What is brand extension? Examples and strategies

A simple brand extension definition defines this process as a company using its brand equity, reputation, recognition, and image to introduce a new product or service in a new category. The goal of a brand extension is to capitalize on the positive recognition of a parent brand to expand into new markets.

Launching a new product can be difficult and time-consuming. When a brand already has positive recognition, it can make sense for the company to leverage that recognition for a product in a new sector.

While brand extensions can be a success, this isn't always the case. Sometimes, poorly executed brand extension strategies result in a lowered opinion of the brand, especially if the new product (known as a spin-off) isn't a hit with the brand's market.

Consumers look for names they trust when they're ready to make a purchase, and attaching a reliable brand that consumers have had positive experiences with in the past can make them more likely to purchase the spin-off. Research found that 97% of consumers in the United States have at least one brand to which they feel loyal. Once a consumer trusts a brand, seeing a brand's name on another product, whether related or unrelated, can create feelings of positivity and trust.

There are several different types of brand extensions. Here, we'll look at some of the most common brand extension types.

• Line extension: A fairly simple addition to a brand, a product line extension adds new products to an already-existing product line. Examples can include new shades of lipstick to an already-existing line or new flavors of cake mix from a well-known baking product company.
• Category extension: This type of brand extension can require some risk, as it involves launching a brand into a fully new category. Google is a great example of category extension. A company that was once recognized only as a search engine is now known for its email, cloud, and smart home services.
• Complementary product extension: Oral care companies are an excellent example of complementary product extensions, in which the company offers a product that works well with a product they already sell. For example, a company that sells whitening toothpaste may also sell whitening strips, all while encouraging customers to use both products to create a foolproof system.
• Customer franchise extension: When a brand has a strong customer base, it may be able to launch other products that appeal to the demographic of its customers. For example, a sporting equipment company may introduce health products and supplements to increase performance.
• Brand lifestyle extension: Typically, brand lifestyle extensions take well-known companies or celebrity personalities and use them to promote a new product.

Brand extensions can make sense for many well-established companies, especially those that already have a widely recognized brand. Some of the benefits of a brand extension include:

• Cost-savings: Using the name of a brand that already exists cuts down on marketing costs. It can also save time, as consumers don't have to take the typical three experiences that it takes to trust a new brand. Companies don't have to make new brand guides, as the brand guidelines stay the same.
• Larger customer base: When a customer base already exists, brands are able to leverage the facets of their company that consumers know and love to get them to buy into their new offering. For example, a granola bar company that transitions into offering supplements can appeal to the customer's love of all-natural, organic, fair-trade-certified ingredients.
• Improved brand image: When a brand extension goes well, the brand is exposed to an even wider range of customers. More people see that the brand is trustworthy, which contributes to the company's longevity.

While brand extension can work well, it can also be risky. Some of the potential drawbacks that can stop a brand extension from working well include:

• Customer confusion: Once, Colgate tried to sell lasagna. Reading that sentence, or seeing that product in a grocery store, simply doesn't feel on-brand and can lead to customer confusion.
• Quality and consistency issues: When a company launches a product that strays from the line they've honed for years, there can be some growing pains. This can cause customers to lose faith in the brand due to poor experiences with the new product.
• Dilution of brand identity: Customers often associate brands with their star products. When a company releases a new product that's not in line with its other offerings, the idea of what the brand represents can become cloudy and weaken the brand identity.
• Product cannibalization: Sometimes, the release of a new product as a part of a brand extension strategy can backfire if companies are not prepared for product cannibalization. When this happens, a company's new product replaces an old product, leading to a dip in sales.

In order for brand extensions to work well, it's key that companies do their research and have a well-thought-out strategy.

Some strategies that can contribute to a successful brand extension include:

• Conduct market research: Companies need to ensure that customers are interested in the spin-off they're considering. Conducting market research can help you assess the demand for a new product or service.
• Assess brand equity: A company's brand equity needs to be high in order for a brand extension to be successful. In fact, 60.6% of brands with strong brand equity will experience a positive response to a brand extension.
• Choose the right type of brand extension: Risk consideration is key. A lesser-known brand may find more success with a line extension than it would with a category extension. Understanding the different types of brand extensions can help you choose one that works best for you.
• Ensure product innovation: Just because a company does one thing well doesn't mean it can do everything well. New products need to be tested and honed, and companies can't only rely on their good name to make their brand extension a success. Ensuring the new product or service is innovative and adds value to the lives of consumers can help ensure the extension performs well.
• Properly position and market your product: Consumers need to know that the company marketing the new product is the same company that they already trust. Targeted marketing to promote new product or category awareness can help customers understand the brand's new offerings before they see the spin-off in the store or online. With a brand extension, you may need to improve your brand guidelines to ensure your marketing efforts reflect your extension.