Brand Extension And Its Types:Complete Guide For Beginner

Brand Extension is the use of an established brand name in new product categories. This new category to which the brand is extended can be related or unrelated to the existing product categories. A renowned/successful brand helps an organization to launch products in new categories more easily. For instance, Nike’s brand core product is shoes. But it is now extended to sunglasses, soccer balls, basketballs, and golf equipments. An existing brand that gives rise to a brand extension is referred to as parent brand. If the customers of the new business have values and aspirations synchronizing/matching those of the core business, and if these values and aspirations are embodied in the brand, it is likely to be accepted by customers in the new business.

Advantages of Brand Extension

Brand Extension has following advantages:

  1. It makes acceptance of new product easy.
    1. It increases brand image.
    2. The risk perceived by the customers reduces.
    3. The likelihood of gaining distribution and trial increases. An established brand name increases consumer interest and willingness to try new product having the established brand name.
    4. The efficiency of promotional expenditure increases. Advertising, selling and promotional costs are reduced. There are economies of scale as advertising for core brand and its extension reinforces each other.
    5. Cost of developing new brand is saved.
    6. Consumers can now seek for a variety.
    7. There are packaging and labeling efficiencies.
    8. The expense of introductory and follow up marketing programs is reduced.
  2. There are feedback benefits to the parent brand and the organization.
    1. The image of parent brand is enhanced.
    2. It revives the brand.
    3. It allows subsequent extension.
    4. Brand meaning is clarified.
    5. It increases market coverage as it brings new customers into brand franchise.
    6. Customers associate original/core brand to new product, hence they also have quality associations.

Disadvantages :

  1. Brand extension in unrelated markets may lead to loss of reliability if a brand name is extended too far. An organization must research the product categories in which the established brand name will work.
  2. There is a risk that the new product may generate implications that damage the image of the core/original brand.
  3. There are chances of less awareness and trial because the management may not provide enough investment for the introduction of new product assuming that the spin-off effects from the original brand name will compensate.
  4. If the brand extensions have no advantage over competitive brands in the new category, then it will fail.

In a study of more than 300 brand extensions it was determined, and now widely accepted that there are eight types, each with its own unique leverage.

  1. Similar Product In A Different Form From The Original Parent Product. This is where a company changes the form of the product from the original parent product.
  2. Distinctive Flavor/Ingredient/Component In The New Item. When a brand “owns” a flavor, ingredient or component, there may be other categories where consumers want that property.
  3. Benefit/Attribute/Feature Owned. Many brands “own” a benefit, attribute or feature that can be extended.
  4. Expertise. Over time, certain brands may gain a reputation for having an expertise in a given area. Leverage can be achieved when extending into areas where this special expertise is deemed important.
  5. Companion Products. Some brand extensions are a “natural” companion to the products the company already makes.
  6. Vertical Extensions. Some brand extensions are vertical extensions of what they currently offer. A brand can use their “ingredient/component” heritage to launch products in a more (or sometimes less) finished form.
  7. Same Customer Base. Many brand extensions represent a marketer’s effort to sell something else to its customer base.
  8. Designer Image/Status. Certain brands convey status and hence create an image for the user.

Read also:Branding Strategy: Complete Guide For Beginner

Co Founder & COO of Digital Treed | Sales & Marketing Manager