Choosing between line extensions and second brands: the case of the Australian and New Zealand wine industries
| DOI | https://doi.org/10.1108/10610429810244684 |
| Date | 01 December 1998 |
| Published date | 01 December 1998 |
| Pages | 519-536 |
| Author | Richard Speed |
| Subject Matter | Marketing |
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 7 NO. 6 1998, pp. 519-536 © MCB UNIVERSITY PRESS, 1061-0421 519
Introduction
When a new product line is launched into a category that is already served,
what branding strategy should be adopted, and what factors will influence
this decision? Marketing researchers have devoted considerable effort to
investigating issues associated with branding (see Shocker et al., 1994 for a
review). A major focus of this research has been on “brand extensions”,
whereby a current brand name is applied to a new product in a completely
different product category (Tauber, 1988). Comparatively neglected have
been new products launched into a product category already being served,
termed “line extensions”. Line extensions clearly have many features in
common with brand extensions. The characteristics of an existing product
that make it a strong candidate for brand extensions will apply to line
extensions. The major point of difference between brand and line extensions
is that, because the original and new product fall within the same category,
cannibalisation is a particularly relevant issue (Reddy et al., 1994).
The relative emphasis on brand extensions in academic research contrasts
strongly with the occurrence of these phenomena in the market. One study of
leading consumer products companies quoted by Aaker (1991), suggests that
89 percent of new product introductions were line extensions, 6 percent were
brand extensions and 5 percent were truly new brands. Over the years there
have been calls to redress the balance. Aaker and Keller (1990) explicitly
called for investigation into the role of branding in upscale or downscale
product launches into markets already served. Reddy et al. (1994) repeated
this call, noting that “relative price may have an important effect on the
success of an (line) extension”. Such line extensions are seen in apparel (e.g.
Levis and Dockers, Donna Karen and DKNY), cars (Toyota and Lexus),
electronics (National Panasonic and Technics), computers (IBM and Ambra)
and beverages (Château-Latour and Les Forts de Latour).
The research objectives of this study are to identify under what
circumstances companies launch new products as line extensions or as
second brands. The research focuses on predicting how the established
position of the original product line, and the various positioning options for
the new product, interact to influence branding strategy. Prior research into
line and brand extensions is drawn on to build a model of branding strategies
under various product positioning options. This research is reviewed in the
next section and the factors identified by researchers as potential influences
on the brand naming decision are listed. In the following section a model is
developed to predict branding strategies for given product positioning
decisions. Predictions that can be derived from hypotheses adopted in
operationalising the model are outlined next. The model, and associated
hypotheses, are tested using survey data and the findings explained. Finally,
some implications for managers and for researchers are outlined.
Choosing between line
extensions and second brands:
the case of the Australian and
New Zealand wine industries
Richard Speed
Melbourne Business School, University of Melbourne, Melbourne,
Australia
Branding strategy
Product positioning
options
Background
Marketing researchers have devoted substantial efforts to understanding and
predicting the impact of using a known brand name on a new product
introduction. Table I presents a selection of the research into brand and line
extensions categorised by focus, design and methodology. Table I reflects the
fact that the majority of work focuses on brand, as opposed to line, extensions.
It also shows the dominance of experimental work in studies of brand and line
extensions, and the diversity of methods used in non-experimental work.
520 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 7 NO. 6 1998
Table I. Selected research in brand and line extension
Principal Principal Relevant
Study focus Design method findings
Aaker and Keller Brand ex Exp’ment Evaluations of Interaction between fit
(1990) proposed brand and brand equity in
extensions evaluation of extensions
Ambler and Decision Cases Interviews with Brand equity concepts are
Styles (1997) making managers central to decision making
Boush and Brand ex Exp’ment Evaluations of Effects of past extensions
Loken (1991) proposed brand on extension success
extensions
Broniarczyk and Brand ex Exp’ment Evaluations of Dominant role of brand-
Alba (1994) proposed brand specific associations over
extensions from brand affect and similarity
competing brands
Chakravati et al. Brand ex Exp’ment Evaluations of Fit between extension and
(1990) proposed brand parent category
extensions
Dacin and Smith Brand ex Exp’ment Evaluations of Portfolio factors affect
(1994) proposed evaluation of brand
extensions from extension
brand portfolios
Fader and Hardie Line ex Survey/ Scanner data in Parent brand significant in
(1996) sales data the fabric softener new SKU success
market
Loken and Brand ex Exp’ment Evaluations of Extensions can damage
Roedder-John proposed brand parent brand
(1993) extensions
Lomax et al. Line ex Survey/ Alternative Cannibalisation is present
(1997) sales data measures of in line extensions
cannibalisation
examined using
scanner data
MacInnis and Brand ex Exp’ment Evaluations of Importance of fit to
Nakamoto (1991) proposed brand transfer of brand equity
extensions
Park et al. (1991) Brand ex Exp’ment Evaluations of Fit between extension and
proposed brand parent category
extensions
Park et al. (1996) Brand ex Exp’ment Evaluations of Evaluation of extension
two brand names/ influences perception of
product category parent brand
combinations
(Continued)
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