Long-term care vendors likely benefit most from adding sub-brand names with new products, according to a new study from the University of Buffalo School of Management.
The study examined new products specific to the packaged-goods market, where more than 150,000 new products were introduced in 2010. More than 90% were extensions of existing brand-name products, such as soda companies introducing a new line like Pepsi Lime or a brand like Gillette introduces a new razor, such as the Gillette Mach3.
There is significant investment in and a high failure rate of product-extension launches, said study co-author Ram Bezawada, Ph.D., MBA, associate professor of marketing at the University at Buffalo School of Management. He and colleagues looked at 155 new product extensions introduced to 20 U.S. markets. While previous studies have examined the introduction of new product extensions, this is the first to look at the aggregate market impact of effects of new product extensions.
“If you’re present and strong in a certain category, like medical devices, and you are entering a space you haven’t done before, maybe surgical supplies, in that case the study finds that if you use your existing brand name, that will be useful,” he told McKnight’s. “That’s what we found to have the most benefit and profits.”
Part of that, however, is dependent on the customer having a positive association with the brand.
“It’s obviously about trust. If I have a negative association with a brand, then it won’t work,” Bezawada said. “You should be trying to launch products that are high quality and benefit from brand recognition. Shoddy products will hurt brand equity.”
Results are scheduled to be published in an upcoming issue of Management Science.