Brand extension

Glossary

What is brand extension?

Brand extension is a marketing strategy where a company uses its established brand name to launch new products or services. The goal is to leverage the brand's existing reputation to enter new markets or product categories. Instead of starting from scratch with a new brand, companies extend their existing brand into new areas.

Brand extension vs. other brand strategies

Let’s break this down to see how brand extension compares with other strategies:

  • Brand stretching: This strategy involves a brand moving into a new category that’s quite different from its original market. For example, Virgin, originally an airline brand, stretched into the financial services sector with the launch of Virgin Money. This move involved entering a completely different industry, relying on the Virgin brand's reputation for innovation and customer service to appeal to a new market.

  • Brand diversification: This strategy focuses on expanding the brand within the same or a closely related category. The brand introduces new products that are different but still closely aligned with its core identity. For instance, a luxury car brand might introduce a line of premium car accessories. This approach allows the brand to leverage its existing market presence and customer loyalty while exploring new revenue streams.

How does brand extension work?

Implementing a brand extension involves several steps:

  • Identify opportunities: Look for gaps in the market or areas where your current brand could naturally fit. For example, if your brand is known for quality kitchen appliances, extending into cooking classes or gourmet ingredients might be a logical step.
  • Develop the extension: Create the new product or service, ensuring it aligns with the brand's existing values and quality. If a brand known for reliability extends into smart home devices, the new products should maintain that reputation.
  • Launch and market: Introduce the new offering to the market. Communicate how this extension fits with the existing brand and highlight the benefits. Effective marketing is crucial to make sure customers understand the connection between the new and the old.

Types of brand extensions

There are a few different types of brand extensions to consider:

  • New product categories: This involves introducing a brand into a completely new category. Think of a skincare brand launching a line of beauty supplements. The brand’s established reputation in skincare helps it gain trust in this new category.

  • New product lines: Here, a brand adds a new line within an existing category.For example, a well-known sportswear brand might extend from running shoes to include a new line of football spikes.

Benefits of brand extension

Brand extension can offer several advantages:

  • Enhancing brand recognition: When you successfully extend your brand, you increase its visibility and familiarity. This helps in building a stronger brand presence.

  • Leveraging existing brand equity: If your brand already enjoys a strong reputation, you can use this equity to introduce new products more easily. Customers are more likely to try a new product if they trust the brand behind it.

  • Attracting new customer segments: Brand extensions can help you reach new customer groups. For instance, a brand known for high-end tech gadgets might use its reputation to appeal to a more budget-conscious segment with affordable versions of its products.

Challenges and risks of brand extension

However, brand extension isn’t without its challenges:

  • Brand dilution: If the new product doesn’t meet customer expectations or is too far removed from the brand’s core, it can dilute the brand’s image. For example - Harley-Davidson, known for its classic, heavyweight motorcycles, introduced the V-Rod in 2008, which had a modern, sports-bike aesthetic. The departure from their traditional image confused loyal customers and was less well-received by their core audience.
  • Confusion among consumers: If the extension isn’t clearly related to the original brand or is inconsistent in quality, it can confuse consumers. They might struggle to understand what the brand stands for.
  • Impact on original brand’s reputation: Any negative feedback or failure of the new product can affect the original brand. If a trusted brand’s extension fails, it can harm the overall perception of the brand.

Successful examples of brand extension

Several brands have successfully navigated brand extension:

  • Apple: Known for its computers, Apple’s move into smartphones with the iPhone was a textbook example of successful brand extension. The iPhone leveraged Apple’s reputation for innovation and design, becoming a massive success.
  • Nike: Originally a shoe company, Nike’s extension into apparel and sports equipment allowed it to become a global leader in sportswear. The new products complemented its existing brand and further solidified its position in the market.