VOL. 0014 – FLORIDA, MONDAY, ABR 10, 2023
Juan F. Arjona Harry
President & CEO Strategee One way to pursue growth with a viable probability of success is through product line extensions and brand extensions. Both allow for the addition of untapped market, especially when executed masterfully and at the right time of introduction and category growth.
Next, we will look at the characteristics of each viable growth alternative:
I. Extending the product line:
The first thing to note under this strategy is that growth is within the same reference market that the brand already has; that is, there is no creation of a new market, but rather an existing market. The brand innovates and sells and surely makes money, but it is not creating a new market, but rather serving the same need in a similar way.
Every time innovations are launched under this modality, protection of the brand's competitive position may improve in sales and market share, but it is limited, given that the degree of innovation under this route is low risk, high certainty, and low product features expected.
The magnitude of changes in usage, purchasing, and consumption habits of the product are minor, so advertising communication can much more effectively impact consumption than purchasing.
Protection of high margins will be tied to the brand's ability to maintain a constant pace of innovation, even anticipating each move; otherwise, margins will quickly continue to erode.
Collaboration of channels is key to the gradual and intensive introduction of innovations into the market without failing to occupy prominent competitive spaces.
II. Extending the brand to other product lines:
Under this strategy, new markets are created, given that the intelligent brand reaps from its ability to better satisfy some of today's consumers' needs for which it currently had no offering, surprising a new market for itself and for all; that is to say, creating a new market.
The protection of the brand's competitive position offered by this strategy is much stronger, given that the novelty and initial secrecy about its formula, technology, or specialty give it many years of grace during which its margins can enjoy very high levels.
The magnitude of changes in usage and consumption habits of the product are greater, so educational marketing, communication aimed at reducing perceived risk with purchasing, and opinion leaders are key to achieving effective results.
Margin protection is higher and, above all, increases in demand may occur despite constant increases in prices until a copy is chosen before our brand.
Channels play a predominant role here as they enable a strategy of greater approach with the consumer so that they approach the consumption of the new product "no matter how strange it initially seems."
Product line and brand extensions are extraordinary growth paths for brands; a judicious and competitive analysis of possible options allows for the generation of sustainable and profitable development lines for brands. Product line and brand extensions usually occur in H1 and H2 development horizons.
Extending or contracting brands requires a lot of analysis and requires very good external market information (Brand Tracking, Brand Competitiveness & Strategic Ladder) that allows for the right strategy to be undertaken within the product line and the set of company brands.
For the maintenance of brand health, the optimization rule based on the goal of 10% for each product line extension and four categories for brand extension seems to be the correct and cost-efficient indication.
At Strategee, we deploy brand evaluation processes, measuring its Brand Competitiveness, Brand Equity & its Brand Funnel, which allow for reducing marketing costs and positioning brands more solidly.