The easiest way for an organisation to resist competition is to launch a new product in a hitherto untapped category or in a category where it can successfully create stark product differentiation. However, while consumer interest could initially peak, there is a far greater possibility that a consumer will prefer extensions of the brands he is comfortable with. In a slow market, the chances of a new brand succeeding are slim, since the consumer is on a tight budget, which he has already allocated to an existing product basket. It is highly unlikely that he will replace the product from an established parent brand with an entirely new product. A new study released by leading global information and measurement provider, Nielsen, affirms this. According to the study, extensions of existing fast moving consumer goods (FMCG) brands are five times more successful than launching a new brand in India.
Nielsenâ€™s study of the top brands in 46 FMCG categories and 82 brand extensions in the food and non-food categories shows that in addition to promoting brand equity, brand extensions can grow incremental sales up to 38 per cent and contribute as much as 30 per cent to parent brand sales.
â€œInnovations are driving FMCG growth in India,â€ says Arun Chogle, Client Business Partner, Nielsen India, adding, â€œBrand extensions, or stretching your existing brand, increase your chances of innovation success. Not only do brand extensions leverage the equity of the parent brand, but they also lead to faster adoption and deliver higher marketing efficiency.â€
Nielsen has identified five ways in which brand extensions are successful in India:
Gain share and build distribution faster than new launches: One example from Nielsenâ€™s review of brands launched in the past two years shows that while eight new, national body lotion brands reached a share of 0.3 per cent, seven national brand extensions increased that figure almost four-fold, delivering a four per cent market share.
More likely to succeed in a highly fragmented category: Findings show that developing categories with fragmented shares, or developing categories with lower penetrations, are two times more successful than established category sizes of greater than Rs 3,000 crore.
Premium index lower than the parent brand: Around 65 per cent of successful brand stretches have a price premium index lower than that of the parent brand. Study results show that brand leaders that are priced below the parent premium at the entry stage were more successful than those that priced above the parent brand.
Strong parent brand = strong brand extensions: Nielsenâ€™s study shows that when the parent brand was a leader in the category, 59 per cent of brand extensions were also successful. When the parent brand was not among the top five players, 35 per cent of brand extensions were successful. â€œBuilding the core is important, but advertising support is critical for both the parent and the child,â€ Chogle states.
Leverage four factors: To successfully unleash the potential of your brand stretch, determine your brandâ€™s leverage power by reviewing its advantage, recognition, relevance, and credibility.
- Advantage â€“ The product delivers new, or distinct, benefits to the category
- Recognition â€“ It ensures strong parent-brand awareness levels in terms of functionality, imagery and personality
- Relevance â€“ It makes certain parent attributes relevant in the new category, and;
- Credibility â€“ The product delivers on brand promises.
Chogle adds, â€œUnderstand the market structure of the new chosen category to determine both its fragmentation and penetration among consumers and most importantly, establish your companyâ€™s executional competence to create the right product offering, deliver distribution muscle to reach consumers, and stay invested in ad spending and support levels.â€