I found this piece written by Al Ries in AdWeek today talking about line extensions. The article caught my eye because it uses examples from the beer industry as arguments against line extending brands.
Al makes some good points and has the data to support it:
- Bud Light ate away at Bud’s volume
- Bud, Bud Light and Bud Light Lime and Bud Select are all one brand, with different flavors – no matter what the marketers want to tell you
- Miller has gone thru the same issues and lost a boat load of money in the process
- (read the article for more of the stats and data to support his point)
But what’s not mentioned is the alternative to line extending: creating new brands. And creating new brands is hard. Starting at ground zero is hard. Convincing distributors, bottlers, retailers and consumers to take a chance on your new brand is just about the hardest thing to do in business. It takes time, it takes patience, it takes an entrepreneurial spirit and it takes a desire to constantly test, track, monitor and measure effectiveness.
Trust me – it’s hard. I’m in the thick of it right now working on a project that is not only launching a new BRAND, but a new category.
Here are some stats to think about:
- 92% of new brands never reach $50MM in sales
- 78% of new items do not reach $7.5MM in year 1
- Of the 22% that do reach the $7.5MM plateau, 92% of them are line extensions – NOT NEW BRANDS!
- Stats via 2007 IRI Pacesetters Report
It’s easy to sit there and play “Armchair Quarterback” and say “Don’t ever line extend!” But there are just as many reasons and statistics pointing marketers in the line extension direction too.
I’m still figuring all of this out, but at this point I think it comes down to this:
- Ask yourself if you need to innovate to stay relevant in your category
- If the answer is “yes” – ask yourself if you have the patience and drive to innovate new to world brands
- If the answer is “yes” again – ask yourself if you have the long-term support of your owner, shareholders and board of directors. By support, I mean the desire to embark on a long, crazy journey that’s bound to have plenty of ups and downs – and probably a few casualties
- If the answer is ever “no” – start thinking about a line extension that might one day be your lead brand
*Hat tip to Jerry Knight for coining the phrase “Innovation is hard.”