Line Extensions of Established Brands: How Close is too Close?
Find out what factors make the Mega-Successes stand apart from the rest

01/13/2003 -- Manufacturers often capitalize on the equity of a successfully established brand name by introducing line extensions (LX) of different flavors, sizes, or complementary uses in a related product category. Line extensions do tend to elicit more consumer appeal than new brands, which can result in increased sales, greater retailer interest, and better advertising and promotion effectiveness. However, introducing a line extension can be risky as well, because line extension purchases are frequently at the expense of purchases of the parent brand. So the success of a line extension must be evaluated not only in terms of its own sales, but also in terms of its cannibalization of the parent brand and its overall impact on the brand franchise. In a study with 15 major CPG manufacturers, ACNielsen BASES created a data set of panel data, consumer responses, and marketing spending information across 70 line extensions that were tested to determine which factors successful line extensions had in common. Each line extension was placed in one of three categories: -Brand Shrinkers - Line extension actually lowered franchise sales -Brand Growers - Line extension grew franchise by 0-20% -Mega-Successes - Line extension grew franchise 21%+ What factors made the Mega-Successes stand apart from the rest? 1. Mega-Successes were less likely to be viewed by consumers as a substitute for the parent brand. They also elicited higher uniqueness ratings than their counterparts. Mega-Successes are not simply a substitute for the parent brand, but offer something new and different. Click on thumbnail to enlarge, or click here. 2.Mega-Successes tended to extend lower penetration brands - in other words, brands where there was "room to grow." Such line extensions added new buyers to the brand franchise by increasing trial, rather than simply shifting the purchases of current parent brand buyers to the new item. Click on thumbnail to enlarge, or click here. 3. Mega-Successes borrowed only about 10% of their spending from the parent brand, in contrast to Brand Shrinkers, which borrowed over 40% of their budget from the parent brand. In short, incremental spending yields incremental volume, while cannibalized spending yields cannibalized volume. Click on thumbnail to enlarge, or click here. The key to success with line extensions is a well-differentiated consumer proposition that offers something new from the parent brand, and is adequately supported by the manufacturer without cannibalizing parent brand spending. ------------- Appeared in Facts, Figures, and the Future Magazine, © January 2003.