Market share matters when launching a new product

Having a strong existing brand is an advantage to companies trying to launch new products, according to new research. 

But be careful of how the product fits within the existing brand portfolio. If it’s only tangentially associated with current products, it might be worth creating an entirely new brand that isn’t associated with the parent name to avoid confusion. 

The research 

The study examined 20,000 products launched by US CPG companies between 2000 to 2012. Researchers identified three different branding strategies, as reported by the Harvard Business Review. The first was launching an entirely new brand; the second was a direct extension (a brand name plus a short descriptive word or phrase); and, finally, a sub-brand (an existing brand plus a non-specific word or phrase, such as Philips Sonicare). 

As a result of the study, researchers were then able to pinpoint five strategies or principles that the most successful launches had in common.

Five principles for launching new products 

• Fit with the other company’s offerings: if the new product is too much of a mismatch, the researchers advise creating a completely new brand. 
• Be careful with innovation: something truly innovative is a risk for parent brands in the event the product fails to live up to the hype. So it’s best to exercise caution in naming the new product after an already successful parent brand. 
• Think of the existing portfolio: when a company already has many brands, it’s probably easy to find a place where a new product can naturally fit, a situation which favors a direct brand extension. If there isn’t a good fit, start anew. 
• Don’t dilute the brand: occasionally companies have too many sub-brands that dilute the pull of the parent company. Be wary of going down this route.
• Advertising matters: bigger brands that are already well known can be bold in launching an entirely new product, but smaller brands lacking the advertising budget or resources might be better off avoiding it.

Why research into launching products matters 

Launching a new product is a risky business. For brands looking to add a new product, the best path might be to look at what the most successful have done before – and this research can bring some rigor to what is an inexact science. 

But it also proves what is fairly obvious: the bigger and better known you are, the better your chances. According to the researchers, as reported by HBR, market leaders can make ‘suboptimal branding decisions without imperiling the parent brand’. The rest of the world’s CPG companies – about 90% – don’t have that privilege.

Sourced from Harvard Business Review