New product performance advantages for extending large, established fast moving consumer goods (FMCG) brands
| DOI | https://doi.org/10.1108/JPBM-07-2018-1932 |
| Pages | 812-829 |
| Published date | 18 November 2019 |
| Date | 18 November 2019 |
| Author | Jake David Hoskins,Abbie Griffin |
| Subject Matter | Marketing |
New product performance advantages for
extending large, established fast moving
consumer goods (FMCG) brands
Jake David Hoskins
Department of Marketing, Westminster College, Salt Lake City, Utah, USA, and
Abbie Griffin
Department of Marketing, University of Utah, Salt Lake City, Utah, USA
Abstract
Purpose –This paper aims to investigate how the current size and structure of a branded product portfolio impacts new product performance for
fast-moving consumer goods (FMCG), testing the long-standing proposition that extending a firm’s brand and product portfolio too far is a
dangerous proposition that may damage the market performance of the firm’s new product launches.
Design/methodology/approach –Aspects associated with brand size and structure that may impact new product performance are opera tionalized
along two key dimensions: within-category (scale) and cross-category (scope). The impact of the brand’s scale and scope on the sales performance
of newly commercialized products by the brand is empirically investigated in the context of FMCG. Over 2,000 new product s launched in 2009 and
2010 across 31 food and non-food FMCG product categories in the USA are included in the regression-based analysis.
Findings –The authors find strong evidence that brands with broader within-category scale and cross-category scope overall are ass ociated with
more successful new product introductions, and that these influences generally are driven more by increased product trial than by repeat or
persistence. The authors argue that the higher new product performance observed for more established and proliferated bra nds may be attributed to
advantages of firm product development abilities and product acceptance by the marketplace.
Originality/value –The current results serve to temper the strong cautions set forth in much of the marketing literature about the dangers of
overextending the firm’s brand and product portfolio. These results also suggest that future research should be conducted to furthe r understand
more nuanced implications of how best to grow the scale and scope of the firm’s brand and product portfolio.
Keywords Retailing, Brand name, Regression analysis, Brand extension, Marketing strategy, Brand performance, Product management,
Innovation management, Consumer brand equity, Fast moving consumer goods
Paper type Research paper
Introduction
A substantial amount of academic research effort has been
devoted to understanding the performance implications of a
firm’s strategy for managing its portfolioof product and brand
offerings (Keller, 1999). The broad study of how a firm
organizes and strategicallydeploys its brands in the marketplace
is commonly referredto as either brand architecture (Rajagopal
and Sanchez, 2004) or brand portfolio strategy (Laforet and
Saunders, 1994). Understanding how a firm manages its
portfolio of brands has substantial performance implications.
For example, establishingstrong marketplace reputations at the
firm, brand and product levels improves financial market
performance and reducesfinancial risk (Bharadwaj et al.,2011;
Lane and Jacobson, 1995;Rego et al., 2009;Roberts and
Dowling, 2002).
While a strong firm reputation for its brand and product
offerings is desirable to the stockmarket, it is less clear how the
market responds to brand strategy (i.e. how and whether
brands are extended within [scale] or across [scope] product
categories). Bahadir et al. (2008) found that firms who use a
greater number of sub-brands to serve different product
categories enjoy higher market valuations in the event of a
merger or acquisition. However, Wiles et al. (2012)found that
firms whose brand holdings extend into lower price positions
within a product category and/or into unrelated product
categories experience lower firm valuations, as it may be
difficult to make sense of that firm’s overall brand portfolio
(Asberg, 2015;Suand Tong, 2015).
Perhaps this market confusion about a firm’s decision to
expand its brand and product offerings emerges from
conflicting evidence about the intermediary performance
implications of this strategic marketing decision. The
marketing literature to date has identified various risks of
extending the scope and scale of a firm’s brand and product
portfolio, ultimately positing that firms must retain narrowly
The current issue and full text archive of this journal is available on
Emerald Insight at: www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
28/7 (2019) 812–829
© Emerald Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/JPBM-07-2018-1932]
Received 6 July 2018
Revised 14 January 2019
7 March 2019
Accepted 9 March 2019
812
focused brand positions. Consumer lab experiments have
consistently shown that expanding brand portfolios through
new product introductions either within an already entered
product category orinto new categories risks diluting the brand
image (Chen and Chen, 2000;Childs, 2017;Loken and John,
1993). In turn, research has shownthat when a new product is
less related in its image, price positioning, or category
membership to the firm’s existing offerings, new product
success is often lower (Asberg, 2015;Volckner and Sattler,
2006). Overall, the marketing field has strongly cautioned
against growing the firm’s brandportfolio, as doing so may lead
to negative outcomes for both the new product’s performance
and the image of the firm and its brand holdings (Davcik et al.,
2015;Urde, 2016).
However, as we review later, there is substantial counter
evidence that a broader brand portfolio may endow the firm
with both innovation resource and market advantages. In turn,
the firm will be more successful at churningout successful new
products if:
the firm is functionally strong in the area of innovation;
and
the firm knows the needs of the market, listens to those
needs and incorporates them into the new product
development process (Henard and Szymanski, 2001;
Markham and Lee, 2013).
Furthermore, using an established brand helps reduce
consumers’perceived risk associated with adopting a new
product (Erdem, 1998). In conjunction with the globalization
of economies, this has led to increasingly dominant positions
held by a few internationalbrands known and trusted by a wide
customer base (Davvetas et al., 2015;Frank and
Watchravesringkan,2016;Lee et al.,2008).
This study focuses on furthering knowledge about how the
scale and scope of a firm’s brand portfolio may influence new
product performanceoutcomes. Building on multiple branding
aspects from the extant literature,we conceptualize the brand’s
portfolio structure in terms of its within-category (scale) and
cross-category (scope) dimensions. We investigate four aspects
of within-category (brand equity, brand price position, brand
line proliferationand brand line price range) and two aspects of
cross-category (cross-category brand extension and house of
brands) structure on new productperformance. We posit from
theory and empirical results that the scale and scope of the
brand’s portfolio structure influences the performance of new
products launched into the market, and that it does so through
influencing both innovative capability and market acceptance
of new products, latent variables that we do not measure. We
also posit that these performance effects are stronger during
product trial periodsthan after, in repeat/persist periods.
We empirically test how the firm’s existing brand portfolio
scale and scope impacts new product performance for 2,236
fast-moving consumer goods (FMCG) introductions in 2009
and 2010 in US retail grocery and drug stores. The
methodological approach using archival sales data brings a
fresh perspective to this area of inquiry, which has been
dominated by experimental approaches. As Klink and Smith
(2001) noted, many of these experiments rely on single
exposures to brands or products, which may underestimatethe
persuasive appeal of an established brand. Moreover, it is
unlikely that such studies can account for the actual resource
and innovation capability or market acceptance advantages of
large, established brands. Thus, the dominance of this single
methodological approach in the extant literature may have led
to an overestimation of the negative outcomes from increasing
branded productportfolios.
Our findings suggest that, at least for FMCG, many brand
portfolios may be sub-optimally scaled and scoped. Our
broadconclusionisinlinewithKeller and Sood (2003):the
extant literature may be overly cautious in advising firms
against expanding their brand and product portfolios.
Growing the scale and scope of a firm’s product and brand
portfolio both within and across product categories may
positively impact the performance of future new product
launches.
Development of hypotheses
The positive associations between new product performance
and product development capabilities, resources, market
knowledge and market acceptance have been well-tested
and strongly supported (Barczak et al., 2009;Henard and
Szymanski, 2001;Markham and Lee, 2013). Our
theoretical argumentation thus focuses on defining the
relationships between these constructs and the scale and
scope dimensions of brand portfolio of interest, accepting
that improving these intermediary development-related
constructs in turn leads to improvements in new product
performance, as previously has been repeatedly found in the
empirical literature. Although we use these intermediary
constructs in our hypotheses development, they are
unmeasured latent constructs in our final hypothesis
statements and testing, as can be seen in Figure 1, the overall
model tested in this research.
Following the extant literature, we investigatesix related, yet
distinct, architecturalaspects of a brand portfolio. The first four
(brand equity, brand price position, brand line proliferation
and brand line price range) reference a brand’sstature within a
focal product category,while the last two (cross-category brand
extension and house of brands) are cross-category brand
constructs. Most prior studies have considered aspects in
isolation, rather than investigatingall simultaneously, as we do.
We define our constructsas follows:
Figure 1 Conceptual model
H1(+): Brand
H7: Trial (+)
H2(+): Brand price
H3(+): Brand line proliferation
H4(+): Brand line price range
New product
performance
Cross-Category Factors
H5(+): Cross-category brand
extension
H6(+): House of brands
Within-Category Factors
New product performance advantages
Jake David Hoskins and Abbie Griffin
Journal of Product & Brand Management
Volume 28 · Number 7 · 2019 · 812–829
813
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