The result is a riot of new products but very few fresh brands. Only two per cent of marketing directors think that new brands will be their main launch method in the next few years. Research International data suggests that as few of 15 per cent of volume forecasting tests are on entirely new brands. We've also found that extensions which get launched did no better in research than rejected ones. In other words, companies are so keen on brand extensions that they will ignore research results.
This recklessness reflects an increased confidence in the power of parent brands to influence consumers. But it also reflects financial reality.
Conventional wisdom has it that extension launches are cheaper and less risky than bringing a whole new brand to market.
But what if conventional wisdom is wrong? No product launch is without risk. Extensions or not, the majority of new launches fail. The bad news from our product and concept test databases is that extensions are actually more likely to fail than new products.
We've identified three key reasons why brand extensions fail. They're not as distinctive as they should be. They're not good enough products.
And they're not being given the right kind of marketing support. Brand extensions often research well but fail at market. They do show much higher purchase intention than new brands - 12 per cent more on average - but this is misleading.
It's easy to be seduced by purchase intention and not worry about how unique a brand is. But uniqueness turns out to be a critical factor in predicting actual sales for new products, only slightly less important than intent to purchase. So the apparently strong research results are a little deceptive - most extensions fail to score well on this vital uniqueness metric.
People say they will buy extensions because the extensions trade off the heritage of a parent brand. That's a good thing, but it can too easily serve as an excuse to bring sub-par products to market. It can also have repercussions for the parent brand itself. An extension launch may seem like a low-risk exercise but really it's a gamble - and the stake is its parent's precious equity. An extension is cheaper to launch than a new brand - but this is partly down to low marketing support. Our MicroTest database tells us that new launches receive double the advertising support of extensions within the parent's category. The parent brand is again expected to do the work. But extensions desperately need differentiation, and 'piggyback' marketing can harm their prospects. Millward Brown data suggests that the ad awareness of extensions is much lower than that of new brands. We're not saying brand extensions are a bad idea. It's just that they need to be handled in the right way. Treating them as low-risk easy options can backfire.