Line Extension – An Idea, a Mistake or a Trap?
by: Not-Just-Marketing, Marketing Cell at NMIMS
Line extension is the practice of using the name of an established brand name for a new product in the same category. Line extensions are standard practice across industries, be it FMCG (clinic, clinic plus), automobiles (Zen LX, Zen VX) or food products (Kraft foods). Actually, it is not even obvious how much this pervades us. The next time you visit a supermarket, take any one brand (Say close-up or Colgate) and see how many SKUs (Stock Keeping Units such as 50 g Colgate Total, 75g Colgate Salt etc) they have. Let’s see the reasons, some advantages and disadvantages of line extensions
The main reason a company chooses line extension instead of creating a new brand is that the company assumes that a particular name has already been established, has a position in the mind of the consumer and has been advertised well. So basically, extension of a given brand is cheaper and more efficient since the company does not have to spend money and time in positioning/advertising a new brand to the consumer, that too in a market that is already so cluttered with products. Another reason why a company chooses to go for line extension is that the company feels its product is invincible and that the consumer would be ready to accept a new product simply because it has heard the same name as before. (Well, this is not the case, as has been proved once too many times before)
Let’s look at a case of line extension in India. Indigo from Tata is a case in point. The car Indigo itself could be considered a line extension of the successful Tata Indica. But now that the Indigo is a success on its own, there are some variations of that as well. When the Indian government announced subsidies for cars under 4 metres in length, Tata was one of the first to react by reducing the length of the Indigo to less than 4 metres (which makes it the shortest sedan in the world), give it a new name called “Indigo CS” and sell it for a price that no sedan could match at that time, making a handsome profit in the process. But then, there’s also an Indigo XL, an Indigo Marina, an Indigo Manza, an Indigo XL etc. But how many people actually understand the difference between the different brands? And what does the Indigo CS do to the XL and what the manza do to the Marina? Doesn’t it all confuse the customer?
Let’s take a look at Kraft foods. They are a classic example of being in everything and still being nothing. They are a confectionary, food and beverage conglomerate. From A to Z, they have a whole line up ranging from Kraft steak sauce, cheese, gelatine, mayonnaise, macaroni & cheese and some brands with different names. Not that they do not generate enough revenue, but the name of the brand is so diluted that people have nothing to associate it with. Though Kraft has a good market share, it is not a leader in almost every product that it sells under its name directly.
Another case is that of Crest toothpaste. Crest was initially a successful product as it was the first toothpaste with fluoride. This was the major selling point for Crest against Colgate. With some success and the fragmentation of the toothpaste, Crest introduced more and more varieties of toothpaste, all under the same name. Some with tartar control, some with fluoride and so on. At a point, there were as many as 52 SKUs (Stock Keeping Units of different varieties, weights etc). This added greatly to the customer’s confusion. Colgate launched Colgate Total, which claimed that it provided everything within one product. Crest could not match this move by removing all 52 SKUs and making one Crest Total instead. Crest was from Procter & Gamble. Not to mention what they did with 31 SKUs of Head & Shoulders.
A successful handling of line extensions must be learnt from the Japanese. Honda’s Acura, or a better example, Toyota’s Lexus. Honda is known for its fuel economy, so it was a good move to categorise the sports car range under a different name. Toyota’s models are known for their great quality and value for money. So it would not be ideal to sell a high priced Toyota as it would deviate from this basic value proposition. So naming a new range under “Lexus” is a good strategy. Not many people that are aware of the Lexus brand know that it is from the Toyota stable. This works well for both the brands without affecting one another.
There are some definite advantages of Line Extension in the form of lesser spending on advertisement, more share of mind and share of heart of a customer for a given brand name, less time and money spent in establishing a new brand name etc. Line extension is not a mistake; rather, line extension is a trap. This trap can be used both ways, though. One way is that of getting too many products and diluting the main product the way Kraft and Crest did, and the other way is to ‘trap’ two products into separate positions in the mind, they way Toyota and Honda did. Line extension must be used with control and with caution. It will cost dear to a company to overuse it such as the case of Crest. The line extension trap is also an easy way for competition to use to overtake a brand: a brand that tries to be everything. The stigma associated with being a ‘jack of all trades, master of none’ isn’t limited to just, people. Brands can fall prey to it too.
By: Srinivasan Chockalingam, NMIMS, Mumbai