Brand-Extending Ourselves to Death

Marketers are still woefully inadequate when it comes to introducing anything truly new. So they opt for a less risky path

By G. Michael Maddock and Raphael Louis Vitón

The words in the headline weren't chosen to be provocative—although we concede they are. We picked them because they're depressingly accurate.

An extensive survey of marketers in all categories nationwide reveals that we think we are getting better at new-product introductions, but a look inside the numbers shows that is an illusion. What we have gotten better at is introducing brand extensions (BusinessWeek.com, 8/12/08)—which, by definition are far less risky that creating something unique.

Marketers are still woefully inadequate when it comes to introducing anything truly new. We were so hoping that was not the case.

Prone to Flop

A few years ago, we set off to get a better handle on how new products are launched and seen in the marketplace. We interviewed a representative number of consumers nationwide, and an equally representative number of senior marketers at companies of all sizes and we uncovered something we called The New Product Paradox: People like new products. They want new products. And, indeed they go out of their way to search for new products which they consider to be an important part of their life.

And yet we as marketers are truly awful at coming up with new products that satisfy those desires. Some 90% of all new products fail, and the senior marketers we talked to said that was just a fact of life that we all just had to accept.

With all the attention given to creating new products in recent years we wondered if anything had changed.

And so we did our survey again. The initial data we got were promising. Marketers told us they had gotten better at introducing new products. In 2004, 39% of the marketers surveyed said: "My company really excels when it comes to developing new products or services and launching them successfully." In 2008, that number climbed to 51%.

But then we probed deeper inside the numbers and found this:

In 2004, 50% of companies agreed with the statement: "Most of our growth in recent years has come from new products or services." That number increased by only 1 percentage point, to 51%, in 2008.

And for the statement: "My company does not dedicate the full resources necessary to properly develop and launch new products or new services," 31% agreed with it in 2004, and 36% did in 2008.

Not Worth the Effort

So, if we have gotten better at new products, they should be driving revenue growth. Yet there was an increase of just on percentage point in companies saying that it is the case.

Similarly, if we are excelling at new-product introductions, you'd think companies would be supporting new-product development to the max. They're not. Why not? Well as the following two questions show, it is simply because they don't think the cost of new products is worth the reward.

In 2004, 10% of respondents said: "New products or new services fail so often they are way too risky." That number climbed to 16% in 2008. And 4% of companies said: "We really don't look at new products or services as being worth the effort" in 2004. Yet 10% of companies agreed with that statement in 2008.

How did they come to this conclusion? Look at the way the following question was answered: "Compared to five years ago, we are no more efficient at new-product/service marketing." In 2004, 15% of companies agreed with that statement. In 2008, 25% of companies surveyed agreed. (You could actually interpret that answer as: "We are substantially worse at introducing new products today than we were five years ago.")

So, what about the increase in the number of marketers who said: "My company really excels when it comes to developing new products or services and launching them successfully"? Remember, the figures were 39% and 51%, respectively, for 2004 and 2008.

The answer is they have defined "new products" to include such things as brand extensions (and to a lesser degree acquisitions). And they told us that they expect this emphasis to continue in the years ahead.

Given all this, it is not surprising that it is raining new products today. Think about a category—air fresheners, bug sprays, cereals, coffee, creamers, deodorants, shaving creams, toothpaste—consumers are facing an almost endless variety of choices.

But the choices are not new products, just variants on the old ones. Having seemingly given up on introducing new products, marketers seem content to jazz up existing ones. Consumers have noticed—and they don't like it. They told us in the latest survey that they find shopping more boring than they did four years ago, and they are buying fewer new things than they once did.

The takeaway is clear. The decision to brand extend may help are batting average when it comes to "new" product introduction. But, it does little if you are trying to generate substantial revenue growth, and it is alienating your customers. It is not a successful long-term strategy.

G. Michael Maddock is founding partner, and Raphael Louis Vitón is president, of Maddock Douglas, a company that invents, brands, and markets products "for companies driven by innovation." .