Risk of cannibalization

Step-down extensions and core brand evaluation

Introducing a step-down vertical brand extension can hurt the core brand in three ways:

(1) cannibalization of the core brand’s sales,

(2) tarnishing the prestige of the core brand name, and

(3) negative feedback effects among the core brand’s consumer franchise.

The risk of cannibalization is a key concern for step-down extensions. Consumers welcome the opportunity to purchase a quality product at a lower price. If the step-down extension is perceived to be similar in quality to the core brand only less expensive, then the risk of cannibalization is great (Reddy et al., 1994). Consumers will forsake the core brand in favor of the brand extension. For example, Gillette introduced a low-end shaving cream entry, Good News!, in order to attack their competitor, Barbasol (Aaker, 1991). However, the Good News! shaving cream took sales away from Right Guard, another Gillette product. The core Right Guard brand was hurt when its customers switched to Good News! Former Right Guard customers were able to purchase the lower priced shaving cream brand which they knew was still a dependable Gillette product. To minimize cannibalization, companies must ensure that their new brand entries fill a different market niche, preferably one that is unfilled or that is currently occupied by competitors. This market niche must be sufficiently different from the core brand to prevent the migration of customers from the core brand to the new brand extension.

Damage to prestige

Tarnishing the prestige of the core brand name is a second key concern when introducing a step-down brand extension. The lower quality of a new stepdown brand extension seems to tarnish or diminish the equity built up within the core brand name, simply by virtue of association. A step-down brand extension reduces the prestige of the core brand, perhaps because the core brand becomes mentally associated with a lesser quality brand extension. The Cadillac Cimarron is one example of a prestige-oriented step-down extension which hurt its company’s core brand image. In the early 1980s Cadillac introduced the Cimarron model as a competitor for General Motors’ Pontiac and Chevrolet’s Cavalier (Aaker, 1991; Keller, 1993). The Cimarron was not targeted to the traditional Cadillac buyer, but at a less affluent consumer who wished to buy a Cadillac but would not pay as high a price. Cadillac did not incur cannibalization sales problems by introducing Cimarron, but some of the prestige of the core Cadillac name was lost. With the introduction of the step-down Cimarron, Cadillac’s upscale prestige-oriented brand concept was reduced in stature. Other car manufacturers, such as BMW, Saab, and Mercedes-Benz, have also recently launched cheaper step-down models of their cars (More, 1995). The impact of these step-down extensions on their core brand images is not yet known, but there is considerable likelihood that they may suffer some damage to their prestigious core brand images.

The third key concern involved in introducing a step-down brand extension is the risk of negative feedback effects among the existing consumer franchise for the core brand. Exclusive luxury brands which introduce extensions to broaden their target market may produce negative feedback effects among their original clientele (Keller, 1993). The original consumer franchise resents the market expansion when a step-down extension is introduced, because the cheaper version reduces the prestige and social status of their expensive acquisition. In a product category that relies on repeat purchase, it can be a dangerous corporate strategy to alienate the existing consumer franchise.

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