How advertising strategy affects brand and USP recall for new brands and extensions

Nathalie Dens

University of Antwerp

Patrick De Pelsmacker

University of Antwerp, Ghent University

Introduction

Numerous frameworks, like the product life cycle and the growth-share matrix, affirm the necessity of new products for a company’s sustained profitability and prevention of product line obsolescence (e.g. Chaney et al. 1991; Kotler 2000). New product introductions have been shown to increase long-term financial performance and firm value (Pauwels et al. 2004). At the same time, new products suffer from high failure rates, ranging from 35% up to 90% (e.g. Boulding et al. 1997; Brand Strategy 2005). Companies often try to link an established brand name to a new product (i.e. extension), hoping the parent brand reputation will leverage the new introduction (DelVecchio & Smith 2005). Although benefiting from parent brand leverage seems tempting, the failure rate of extensions is still high, and might even be higher than for completely new brands (Roche 1999; Wing 2004).