The changing market dynamics and heightened competition of the global economy
have taken the role of brands to an unsurpassed level. Brand marketers seek ways to
achieve growth while reducing both the cost of new product introductions and the risk of
new product failure.
A popular way of launching new products has therefore been to leverage the equity
of an existing brand into a new sector, market or product category—the so-called
brand extension. Launching new products can be an attractive growth strategy to
further penetrate the existing market, however, this strategy is not without risks. Some
estimate that 30-35% of all the new products fail (Booz et al., 1982; and Montoya-Weiss and Calantone, 1994), while others (e.g., Crawford, 1977) are even more pessimistic,
citing that only two out of 10 new launches succeed. Due to factors such as high advertising
cost and increasing competition for shelf space, it has become more difficult to succeed
with new products (Aaker, 1997). An increasing popular approach to reducing risk
when launching new products is to follow a brand extension strategy. This is followed in as
many as eight out of 10 new product launches (Ourosoff et al., 1992). One of the most popular ways to
achieve this is to put a new product in another category under the
name of an existing brand. This is called brand extension (Fox et al. 2001). |
