Brand extensions vital in India

29 November 2012

NEW DELHI: Brand extensions are five times more likely to be successful than launching entirely new products in India, a report has revealed.

Nielsen, the insights group, studied leading firms in 46 categories across the industry, an analysis that incorporated 82 brand extensions from both the food and non-food segments.

According to the organisation, brand extensions can contribute as much as 30% to the sales recorded by their parent, and also boost incremental growth by 38%.

Looking at specific sectors, Nielsen reported eight new national body lotion lines rolled out in the last two years had achieved a 0.3% share, versus the 4% share taken by seven brand extensions.

Similarly, when assessing the oats category, which includes major players like Quaker and Saffola, three new offerings currently boast a 9.2% share, a total hitting 9.6% for a single brand extension.

Nielsen also found that the latter strategy was three times more likely to succeed in fragmented sectors and those with low penetration rates, valued at less than Rs3000 crore ($540m).

Fully 65% of the top-performing extensions had a lower price than its parent, suggesting that entry-level or mass market products may prove to be particularly fertile territory.

A 59% majority of extensions were found to be successful when they belonged to the top five leading brands, falling to 35% where this was not the case.

Arun Chogle, client business partner at Nielsen India, argued there were two key reasons why trial, adoption and distribution rates proved to be superior when "stretching" existing lines.

"The first reason ... is a known brand is more likely to have a faster consumer adoption process," he said. "If I know the brand, I'm more likely to try its extension."

"The second is that there's a much greater retailer acceptance of this phenomenon. So if the retailers know the parent, they're more likely to stock it."

Data sourced from Nielsen India; additional content by Warc staff