7 Keys to Marketing Genius: Avoid the Line Extension Trap*
The following is an excerpt from The 7 Keys to Marketing Genius by Michael Daehn
If you follow the prevailing logic of most modern companies, you will inevitably fall into this trap. Line extension is using an existing brand name or image and extending it to new products. Sounds like a good idea, right? Why not use the equity of your known brand to draw attention to a new product? The reason is that you tend to confuse customers as to what your brand means, and in the long run this strategy decreases overall market share.
For example, in 1978 7UP was the lemon lime Uncola with a 5.7% share of the soda beverage market. Trying to capitalize on this significant market share, they created 7UP Gold, Cherry 7UP, and assorted diet versions. Logic would dictate that with a greater product offering they would have gained a greater share of the market. On the contrary, their sales plummeted to 4.2%. Line extensions confuse customers.
Why do so many companies use line extensions if they tend to fail? I’m not really sure why they continue to ignore the data, but here are some possible reasons:
• They don’t do their homework. If companies took the time to investigate the lack of success of line extensions by other brands and companies, they might think better of the idea.
• Ego. They feel so successful with their current brand they think they can carry the momentum to the next item by slapping their name on the label. They also don’t think the seven keys to marketing apply to them.
• Copycats. Everyone else has line extensions so they reason that it is the proper strategy, not taking into account the number of line contractions that frequently occur.
• Appearance of success. An insidious feature of this trap is that line extension usually has initial success. Consumers are usually curious about the new product with a familiar name and will try the new item initially, but long-term sales plummet. Some line extensions become market leaders further muddling the argument. But in those cases, it is usually because their direct competitors are also using line extensions such as Diet Coke vs. Diet Pepsi.
• Appearance of growth. Most executives are paid to come up with ideas on how to grow the brand. By concocting new versions of a brand, it appears as though they are earning their paycheck since there are more items in the market with their brand name on the label.
• Appearance of cost effectiveness. It would seem that extending a brand would be cheaper, since the company already has a place in the mind of the consumer. On the contrary, it often costs just as many, if not more, marketing dollars to educate the public about the new product line. In many cases, brands try to reeducate their consumers about what their name means. They are changing the promises made by the original brand.
*Ries, Al. Focus: The Future of Your Company Depends on It. ©1996 HarperCollins Publishing, New York, NY. I highly recommend reading this book for a thorough explanation of line extension and the power of focusing a brand.