Braintrust Query: When are brand extensions a good idea?
Chief Research Officer, The Advertising Research Foundation
extensions (e.g. a new flavor of Crest toothpaste) and franchise extensions
(e.g. Crest Whitestrips) are thought to be more affordable ways to introduce
new products and have a higher success rate vs. creating completely new
brand names. In this recessionary "do more with less" marketing era,
brand extension strategies for new products become increasingly alluring.
brand extensions are not always a good idea. Through the years, I have
been involved with forecasting the sales potential of hundreds (maybe
thousands) of line and brand extensions and wanted to share what I think
are some important insights.
#1 – A
brand extension strategy for launching a new product only works if
your existing brand has high enough parent brand penetration.
the early ’80s, General Mills launched a new flavor of Cheerios called
"Honey Nut Cheerios." Concept test results were good but not off the
charts, yet when this new flavor was launched, it got an unpredictably
high level of purchase trial given its modest advertising and promotion
I analyzed actual in-market results regarding trial rates for Honey Nut
Cheerios and many other line extensions separately by those who bought
the parent brand buyers vs. non-buyers, I found that parent brand buyers
had a 2-6X HIGHER trial rate (e.g. 18 percent trial among parent brand
buyers vs. three percent among non-buyers). The big factor was that the
conversion of positive purchase intent into trial among parent brand
buyers was much higher. In fact, the knife cut both ways; people who
did not buy your brand were less likely to try the new line extension
relative to their stated purchase interest than if it had a new brand
#2 – Brand
extensions that are not connected with the meaning of the base
brand are destructive even though they might hit year one sales
targets. That’s why naming Spaghetti Sauce "Prego" rather than
"Campbell" or calling a premium line of autos "Lexus" rather than
"Toyota" made so much sense. It’s also why I question Starbucks’
concept testing, if positive purchase interest towards the new product
isn’t at least 30 percent higher among parent brand vs. non-parent brand
buyers that means that your buyers are not seeing the connection between
the new product and your existing brand.
#3 – Emphasize
brand-building (e.g. advertising, social media) to build the
master brand and shopper marketing and couponing to sell the
extension of a brand someone buys enjoys instant credibility because
users trust anything they connect with that brand. For new flavor and
size line extensions you might not need anymore than to be visible in
the store or offer a coupon. Because line extensions are bought out of
acceptability, there is random component to whether they buy it or not.
Therefore, the more SKUs your brand already has, the lower the trial
rate will be among your own parent brand buyers.
Questions: What are some core strategies for launching brand extensions?
Of the points brought up in the commentary, which do you think are most
critical to success?