Are there generalizable patterns in line extension performance?
| Date | 16 July 2024 |
| Pages | 733-744 |
| DOI | https://doi.org/10.1108/JPBM-08-2023-4678 |
| Published date | 16 July 2024 |
| Author | Kirsten Victory,Arry Tanusondjaja,John Dawes,Magda Nenycz-Thiel,Jenni Romaniuk |
Are there generalizable patterns in line
extension performance?
Kirsten Victory, Arry Tanusondjaja, John Dawes, Magda Nenycz-Thiel and Jenni Romaniuk
Ehrenberg-Bass Institute, University of South Australia, Adelaide, Australia
Abstract
Purpose –New product introductions, particularly line extensions (LEs), are common in consumer goods categories. Despite their commonality,
the success of LEs are not guaranteed. The purpose of this study is to provide brands that introduce LEs a benchmark about what success to
expect.
Design/methodology/approach –This study investigates the success of 36,994 LEs in each quarter for the first three years after introduction. Four
indicators are calculated using consumer panel data to benchmark how long LEs survive (failure rate), how competitive they are in the category
(market share) and how they are adopted by category buyers (penetration and repeat buyer rate).
Findings –Most LEs survive after the first year, but many cease to exist or perform well in the long term. Around 50% of LEs fail a year after launch,
but this failure rate halves once seasonal LEs are removed. Failure rates start to approach 80% after three years. Most LEs do not performbetter
than existing products. Around three in four LEs have a market share or penetration near or below the category norm. Although this percentage
decreases the longer after launch, most LEs are still below the category norm.
Practical implications –These new product success benchmarks provide guidelines to practitioners about what success the “typical”LE will
achieve. This research can help guide new product investment decisions because it providescontext on what is feasible to achieve.
Originality/value –Four market success measures are used, a departure from past benchmarking research which uses practitioner evaluation
on metrics seldom used in practice. The authors provide guidelines about when and how to measure LE and new product success more
broadly.
Keywords Portfolio management, Product innovation, Brand performance, New product development, New product management,
Marketing metrics, New product adoption
Paper type Research paper
Introduction
New introductions are common across consumer-packaged
goods (CPG) brands. The number of new CPG introductions
is well into the thousands each year, and it is estimated that a
new consumer product is launched in the USA every 2 min
(Nielsen, 2019). This trend is not slowing and rises with every
year (McKinseyand Company, 2020).
The reasons why practitioners decide to launch a new
product vary. Generally speaking, brands introduce new
products to stay competitiveshort term and to stimulate growth
long term. New products can produce substantial economic
advantages, demonstrated by the examples of new products
with sales well into the millions (e.g. Circana, 2023). Their
anticipated financial rewards provide practitioners a strong
incentive to launch them, but they require a substantial time
and capital commitment, in which the payoff is never
guaranteed.
Not all new products will last, not even all award winners
(Victory and Tanusondjaja,2023), but how many typically fail?
An 80% rate is widely accepted but cumulative evidenceshows
new products fail at half the accepted rate (Castellion and
Markham, 2013;Crawford, 1979,1987). Past research
sampling new product projects continually support a 40% rate
when using practitioner evaluation (e.g. Knudsen et al., 2023;
Markham and Lee, 2013). A similar rate is also seen in
purchasing data for new stock keeping units (SKUs) (e.g.
Victory et al.,2021), of which many are from established
brands (line extensions). A 40% rate is better than the widely
accepted 80%, but this is still a significant risk when it can
equate to millions of wasted investment.
Many studies examine how certain conditions (e.g. product
innovation and marketing support) increase the likelihood of
achieving new product success (Evanschitzky et al.,2012).
These studies are often among the mostcommonly researched
in innovation (Page and Schirr,2008) but they seldom provide
consistent insights to apply in practice. This is likely
The current issue and full text archiveof this journal is available on Emerald
Insight at: https://www.emerald.com/insight/1061-0421.htm
Journal of Product & Brand Management
33/6 (2024) 733–744
© Emerald Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/JPBM-08-2023-4678]
Researcher(s) own analyses calculated (or derived) based in part on data
from Nielsen Consumer LLC and marketing databases provided through
the NielsenIQ Data sets at the Kilts Center for Marketing Data Center at
The University of Chicago Booth School of Business. The conclusions
drawn from the NielsenIQ data are those of the researcher(s) and do not
reflect the views of NielsenIQ. NielsenIQ is not responsible for, had no role
in, and was not involved in analyzing and preparing the results reported
herein.
Received 28 August2023
Revised 20 February 2024
9 May 2024
Accepted 9 May 2024
733
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