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Why Bud Light worked, but Tab didn’t

September 11, 2009

My senior year in college, all the marketing students were required to take a class of case studies. This is the problem facing company x, “what should they do?,” etc…

During the class, I was also reading all of Al Ries’ books. And in every case study, I argued against line extensions, using Ries’ point that it weakens your core brand.

I was hooked on Ries. He’s a great writer, and a great marketing thinker. And so, in my mind, line extensions were the evil empire. Avoid at all costs.

But, experience has made me rethink that stance. In Ries’ latest article in AdAge, he continues to argue against line extensions. But reading the article, the argument, while still true in many cases, misses the point.

In today’s world, your goal with any new product is to convince the youth to buy it. No consumer goods company launches a product hoping to capture the all-important 60-75 year old female demographic. But the problem is, the youth are no longer listening to your messages.

And that’s where the line extension comes in. Ries uses as his example Bud Light. Sales of Bud Light have slipped a few points, as Bud Light lime has taken some of its share. The same thing happened with Budweiser and Bud Light. So, in the anti-line extension camp, you have this argument: “By launching Bud Light lime, you lost sales of Bud Light.” Here’s the thing: Do you think InBev cares?

The only thing that matters at the end of the day is, are your total sales increasing.

Let’s say you wanted to launch a new light beer with lime in it. The market for light beer is static. It’s not as if there is an entire group of people not drinking light beer because there’s no lime. You could try to create a new brand. But the brand doesn’t have legs. Stores aren’t going to stock it, consumers aren’t going to ask for it. You will be restarting.

Or, you can build on the largest beer brand in the world. Here, you want a beer with lime in it? Don’t stop drinking budweiser products. Take the bud light you know and trust. It has lime in it now.

Line extensions in today’s cluttered marketing world are a way to make sure your product doesn’t get lost. You need to react to a change in the market that might only last for 2-3 years. And you don’t have time to build a brand in that environment. By the time your brand builds enough traction, the taste has changed.

Now, the line extension is a problem where your brand has no business being. If you’re a soda company, you shouldn’t try to use your soda expertise to line extend into coffee. But, where your brand is already strong, (like Bud in beer), you should feel free to use your brand in a line extension.

Here are the three tests for whether you should line extend:

1) Is this a major new consumer trend that could grow for years?

2) Is this something that isn’t immediately linked to what your existing brands do well?

3) Is the competition line-extending?

Here’s the reality. In the case of test No. 1, certain things come to mind, such as Energy Drinks or Hybrid Cars. Toyota made the right decision to launch the Prius. Notice that Camry H, or Escalade H, aren’t selling nearly as well as the car that is only a Hybrid. But, you could also argue that this applies to light beer and diet soda. So why did Bud Light and Diet Coke work?

Because people already love their beer or soda brand. If you’re forced to stop drinking Pepsi because you’re getting older, that allegiance can transfer right over to a safe diet drink that you already know you love the taste of.

But, in Ries’ book, he argues that Coke didn’t need to get into Diet Coke. They already owned Tab. Sure, but what is going to happen when someone decides to switch from Coke to diet sodas. Are they more likely to go with a brand that they know has cola taste and zero calories (diet pepsi) or a brand that they know is a diet soda (tab?) Once your competitor line extends, unless you have a compelling reason why, you must line extend as well. Otherwise, the already strong brand will smother your brand in it’s sleep.

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