I continued to question the adage that a line extension is a trap, especially a line extension based on price. Reis and Trout assert that creating a line extension educates the consumer to the fact that there is a cheaper or better way to deliver a product to the consumer.

They use the example of Bayer Aspirin. Bayer was positioned in the mind of the consumer as a superior pain reliever until Bayer thought they should compete with Tylenol. So, Bayer decided to use their brand equity to develop a “non-aspirin” pain reliever thereby destroying the “illusion that Bayer is a superior form of aspirin” (Reis & Trout, 2001, p. 103). However, I always wondered: How can line extensions work?

Well, today in the Wall Street Journal, I found a very interesting article that might be the answer to creating a price-based line extension. Jean-Paul Agon, L’Oreal’s CEO, has been facing a drastic decline in L’Oreal’s’ expensive, glamorous cosmetic brands to the other less expensive brands during this economic downturn. His solution is to develop a lower-cost product line. Right of the bat, the first question has to be: How are you going to protect the brand equity of the higher-priced L’Oreal lines?

He had an interesting response. It was, “you keep advertising on the top products. You don’t advertise the [accessible] products. This has another advantage: the [accessible products] are very profitable. Because you don’t spend much in advertising” (WSJ, August 28, 2009, B1).

This strategy is very interesting, but just because you don’t advertise something doesn’t mean it won’t cannibalize your existing line. This will be a strategic move to watch.

I think they might be missing a golden opportunity by not offering rebating during this economic downturn. Rebating would allow them to collect an extreme amount of data to use when the economy begins to recover. Just imagine the plethora of target market information L’Oreal could obtain by giving women their anti-wrinkle cream at a reduced rate. Plus, everyone knows that rebating is a short-term discount, as long as the company does not make it a habit.