Brand extension is a marketing strategy in which a company uses its brand name and reputation to launch a new product or service in a different product category or market segment. The brand extension strategy aims to leverage the brand equity of an established brand to increase the chances of success for the new product or service.
The benefits of brand extension include the following:
- Increased brand awareness and recognition: The new product or service benefits from the established reputation and recognition of the existing brand.
- Cost savings: The cost of launching a new brand from scratch can be significant. The brand extension allows companies to save on marketing and advertising expenses.
- Increased revenue: Brand extension can help companies capture additional market share and generate new revenue streams.
However, brand extension has potential risks, such as diluting the existing brand’s image or confusing consumers with many different product offerings. Companies should carefully research and test their brand extension strategies to mitigate these risks to ensure they align with their brand positioning and customer needs.
Types of brand extension strategies
There are two main types of brand extension strategies:
Line Extension:
A line extension involves introducing new products or services within the same product category or market segment as the existing brand. This is typically the easier and less risky type of brand extension, as the company can leverage its existing brand recognition and distribution channels.
For example, a company that sells soft drinks may introduce new flavors or packaging options under the same brand name. Similarly, a company that sells personal care products may introduce new fragrances or formulations under the same brand name.
Category Extension:
A category extension involves introducing a new product or service in a different product category or market segment than the existing brand. This is a more challenging and risky type of brand extension, as it involves expanding the brand into new and potentially unfamiliar territory.
For example, a company that sells athletic shoes may introduce a clothing line under the same brand name. Similarly, a company that sells home appliances may introduce a furniture line under the same brand name.
Other types of brand extension strategies include:
Franchise Extension:
Franchise extension allows third-party businesses to use the parent company’s brand name and business model to operate their business. This strategy is commonly used in the food and beverage industry, where companies such as McDonald’s and Subway allow franchisees to run under their brand name and systems.
Brand Licensing:
Brand licensing involves allowing other companies to use the parent company’s brand name and intellectual property to manufacture and sell products under the parent company’s brand. This strategy is commonly used in the fashion industry, where companies such as Nike and Adidas license their brand name and logos to third-party manufacturers who produce and sell clothing and accessories under their brand names.
Co-Branding:
Co-branding involves partnering with another company to introduce a new product or service that combines the strengths and reputation of both brands. For example, a car manufacturer may partner with a luxury watch brand to introduce a special edition car that includes a custom-designed watch. Co-branding can help companies reach new audiences and create unique products that stand out.
Examples of brand extension strategy
There are many examples of brand extension strategies used by companies across various industries. Here are some examples:
- Coca-Cola – Line Extension: Coca-Cola is a classic example of line extension. The company has introduced several new flavors and packaging options over the years, including Diet Coke, Cherry Coke, and Coca-Cola Zero. Coca-Cola Marketing Strategy, Plan & Mix (4Ps)
- Nike – Category Extension: Nike has successfully extended its brand into new categories. In addition to athletic shoes, the company now sells clothing, accessories, and even technology products like fitness trackers. Nike doesn’t sell shoes. It sells an idea with its marketing strategy!!
- Apple – Category Extension: Apple has expanded its brand from personal computers to other technology products, including smartphones, tablets, and smartwatches. This has helped the company become one of the most valuable brands in the world.
- Marriott – Franchise Extension: Marriott is a well-known hotel chain that has expanded its brand through franchise extensions. The company allows third-party businesses to operate hotels under its brand name and systems.
- Disney – Brand Licensing: Disney has a vast brand licensing program that allows other companies to use its characters and intellectual property to produce and sell products under the Disney brand. This includes everything from clothing to toys to home goods.
- Toyota and BMW – Co-Branding: Toyota and BMW partnered to develop and release the Toyota Supra, which features BMW’s engine and technology. This co-branded product combines the strengths of both companies and helps Toyota reach a new audience.
Failed brand extensions
While brand extension can be a successful strategy, there have also been instances where it has failed. Here are some examples of failed brand extensions:
- Colgate Kitchen Entrees: Colgate, the well-known toothpaste brand, attempted to enter the frozen food market in the 1980s with Colgate Kitchen Entrees. However, the brand failed to resonate with consumers and was eventually discontinued.
- Bic Underwear: Bic, known for making disposable pens and razors, attempted to enter the underwear market in the 1980s. However, the brand failed to gain traction and was eventually discontinued.
- Zippo Women’s Perfume: Zippo, the company known for making lighters, attempted to extend its brand into the fragrance market in the early 2000s with Zippo Women’s Perfume. However, the brand failed to appeal to consumers and was eventually discontinued.
- Frito-Lay Lemonade: Frito-Lay attempted to extend its brand into the beverage market in the 1990s with Frito-Lay Lemonade. However, the brand failed to gain market share and was eventually discontinued.
- Harley-Davidson Perfume: Harley-Davidson attempted to extend its brand into the fragrance market in the early 2000s with a line of perfumes. However, the brand failed to resonate with consumers and was eventually discontinued.
These examples highlight the importance of carefully considering whether a brand extension aligns with a company’s core values, target audience, and existing brand equity.
Case study of successful brand extension
One example of a successful brand extension is the Apple iPhone. Apple was primarily known for producing personal computers and software until it introduced the iPhone in 2007. The iPhone represented a significant category extension for the company, as it was a mobile phone and media player offering internet connectivity and a touch-screen interface.
Apple successfully leveraged its brand equity and innovation reputation to enter the highly competitive mobile phone market. The iPhone was a game-changer, offering features and capabilities not available on other mobile devices at the time, such as the ability to browse the internet, play music and videos, and use apps.
The success of the iPhone has helped Apple become one of the most valuable and influential companies in the world. Since its launch, Apple has introduced several new iterations of the iPhone, each with new and improved features and capabilities. The iPhone has also helped Apple extend its brand into other categories, such as wearables with the Apple Watch.
The success of the iPhone can be attributed to several factors, including:
- Strong Brand Equity: Apple’s strong brand equity and reputation for innovation helped it enter the highly competitive mobile phone market and gain market share.
- Innovative Features: The iPhone offered innovative features and capabilities not available on other mobile devices at the time, which helped it stand out in the market.
- User Experience: The iPhone offered a user-friendly interface and experience, which helped it appeal to a broad audience.
- Marketing: Apple’s marketing campaigns for the iPhone were highly influential in generating buzz and excitement around the product, which helped drive sales and adoption.
Overall, the success of the iPhone demonstrates the importance of carefully considering a brand extension and leveraging existing brand equity and reputation to enter new markets successfully.
