How to Brand a Next-Generation
Product
Upgrades to existing product lines
make up a huge part of corporate research and development activity, and with
every upgrade comes the decision of how to brand it. Harvard Business School
marketing professors John T. Gourville and Elie Ofek teamed up with London
Business School's Marco Bertini to suss out the best practices for naming
next-generation products. Key concepts include:
- Companies often take one of two tacks in naming a next-generation product—the sequential naming approach or the complete name change approach.
- Experimental research showed that each naming approach affects customer expectations. With a name change, research participants expected features that were distinctly different or new. With a name continuation, they just expected improved performance on existing features.
- Companies must assess risk versus reward when branding a product upgrade, weighing the excitement generated by a new name against the danger of scaring away customers who worry that new features pose the threat of new glitches and a steep learning curve.
When Apple launched its latest
iPad, experts and nonexperts alike expected it to be dubbed "iPad 3,"
a natural follow-on to the second-generation iPad 2. Instead, the company
called the new iPad just that: "the new iPad." Observers debated
whether this was lazy branding or a very deliberate effort to market the iPad
as a sibling to the Mac. Macs keep their names with each successive upgrade,
analysts noted, while iPhones sport sequential numbers and letters to indicate
improvements.
“Consumers don‘t necessarily read specs to learn about new
features, but they’ll always notice a new name.”
Like Apple, most consumer-centric
companies deal with the dilemma of how to brand the next- generation of an
existing product. Product upgrades make up the majority of corporate research
and development activity. That's why Harvard Business School marketing
professors John T. Gourville and Elie Ofek were surprised to find a dearth of
academic research on the subject. "There's a lot of research about
new-product branding, but as best as we could tell, nobody had looked closely
at the issue of how to brand a successive generation," Gourville says.
To that end, Gourville and Ofek
teamed up with London Business School professor Marco Bertini (HBS DBA '06) to
suss out the best practices for branding next-generation products.
"For managers, this is not a
trivial decision," Ofek says. "Consumers don't necessarily read specs
to learn about new features, but they'll always notice a new name. We thought
we could come in and bring some guidelines and normative implications that were
well grounded in academic research."
Many companies choose either the
sequential naming approach (Sony's successive PlayStation, PlayStation 2, and
PlayStation 3 video game consoles, for example) or the complete name change
approach (Nintendo's Nintendo 64, GameCube, Wii). The professors conducted a
series of experiments to determine when and why each approach made the most
sense.
Brand
name continuation vs. name change
In one experiment, 78 participants
considered a hypothetical scenario in which a well-known firm is preparing to
launch a new version of its color printer. The participants, who were split
into two groups, received a list of seven successive model names. For the first
group, the entire series of printers was branded in a sequential fashion, from
2300W to 2900W. For the second group, the first four models were named
sequentially—2300W to 2600W, but the last three models reflected a brand name
change—MagiColor, MagiColor II, and MagiColor III.
Based on the names alone, on a scale
of 1 to 7, participants gauged the likelihood of significant changes and
improvements for each successive model. Even though participants had no
information about the actual features of the products, participants predicted
much greater change when the latest version was named MagiColor than when it
was named 2700W.
"With a name change,
participants tended to expect features that were distinctly different or
new," Ofek says. "With a name continuation, they just expected
improved performance on existing features."
“The perception is that if it’s a brand name continuation,
it‘ll be somewhat better than the previous model, but it won't be buggy and
there won’t be a learning curve.”
A follow-up experiment reversed the
task. Participants learned that the firm Garmin had adopted a sequential naming
approach for the first five generations of its in-car GPS receiver, from
RoadRunner 610 to RoadRunner 650. Their task was to choose the more appropriate
name for the sixth generation: either RoadRunner 660 or StreetPilot. In this
experiment, the researchers varied the list of features for the new product.
When the list only included improvements on existing features, 61.3 percent of
participants choose RoadRunner 660 as the preferred name. But when the list
included several new features, 65.7 percent chose the name StreetPilot.
While these experiments focused on
high-tech equipment, the professors note that the findings hold true across
many industries. "Take the movies," Gourville says. "In the Rocky
series, you expect Rocky II to play off Rocky. But with James
Bond movies, there's no reason to expect that the latest Bond movie [Quantum
of Solace] has anything to do with the previous Bond movie [Casino Royale].
So it gives you added freedom. You can change who James Bond is—Sean Connery,
Roger Moore, Timothy Dalton, Pierce Brosnan, Daniel Craig—without destroying
the franchise… Whereas with Rocky, you're pretty much stuck with
Sylvester Stallone."
Risk
vs. reward
Companies also must assess risk
versus reward when branding a product upgrade. On the one hand, changing the
brand name may induce excitement among prospective consumers who value new
bells and whistles over small improvements. On the other hand, customers may
worry that new features pose the risk of new glitches and a steep learning
curve. It's important for a firm to predict the likelihood of risk aversion in
its branding decision. Sometimes this is an unpredictable matter of a
consumer's individual personality; for every Cautious Carl in the world,
there's a Risky Rita. But many times, it's a matter of the situation at hand.
Ofek cites the example of Intel,
which in 2001 introduced a 64-bit processor called Itanium, indicating that the
product was markedly different than Xeon, its 32-bit predecessor. These types
of processors power huge computer servers, which play vital roles in companies'
day-to-day operations. Servers are a major expenditure, and a faulty server can
lead to a crisis. "Even though Intel promised that Itanium had backward
compatibility with Xeon, IT directors really worried about it," Ofek says.
"That created a real delay in purchasing for Itanium, which really never
took off."
To illustrate this point
scientifically, the professors conducted an experiment with 203 participants,
who each were told to imagine that a close friend was getting married soon, and
that the friend had asked them to photograph the ceremony as a favor. However,
because their Ricoh camera had been stolen, they would have to buy a new one
shortly before the event. Each participant had a choice: replace the camera
with the exact same model that was stolen, or upgrade to the next-generation
version that Ricoh had recently introduced.
All the participants received the
same list of specs for both the old and the new cameras, including information
on features such as resolution, memory, zoom, and motion sensor. But the
researchers manipulated the experiment in two key ways.
In some cases, participants were
told that they were among several people taking pictures at the wedding,
indicating a low-risk situation because if one person's photos came out badly,
another person's photos could pick up the slack. In other cases, they were told
that they would be the wedding's sole photographer, a much higher-risk
proposition.
Participants also learned that the
stolen camera model, named FS-E40, was the fourth in a line of sequentially
named products: the FS-E10 through FS-E30. While some participants learned that
the next-generation model followed that pattern, the FS-E50, others were told
that the new model had a new name: the Spectra.
As expected, participants in the
high-risk solo-photographer scenario were more likely to choose the FS-E50 over
the FS-E40; the sequential naming approach indicated small, manageable changes.
Given the choice between the FS-E40 and the Spectra, however, they stuck with
the FS-E40--presumably fearing the challenges of moving to a significantly new
design, Gourville says.
“In the Rocky series, you expect Rocky II to play off
Rocky.”
Participants in the low-risk
scenario were much more likely to go with the new model regardless of whether
it was called Spectra or FS-E50; given the choice of either new model, the
low-risk set tended toward the Spectra.
"The perception is that if it's
a brand name continuation, it'll be somewhat better than the previous model,
but it won't be buggy and there won't be a learning curve," Gourville
says. "With a brand name change, you infer that there may be a steep learning
curve, and it may work differently from your previous camera."
Creative
sequences
A brand name change also comes with
the risk of disappointing consumers who expect more from the product than they
otherwise would have.
"If you're really just tweaking
the previous generation of your product, it's probably much better to use brand
name continuation than brand name change," Gourville says. "Otherwise
people will be led to believe that there are massively new features in there,
and you'll just lead them to disappointment."
On the other hand, a brand
sequencing approach can be tricky in a crowded marketplace where competitors
are using the same approach. No company wants to release Doodad 3 when its
chief rival is launching Thingamabob 4, for fear of apparently lagging behind.
But there are ways around that.
For instance, Microsoft released its
Xbox video game well behind Sony's PlayStation launch such that its
second-generation Xbox competed directly against the third-generation
PlayStation. Fearful of being perceived as a laggard, Microsoft chose the name
Xbox 360—sneaking that "3" in there with the added promise of
360-degree comprehension, Gourville explains.
Microsoft also shows us that if a
company switches from a sequential naming approach to a name change approach,
it's perfectly OK to switch back. With its Windows operating system platform,
the company succeeded Windows 98 and Windows 2000 with Windows XP and then the
oft-criticized Windows Vista. And then came Windows 7. Windows 8, due out later
this year, is still in development, but Microsoft has already confirmed its
name.
"Windows 7 brought us back to
the notion of sequential indicators," Ofek says. "Microsoft learned
that when you break from sequential names, people often overemphasize the risk
of significant change."
Carmen Nobel is senior editor of HBS Working Knowledge
http://hbswk.hbs.edu/item/6961.html?wknews=04252012
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