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BRAND EXTENSIONS

 

Multinational study analyses why brand extensions succeed – or fail

By our News Team | 2023

Given the high failure rate of brand extensions, it is vital for marketers to understand what factors can drive their success.

Researchers from the University of International Business and Economics (China), University of Groningen (Netherlands), University of Cologne (Germany), and University of Chinese Academy of Sciences (China) have published a new Journal of Marketing article that examines the drivers of brand extension success.

Brand Extensions

Photo courtesy of The Coca-Cola Company

Management typically expects that introducing a new product under an existing brand name can reduce introduction costs, lower the risk of failure and increase profit. However, only 30% of all brand extensions in the US consumer packaged goods market survive the first two years, a success rate similar to new brands. Given this unexpectedly high failure rate of brand extensions, it is vital for marketers to understand what drives the success of brand extensions.

According to the research team, the study provides three key findings that will benefit chief marketing officers:

Leverage both parent brand equity and extension fit

There is a 60.6% probability of a more positive response to a brand extension if parent brand equity improves. Similarly, there is a 61.4% probability of a positive response to a brand extension if extension fit improves.

Co-author Chenming Peng says: “Managers should leverage both parent brand equity and extension fit to enhance brand extension success. However, pay more attention to extension fit because it is slightly more influential than parent brand equity.”

Consider parent brand equity and extension fit simultaneously

Managers should pay attention to the differential effects of various dimensions of parent brand equity and extension fit. For example, when introducing an extension product, creating and highlighting similarities in product features and images of the parent brand and the extension is beneficial.

“We find that parent brand equity can strengthen the positive impact of extension fit on brand extension success, and vice versa. Therefore, managers should consider parent brand equity and extension fit simultaneously,” explains co-author Tammo H.A. Bijmolt. 

Parent brand equity has a positive (though small) effect on brand extension success even if the extension has a poor fit. Similarly, extension fit exerts a positive (though small) effect on brand extension success even if the extension has a low parent brand equity.

“If the parent brand does not have high equity, brand extensions can still be a viable strategy for launching new products, as long as the extension fits well with the parent brand. Likewise, an extension that does not have a good fit can still be successful, as long as the parent brand is strong,” co-author Franziska Völckner adds.

Take a broader perspective on brand extension strategies

Managers should take a broader perspective on brand extension strategies by considering contextual factors related to the parent brand, the extension product, communication, and consumers. For example, managers of brands whose existing core products are services should particularly emphasise the equity of the parent brand (and its dimensions) when introducing an extension product.

You can find out more about the study ‘A Meta-Analysis of Brand Extension Success: The Effects of Parent Brand Equity and Extension Fit’ here.

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    Dr Kin Kariisa

    Group CEO - Next Media

    Dr. Kin Kariisa is an extraordinary force at the helm of Next Media Services, a conglomerate encompassing NBS TV, Nile Post, Sanyuka TV, Next Radio, Salam TV, Next Communication, Next Productions, and an array of other influential enterprises. His dynamic role as Chief Executive Officer exemplifies his unwavering commitment to shaping media, business, and community landscapes.
    With an esteemed academic journey, Dr. Kariisa’s accolades include an Honorary PhD in exemplary community service from the United Graduate College inTexas, an MBA from United States International University in Nairobi, Kenya, a Master’s degree in Computer Engineering from Huazong University in China, and a Bachelor’s degree in Statistics from Makerere University.
    Dr. Kariisa pursued PhD research in Computer Security and Identity Management at Security of Systems Group, Radboud University in Nijmegen, Netherlands. As a dynamic educator, he has shared his expertise as a lecturer of e-Government and Information Security at both Makerere University and Radboud University.

    Dr Kin did his PhD research in Computer Security and Identity Management at Security of Systems Group, Radbond University in Nigmegen, Netherlands. He previously served as a lecturer of e-Government and Information Security at Makerere University in Kampala, Uganda and Radbond University in Netherlands.

    Dr Kin did his postgraduate courses in Strategic Business Management, Strategic Leadership Communication and Strategies for Leading Successful Change Initiatives at Harvard University, Boston USA.

    • Other current and previous roles played by Dr Kin Kariisa:
    • Lecturer of e-Government and Information Security to graduate students at Makerere University, Kampala and Radbond University in the Netherlands
    • Director of Eco Bank Uganda Limited, one of the largest banks in Africa
    • Chairman of the National Association of Broadcasters, an umbrella industry association for all Television, Radio and online broadcasters in Uganda.
    • Chairman of Board of Directors of Nile Hotel International, that owns the leading hotel in Uganda, Kampala Serena Hotel.
    • Chairman of Board of Directors of Soliton Telmec Uganda, the leading telecom company in Optic fibre business managing over 80% of optic fibre in Uganda.