When an established consumer packaged goods (CPG) company introduces a new product, it faces a potentially make-or-break decision: how to brand it. Tying it to an existing brand (as was the case for Cherry Coke and Del Monte Tomato Sauce) is tempting. Customers are more likely to try a new product with a familiar association, and companies have to expend fewer marketing resources to launch it. But the strategy has risks, too: Weak or failed brand extensions can harm the parent brand. When the maker of Coors beer introduced a nonalcoholic beverage, Coors Rocky Mountain Sparkling Water, customers were confused, with some wondering about its alcohol content. Sales of Coors water and Coors beer suffered, and the new product was ultimately discontinued.
The Best Way to Name a New Product
When an established consumer-packaged-goods (CPG) company introduces a new product, it faces a potentially make-or-break decision: how to brand it. Tying it to an existing brand (as was the case for Cherry Coke and Avon Hand Lotion) is tempting. Customers are more likely to try a new product with a familiar association, and companies have to expend fewer marketing resources to launch it. But the strategy has risks, too: Weak or failed brand extensions can harm the parent company. When the maker of Coors beer introduced a nonalcoholic beverage, Coors Rocky Mountain Spring Water, customers were confused, with some wondering about the alcohol content of the beverage. Sales of both water and beer suffered, and the new product was ultimately discontinued. A new study can help companies make the right branding decision—and shows that those who do will be rewarded with higher returns.