Brand extension is using an existing brand to promote a product or a brand in a different category altogether. It is also known as brand stretching which is a form of marketing strategy in which the company uses existing brand equity to increase the brand equity of a new product.
Following are a few types of brand extension
- Following are a few types of brand extension
- Advantages of brand extension
- Disadvantages of brand extension
1) Companion product extension :
Companion products are a form of an extension which is very popular in the market with the customers. the ultimate aim behind company product extension is to materialize or capitalize the complementary products, customers view both of them as together or jointly and therefore it offers a scope of brand extension. For example, getting a Google cloud drive free with Gmail.
2) Product form extension :
Line extension is when the brand is launched in a different form from the present form. If the different product formed is an entirely new product category, it will be termed as a brand extension rather than a product from the extension. For example, Google is extended now to mobile phones industry and called as Google Pixel.
3) Extension of company expertise :
The extension can take a different form of product category since the expertise remains the same the new product category also is equally good terms of quality. the expertise of a particular company in extended to a new product category or a brand category is called an extension of company expertise. For example, Sony which started out as a player in Walkman is now serving mobile phones, Smartwatches, speakers, headphones and other extended product categories.
4) Customer franchise extension :
When a specific customer group has specific needs for the product the range which is extended is called customer franchise product range. Customer franchise focuses on the needs of the customer and ensures that customer satisfaction is obtained from the group. For example, Johnson and Johnson have offerings for all ranges of customers like baby products, baby shampoo etc.
5) Extension of brand prestige :
When new products are introduced into unrelated and entirely new product categories, under the brand extension, it is termed an extension of brand image or brand prestige. The same popular name is used for a range of unrelated products. usually, the names have been associated with the different product for a long-time recharge now been extended with a new product category but using the same old name. Allen Solly has a range of garments for men and women but when it extends into footwear it would be termed an extension of brand prestige or brand image.
6) Extension of brand distinction :
Brands have been unique in terms of an attribute or in terms of the benefit that they offer. And it is this uniqueness that attracts the customer to the brand. The company that works backwards to launch a different product and obviates this distinction.
Example Apple has always promoted security and they have achieved this distinction by launching a variety of products with amplified security. Apple tries to leverage new products on the same brand distinction. Some might argue that innovation has been the brand extension of Apple but that was true until 2017.
7) Component brand extension :
A brand develops a close association with taste. since it is been in the market for a long time it enjoys the proprietary association of the brand with the unique and distinctive taste. and this is the property that the brand could leverage on in other products as well. example head and shoulders shampoo which now comes in different flavours.
8) Customer base extension :
The customer base is something that brands acquire over a long period of time and it is easier to extend that bass to new product categories. This is effective when the customer base is huge and captive to some extent. Example launch of Prepaid ForEx cards by Thomas Cook for its travellers. The customer base, in this case, is extended to the new product.
Advantages of brand extension
1) New entrant
The primary advantage of brand extension is it enters into entirely Newmarket which has scope for growth. The new market offers increase profits and additional revenue generation for the organization.
2) Higher returns
whenever an organization jumps into a new category of products with not only stretches itself but it also ensures that in the long run the organization would be termed as a conglomerate with diverse experience in different categories of products. This gets the organization higher profit levels which in turn means better financial stability.
If the brand extension works in the favour of the company the company will have a new product to the into manage which will establish its status as a conglomerate. This grows the overall organization in every way which pushes it into the big league of competitors.
Disadvantages of brand extension
1) High risk
venturing into the unknown always has higher risk and it is no different for brand extension. While going into a new product may help to grow the revenue of the organization it may also backfire and causes the organization higher losses. Hence before extending any brand, the organization should ensure that the market is prepared to receive such an extension and should thoroughly know the market of the extended product.
Failure of a brand extension will prove very costly to the company. This usually happens in the case of the product extension which is not related to the company. Recent examples of brand extension officer would be the acquisition of a medical device company Alcon by another multinational pharmaceutical company Novartis. Novartis had the intention of extending the product line into medical device markets but since they had no expertise of managing a medical device industry turned out to be a failure. Alcon will be spun off in 2019.
3) Parent brand failure
If the brand extension does not work out well, there are very high chances that the parent brand may take the hit. The brand equity in the market goes down and both the child and parent product fail. For example, in 2018, when Facebook CEO Mark Zuckerberg was accused of data scam, and the selling of customer data to various companies, it took a hit for other brand extensions of Facebook like WhatsApp and Instagram.