What brand do I use for my new product? The impact of new product branding decisions on firm value

Every new product introduction entails a branding decision: whether to name the product using a direct extension, a sub-brand, or a new brand. While previous research has focused on how consumers evaluate alternatives in lab settings, or, in studies based on secondary data, on the effectiveness of brand extensions in general, a comprehensive framework of the antecedents and consequences of new product branding decisions is lacking from the literature. The authors propose a theoretical framework that organizes product-, category-, and firm-level determinants of firms’ new product branding decisions, and empirically test the framework’s predictions using a large sample of new product introductions, documenting with real world data how managers choose among three branding alternatives. In addition, using both product-specific and firm-specific valuation metrics, the authors quantify the negative impact on firm value of misaligning the new product branding decisions with the conditions facing new products. Conceptually, the authors bridge the branding and new product performance literatures, and present findings that extend knowledge from behavioral research on brand extensions. Empirically, the authors provide evidence to managers on how to choose brand names for new products in a way that enhances the stock market value of firms.