Traditional New Product
When a company launches a new brand in a category where they have not previously had an entry, it is called a traditional new product. Hint was a new brand name used on flavor infused bottled water.
When a company launches a new brand in the same category where they have other entrees, it is a flanker brand. Using military language, the new brand is “flanking” the existing brand they have in the category. This is done for a number of reasons. Sometimes the flanker is targeted to a different segment such as the example of T-gel targeting the dandruff user vs. Neutrogena targeting the frequent shampoo user. Another reason to introduce flankers is to have more shelf facings in a section and hopefully capture more sales due to this increased exposure.
Often a company will expand their product line with new varieties or versions. These new products use the same brand name as the original parent product. Line extensions are the most common type of new product and help expand interest as well as shelf exposure.
Brand extensions leverage an existing brand name owned by the company to launch a new product in a category where that brand has not had a presence. Gerber is a brand of baby food. My brand extension, Gerber Good Start Infant Formula, took the brand into a new category.
The benefit of using an existing brand name to launch a new product comes from its familiarity to the target market for the new product. If a brand has low awareness, it will be perceived of as a new brand negating the benefits of brand extension. Because brand extension, by definition, is a new product in a different category from the parent, some of the target customers in the new category may be customers of the parent but often they are not. A widely known brand will likely be known by the people who purchase products in the new category even if they don’t buy them.
New products such as line extensions and flanker brands rely on gaining a share of their category to be successful. To the extent that this category has sales that are not growing, these new products can succeed only if they get their share of market from competitors. Otherwise, they cannibalize the company’s other brands in the same category. In contrast, brand extensions enter a category new to the company.
Entering new categories is not easy; it is very expensive and risky.
That is so because there are often significant barriers to entry. Some industry categories have barriers such as patents, technology, capital requirements, manufacturing expertise, distribution availability and the like. For example, companies in the pharmaceutical industry are protected by patents that result from heavy research expenditures. Airplane manufacturing is protected from other companies entering by technology, capital requirements and scale efficiencies. Some industries are blocked by the availability of raw materials or inputs to the manufacturing process limiting new companies from entering the business. Brand extensions permit entry because the existing brand name has awareness and leverage that attracts customers to purchase it.