Apple iPhones, Colgate toothbrushes, Dr. Pepper marinade, Virgin Atlantic Airways—all are examples of brand extensions. Some have become instant successes, while others never made it off the ground. Brand extension is when an established brand name introduces and markets a new product or service in a different category. Brand extensions can be a great way for companies to create new revenue streams, but it’s important to do upfront planning and research to ensure a brand isn’t diluted or damaged in the process.
When an established brand is used to launch a new product, the investment required to introduce and market that new product is typically lower. That’s because the brand is already recognized by consumers in the marketplace. When there are multiple brand extensions, the cost to build brand equity and awareness can be spread out, which also creates efficiencies.
Along with the rewards that can be realized with brand extensions, there are also risks. Too many brand extensions can result in brand dilution, which happens when consumers lose sight of the brand’s core meaning and purpose. For example, consider Dr. Pepper marinades. Dr. Pepper is a soft drink, right? What’s it doing in the marinade category? Or how does Samsonite, a brand known for quality luggage, make the connection to a line of outerwear? What about Bic making perfume? Failed extensions such as these can cause confusion and lower consumer confidence.
Other challenges arise if a brand introduces a product that’s too similar to its current products. In this case, if the new products don’t meet expectations, it can reflect poorly not only on the extension but the brand’s existing, established products as well. Additionally, if a new product is too similar to established products, it risks cannibalizing sales and market share. In this situation, success can only be realized if the new product’s sales outweigh the existing product’s loss of sales.
The most successful extensions increase brand awareness and strength. Look no further than Apple for a perfect example. Starting with computers, the company extended its brand into the audio category with MP3 players and later on, smartphones with the introduction of the iPhone. They extended their brand into complementary categories without altering their core identify. Category extensions are products that are introduced in a category that’s different than the parent brand. Starbucks is another example of successfully using category extensions. The company’s extensions have included ice cream, liqueurs, energy drinks and grab-and-go frappuccinos.
Before embarking on a brand extension, companies need to have a clear understanding of their brand, what it stands for, what it promises, what consumers value most about it and what advantages it affords. Then they must determine if a new product can fulfill and support the brand. Companies can do that by considering if the brand has credibility within the new category. Is it a logical fit? Is it different enough from the brand’s existing products? Will the extension enhance and strengthen the brand rather than dilute it? Can the new product’s experience be consistent with that of established products? These and other questions must be answered before proceeding with a brand extension.
Some of the greatest products on the market today are the result of successful brand extensions. They can increase brand awareness, profits and market share, while welcoming new customers. Because they can benefit from the parent brand’s awareness and distribution networks, extensions often require a lower investment to bring to market. While they have many benefits, it’s important to approach brand extensions cautiously, doing the necessary research and planning. Taking the time up front can make all the difference between a successful brand extension and a failed one.
We are the brand strategy experts! Discover how we can revitalize your brand through our proprietary Brand Re-Engineering™ process. Contact our team today or download our bluepaper.