New Products and Brand Extensions

Disadvantages of Brand Extensions

Despite these potential advantages, extensions have a number of disadvantages

1. Can Confuse or Frustrate Consumers

Different varieties of line extensions may confuse and per ­haps even frustrate consumers as to which version of the product is the “right one” for them. As a result, they may reject new extensions for tried and true favorites or all-purpose versions that claim to supersede more specialized product versions. Moreover, because of the large number of new products and brands continually being introduced, many retailers do not have enough shelf or display space to stock them all. Con ­sequently, some consumers may be disappointed when they are unable to find an advertised extension if a retailer is not able to or is unwilling to stock it. If a firm launches extensions that consumers deem inappropriate, they may question the integrity and competence of the brand.

2. Can Encounter Retailer Resistance

On average, the number of consumer packaged-goods stock-keeping units (SKUs) grew 16 percent each year from 1985 to 1992, whereas retail shelf space expanded only 15 percent each year during the same period. Many brands now come in a multitude of different forms. For example, Campbell has introduced a number of different lines of up–including Condensed, Chunky, Healthy Request, Select, Simply Home, and Ready-to-Serve Classic–and offers more than 100 flavors in all.

As a result, it has become virtually impossible for a grocery store or supermarket to offer all the different varieties available across all the different brands in any one product category. Moreover, retailers often feel that many line extensions are merely “me-too”” products that duplicate existing brands in a product category and should not stocked even if there were space. Attacking brand proliferation, a year-long Food Marketing Institute (FMI) study showed that retailers could reduce their SKUs by 5 percent to 25 percent in certain product categories without hurting sales or consumer perceptions of the variety offered by their stores The FMI “product variety” study commended that retailers systematically identify duplicated and slow-moving items eliminate them to maximize profitability. The Science of Branding summarizes one perspective on how to reduce brand proliferation and simplify marketing.

3. Can Fail and Hurt Parent Brand Image

The worst possible scenario with an extension is that not only does it fail, but it also harms the parent brand image somehow in the process. Unfortunately, these negative feedback effects can sometimes happen.

Consider General Motors’s experience with the Cadillac Cimarron This model reduced in the early 1980s, was a “relative” of models in other GM lines, such as the Ponitiac 2000 and Chevrolet Cavalier. The target market was less-affluent buyers seeking small luxury car who wanted, but could not really afford, a full-size Cadillac. Nor was the Cadillac Cimarron unsuccessful at generating new sales with this market ‘segment, but existing Cadillac owners hated it. They felt it was inconsistent with the large size and prestige image they had expected from Cadillac. As a result, Cadillac sales dropped significantly in the mid-1980s. Looking back, one GM executive offered following insights:

The decision was made purely on the basis of shortsighted profit and financial analysis, with no accounting for its effect on long-run customer loyally or, if you will, equity. A typical financial analysis would argue that the Cimarron would rarely steal sales from Cadillac’s larger cars, so any sale would be one that we wouldn’t have gotten otherwise. The people who were most concerned with such long-range issues raised serious objections but the bean counters said, “Oh no, we’ll get this many dollars for every model sold.” There was no think ­ing about brand equity. We paid for the Cimarron down the road. Everyone now realizes that using the model to extend the name was a horrible mistake.

Even if an extension initially succeeds, by linking the brand to multiple products, the firm increases the risk that an unexpected problem or even tragedy with one product in the brand family can tarnish the image of some or all of the remaining products. For example, starting in 1986, the Audi 5000 car suffered from a tidal wave of negative pub ­licity and word of mouth because it was alleged to have a “sudden acceleration ” problem that resulted in an alarming number of fatal accidents. Even though (here was little concrete evidence to support the claims (resulting in Audi, in a public relations dis ­aster, attributing the problem to the clumsy way that Americans drove the car), Audi’s U.S. sales declined from 74,000 in 1985 to 21,000 in 1989. As might be expected, the dam ­age was most severe for sales of the Audi 5000, but the adverse publicity also spilled over to affect the 4000 model and, to a lesser extent, the Quattro model. The Ouattro might have been relatively more insulated from negative repercussions because it was dis ­tanced from the 5000 by virtue of its more distinct branding and advertising strategy.

Understanding when unsuccessful extensions may damage the parent brand is important. On a more positive note however, it should be recognized that one reason why an unsuccessful extension may not necessarily damage the parent brand is for the very reason that the extension may have been unsuccessful in the first place–hardly anyone may have even heard of it. Thus, the sil ­ver lining in the case when an extension fails as a result of an inability to secure adequate distribution or to achieve sufficient brand awareness is that the parent brand is more likely to survive relatively unscathed. Product failures in which the extension is found to be inadequate in some way on the basis of performance are more likely to negatively affect parent brand perceptions than these “market” failures.

4. Can Succeed but Cannibalize Sales of Parent Brand

Even if sales of an extension are high and meet targets, it is possible that this rev ­enue may have merely resulted from consumers switching to the extension from exist ­ing product offerings of the parent brand–in effect cannibalizing the parent brand by decreasing its sales. Line extensions are often designed to establish points of parity with current offerings competing in the parent brand category, as well as to create addi ­tional points of difference in other areas (e.g., low-fat versions of foods). These types of line extensions may be particularly likely to result in cannibalization. Often, however, such intra brand shifts in sales are not necessarily undesirable because they can be thought of as a form of “preemptive cannibalization.” In other words, consumers might have switched to a competing brand instead of the line extension if it had not been introduced into the category.

For example Diet Coke’s point of parity of “good taste” and point of difference of “low calories” undoubtedly resulted in some of its sales coming from regular Coke drinkers. In fact, although U.S. sales of Coca-Cola’s cola products have held steady since 1980, sales in 1980 came from Coke alone whereas sales today also receive signif ­icant contributions from Diet Coke, Cherry Coke, and uncaffeinated forms of Coke. Without the introduction of those extensions, however, some of Coke’s sales might have gone to competing Pepsi products or other soft drinks or beverages instead.

5. Can Succeed but Diminish Identification with Any One Category

One risk of linking multiple products to a single brand is that the brand may not be strongly identified with any one product. Thus, extensions may obscure the identification of the brand with its original categories, reducing brand awareness. For example, when Cadbury became linked in the United Kingdom to mainstream food products such as Smash instant potatoes, marketers of the brand may have run the risk of weakening its association to fine chocolates. Pepperidge Farm is another brand that has been accused by marketing critics of having been extended so much (e.g.. into soups) that the brand has lost its original meaning as “delicious, high-quality cookies.”

The vociferous business consultants Al Ries and Jack Trout, who in 1981 introduced the notion of the “line extension trap”, have popularized this potential drawback. They provide a number of examples of brands that, at the time, they believed had overextended.

One such example was Scott Paper, which Ries and Trout believe became overex ­tended when its name was expanded to encompass ScotTowels paper towels, ScotTissue bath tissue, Scotties facial tissues, Scotkins, and Baby Scot diapers. Interestingly, in the mid-1990s, Scott decided to attempt to unify its product line by renaming ScotTowels as Scott Towels and ScotTissue as Scott Tissue, adding a common look and logo (although some distinct colors) on both packages as well as their Scott Napkins. In perhaps a risky move, Scott also decided to phase out local brand names in 80 foreign countries where Scott garnered almost half its sales including Andrex, its top-selling British bath tissue. Scott’s hope was that the advantages of brand consoli ­dation and global branding would offset the disadvantages of losing local brand equity.

Some notable–and fascinating–counterexamples to these dilution effects exist, however, in terms of firms that have branded a heterogeneous set of products and still achieved a reasonable level of perceived quality in the minds of consumers for each product. For example, Yamaha has developed a strong reputation selling an extremely diverse brand line that includes motorcycles, guitars, and pianos. Mitsubishi uses its name to brand a bank, cars, and aircraft. Canon has successfully marketed cameras, photocopiers, and office equipment. In a similar vein, the founder of Virgin Records, Richard Branson, has conducted an ambitious, and perhaps risky, extension program. In all these cases, it seems as if the brand has been able to secure a dominant association to quality in the minds of consumers without strong product identification that might otherwise limit it.

6. Can Succeed but Hurt the Image of the Parent Brand

If the extension has attribute or benefit associations that are seen as inconsistent or perhaps even as conflicting with the corresponding associations for the parent brand, consumers may change their perceptions of the parent brand as a result. For example, Farquhar notes that when Domino’s Pizza entered into a licensing agreement to sell fruit-flavored bubble gum a number of years ago, it ran the risk of creating a “chewiness” association that could negatively affect its flagship pizza products.

As another example described Miller Brewing’s difficulty in creating a “hearty” association to its flagship Miller High Life beer brand in, part because of its clear bottle and other factors such as its advertising heritage as the “champagne of bot ­tled beer.” It has often been argued that the early success of the Miller Lite light beer extension-market share soared from 9.5 percent in 1978 to 19 percent in 1986–only exacerbated the tendency of consumers to think of Miller High Life as “watery” tasting and not a full-bodied beer. These unfavorable perceptions were thought to have helped to contribute to the sales decline of Miller High Life, whose market share slid from 21 percent to 12 percent during that same eight-year period.

7. Can Dilute Brand Meaning

The potential drawbacks from a lack of identification with any one category and a weakened image may be especially evident with high quality or prestige brands.

8. Can Cause the Company to Forgo the Chance to Develop a New Brand

One easily overlooked disadvantage to extensions is that by introducing a new product as an extension, the company forgoes the chance to create a new brand with its own unique image and equity. For example, consider the advantages to Disney of having introduced Touchstone films, which attracted an audience interested in movies with more adult themes and situations than Disney’s traditional family-oriented releases; to Levies of having introduced Dockers pants, which attracted a customer segment interested in casual pants; to General Motors of having introduced Saturn, which attracted consumers weary of “the same old cars sold the same old way”; and to Black & Decker from having introduced DeWalt power tools, which attracted a higher-end, more skilled market segment.

Each of these brands created its own associations and image and tapped into markets completely different from those that currently existed for other brands sold by the company. Thus, introducing a new product as an extension can have significant and potentially hidden costs in terms of lost opportunities of creating a new brand franchise.

Moreover, there may be a loss of flexibility in the brand positioning for the extension given that it has to live up to the parent brand promise and image. The positioning of a new brand could be introduced and updated in the most competitive advantageous way possible.

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