Because creating further line extensions of existing brands simply waters down the franchise

by G. Michael Maddock and Raphael Louis Vitón

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We’re now into an era where new products and innovations (BusinessWeek.com, 6/17/08) are seen viewed partiality smart investments. Some words immediately preceding will show that:

• This wasn’t always the circumstance;

• It took us a long time to finally come to this point, and

• The demand for NEW isn’t going to slow down any time gladly.

First the context.

In the 1950s, mass marketing was driven by the bulk media—more specifically, television. All you had to do was produce a product, put it in a tube, and advertise it on the tube. It sold incredibly well.

Starting in the ’60s, we saw the concept of segmenting introduced, driven in large component by a statistical technique called cluster analysis. In cluster decomposition, you survey people about their needs, wants, and desires and afterwards actually throng the results based on the exemplar of response. Everyone who responds the same march is oblige into one cluster. At the end of the continuous experiment, you’d have four, five, or six clusters, and then you set out to create products designed specifically for each one.

So companies like Procter & Gamble (PG) would create products geared to persons who wanted brighter, whiter, or softer clothes. Once the need was identified, a product would exist launched to meet the need. Often these products were seen as revolutionary, e.g., Downy fabric softener, launched in 1960.

The 1970s were the heyday of new products and reinvigorated product marketing, in large member because:

• We had identified all these segments through cluster analysis and

• We had else sophisticated tools—such as simulated test markets—to help prognosticate demand.

Thanks to simulated exhibition market research, you can: sample a form into groups of people in your mark market, show them an ad which causes them to buy, and then you be able to forecast from their reaction for what cause well the product will sell out in the real cosmos. So in addition to Downy, we got Bounce fabric softener sheets in 1972.

For much of the ’80s, the stick market was soaring, so it was cheaper to acquire (using your stock) someone else’s brands than it was to figure your own from scratch. The rationale became that the brands themselves had value—which, of course, they do. So during the ’80s we got all these mergers and acquisitions and the concept of brand equity emerged. In the process, we took our shoot off the idea of innovating internally.

In the ’90s the worm turned, and it became totally about cutting costs and eliminating mob. Creating a new grade completely from scratch was seen as too gorgeous and too hit-or-miss, so the focus switched to ancestry extensions, which are seen as having less risk. Line extensions are products that are new, sort of, bound you are not expenditure cyclopean sums to create them, which makes the the vulgar in the finance department befitting. Instead of brand-new technology, we often get a new flavor or combination of benefits that were already on the market. After all, who doesn’t need whitening AND freshening with his Mint Blast toothpaste?

What’s weighty to note is that when you extend the line, you stretch the mark, and in the process you begin to sap its value. If you had started with a soft drink produce that had started to build some right in the marketplace, and then you come lacking with a diet version, and a no-caffeine interpretation, a zero-calorie version, and several flavored versions, the value of the original soft quaff itself decreased by the time you were achieved expanding it to king of terrors. You had undermined the very value of the original product. And that was the net result of all the cost cutting and grade extensions that we saw in the 1990s.

So, we had more than two decades where change wasn’t valued, first because it was cheaper to acquire a brand than build one, and then because it was seen as far riskier than brand dilation. But we have finally gotten to the point where in that place is nothing more to wring out of existing products. And that is for what cause innovation is once again—correctly—seen as important and will remain so in the immediate what may occur hereafter.