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Brand Extensions: When to Use Them

Author

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  • Mary W. Sullivan

    (Graduate School of Business, University of Chicago, 1101 E. 58th Street, Chicago, Illinois 60637)

Abstract

This empirical study investigates whether brand extensions should be introduced early or late in the life cycle of a product category. The longitudinal/cross-category sample of frequently purchased consumer brands is used to analyze how the performance of brand extensions depends on order of entry. The results indicate that early-entering brand extensions do not perform as well on average as either early-entering new-name products or late-entering brand extensions. This conclusion is based on four findings. First, the brand extensions were introduced later on average than the new-name products. Second, the early brand extensions had a lower probability of surviving than either the early-entering new-name products or the late-entering brand extensions. Third, the brand extensions earned higher market shares on average than new-name products, controlling for order of entry. Fourth, the extensions obtained smaller market share premia from entering early than did new-name products.

Suggested Citation

  • Mary W. Sullivan, 1992. "Brand Extensions: When to Use Them," Management Science, INFORMS, vol. 38(6), pages 793-806, June.
    • Handle: RePEc:inm:ormnsc:v:38:y:1992:i:6:p:793-806
    DOI: 10.1287/mnsc.38.6.793
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    Cited by:

    1. n/a, 2012. "Commentaries and Reply to "Can Brand Extension Signal Product Quality?" by Sridhar Moorthy," Marketing Science, INFORMS, vol. 31(5), pages 771-778, September.
    2. Dirk Crass & Franz Schwiebacher, 2017. "The importance of trademark protection for product differentiation and innovation," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(2), pages 199-220, June.
    3. Chakravarthi Narasimhan & Z. John Zhang, 2000. "Market Entry Strategy Under Firm Heterogeneity and Asymmetric Payoffs," Marketing Science, INFORMS, vol. 19(4), pages 313-327, November.
    4. Vijay Ganesh Hariharan & Ram Bezawada & Debabrata Talukdar, 2015. "Aggregate Impact of Different Brand Development Strategies," Management Science, INFORMS, vol. 61(5), pages 1164-1182, May.
    5. Sridhar Moorthy, 2012. "Can Brand Extension Signal Product Quality?," Marketing Science, INFORMS, vol. 31(5), pages 756-770, September.
    6. Louis A. Thomas, 1996. "Brand Capital and Entry Order," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(1), pages 107-129, March.
    7. Javier Garcia-Sanchez & Luiz F. Mesquita & Roberto S. Vassolo, 2014. "What doesn't kill you makes you stronger: The evolution of competition and entry-order advantages in economically turbulent contexts," Strategic Management Journal, Wiley Blackwell, vol. 35(13), pages 1972-1992, December.
    8. Liliya Lozanova, 2016. "To Extend or Not to Extend: Advantages and Disadvantages of Brand Extension Strategy," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 500-514, December.
    9. Bronnenberg, Bart & Dube, Jean-Pierre, 2016. "The Formation of Consumer Brand Preferences," CEPR Discussion Papers 11648, C.E.P.R. Discussion Papers.
    10. DeGraba, Patrick & Sullivan, Mary W., 1995. "Spillover effects, cost savings, R&D and the use of brand extensions," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 229-248.
    11. Norman George & Pepall Lynne & Richards Daniel J, 2008. "Entrepreneurial First Movers, Brand-Name Fast Seconds, and the Evolution of Market Structure," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-26, October.
    12. Gerrath, Maximilian H.E.E. & Biraglia, Alessandro, 2021. "How less congruent new products drive brand engagement: The role of curiosity," Journal of Business Research, Elsevier, vol. 127(C), pages 13-24.
    13. Bart J. Bronnenberg & Jean-Pierre H. Dubé, 2016. "The Formation of Consumer Brand Preferences," NBER Working Papers 22691, National Bureau of Economic Research, Inc.
    14. Hans H. Bauer & Marc Fischer, 2001. "Ein Ansatz zur simultanen Messung von Kannibalisierungs-, substitutiven Konkurrenz- und Neukäufereffekten am Beispiel von line extensions," Schmalenbach Journal of Business Research, Springer, vol. 53(5), pages 455-477, August.
    15. Hasan, Syed Akif & Subhani, Muhammad Imtiaz, 2011. "Empirical Conclusion from the Managerial Perception for the Various Multi-Brands Strategies and their Implementations," MPRA Paper 34755, University Library of Munich, Germany.
    16. Riemer, Hila & Mallik, Suman & Sudharshan, Devanathan, 2002. "Market Shares Follow the Zipf Distribution," Working Papers 02-0125, University of Illinois at Urbana-Champaign, College of Business.
    17. Thomas, Louis A., 1999. "Incumbent firms' response to entry: Price, advertising, and new product introduction," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 527-555, May.
    18. Larisa Kovalenko & Alina Sorescu & Mark B. Houston, 2022. "What brand do I use for my new product? The impact of new product branding decisions on firm value," Journal of the Academy of Marketing Science, Springer, vol. 50(2), pages 338-365, March.
    19. Ian Sinapuelas & William Robinson, 2009. "Entry for supermarket feature me-too brands: An empirical explanation of incidence and timing," Marketing Letters, Springer, vol. 20(2), pages 183-196, June.
    20. Barry L. Bayus & William P. Putsis, Jr., 1999. "Product Proliferation: An Empirical Analysis of Product Line Determinants and Market Outcomes," Marketing Science, INFORMS, vol. 18(2), pages 137-153.
    21. Dan Richards & Puqing Sheng, 2009. "Foreign Fast Seconds and Market Contestability in Emergin Economies: Implications for Domestic Welfare," Discussion Papers Series, Department of Economics, Tufts University 0730, Department of Economics, Tufts University.
    22. Luigi Luini & Andrea Mangani, 2004. "Trademarks, Product Variety, and Economic Activity in Italy and Europe," Department of Economics University of Siena 422, Department of Economics, University of Siena.
    23. Cruz Roche, Ignacio, 1997. "Strategic alliances with intangible assets : special reference to brand alllances," DEE - Working Papers. Business Economics. WB 7021, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    24. Moon, Sangkil & Jalali, Nima & Song, Reo, 2022. "Green-lighting scripts in the movie pre-production stage: An application of consumption experience carryover theory," Journal of Business Research, Elsevier, vol. 140(C), pages 332-345.
    25. Pattikawa, L.H., 2006. "Modeling Brand Extension as a Real Option: How Expectation, Competition and Financial Constraints Drive the Timing of Extensions," ERIM Report Series Research in Management ERS-2006-030-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.

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