Life Line Potential
CHICAGO – It can seem like a no-brainer. They have built-in consumer loyalty right off the shelf. But convenience-store retailers are finding that line extensions are not always the hole-in-one they should be.
Yes, line extensions have a lot of potential, but if they are poorly managed it can cause unintended harm on the parent brand, according to new research from Nielsen. To protect a brand’s reputation, a line extension “should clearly link with the core product while also offering consistency, uniqueness and relevance in the market,” stated Nielsen in its Global New Product Innovation Survey.
“Brands can signify quality and inspire confidence,” said Rob Wengel, senior vice president and managing director of Nielsen Innovation in the United States. “For a consumer with limited disposable income, the potential loss from an underperforming product is magnified. As a result, they’re often hesitant to take a risk on a product that might not live up to expectations, and are sometimes even willing to pay more for brands they trust.”
For new products launched without that brand-name cache, Wengel said “extra care must be taken to provide strong assurance that the product will be perceived as a good value for the money.”
The executive added that brand building can be costly and time-consuming and, as such, it can be “extremely advantageous for established brands to lend their name to a new item in the same category through line extensions.”
He said line extensions are approximately three to four times more common than “new-manufacturer” and “new-brand” launches combined.
For consumers, line extensions translate to confidence in a new product’s ability “to deliver against promises and can relieve some of the apprehension often associated with trying something new,” said Wengel.
Nielsen’s Global New Product Innovation Survey found that nearly six in 10 global respondents (59%) prefer to buy new products from brands familiar to them, and 21% say they purchased a new product because it was from a brand they like.
Consumers in North America and Latin America value brand recognition more than consumers in any other region. For both, it was the second-most important reason (after affordability) consumers gave for purchasing a new product.
Brand recognition is particularly influential in developing markets. On average, more than two-thirds of developing-market respondents (68%) say they prefer to buy new products from brands they’re familiar with, compared with 57% in developed markets.
In addition, more than one-fifth of developing-market respondents (22%) say they purchased a new product because it was from a brand they like, compared with 17% in developed markets.
Nielsen noted that a brand extension can provide a strong foundation for success, but only if the company manages the line extension well.
In fact, line extensions with little differentiation could lead to cannibalization. Likewise, if a line extension varies too dramatically from the parent, it can dilute sales, said Nielsen.