Abstract:
Line extensions allow companies to launch new products under an existing brand name with lower launch costs. Particularly considering the potential cannibalisation of the parent brand’s sales, it is important to evaluate the impact of extension products on the overall success of the brand. To achieve this, a method for measuring the extension level is developed. This study proposes two ways to operationalise the extension level and examines the impact of line extensions on the revenue for both high-priced and low-priced brands. The empirical analysis uses household panel data from over 30,000 German households in the detergent product group from 2012 to 2023. For measuring the extension level, the method based on the average number of product attributes within a brand proved most effective. A linear regression analysis shows that an increase in the number of extensions only leads to a significant increase in revenue for low-priced brands. For both high-priced and low-priced brands, a higher extension level negatively impacts revenue. Even if the desire for variety can be satisfied by offering several extension products, brand manufacturers should not equip their extension products with too many different product attributes, as consumers may be overwhelmed.