Brandchannel.com has an interesting article about brand and line extensions:
In the marketing world, the Tide proliferation is known as line extension, and similarly, if Tide started making washing machines, it would be called brand extension.
It’s estimated that as of 2004, six percent of all new products launched each year in the US are in fact brand or line extensions.
While the practice of extensions is classic, today’s brand extensions can leave one’s head spinning.
Many attribute the plethora of extensions to being a more cost-effective means to stay in the mind of the consumer. A variation on advertising without resorting to using the same message in every instance.
But with over 30 (and counting) Oreo extensions created over the years —not including the infamous Oreo Fun Barbie doll licensed to Mattel— just how relevant is the exposure, and is the consumer marketplace flat out oversaturated?
Is there too much out there?
There are plenty of opportunities and they are working, which is why more and more marketers are looking to brand extensions. Consumers find comfort in brands they’re familiar with—and are more comfortable with a new product from those brands.
Back in 1998, prior to Kraft’s acquisition of the beloved cookie brand, then-parent company Nabisco’s public relations department maintained that its core revenue was still derived from the Oreo cookie SKUs and that extensions were only a small segment of the revenue.
Fast forward to 2003, and the Wall Street Journal cited the ousting of Kraft’s co-chief executive Betsy Holden as the result of an “over-reliance on brand extending and lack of new products.” The company had not profited from a new-brand success since the launch of DiGiorno Rising Crust frozen pizza in the mid-1990s. In the same article, industry professionals observed that Kraft had perhaps become too good at building brands, completely forgetting to create new ones.
Nonetheless, brand and line extensions are considered across the industry to be a vital part of growing the brand, particularly a mature one.
Business consultants McKinsey & Company recommended to consumer product companies in 2004 to develop product categories that “others have shunned” as an effective means for profitable growth. In the world of extensions, the danger lies in going too far with the model.
Extensions via licensing is a trend that continues to increase in the new millennium accounting for US$ 172 billion of retail sales worldwide, according to the Licensing Industry Merchandisers’
Association (LIMA).
While licensing deals can be lucrative for both the licensee and licensor, they also have the ability to negatively impact a brand when there is a lack of creative and/or marketing management participation on the part of the licensing brand. If there isn’t one person who’s really controlling the quality of the product or the quality of the marketing and advertising, you can really hurt your brand and oversaturate the marketplace.