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Brand Extension

The Brand Extension is the marketing strategy wherein a new product is launched under the existing brand name. The category in which product is launched may be related or unrelated to the brand’s current category. The brand that gives rise to a new product under its name is called “The Parent Brand”.[1]


Brand Extension Methods[2]
Brand extension can be as simple as offering an original product in a new form such as frozen pizza offered by a made-to-order pizza restaurant or a restaurant selling a proprietary sauce in stores. Another form of brand extension is combining a product with another such as a chocolate company working with a pretzel company to offer chocolate-covered pretzels. Another method is to leverage a brand's reputation to move into new product categories such as a car company known for its engineering prowess starting a motorcycle division and selling those motorcycles based on superior engineering qualities. A company could also create companion products; a peanut butter company could start offering jelly to leverage its brand and the natural relationship between the products. Another method is to leverage a designer brand or status to offer products seemingly different from the original; a band grows popular through its music, and then it starts branding clothing with its logo.


Brand Extension Strategies[3]
There are eight different strategies to create a Brand Extension
1. Similar product in a different form from the original parent product - This is the strategy Snickers used to create Snickers Ice Cream Bars.
2. Distinctive flavor/ingredient/component in the new item - Hershey's chocolate milk uses this strategy. Consumers purchase this product because they know the taste of Hershey's chocolate.
3. Benefit/attribute/feature - Febreeze is known for smelling good. Extending into the car air freshener category made sense for this company.
4. Expertise - Honda is known for reliable engines, which made Honda lawn mowers a good move for the company.
5. Companion products - Aunt Jemima launched a pancake syrup to go with its pancake mix.
6. Vertical extensions - This strategy has the reputation of going backwards. For example, Rice Krispies are used to make Rice Krispies Treats. So Kellogg decided to offer a ready-to-eat version of this snack.
7. Same customer base - This strategy is used when a marketer knows they have a product that could be used by their current customers.
8. Designer image/status - Harley-Davidson found success with this strategy through its clothing line.


Principles of Brand Extensions[4]
Brand Extension Research has identified 10 principles that characterize a GOOD brand extension. These rules should guide any work in order to increase the probability of success.

  • 1. Brands should not be extended unless they are well-known, have high awareness and a good reputation among the new target market.
  • 2. Brand extensions must be a logical fit with consumers’ expectations.
  • 3. Brand extensions must have leverage in the new category – a transfer to the new product of a distinctive property associated with the parent brand that gives the brand extension an edge in the new category. The test: “Just knowing the brand name, customers of the new category should be able to identify a reason why they might prefer the new brand extension to existing competition.”
  • 4. Brand extensions that could create confusion or a negative image for the parent should not be undertaken.
  • 5. Brands that consumers use synonymously with a category (generic) should not be extended to other categories.
  • 6. Brands should not be stretched to too many diverse categories risking dilution in the long run. (There are cases, however, where a brand dominates a modest sized category and has no room to grow. In these instances, the upside potential of extending is worth the risk of dilution – e.g., Arm & Hammer.)
  • 7. Brand extensions that will not create positive synergy for the parent brand should not be pursued. (Ask consumers whether their opinion of the parent would be lowered if the new brand extension were available.)
  • 8. Brand extensions must make business sense.
  • 9. Every brand extension should open a category for the firm. The whole point of brand extension is to efficiently and successfully enter a new category.
  • 10. A critical part of every brand extension research study is developing a brand plan. Short and long term possibilities should be identified up-front.


Here we might discuss in more detail the last three points. Many brand extensions are simply bad business ideas. Just because consumers would accept chocolate pudding from Nestlé doesn’t mean this is a good business idea. The category may be dominated by another company. Nestlé may not be able to efficiently manufacture the product. The margins in the new category may be too small to justify the investment, etc. In point 9, we suggest that every brand extension should open a new category for the company and in point 10 that long term possibilities should be contemplated in advance. When Ocean Spray launched Ocean Spray Cranberry Juice Cocktail, that product opened the door for the company to enter the bottled juice business in a big way. A myriad of other flavors followed creating a sizable business. Launching a brand extension that is an orphan in the category can be a prescription for failure because the item cannot generate sufficient sales to be adequately supported and defended. Developing a long term plan using brand extension as a means to enter a category is what brand extension should be all about.


Types of Brand Extension[5]
Below are some excerpts of a categorization of Brand Extension by Mike Bawden of Brand Crafting”

  • The Next Step – An evolutionary brand extension.
  • The Sequel – More than evolutionary, these extensions tend to be a complete re-thinking of existing products and then re-packaged and represented with or without the lineage clarified.
  • The Spin-Off – Just as the name implies, these are extensions that take some small element of the original and tries to make a full-blown brand out of it.
  • The Partnership – Co-branded extensions can confuse and confound customers, eventually pissing them off in the process.
  • The Anti-Brand – Not really an extension, these are brands that leverage the brand awareness of another product to their benefit by claiming to NOT be them.
  • The Non-Sequitur – These are brand extensions that generate a “huh?” reaction out of consumers.


Steps for Brand Extension Success[6]
There are many examples of successful brand extensions, and the benefits from the extensions are huge. Beyond offering new sources of revenue, a successful brand extension can create business diversification, achieve marketing efficiencies between categories, increase brand equity, enhance brand associations and accelerate the speed to market the new category.However, there will always be uncertainty about how successful a brand extension can be. To increase the probability of success, any brand should follow a few best practices.

  • 1. Measure Brand Equity: One of the biggest concerns when implementing brand extensions is the risk of causing brand dilution, that is, when the new product category fails and presents a negative impact on the brand as a whole. Thus, the first step is to have a Brand Equity measurement in place in order to track possible future impacts.
  • 2. Measure the potential risks: Run a scenario analysis to identify the positive or negative effects on the business and brand equity. The goal is to implement a brand extension whose risk of failure does not exceed any marketing efficiencies.
  • 3. Leverage from business core competency: The new product should leverage all the skills and know-how from the current business and marketing operations in order to gain a competitive advantage in the new category. By identifying the business key competencies, the brand will be able to gain efficiencies and create market differentiation.
  • 4. Invest in Marketing Research: In the eagerness to grow the business, brands forget about making sure the new category has market potential, that there are clear opportunities or unmet customer needs. When identifying key opportunities, make sure to understand prospect and current customers and estimate their acceptance for potential brand acceptance. Use marketing research also to test the possible new brand extensions.
  • 5. Make the brand extension a logical fit: The new product must be a logical fit to the brand, compatible, expected and follow the current brand story. The link between the new product and the parent brand should be easily tracked. The biggest brand extension pitfalls fall into this category.
  • 6. Create a Brand Extension Strategy: After making sure the story follows a smooth path between both categories, make sure you develop a brand management plan and a compelling go-to-market strategy that will connect with your audience across multiple touchpoints on the Customer BuyWay.


Brand Extension Failure[7]
Literature related to negative effect of brand extension is limited and the findings are revealed as incongruent. The early works of Aaker and Keller (1990) find no significant evidence that brand name can be diluted by unsuccessful brand extensions. Conversely, Loken and Roedder-John (1993) indicate that dilution effect do occur when the extension across inconsistency of product category and brand beliefs. The failure of extension may come from difficulty of connecting with parent brand, a lack of similarity and familiarity and inconsistent IMC messages. "Equity of an integrated oriented brand can be diluted significantly from both functional and non-functional attributes-base variables", which means dilution does occur across the brand extension to the parent brand. These failures of extension make consumers create a negative or new association relate to parent brand even brand family or to disturb and confuse the original brand identity and meaning. In addition, Martinez and de Chernatony (2004) classify the brand image in two types: the general brand image and the product brand image. They suggest that if the brand name is strong enough as Nike or Sony, the negative impact has no specific damage on general brand image and "the dilution effect is greater on product brand image than on general brand image". Consequently, consumers may maintain their belief about the attributes and feelings about parent brand, however their study does show that "brand extension dilutes the brand image, changing the beliefs and association in consumers' mind". The flagship product is a money-spinner to a firm. Marketers spend time and money to maximize exposure and awareness of the product. In theory, a flagship product has the top sales and highest awareness in its product category. In spite of Aaker and Keller's (1990) research, which reports that prestigious brands are not harmed from failure of extensions, some evidence shows that the dilution effect has great and instant damage to the flagship product and brand family. Still, some studies suggest that even though overall parent belief is diluted; the flagship product would not be harmed. In addition, brand extension also "diminish[es] consumer's feelings and beliefs about brand name." To establish a strong brand, it is necessary to build up a "brand ladder". Marketers may follow the order and model created by Aaker and Keller who are authorities on brand management, but branding does not always follow a rational line. One mistake can damage all brand equity. A classic extension failure example would be Coca-Cola launching "New Coke" in 1985. Although it was initially accepted, a backlash against "New Coke" soon emerged among consumers. Not only did Coca-Cola not succeed in developing a new brand but sales of the original flavor also decreased. Coca-Cola had to make considerable efforts to regain customers who had turned to Pepsi cola. Although there are few works about the failure of extensions, literature provides sufficient in-depth research into this issue. Studies also suggest that brand extension is a risky strategy to increase sales or brand equity. It should consider the damage of parent brand no matter what types of extension are used.


Benefits of Brand Extensions[8]
There are significant benefits to a successful brand extension: • Identify logical new product possibilities • Capitalize on the paid-for equity in established brand names • Enable a company to enter new categories at significantly lower cost • Reduce the risk of failure given the already established awareness and trust • Create a positive synergistic effect with the efficiencies of umbrella branding and advertising • Reinforce the consumers’ perceptions of the parent brand name • Bring news to existing brands when there is otherwise nothing new to say about them


Disadvantages of Brand Extension[9]

  • 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.
  • There is a risk that the new product may generate implications that damage the image of the core/original brand.
  • There are chances of less awareness and trial because the management may not provide enough investment for the introduction of new products assuming that the spin-off effects from the original brand name will compensate.
  • If the brand extensions have no advantage over competitive brands in the new category, then it will fail.


See Also

Brand Brand Ambassador
Brand Asset Valuator
Brand Identity Prism
Brand Loyalty
Brand Management
Brand Personality
Brand Recognition
Brand Strategy
Branding


References

  1. Definition of Brand Extension Business Jargon
  2. Brand Extension Methods Investopedia
  3. Brand Extension Strategies study.com
  4. Principles of Brand Extensions brandextension.org
  5. Types of Brand Extension brandxpress
  6. 6 Vital Steps for Brand Extension Success Top Right
  7. Brand Extension Failure Wikipedia
  8. Benefits of Brand Extensions brandextension.org
  9. Disadvantages of Brand Extension Your Article Library


Further Reading

  • The Best (and Worst) Brand Extensions AdWeek
  • Brand Extension Research: Case History - CLOROX Brand Extension Research
  • Brand Extension vs Brand Stretch: The Good, the Bad, and the Rules BrandingMag
  • Strategic benefits of low fit brand extensions: when and why? Elsevier
  • Steal This Idea: Brand Extension arty Neumeier