Meaning of Brand Extension
Brand extension refers to the process in which companies use same brand name for launching its different products category. It is a marketing strategy in which products are developed by introducing minor products variations and the newly developed product is called spin-off. Brand extension is also termed as brand stretching or category extension where current brand name is used for making an entry into distinct product category. The existing brand name is used for all line of products by company such as motor cycles, generators, marine engines, automobiles etc. Category of products launched may be either same or differ from current category of brand. This brand under whose name a new product is brought into the market is known as “The parent brand”.
Brand extension is an effective tool used by companies for increasing their product acceptability rate in market. Consumers are more readily willing to buy those products which are associated with well-established and reputed brands. They are able to form product expectations on the basis of their prior brand experience. Extension of brand outside its core product category can be beneficial for company in the sense it helps in reaching new demographics, expanding customer base, raising sales volume and boosting profit margins.
Types of Brand Extension
Various types of brand extension are as discussed in points given below: –
- Companion product extension: Companion products are those which serve as a complimentary to original products. Such products come under the same niche and are directly related to original products. Under this brand extension, company release products which are companion to the one they already make. It is the most sought-after strategy of brand extension leading to sales promotion and marketing of original product.
- Company expertise extension: Company expertise extension strategy is one where expertise and brand name of company is expanded to new products. Company who has expertise in making good sounding speakers may expand its expertise in manufacturing good sounding TV as well.
- Product form extension: It is a brand extension strategy where same product is launched in a different form by company. As a result of this, the product starts competing in a distinct product category. Snickers bar ice cream is launched by snicker employing this strategy. This product now relates to distinct category of product even though it has just changed its form.
- Brand distinction extension: Some brands build a distinguished image in market because of the benefits offered by them or the way in which they deliver utility. These benefits are many times used by brand along with their existing brand name in order to enter into new niches and industries. This results in expanding of existing brand equity to new product launched.
- Brand prestige extension: Brand prestige extension is a strategy where a completely unrelated product category is launched by company under the same brand image. For example, a well reputed automobile brand BMW extended its brand prestige for launching of products in the apparel industry (watches).
- Red carpet brand extension: Red carpet brand extension employs name, expertise and knowledge of an industry expert, celebrity or an influencer for extending the product offerings under the brand. Brands uses this strategy for extending into the industries which is not logically related to their existing sector. It is used for borrowing the brand equity of present expert in that industry.
- Extension by leveraging a lifestyle: Many brands have positioned themselves in the form of particular lifestyle part and termed as lifestyle brands. These brands reinforce culture, way of living and set of values. Lifestyle brands are known for the distinct virtual style to which customers emotionally relate themselves but not from their distinctive benefits. Such positioning strategy are used by brands for expanding their offering range.
Advantages of Brand Extension
The advantages of brand extension can be well-understood from points given below:
- Increases the chances of product acceptance: There are better chances of product success when it is released under the well-established brand name. People are more willing to buy and accepts products from brands with whom they share acquaintance. This acceptance rate increases to a greater level in case when products belong to same niche/industry.
- Enhances the brand image: Brand extension helps in enhancing the brand image via launch of quality products under its name. When new products are brought into the market under the same underlying promise and brand message, its image get improve and peoples increasingly start believing into it.
- Economies in promotion and advertising: Brand extension saves the promotion and advertising cost of company to a great extent. Under this strategy, the launching campaign is meant for the introduction of product only but not of brand. Various product of brand is introduced under its same name in market and there is no need to build an afresh public awareness. The full attention is given to product itself which saves both efforts as well as expenses of corporation.
- Initial attraction become easy: This strategy enables in easily getting initial attraction for newly launched products in market. Existing brand customers or all those who are acquainted with brand more rapidly try the products which are introduced to people under the same brand name.
- Saves cost of developing new product: Every company incurs a substantial amount for developing a new product. Under the brand extension strategy, companies employ same communication channel for promoting products that were used by them earlier. This way brands cuts a considerable amount of expenditure by reducing marketing and promotion costs.
- Increases the brand’s operating market: The operating market of brand gets increased when new products of distinct categories are launched under the same brand name. With the introduction of more products, brand is visible to broader audience which eventually increases its brand equity.
- Immensely help parent brand: Brand extension helps immensely the parent brand in attaining its growth and better profitability rate. The first benefit provided by it is that it brings clarity in brand meaning and in fact it can enlarge the meaning. Secondly, it makes bonds of customers with brand stronger.
Limitations of Brand Extension
Various limitations of brand extension are as follows: –
- Problem of cannibalization: One of the major limitations of brand extension is that a company may face a problem of cannibalization. The resources of company may get wasted by producing a product which closely resembles to the original product. Sales may be achieved by them at the expense of original product.
- Can lead to brand dilution: Brand extension may lead to brand dilution where power of brand gets weakened due to its overuse. It takes place when company excessively uses the strategy of brand extension into almost every industry wherever it enters. The same brand name is used without eve n considering the logical relationship in between the existing and new products.
- Spoiler effect: This strategy may have spoiler effect over the image of newly launched products. In case if there is a negative publicity for original product, then all other products under the same brand name gets adversely affected.
- Discourage innovation: Brand extension strategy results in discouraging innovation within the organization. When company employs this strategy, it produces too many “lookalike” products under the same brand name. The chance of creating a new and innovative product identity is lost.
- Spoil the existing brand image: The brand extension may many times spoil the image of parent brand. In case if the newly launched product by company fails and do not get proper response, existing brand name under which it is released also get adversely affected.