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While the reaction of the anti-extension pack led by Jack Trout tends to be over the top, they are right to ag up the risks to the core business (Figure 25) These include stealing thunder, cannibalization and the new toy syndrome
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Stealing thunder
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Extensions can bene t from exciting innovations that would have been better off revitalizing the existing core range The basic rule is to ask if there is a trade-off involved in the product change
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When more means more
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Upgrading the core product is a better route when the product change improves performance with no trade-off This is how mainstream car makers like Ford responded to the increased demand for safety features such as ABS brakes and air bags pioneered by Volvo Rather than creating their own safer car extensions, they integrated these features into existing models This was rst done as optional extras, creating incremental revenues Eventually, these features became expected in a car and were offered as standard
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When more means less
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Extension is the best route when modifying the product adds some bene ts but risks undermining others When Head & Shoulders wanted to respond to the trend for more
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Cannibalization Brand clones that lack differentiation versus core product and so eat volume
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KILLING THE CORE
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New toy syndrome Diverting money from the core to support the new extension, rather than using incremental funds
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Stealing thunder Launching new extensions, when the money could have been used to update and strengthen the core
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Figure 25: Extensions can seriously damage your brand health
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STEP ONE: STRENGTHEN THE CORE
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regular hair washing, a frequent-use version was developed It had a lower amount of active ingredient and a milder cleaning system If this had been used to replace the original version, existing users may have been disappointed with the lower ef cacy and left the brand The new product was launched as a range extension and succeeded in building sales by about 10 per cent, attracting new users to the brand
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Cannibalization
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As the name suggests, this is the risk of an extension eating up other family members The biggest risk occurs with range extensions that are brand clones , lacking differentiation versus the existing products Crest spent decades launching new toothpaste twists such as tartar control, gum protection and whitening In the USA, share halved from 50 per cent with one product to 25 per cent with 50 products (6) Each introduction competed for the same usage occasion and introduced novelty value but not enough added value to create incremental growth What most people wanted was an all-in-one version, which was successfully launched by Colgate as Colgate Total
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Eating pro ts
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Eating volume is bad enough However, the story gets even worse when extensions cost more owing to extra goodies yet fail to be priced up, resulting in a lower pro t margin So not only does the new eat the old, the pro tability of the total business goes south This problem often happens because the changes made cost the company more without adding relevant bene ts for the consumer If you are really adding value, then you should be able to price up
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Launch and run
The problem of cannibalization is made more likely by the revolving door syndrome on many brand teams, where new people come on board every couple of years The tendency is to launch and run : do an extension that boosts sales in the short term then move on before the cracks in the core product start to show up The type of sales chart shown in Figure 26 is all too common Note that much of the initial volume lift is pipeline to ll up the shelves of key customers The ongoing level is often not as high, especially if the repurchase rate is poor The new brand manager inherits the problem and often makes the same mistake: another extension that further weakens the core, and so on You end up with the same or fewer sales, spread over more products