Do you know that there is a relatively high failure rate and sizeable investment associated with launching a new product extension on the market? Bringing a new product before consumers, especially when you are a small business owner saddled by a limited marketing budget, can be daunting. Your target customers may not respond positively to your new product and worse, you can end up not hitting your breakeven point. A study undertaken by researchers from the University at Buffalo, however, uncovered a viable way for you to maximize your revenue if you are planning to launch a new product.

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The researchers–Debabrata Talukdar, PhD, Ram Bezawada, PhD, and Vijay Ganesh Hariharan–studied more than 150 new product extensions that were launched in 20 markets in the United States. They analyzed how the new products performed in their respective consumer markets and how they affect their parent brands. The researchers then discovered that in order to earn the most revenue from introducing a new product, a marketer must incorporate the company’s existing brand name plus a new sub-brand name to the product. The effectiveness of this approach makes a lot of sense because a well-established brand name has already amassed its own following and is more likely to enjoy better name-recall for potential buyers.

In 2010, manufacturers in the U.S. put forth over 150,000 new products. More than 90 percent of the new products were introduced as “extensions” of existing brands. For years, manufacturers have long appreciated the strong marketing appeal of existing brand names in conjunction with new product extensions. For instance, think of popular toothpaste brands introducing their mouthwash products or Pepsi announcing its new flavored drink–the new product extension always carries the manufacturer’s existing brand name.
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A sub-branding technique also works beautifully. You can drive revenue by having your new product carry a well-thought-out sub-brand name that helps consumers differentiate from the familiar parent brand name. An example of this revenue-boosting branding approach is the product extension Gillette Mach3.