Why do most launches fail to grow your brand?
Prof. dr. Koen Pauwels
Top AI Leader 2024, best marketing academic on the planet, ex-Amazon, IJRM editor-in-chief, vice dean of research at DMSB. Helping people avoid bad choices and make best choices in AI, retail media and marketing.
?Companies regularly launch new products and services with high hopes for their success without accounting for their potentially negative consequence for the umbrella brand. Indeed, a TNS report found that, in the UK, 60% of new launches fail to provide growth or eat into companies’ profits from existing products as "Zombie and Cannibal Products are killing Consumer Brands" .
In contrast, many product introductions have revived stale brand portfolios by creating positive synergy, as in our research how Toyota's other products (BP) benefitted from its Prius launches and updates .
So how can you predict whether a new product will benefit your brand?
My first tenured PhD-student, Burcu Sezen and I tackled this problem with the wonderful professor Berk Ataman, also at Ozyegin University; the startup I joined in 2008 in Istanbul. A few months ago, we open-access published 'How do line extensions impact brand sales? The role of feature similarity and brand architecture' .
As we know from previous research, most new product introductions in fast moving consumer goods are line extensions: horizontally differentiated product lines that showcase minor but functional product variations—such as in flavor or package size. While the need to differentiate along product features is obvious, an unresolved question involves the difference in brand name: whether to introduce the new product line as an extension of an existing brand in the portfolio (i.e., under a sub-brand, creating similarity in brand names) or under a new and unrelated brand (i.e., a stand-alone brand, creating dissimilarity in brand names). Our research distinguishes the brand name decision, related to brand architecture strategy, from the decision related to product features.
Kevin Keller (2014 , p.702) emphasizes that the “brand architecture strategy of a firm determines which brand elements a firm should apply across new and existing products and services” ?in order to
(1) improve consumer understanding of the role and meaning of each brand in the portfolio and communicate similarity and differences between products, and
(2) maximize transfer of equity between the brand and individual products and services to improve trial and repeat purchase.
Therefore, the right brand architecture has to get the right balance between seemingly conflicting goals of communicating similarity and differences across product lines.
We quantify the effect of different brand architecture choices and product feature similarity in moderating the impact of line extensions on brand sales. To that end, we estimate models of brand sales response to product line extensions using data from three consumer packaged-goods categories: coffee, laundry detergent, and toothpaste. In these categories, we observe brands with different architectures: brand portfolios featuring both closely associated, similar brands—sub-brands—and unrelated, dissimilar brands—stand-alone brands.
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We find that both brand name and feature similarity may have detrimental effects on the performances of other brands in the portfolio (i.e., sales cannibalization). However, feature similarity is a greater driver of cannibalization effects than brand name similarity. Controlling for feature similarity, line extensions introduced under sub-brands cause greater cannibalization.
Managers looking to minimize cannibalization within their existing brand portfolio should focus more on reducing feature similarity than on reducing brand name similarity. These considerations gain even more critical importance given a brand portfolio organization with sub-branded products rather than stand-alone ones. Having a stand-alone branding strategy is not sufficient to reduce cannibalization within the product portfolio without new, highly differentiated features. Instead, it is better to have a sub-branding strategy with differentiated features in harmony with the second (individual) part of the dual name structure, communicating a positioning different from that of the parent brand. Coca-Cola and Marriott are great examples of such subbranding :
For other drivers of cannibalization, check out the wonderful summary piece by professors Mason and Jayaram in the 2018 Marketing Intelligence Review :
Ex-The Economist - Growth Strategy, Innovation, and Marketing Effectiveness
6 个月I'll take it a step further. I propose / have seen that the continued introduction of extensions and innovation actually end up being detrimental to the core brand margins due to "complexity" of sales process, i.e. cross subsidization within bundled sales.
Pricing, Velocity & Profitability Solutions for CPG Brand Growth
6 个月Over the course of my CPG career and via client engagements I have observed that the following sometimes occurs: Line extensions or new product introductions (of various architecture classifications) are introduced, not as part of core brand growth momentum, but rather in response to core brand weakness. The line extensions then act as a mask to hide underlying weakness. Related to this, is the cyclical trap that then occurs where brand owners know that these extensions and NPIs will have a limited life. These introductions become part of an ongoing in/out "innovation strategy" and supply-chain pipeline fill approach to maintain shelf-space. The "goal" here is to prop up overall core brand and NPI growth. Other than the cannibalization impact that your research identified, did you also track the impact on overall combined and net impact on company sales and profitability? Short and Long term? Great topic Prof. dr. Koen Pauwels!
Marketer. Innovator. Nutritionist (Human & Canine).
6 个月Thanks for sharing! Two things I’d build further, which are interrelated: 1. Innovation type and, 2. Purchase location. Core NPD/line extensions usually add little value to the consumer, serve the same JTBDs, and rely upon incumbent brand SKUs to be deleted to make space for them. It’s no wonder new SKUs steal disproportionately from their brand’s existing SKU sales and do very little for category growth! Brands that stretch into relevant new spaces (eg adjacent innovation, new categories) are 3x bigger on avg. in realized net revenue, merchandised separate to the core, and are not generally cannibalistic to the brand’s existing portfolio (they steal sales from their new category’s competitive brands, roughly proportionate to their shares). *note: sometimes boring core NPD is done defensively, attempting to maintain a brand’s shelf space where existing SKUs have been given their marching orders by retailers… this is perfectly fine, but it’s close to zero-sum and becomes a problem if that’s the only type of innovation that’s ever done.
Ex-Strategyn & EY consultant helping companies compete for growth by identifying the right products, services, and business models to target before designing or building them.
6 个月Classic example of not aligning their portfolio in a way that gets the entire customers' job done. If they understood what that was - which 99% don't - they would put more though into new products. TL;DR Help customers get their entire job done on a single platform {or portfolio)
Professor @ Georgetown | Behavioral Economics | Consumer Empowerment | Product Management | Customer Analytics
6 个月Wonderful addition(s) to my product management course! Dank je well!