How do line extensions impact brand sales? The role of feature similarity and brand architecture

Abstract

Brand architecture decisions have important performance implications but have seen little quantitative research. In particular, there is little empirical evidence on how the strength of the link established among clusters of products within the company’s portfolio impact the sales effects of typical marketing actions such as line extensions. This paper quantifies the effect of different brand architecture choices and product feature similarity in moderating the impact of line extensions on brand sales. Based on categorization theory, the authors hypothesize that brand name similarity and feature similarity, both independently, and in interaction, increase brand cannibalization. The empirical analysis in three consumer packaged-goods categories shows that it is more critical to minimize the feature similarity than brand name similarity to limit cannibalization and generate higher incremental sales from line extensions. Controlling for feature similarity, line extensions introduced under sub-brands cause greater cannibalization.

Are there generalizable patterns in line extension performance?

“…LEs are new products that supplement the product portfolios of established brands in the same category (Reddy et al. , 1994; Sezen et al. , 2023; Tauber, 1981).…”

“…LEs are new products that supplement the product portfolios of established brands in the same category (Reddy et al, 1994;Sezen et al, 2023;Tauber, 1981). Product additions and revisions are the most common introduction type in CPGs (Booz-Allen and Hamilton, 1982;Hultink et al, 2000).…”

“…Altogether, LEs compete with products from competing brands and (cannibalize) other products within their portfolio. This cannibalization risk is even greater for LEs with similar features to the brand’s products (Sezen et al. , 2023).…”

“…Altogether, LEs compete with products from competing brands and (cannibalize) other products within their portfolio. This cannibalization risk is even greater for LEs with similar features to the brand's products (Sezen et al, 2023). While there are advantages in introducing new products using an established brand, it is vital to benchmark whether the likely success and performance of LEs are worth the possible risks.…”