Brand extensions dominate product launches in the 00s. Unofficial websites like snackspot.org find new packaged goods ranges every day. Google’s Gmail brand extension made front page news in April. If the big theme of marketing in the 90s was understanding the core lessons of branding, this decade has been about seeing just how far brands can reach.
The result is a riot of new products but very few fresh brands. Only two percent of marketing directors think that new brands will be their main launch method in the next few years. Research International data suggests that as few of 15 percent of volume forecasting tests are on entirely new brands. We’ve also found that extensions which get launched did no better in research than rejected ones. In other words, companies are so keen on brand extensions that they will ignore research results.
This recklessness reflects an increased confidence in the power of parent brands to influence consumers. But it also reflects financial reality. Conventional wisdom has it that extension launches are cheaper and less risky than bringing a whole new brand to market. But what if conventional wisdom is wrong?
No product launch is without risk. Extensions or not, the majority of new launches fail. The bad news product and concept test databases is that extensions are actually more likely to fail than new products. The good news is that we can work out why that happens and how to avoid it.
Brand extensions often research well but fail at market. They do show much higher purchase intention than new brands ,12 percent more on average – but this is misleading. A larger proportion of extension launches than new launches are ‘dead’ by the end of their first year, according to a study by Ernst & Young. That fact doesn’t help if you’re the owner of a failed extension, though the question is why? The answers aren’t pleasant. why brand extensions fail.
- They’re not as distinctive as they should be.
- They’re not good enough products.
- And they’re not being given the right kind of marketing support.
It’s easy to be seduced by purchase intention and not worry about how unique a brand is. But uniqueness turns out to be a critical factor in predicting actual sales for new products, only slightly less important than intent to purchase. So the apparently strong research results are a little deceptive most extensions fail to score well on this vital uniqueness metric. Extensions might not be distinctive but people still like them, surely? Well, not really. The scores for liking that consumers typically give to an extension are hardly better than those they give new brands. People still buy extensions, but it turns out that the relationship between liking a new concept and trying it out is weaker for them than for new brands. Trialling well is never a guarantee of longer-term success.
People say they will buy extensions because the extensions trade off the heritage of a parent brand. That’s a good thing, but it can too easily serve as an excuse to bring below-standard products to market. It can also have repercussions for the parent brand itself. An extension launch may seem like a low-risk exercise but really it’s a gamble and the stake is its parent’s precious equity.
An extension is cheaper to launch than a new brand but this is partly down to low marketing support..
But extensions desperately need differentiation, and ‘piggyback’ marketing can harm their prospects. Data from Millward Brown suggests that the ad awareness of extensions is much lower than that of new brands. In fact for half of extension adverts the product is incorrectly identified as the parent!
Brand extensions are not a bad idea – they can be a great idea. It’s just that they need to be handled in the right way. Treating them as low-risk easy options can severely backfire.
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