Our executive leadership team is exploring the idea of expanding some of our brands into new categories. Does the institute have any insights on launching an established brand into a new category? Specifically, for a brand with 90% or more aided awareness in a mature category, are there any known advantages or disadvantages it might face when expanding into a different category? I understand this might depend greatly on the categories of interest, but I am curious to what extent research has been done on this topic.
There has been a great deal of academic research into questions around brand stretch. Unfortunately, much of the existing research out there does have limitations. As an example, often they use hypothetical/fake extensions (rather than real ones), have student samples (rather than consumers), and studies using sales outcome measures are few and far between. However, here are summarised thoughts on what has been done.
While a lot of my work is thinking about introducing new products from established brands within the same category (line extensions), an Institute study investigating 99 brand extensions shows the chance of buying the same brand in a second category is 2.4 times higher than if an unrelated brand in the first category was bought (see here). This is supported in older research showing brand extensions tend to have slightly higher market shares than completely new brands launched in the category. These results suggest that brand extensions that leverage higher share (established) brands may help with sales, which is likely due to the existing brand associations that exist in people’s memories from the established category, while new/very small brands effectively start at ‘zero’. Getting into people’s heads can be a really tough task to do!
On this point, if you’re looking at extending your brands into new categories, work with those consumer associations (e.g., branding, image fit), rather than looking to disrupt them. As an example, consider how to carry across/adapt your brand’s Distinctive Assets into the new category, rather than disrupt this completely, impacting the original brand. If you’re finding you’re adapting lots of things/there is little fit between categories, then a sub-brand strategy might be a better idea. But again, don’t sub-brand too far away from the original brand, because then you’re not leveraging the benefits of the brand. Fit does come up a lot in the past research. I am hoping to do some research on this very topic soon. What we see at the moment in studies using (mostly) fake extensions is that higher functional fit (i.e., more logical options for the brand to introduce) are evaluated more favourably. Others find more similar image fit also has more positive associations.
For research on reciprocal benefits on the original brand when extending somewhere new, there are suggestions that there can be negative effects on the parent brand for poor fit/unsuccessful extensions, but again there are limitations with these studies/not all studies see this. This doesn’t mean it is not impossible to launch something successful that doesn’t have a similar functional or image fit, it is just one consideration alongside securing wide distribution, being prominent where people shop and reaching out to category buyers. It truly isn’t just about the ‘right’ product, all things need to be switched on when launching something new. I recommend reviewing your previous extensions and see if there are any similarities in what worked or didn’t work, and learn-test-learn!
K.V
21 August 2024
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