Upward line extensions—introducing premium versions of an existing product—are often employed by brands seeking to expand their market share and compete with rivals. However, new research from the Journal of Marketing suggests this common practice can introduce risks to brand perception. According to the study, changes in brand perception are especially likely when the premium sub-branded product features attributes that a competing product also has.
“When a firm launches a different version of a product whose features overlap those of a competitor’s products, changing consumer perceptions can cause an overall loss of demand, market share, and profit,” write authors Fabio Caldieraro, Ling-Jing-Kao, and Marcus Cunha Jr.
For example, a brand known for the convenience of its products might extend a line of products to compete with a brand known for comfort. If that initial brand prioritized comfort in its premium line extension, regular customers would inevitably experience a change in their perception of that brand. This change in perception becomes harmful when consumers are searching specifically for a product offering comfort.
In this scenario, consumers are considerably more likely to select the brand long established for its comfort-centered products. As a result, an upward line extension strategy for the competing brand can lead to increased perceptions of superiority toward established competitors. Conversely, the brand employing the line extension tactic may experience decreased perceptions of value from consumers.
Strategies aiming to extend a product line through an increase of price and quality should only be adopted when the expected spill-over effects are positive or nonexistent. How can managers determine this? Ask these following questions:
- What is your brand known for predominantly?By identifying the strong points of your brand, you can better plan for an effective upward line extension strategy by maximizing on what you’ve already got going for you rather than trying to steal the thunder of your competitors.
- Do competitors hold the upper ground in the area you intend to expand?If you are intent on including attributes shared by competitor products, then ask yourself whether you really have a chance at becoming a preferred option over your competition. Depending on consumer perceptions of your rival, it may be better to steer clear of product features in which your competitor already holds the upper hand.
- What novel attributes can you introduce in your competing line extension?In some cases, introducing new features altogether may be the best option in an upward line extension strategy. This route decreases the likelihood of cannibalization within your own brand and mitigates the risks involved with changed brand perceptions when introducing products with shared rival features.
Fabio Caldieraro, Ling-Jing Kao, and Marcus Cunha Jr. (2015) “Harmful Upward Line Extensions: Can the Launch of Premium Products Result in Competitive Disadvantages?“. Journal of Marketing: November 2015, Vol. 79, No. 6, pp. 50-70.