Most successful brands have multiple extensions- Adidas, Coca-Cola, Boohoo, and others. These brands have leveraged their well-established brand to introduce new products to their already existing and loyal customer base.
The goal of brand extensions is to reach new customers, expand into new markets, and increase sales of the existing brand. They also help you increase customer loyalty by providing products they need from a single brand.
In this article, we’ll explore how brand extensions help you stay ahead in today’s fiercely competitive market, and examples of successful and unsuccessful brand extensions.
Understanding Brand Extension
Brand extension is when a company uses an existing brand name for a new product or category. You can use brand extensions to attract new customers, reach new markets, or just boost sales of an existing brand.
Think about it this way: you’re in a meeting room with your audience, they are paying close attention, and are enjoying your presentation. This is a great chance to show them what else you have to offer, instead of hosting another event to launch your new product.
Types of Brand Extension
- Line extension: This is one of the most popular brand extensions. It’s when you launch new products that are closely related to your existing brand. For example, the Boohoo Group has launched a variety of line extensions, such as Boohoo, boohooMAN, PrettyLittleThing, MissPap, Karen Millen, Nasty Gal, and others.
- Category extension: This involves launching new products under the same brand. For example, Nike went from footwear to also producing fashion and sporting apparel.
- Brand franchise extension: This involves launching a new product under a sub-brand of the existing brand. For example, Disney has launched a variety of brand franchise extensions, such as the Star Wars and Marvel movie franchises.
Benefits of Brand Extension
Launching new products draws attention to both your already established brand and the new one. Customers are already familiar with the brand name and its reputation, so they are more likely to recognize it and be interested in the new product.
Customers already know and trust your parent company. This gives you an easier platform when introducing your new offers, they are more likely to accept the products without skepticism because they already trust your brand.
- Cost-Effective for Marketing and Advertising
A brand extension reduces your marketing and advertising costs when launching a new product or service. Sure, launching a new product can be expensive, but you’re reusing the brand name, logo, and marketing collateral for the new product.
You are also leveraging the existing brand awareness and reputation to help the new product reach a wider audience, which can also save on marketing costs.
- Expansion into New Markets and Customer Segments
Brand extensions allow you to use your existing brand name to reach new customers who may not be familiar with the company’s products or services. For example, Apple has successfully extended its brand from computers to smartphones, tablets, and wearables.
Brand extensions help build customer loyalty in two main ways. First, if customers are happy with the new product, they’re more likely to stick with your brand.
Also, existing customers who are loyal to your brand are more likely to try new products from your brand because they trust your products and services.
Read Also: Brand Extension Strategies to Propel Your Brand Forward
Challenges of Brand Extension
- Brand Dilution and Potential Damage to the Core Brand
Your brand extension may damage your brand reputation if your new product doesn’t match the parent brand’s quality. Customers may link the parent brand quality to the new product/service, even if it’s not directly related.
For example, if your company is known for making luxury fashion items and you extend the brand to a line of budget fashion products, it could damage your brand’s image of exclusivity and prestige.
- Cannibalization of Existing Products or Services
Your new product or service can compete with the existing products or services, and cannibalize sales of those products or services. This means customers may choose to buy the new product or service instead of the existing products or services.
For instance, if your business specializes in casual wear and expands the brand to include a formal wear collection, customers may choose to purchase only formal wear products from your brand.
- Consumer Perception and Acceptance of the Extension
However, not all customers will be receptive to a brand extension. Some may be hesitant to try something different from the brand, especially if it’s a product that’s completely different from what the brand originally offered.
Also, customers may not understand the need for a new product/service and simply won’t buy it. Therefore, it’s important to think through how consumers will view and respond to the brand extension.
- Maintaining Brand Consistency and Relevance
The new brand extension has to be relevant to the parent brand with the same quality. If the new product or service is not consistent with the parent brand or is not relevant to the target market, it could damage the brand’s reputation.
For example, your original company only makes high-quality, long-lasting vacuum cleaners, but your new brand extension, which includes refrigerators, doesn’t offer the same level of quality, people might just give up on your all products altogether.
- Operational and Supply Chain Complexities
When launching brand extensions, your company may need to invest in new production facilities or distribution channels. You may also need to train your employees on the new product or service These complexities can increase the cost of brand extensions and make them more complex to manage.
Successful Brand Extension Strategies
- Market Research and Analysis for Identifying Extension Opportunities
The first step in brand extension is market research and analysis. Market research should focus on the target market, competitive landscape, and growth potential.
Also, identify the brand attributes and values you can leverage from your parent brand to promote the extension.
- Leveraging Brand Attributes and Values for Consistent Extension
Knowing and leveraging the brand attributes and values of the parent brand enables you to ensure your product/services stay consistent. This strengthens customers’ positive perception, loyalty, and NPS score.
For example, if a company is known for making eco-friendly jewelry, it should not extend its brand to a line of environmentally harmful accessories.
- Effective Communication and Marketing to Promote the Extension
After creating the brand extension, it’s time to get it out there and market it to your target audience. Focus on the value of your new product/service and how it ties in with your brand’s values. Also, make sure your marketing is consistent with your parent brand’s marketing strategy.
- Ensuring Quality and Credibility of the Extended Product or Service
Make sure your parent brand quality and credibility extend to the new products/services. You should also be transparent about the new product/service’s features, and benefits. This will help you to build trust and loyalty with your customers.
Don’t just sit back after you’ve successfully extended your brand, get feedback so you can see how your product is performing. The feedback you get will help you figure out what you can do to make your new product or service better.
It can also help the company to determine how to better communicate and market the new product or service.
Read – Brand Personality Guide: Definition, Types, Dimensions + Free Template
Case Studies of Notable Brand Extensions
- Coca-Cola: From Carbonated Beverages to Clothing and Merchandise
Coca-Cola is popularly known as a beverage company. The company extended its brand by licensing its brand to other companies to produce clothing, accessories, and other merchandise. Some of the most popular Coca-Cola-branded merchandise items include t-shirts, hats, mugs, and water bottles.
This extension the company to reach a wider audience and generate additional revenue. It also provided free offline brand promotion when customers wear the branded merchandise.
- Apple: From Computers to Smartphones, Tablets, and Wearables
iPhone is Apple’s greatest brand extension. It’s what propelled Apple to become one of the world’s most valuable brands. Apple launched its iPhone years after being known for its computer, and sold millions of units, making it one of the fastest-growing brands worldwide.
But Apple did not stop there. It leveraged the trust and quality of its iPhone and computers to create a platform for its other devices, such as its iPad and wearables. The new additions were quickly adopted by customers due to the credibility and brand image that Apple already built.
- Nike: From Athletic Footwear to Apparel, Accessories, and Fitness Equipment
Nike’s main focus when it launched was footwear, but it has successfully extended its brand to other apparel categories, such as sportswear, outerwear, and accessories. Just like Nike’s footwear is known for its comfort and quality, its apparel is known for its high-quality and stylish designs.
Nike has also extended its brand into fitness equipment and training. These extensions enable the company to offer a comprehensive fitness experience to its customers.
- Amazon: From an Online Bookstore to a Global E-Commerce Powerhouse
Amazon didn’t start as the world’s largest e-commerce retailer, it started as an online bookstore. It kept extending its offers to different kinds of products, clothing, accessories, equipment, computing goods, groceries, and more.
Steps to Successful Brand Extension
- Identify extension opportunities using market research and consumer insights. This involves understanding the specific needs and desires of your target market, as well as the competitive landscape. The most effective ways for this are market research surveys, potential competitor analysis, and focus groups.
- Develop a clear brand extension strategy aligned with the core brand values Your brand extension should be consistent with the values and personality of your existing brand. For example, if your brand is known for being high-quality and luxurious, you wouldn’t want to extend it to a low-cost product category.
- Conduct feasibility studies and test the viability of the extension. This involves testing the concept of your brand extension with potential customers to see if they are interested in it. You can do this through surveys, focus groups, or even a small-scale launch.
- Develop marketing and communication plans to support the extension. This involves creating a plan to reach your target market and let them know about your new product or service. Your marketing plan should be consistent with the overall brand strategy.
- Monitor and evaluate the success of the brand extension over time. This involves tracking sales, customer satisfaction, and other metrics to see how the brand extension is performing. You can use this information to make necessary adjustments to your strategy.
Brand Extension Failures and Lessons Learned
- Colgate Kitchen Entrees
In 1982, Colgate, a toothpaste brand, launched a line of frozen dinners called Colgate Kitchen Entrees.
Why It failed- The product was a failure because it was not seen as being consistent with the Colgate brand image. Consumers did not associate Colgate with food, and they were not interested in buying frozen dinners from a toothpaste company.
Lesson learned– Successful brand extensions need to align with the parent brand’s core value and image. When Colgate launched toothbrushes it was widely adopted by the target market because it was consistent with the brand image.
- Bic underwear
Bic has a long-standing reputation for being one of the most affordable and high-quality razors on the market, so it was a surprise when the company announced the launch of disposable underwear “Bic Underwear.”
Why It Failed– The product failed because it didn’t resonate with consumers. Bic wasn’t seen as a reliable underwear brand, and consumers didn’t want to buy underwear from a company that made razors.
Lesson learned– Successful brand extensions need to align with the parent brand’s core value and image.
Importance of Market Research, Consumer Feedback, and Adaptability for Brand Extensions
You need in-depth market research to gain insight into your target market’s needs and wants. You also need to figure out how your target audience perceives your brand to effectively communicate the new product’s value through your marketing and advertising campaigns.
Conclusion
Brand extension is a great way to scale your business, reach new customers, and boost sales. However, it is important to carefully consider the factors that will contribute to a successful brand extension; it’s unsuccessful it could result in huge financial loss.
So carefully research your target audience, the product fit, and your marketing strategy.