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Extensions of existing fast moving consumer goods (FMCG) brands are five times more successful than launching a new brand in India, according to a new study released today by Nielsen, a leading global provider of insights and information into what consumers watch and buy.
Nielsen’s study of top brands in 46 FMCG categories and 82 brand extensions in food and non-food categories shows that in addition to promoting brand equity, brand extensions can grow incremental sales up to 38 percent and contribute as much as 30 percent to parent brand sales.
“Innovations are driving FMCG growth in India,” said Arun Chogle, client business partner, Nielsen India. “Brand extensions, or stretching your existing brand, increase your chances of innovation success. Not only do brand extensions leverage the equity of the parent brand, but they also lead to faster adoption and deliver higher marketing efficiency.”
Nielsen identifies five ways brand extensions are successful in India:
1. Brand stretches gain share and build distribution faster than new launches. One example from Nielsen’s review of brands launched in the past two years shows that while eight new, national body lotion brands reached a share of 0.3 percent, seven national brand extensions increased that figure almost four-fold, delivering a four percent market share.
2. Brand stretches are two times more likely to succeed in a highly fragmented category. Nielsen’s findings show that developing categories with fragmented shares, or developing categories with lower penetrations, were more successful than established category sizes of greater than Rs. 3000 Crore.
3. Sixty-five percent of successful brand stretches have a premium index lower than the parent brand. Keeping under the price premium index of parent brands is likely to increase the chance of success. Nielsen’s results show that brand leaders that priced below the parent premium at the entry stage were more successful than those priced above the parent brand.
4. Strong parents beget strong children. Nielsen’s study shows that when the parent brand was a leader in the category, 59 percent of brand extensions were also successful. When the parent brand was not among the top five players, 35 percent of brand extensions were successful. “Building the core is important, but advertising support is critical for both the parent and the child,” said Chogle.
5. Successful stretches leverage four factors: Advantage—delivers new, or distinct, benefits to the category. Recognition—ensures strong parent-brand awareness levels in terms of functionality, imagery and personality. Relevance—makes certain parent attributes relevant in the new category and Credibility—delivers on brand promises.
“To successfully unleash the power of your brand stretch potential, determine your brand’s leverage power by reviewing its advantage, recognition, relevance and credibility,” said Chogle. “Understand the market structure of the new chosen category to determine both its fragmentation and penetration among consumers and most importantly, establish your company’s executional competence to create the right product offering, deliver distribution muscle to reach consumers and stay invested in ad spending and support levels.”
Nielsen Holdings N.V. (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and related properties. Nielsen has a presence in approximately 100 countries, with headquarters in New York, USA and Diemen, the Netherlands. For more information, visit www.nielsen.com.