Management Notes

Reference Notes for Management

Introduction of more brands and extensions leads to _________ with no new benefits to consumers

Introduction of more brands and extensions leads to _________ with no new benefits to consumers


A. Higher cost
B. Greater revenue
C. Brand proliferation
D. Increased competition

The Correct Answer Is:

  • C. Brand proliferation

The correct answer is C. Brand proliferation.

Brand proliferation refers to the practice of introducing more brands or brand extensions within a company’s product portfolio. It often occurs when a company expands its product range without necessarily offering new benefits to consumers.

This strategy can lead to a variety of issues, including market confusion, increased operational costs, and potential dilution of brand equity. Let’s explore why the other options are not correct and delve into why brand proliferation is the appropriate answer.

Option A: Higher cost

While introducing more brands and extensions can lead to higher operational costs, it doesn’t inherently imply that there are no new benefits to consumers. Companies may choose to invest in new brands or extensions to target different market segments, diversify their product offerings, or enhance their competitive position.

In such cases, there may be legitimate reasons to justify the higher costs, such as increased sales and profitability. Therefore, while cost may be a consequence, it is not the primary outcome of brand proliferation without benefits.

Option B: Greater revenue

Introducing more brands and extensions can indeed lead to greater revenue if executed strategically. Companies often expand their product lines to tap into new customer segments, respond to market trends, or increase their market share.

When these brand extensions are successful and provide tangible benefits to consumers, they can drive revenue growth. Therefore, greater revenue is a possible outcome when new brands and extensions do offer value to consumers, making it less likely as the primary consequence of brand proliferation without benefits.

Option D: Increased competition

Brand proliferation, in and of itself, doesn’t necessarily lead to increased competition. Competition arises when multiple companies operate in the same market space and vie for market share. While the introduction of new brands or extensions can influence competitive dynamics, it’s not the sole factor responsible for increased competition.

Moreover, increased competition could potentially benefit consumers by driving innovation, improving product quality, and lowering prices. So, while increased competition can be an effect, it’s not the primary result when brand proliferation lacks new benefits for consumers.

Why Brand Proliferation is the Correct Answer:

Brand proliferation, as the correct answer, accurately reflects the scenario where a company introduces more brands or brand extensions without offering new benefits to consumers.

This practice often results in a cluttered and confusing marketplace with multiple similar options, where consumers may struggle to differentiate between brands or find significant advantages in choosing one over another.

Brand proliferation can lead to several negative consequences:

1. Market Confusion:

With an abundance of brands and extensions, consumers may become overwhelmed and have difficulty distinguishing one product from another. This can result in confusion and decision-making paralysis.

2. Cannibalization:

Introducing new brands or extensions within the same company can lead to cannibalization, where products within the same portfolio compete against each other for market share. This can erode the sales of existing products without bringing substantial benefits to consumers.

3. Operational Complexity:

Managing a multitude of brands and extensions can significantly increase operational complexities and costs for the company. This includes marketing, inventory management, and supply chain logistics, which can strain resources.

4. Brand Dilution:

When a company stretches its brand too thin by introducing numerous products or brands, it risks diluting the brand’s identity and equity. Consumers may lose a clear perception of what the brand stands for, which can weaken its competitive advantage.

5. Lack of Innovation:

Introducing new brands or extensions without offering meaningful benefits can divert resources and attention away from true innovation. Companies may become more focused on quantity rather than quality or genuine innovation.

In summary, brand proliferation is the most appropriate answer as it encapsulates the negative consequences of introducing more brands and extensions without delivering new benefits to consumers.

While higher costs, greater revenue, and increased competition can be outcomes of strategic brand expansion, they are not the primary results when brand proliferation leads to market confusion and lack of added value for consumers.

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