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In fact, customers are more likely to try a new product with a familiar association, and companies have to expend fewer marketing resources to launch it.
They conduct a study that help companies make the right branding decision, and shows that those who do will be rewarded with higher returns.
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“A strong existing brand is a strategic resource for managers wishing to introduce a new product, but they must be careful not to kill the golden goose(harm the parent brand)”
This research mentioned an examination of nearly 20,000 products introduced by U.S. CPG firms from 2000 to 2012. There are three branding strategies had been used, as shown below.
How to Name a Product
There are three branding strategies had been used, as shown below.
Apple is the number 1 brand in the world, so it will become an example in the explanation after. Apple hold a series of technology product. Amongst, there are 10 most prominent products which are iPhone, AirPods, iPod, Mac, MacBook, Apple Watch, iPad, Apple Watch, AirPods Max, and iTunes.
1. New brand (an entirely original name)
New brand means Apple company will directly put a new name (totally different from any of its current product) to a new product. For example, when Apple launched the iPhone, it used a totally different brand name from MacBook.
For example: iPhone, MacBook, Apple Watch, AirPods Max, and so on.
2. Direct Extension (an existing brand name plus a descriptive word or phrase)
Brand extension means that the company leverages the reputation, popularity, and brand loyalty associated with a well-known product to launch a new product.
For instances, iPhone 12, iPhone 13, iPhone 14 and so on.
3. Sub-brand (an existing brand name plus a non–dictionary or nonspecific word or phrase)
Sub-branding is when Apple company creates a secondary brand within its own brand
For instances, iPhone 14, iPhone 14 Pro, iPhone 14 Pro Max
Five Principle To Guide A Successful Branding Choice
By analyzing the new products’ performance and companies’ financial returns, the research identified five product and firm characteristics that guided the most successful branding choices.
1. Fit with the company’s other offerings
The company need to determine whether the new product tie in naturally to an existing brand portfolio. If not, customer may get confused about why two different products are using a familiar brand name.
For example, MacBook (Laptop), Apple Watch and iPhone is totally from three different categories (Laptop, Watch, and Smartphone). So, Apple company have to name it separately.
Vise Versa, Mac and MacBook as both of them are computer and laptop. The similarity is high.
2. Innovativeness of the new product.
3. The breadth of the existing portfolio.
When a company owns many active brands, odds are it can find a good fit for a new product.
For instances, iPhone, iTunes, iPad, iPod.
‘I’ in Apple products stand for ‘internet, individual, instruct, inform and inspire‘, which was explained by Steve Jobs during the iMac launch in 1998.
4. The risk of brand dilution
5. Amount of advertising funds
Firms lacking the resources to provide strong advertising support should avoid the capital-intensive task of building a brand with an entirely new name, and vice versa.
According to the study, it illustrates that the company that followed the guidance of the five principles when branding a new product saw, on average, a 0.18% increase in stock market value in the five days around the product launch— which for large firms translates to as much as $26 million in shareholder value.
How to name a product is a sophisticated and tricky question for the marketing manager.
