They're the sirens of marketing, and the song they sing is all about easy money. How could a beer brand resist?
Line extensions-- like the citrusy Coors Light just announced-- promise two routes to more cash: Minimal investment on one hand, and quick new revenue on the other. Marketing executives are easily smitten. It's "low risk," as the MillerCoors top marketing guy put it. Why make a risky bigger investment in a new brand name, when an established one can be so economically stretched?
Didn't the sirens lure ships toward hidden rocks?
On the surface, the risks of line extending are neither obvious, nor do they necessarily manifest themselves quickly. In business- school speak, it's a matter of resource allocation and its consequences.
At the brand-marketing level, resources are not limitless, so line-extension support must come from somewhere. Parent-brand budgets are the easy choice. Trimming them is usually done without fanfare. There are no press releases.
The more consequential syphoning of resources away from the parent brand is even easier to hide. Nobody'll spot the loss of attention, creativity, and focus by management and its marketing folks. Top executives will proclaim they'll maintain concentration on the parent brand while getting the line extension launched. Yet no matter what, there just can't be two number-one priorities. Just as mom and dad may proclaim they love their children equally, while in practice bestowing more attention on one, so it is with marketing companies. The new baby always gets more hugs.
This attention deficit at the expense of the parent brand runs all through the chain.
"Focus" is the go-to buzzword in the sales organization, too. Distributors promise they won't take their eye off the ball. But will they really devote the very same attention to the parent brand as they did before the line extension existed? How is that even possible?
Out on the street, imagine the guys tasked with selling the new stuff into stores and bars. Sales guys always "lead with the news." Guess what gets pushed out of first-place. When they pitch for extra space in the cooler, on the shelf, and in displays, which brand is the logical choice to give up some of its real estate?
Speaking of distraction, what brand is the line extension's most likely trier now drinking? Won't many of them already be good customers? Where will they end up if they don't like the taste of the new one? (In the citrus Coors Light case, Bud Light Lime seems one likely beneficiary.) Why rock one's own boat?
There definitely are shipwrecks
On the surface, the risks of line extending are neither obvious, nor do they necessarily manifest themselves quickly. In business- school speak, it's a matter of resource allocation and its consequences.
At the brand-marketing level, resources are not limitless, so line-extension support must come from somewhere. Parent-brand budgets are the easy choice. Trimming them is usually done without fanfare. There are no press releases.
The more consequential syphoning of resources away from the parent brand is even easier to hide. Nobody'll spot the loss of attention, creativity, and focus by management and its marketing folks. Top executives will proclaim they'll maintain concentration on the parent brand while getting the line extension launched. Yet no matter what, there just can't be two number-one priorities. Just as mom and dad may proclaim they love their children equally, while in practice bestowing more attention on one, so it is with marketing companies. The new baby always gets more hugs.
This attention deficit at the expense of the parent brand runs all through the chain.
"Focus" is the go-to buzzword in the sales organization, too. Distributors promise they won't take their eye off the ball. But will they really devote the very same attention to the parent brand as they did before the line extension existed? How is that even possible?
Out on the street, imagine the guys tasked with selling the new stuff into stores and bars. Sales guys always "lead with the news." Guess what gets pushed out of first-place. When they pitch for extra space in the cooler, on the shelf, and in displays, which brand is the logical choice to give up some of its real estate?
Speaking of distraction, what brand is the line extension's most likely trier now drinking? Won't many of them already be good customers? Where will they end up if they don't like the taste of the new one? (In the citrus Coors Light case, Bud Light Lime seems one likely beneficiary.) Why rock one's own boat?
There definitely are shipwrecks
When line extensions fail outright-- or fail to generate meaningful volume-- they rarely take the parent brand down with them. But it's hard to argue they leave it completely unscathed. The resources invested, the time lost, and the credibility sacrificed are not replaceable. The investment sunk
on just the line extensions shown here ran well into the tens of millions. And who-knows-how-many man hours. What was the return? In the end, how much did any of them help their parent brand?
Lemon or lemonade?
Time will tell whether Coors Light's citrus line extension succeeds, or joins the shipwrecks. On the downside, the Coors Light parent brand just saw its long-running positive sales momentum stall at the end of 2013. The new citrus product-- and its need for attention-- could shove that momentum the wrong way.
An early indication of trouble? Watch to see if MillerCoors reports sales for Coors Light and its line extension together, combining them to mask the parent brand's momentum trend.
One thing is certain: "Low risk" isn't "no risk."
Lemon or lemonade?
Time will tell whether Coors Light's citrus line extension succeeds, or joins the shipwrecks. On the downside, the Coors Light parent brand just saw its long-running positive sales momentum stall at the end of 2013. The new citrus product-- and its need for attention-- could shove that momentum the wrong way.
An early indication of trouble? Watch to see if MillerCoors reports sales for Coors Light and its line extension together, combining them to mask the parent brand's momentum trend.
One thing is certain: "Low risk" isn't "no risk."
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