Over the years, from my BMM days to MBA, this one concept has always been a part of my syllabus.
But what I have realized is that, a lot of people still get confused in understanding the basics of Brand extension.
At the same time, a practical understanding of Brand extensions is still missing.
So in this post, I plan to cover the following elements, to give you guys a thorough understanding of the topic
1. What is a Brand Extension?
2. How Brand Extension works?
3. Types of Brand Extensions
4. Advantages & Disadvantages of Brand extensions
5. Examples of Brand extensions
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I aim to provide the most simplified understanding of the concept, so let’s get started
1. What is a Brand Extension?
Let’s first understand the difference between ‘brand’ and a ‘product’
Oh yes, they are different, and the difference is crucial to understand.
A brand is a name that is given to a product.
So ‘Chocolate’ is a product, however, ‘Dairy Milk’ is a brand.
These brands over some time, gain the trust and loyalty of customers, and this is further used in the process of Brand extension.
Brand extension can be defined as a process where a company utilizes its well-established brand name for a new product or a new product category.
Companies do this because it makes sense in leveraging the brand name that has already garnered a lot of equity in the minds of the consumers.
It also creates a feeling of ‘Hey, I already use brand X and it’s great, this new product under brand X must be good as well’
So basically you don’t need to start working on the new product from scratch, instead, you already have a head start.
If a brand extension is done in the right way, companies can reach new demographics, reach new customers, increase sales, and overall gain much more profit.
Brand extension is also referred to as Brand stretching in some cases, but irrespective of different names, the concept is still the same.
Before we move on to understanding this concept in-depth, please note, that brand extension is not bound to succeed always.
We will cover this in the disadvantages area, so read till the end
2. How Brand extensions work?
So as mentioned earlier, a brand extension takes into account the reputation and goodwill a brand has already gained, to launch a new product.
Of course, this is done with the hope that the new product will be just as successful as the previous ones with the same brand name.
But just adding your brand name, is job, half-done.
Or rather the process is not that simple, the new product has to have a logical connection.
Whereby, the brand suits the product and vice versa.
A situation where the brand extension doesn’t work is referred to as Brand Dilution, this is a very risky area to be in, because it can also harm the parent brand.
Brand extensions work in providing more market share to the company, diversify their offerings, and also gain a competitive advantage.
3. Types of Brand Extensions
Broadly, brand extensions can be divided into the following types:
The company may decide to incorporate either of these types or more depending on the new product launches.
a.) Line Extension
Simply put, Line extension is when the same brand name is used to launch a product differently.
So here the product has slight extensions in the form of flavors, forms, colors, added ingredients, etc.
Let’s take a few examples to understand this
Sunsilk is a brand name, and for their line extensions, they have various sizes of their shampoos and conditioners.
Another example can be concerning different flavors being introduced, in case of juices, Tropicana has Orange, Guava, etc. these are all line extensions.
b.) Product Extension
The difference between line and product extension is that, when it comes to product extension, the product is completely different.
For example, initially, Amul launched milk, later they diversified into Amul Masti Dhai, Condensed milk, chaas, etc.
These are all product extensions.
c.) Customer Franchise Extension
This type of extension is specific to those brands that have a particular set of the target audience.
So you are extending your product range, to cater to that specific target group.
For example, a brand like Maybelline, has women as their core target audience, so introducing lipsticks, nail polishes, etc. are a customer franchise extension.
The aim here is to satisfy the various needs of your target group.
d.) Company expertise extension
Again, this is specific to the company’s that have been in the field for a long time, and have developed the ‘expertise’ in the minds of the consumers.
For example, Xiaomi now lets put aside the India-China bit right now, but as a brand, Xiaomi has well established its expertise.
So them introducing, laptops, TVs, etc. is a form of company expertise extension
4. Advantages and Disadvantages of brand extension
Before incorporating any form of brand extension it’s very important to analyze both the pros and cons, so let's look at them below
Advantages of Brand Extension
i) Most important advantage is the brand legacy that comes in with a brand extension, the possibility of success is much higher, thanks to that
ii) It increases the set of ‘experimenters’ in your target group.
Now let me explain this a little, given that a new product is launched under a known brand name, more and more people are interested in trying out the product, which is always an add on for the brand.
iii) Promotional costs, including advertising, are reduced, think about the numerous line extensions that Cadbury has introduced over the years.
Of course, they advertise for most of their products but imagine visiting a Kirana store and coming across a new flavor, you would definitely try it, irrespective of watching the ad or not.
Disadvantages of Brand Extension
i) A wrongly incorporated brand extension can also hamper the overall brand love, already created.
It’s important to understand that for any extension, your brand image is at play, so if your product doesn’t live up to the expectations, then it’s bound to affect your brand too.
ii) Weakening of the brand name is another common disadvantage of brand extensions.
How much is too much, we need to know the answer to this before coming up with various extensions
5. Examples of Brand Extensions
Let’s look at two examples, one for success and other for failure.
There are way too many examples, but I have already covered a few above, here are two more
i) Dove
Dove was initially known only for soaps majorly, and soon they expanded into the category of shampoos and conditioners.
I wouldn’t be surprised if most of the people are now using Dove Shampoos rather than soaps
ii) Pepsi Blue
Now I wouldn’t call it a bad decision here, but the product failed in the market.
And while there were multiple reasons for the same, the main reason was the lack of advertising promotions.
I feel maybe the brand expected the ‘expertise’ to work, but it didn’t.