically, that fits because a smart phone is a mini computer for your pocket. But is the Dell smart phone different from the other smart phones out there? If Dell can say what it is that we can add that no one else has, that enough people will care about, something that enough people want to use, and assuming that people are willing to pay for the premium options, then Dell will have something different from what is out there. That is ideal leverage. Since it is so easy to brand extend, many companies overextend, at the danger of diluting what the brand stands for, and also, lack of time. The company spends so much time extending that they overlook important things, and may trivialize its brand. So here is an example that did end up trivializing its brand, this is John Hopkins Hospital in Baltimore, which is a very well-known medical establishment, and somebody had a bright idea: why dont we go to cosmetics? So they launched a cosmetic line in 2006, and there was a giant uproar within the hospital and the outside that this is trivializing the Johns Hopkins brand, because this is a serious medical place, why are you doing cosmetics? The people who came up with the cosmetics line apologized and said sorry, we made a mistake....
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- Fall '11