Cadbury is a premium confectionery company, so when they started producing low-end food products, like instant mashed potatoes, it’s not shocking to learn that their association with the finest chocolates weakened. Cadbury’s expansion into instant mashed potatoes created a new revenue stream and even generated more sales for them, but it damaged their brand as a whole. Brand Dilution Brand dilution is when a company’s brand equity diminishes due to an unsuccessful brand extension, which is a new product the company develops in an industry that they don’t have any market share in, like Reese’s Puff Cereal or Gerber’s baby clothes. According to two marketing professors from Dartmouth College and UCLA, brand dilution usually occurs when a company’s failed brand extension is closely related to their flagship product -- consumers will start questioning the company’s expertise and dedication to quality within their main product category. On the other hand, when a company develops a brand extension that’s unrelated to their flagship product, consumers will expect differences in the extension and distance it from the brand’s main product category, leading to significantly less brand dilution if the extension fails. Amongst a company’s most loyal customers, however, an unrelated brand extension can lead to brand dilution because they have a deeper understanding of the company’s brand identity. Brand Dilution Examples Even though Pillsbury is known for producing foodstuffs, their frozen microwave popcorn couldn’t compete with Orville Redenbacher or General Mills’ Pop Secret because their product positioning of being “frozen for freshness” didn’t offer enough value. Brand Cannibalization Brand cannibalization is when a company develops a brand extension that competes with one of its established products and takes a portion of its market share. Even though brand cannibalization sounds like a counter-intuitive business strategy, companies do it because they think their new product’s sales will be greater than their older product’s loss in sales, leading to a boost in total revenue. However, brand cannibalization can also backfire, prompting customers to purchase the new product instead of the older product, leading to a stagnation or decrease in the company’s total revenue.
You might know Cadbury for their high-end chocolate and candy, but did you know they sold instant mashed potatoes from the early 1960s to the mid 1980s?
Smash, their instant mashed potato brand, surprisingly reached mainstream success. But, unfortunately, it was at the expense of lowering their flagship product’s perceived quality.
Cadbury is a premium confectionery company, so when they started producing low-end food products, like instant mashed potatoes, it’s not shocking to learn that their association with the finest chocolates weakened. Eventually, in 1986, Cadbury sold Smash, only 20 years after they introduced their instant mashed potatoes to the world.
Cadbury’s expansion into instant mashed potatoes created a new revenue stream and even generated more sales for them, but it damaged their brand as a whole. This phenomena is called brand dilution, and, below, we’ll dive into it, as well as other related concepts called brand extensions and brand cannibalization.
Brand Dilution
Brand dilution is when a company’s brand equity diminishes due to an unsuccessful brand extension, which is a new product the company develops in an industry that they don’t have any market share in, like Reese’s Puff Cereal or Gerber’s baby clothes.
Brand Extension
Companies leverage their existing brand awareness and equity to develop brand extensions that create new revenue streams. However, an unsuccessful brand extension, like Zippo’s perfume for women or Samsonite’s outerwear, can attach undesirable associations to their brand, weaken its existing associations, and hurt its established products’ perceived quality, which can all lead to brand dilution.
When does brand dilution occur?
According to two marketing professors from Dartmouth College and UCLA, brand dilution usually occurs when a company’s failed brand extension is closely related to their flagship product — consumers will start questioning the company’s expertise and dedication to quality within their main product category.
On the other hand, when a company develops…
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