How do line extensions impact brand sales? The role of feature similarity and brand architecture

Abstract

Brand architecture decisions have important performance implications but have seen little quantitative research. In particular, there is little empirical evidence on how the strength of the link established among clusters of products within the company’s portfolio impact the sales effects of typical marketing actions such as line extensions. This paper quantifies the effect of different brand architecture choices and product feature similarity in moderating the impact of line extensions on brand sales. Based on categorization theory, the authors hypothesize that brand name similarity and feature similarity, both independently, and in interaction, increase brand cannibalization. The empirical analysis in three consumer packaged-goods categories shows that it is more critical to minimize the feature similarity than brand name similarity to limit cannibalization and generate higher incremental sales from line extensions. Controlling for feature similarity, line extensions introduced under sub-brands cause greater cannibalization.