Are there generalizable patterns in line extension performance?

Abstract

Purpose New product introductions, particularly line extensions (LEs), are common in consumer goods categories. Despite their commonality, the success of LEs are not guaranteed. The purpose of this study is to provide brands that introduce LEs a benchmark about what success to expect. Design/methodology/approach This study investigates the success of 36,994 LEs in each quarter for the first three years after introduction. Four indicators are calculated using consumer panel data to benchmark how long LEs survive (failure rate), how competitive they are in the category (market share) and how they are adopted by category buyers (penetration and repeat buyer rate). Findings Most LEs survive after the first year, but many cease to exist or perform well in the long term. Around 50% of LEs fail a year after launch, but this failure rate halves once seasonal LEs are removed. Failure rates start to approach 80% after three years. Most LEs do not perform better than existing products. Around three in four LEs have a market share or penetration near or below the category norm. Although this percentage decreases the longer after launch, most LEs are still below the category norm. Practical implications These new product success benchmarks provide guidelines to practitioners about what success the “typical” LE will achieve. This research can help guide new product investment decisions because it provides context on what is feasible to achieve. Originality/value Four market success measures are used, a departure from past benchmarking research which uses practitioner evaluation on metrics seldom used in practice. The authors provide guidelines about when and how to measure LE and new product success more broadly.