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Brand Extension Strategies: Everything You Need To Know

2 February 2024 | By Brandwell

Companies are constantly trying to increase their market share, vying for the attention of customers, and this type of approach where an established brand introduces a new product to their line is called a ‘brand extension’. This article will help you understand what a brand extension is, how it works, successful and unsuccessful brand extensions and the types of brand extension strategies to choose from.

What is a Brand Extension Strategy?

A brand extension strategy is when a company uses the same brand name but in a different business category. Sometimes called brand stretching, the strategy behind using a brand extension is to extend the already established brand’s equity to help the new product succeed. This strategy works best when the new product category is related to its parent category and is something consumers want.

Many companies use brand extensions because it allows them to leverage their parent brand’s brand awareness and authority to reach new demographics and open up new sales channels.

Engaging in brand extension extends beyond associating an established brand name with a new product. Utilising the same core brand name does not guarantee the success of a new offering. Successful implementation of this strategy requires understanding the various brand extension strategies. Brands must study and analyse emerging trends, discerning the desires and requirements of both their existing and potential customer base. By doing so, brands can position themselves strategically to meet the evolving needs of the market and ensure the success of their extended offerings.

Benefits of Brand Extension

The benefits of brand extension play a crucial role in fostering business growth. Nielsen reports that companies in the consumer goods sector embracing brand extension can achieve up to five times more success than those introducing a completely new brand for their offerings. This highlights the significant impact and effectiveness of leveraging an established brand when expanding product lines.

A brand extension is a viable way of increasing the reach of a trusted business, from expanding an existing product line to appealing to other audiences with a new product; if successful, a brand extension can:

  • Reach new audiences.
  • Lead to an increase in sales.
  • Provide an inexpensive form of marketing. 
  • Leverage customer loyalty and trust and bring attention to existing products.

In addition to these benefits, venturing into a new product category where your brand is currently absent can significantly boost brand awareness. The increased visibility can have a direct impact on your brand image. When your product or extension aligns authentically with the fundamental values of your brand, it fosters a sense of consistency and contributes to reinforcing your overall brand image.

Despite the many advantages gained by using brand extensions, they also have the potential to create issues for the brand. These can include:

  • Brand dilution: Arises when the new product/service is seen as inconsistent, irrelevant, or inferior to the core brand identity and values.
  • Brand conflict: Emerges when the new product/service competes or clashes with existing ones.
  • Brand overextension: This happens when the brand enters too many markets, categories, or partnerships, losing focus, credibility and distinctiveness.
  • Brand backlash: This occurs when the new product/service triggers an adverse reaction from customers, media, or society due to ethical, cultural, or environmental concerns.

Types of Brand Extension Strategies

There are several types of brand extension strategies that a company can use depending on the product they are looking to launch.

Product line extension

Line extensions involve expanding an established product line, leveraging the brand’s existing value to introduce new choices. The aim is to cater to a refined customer segment. Two types exist:

  • Horizontal extensions: Maintain product price and quality, varying factors like colour or ingredients to differentiate.
  • Vertical extensions: Product quality and price adjustments, creating lesser or luxury versions.

Line extensions allow companies to introduce products without starting afresh or targeting new markets or segments. First Press Coffee provides a notable example of employing a horizontal
extension strategy by introducing its specialty coffee into the realm of espresso martinis.

Complementary product extension

A complementary product extension occurs when a brand introduces a new product that complements its initial offering. Oral care companies like Bliss often exemplify this strategy, selling products like whitening toothpaste and strips, encouraging customers to use both for enhanced effectiveness. 

Customer base extension

A brand targets a specific demographic in a customer base extension, expanding products to meet their needs. Ideal for companies seeking to diversify offerings for loyal customers, these aren’t complementary but cater to the same audience—for instance, Dyson’s extension from vacuum cleaners to high-powered fans.

Company authority extension

A company authority extension entails leveraging brand credibility to introduce new products within a related domain, built on established authority and aimed at fostering customer trust. For example, Beats By Dre, known for high-quality headphones, expanded into earbuds and speakers, leveraging customer trust in their audio expertise.

Brand lifestyle extension

Departing from their expertise, lifestyle extensions leverage a brand’s popularity to launch products, reinforcing brand image or driving sales. For instance, luxury fashion brands like Armani and Bulgari have extended into five-star hotels, where the decor reflects the brands, enhancing their association with beautiful destinations.

Category extension

A category extension involves introducing a product or service in a different category or market segment, expanding the brand into new territory. This more challenging and risky brand extension involves expanding the brand into new and potentially unfamiliar territory. Amazon exemplifies this with AWS (Amazon Web Service), shifting from e-commerce to cloud computing. This strategic move showcases the brand’s adaptability and successful extension into diverse industries.

Franchise extension

Franchise extension permits third-party businesses to operate using the parent company’s brand name and business model. Examples commonly employed in the food and beverage industry include McDonald’s and Subway, where franchisees run establishments under the parent company’s brand and systems.

Brand Licensing

Brand licensing permits companies to use a parent company’s brand name and intellectual property to create and sell products. In the fashion industry, Nike and Adidas license their brand names. Disney exemplifies this with an extensive licensing program, allowing products like clothing and toys to be produced and sold under the Disney brand.

Co-branding

Co-branding involves partnering with another company to introduce a new product or service that combines the strengths and reputation of both brands. Co-branding can help companies reach new audiences and create unique products that stand out. An example is SKYN® by LifeStyles teaming up with the global charity Movember to introduce a special edition box of condoms dedicated to the Movember initiative.

How To Choose the Right Brand Extension Strategy

Now you’re familiar with various brand extension types, conducting thorough research and planning is crucial to selecting the ideal strategy. A well-chosen approach will avoid brand dilution, leveraging a robust brand identity. Carefully consider your desired outcomes to determine your goals’ most fitting brand extension.

Do market research

Market research is crucial when selecting a brand extension strategy. Exploring new markets through surveys, interviews, and focus groups helps identify opportunities and assess compatibility. Analysing gathered data reveals consumer needs and trends, guiding the development of a successful brand extension strategy. Failure often arises when brands overlook market potential and customer needs, stressing the importance of understanding customer acceptance and avoiding overstretching brand associations.

Conduct a brand audit

A brand audit is crucial in selecting a brand extension strategy to mitigate the risk of brand dilution. Assessing current brand equity helps gauge its ability to withstand potential impacts, ensuring a solid foundation for the extension. Understanding the core brand values allows effective leveraging in introducing new products or strategies.

Develop a unique brand positioning

Establish a distinctive brand positioning for the new product by harnessing existing business skills and marketing expertise. Leverage these strengths to attain a competitive edge in the new category. Identifying key business competencies ensures efficiency and market differentiation, enhancing the brand’s overall appeal.

Assess how suited the brand is to a new category in the market

Evaluate the brand’s compatibility with the new market category. Ensure the new product aligns logically, harmonises with the brand and seamlessly integrates into the existing brand narrative. Establishing an easily traceable connection between the new product and the parent brand is crucial to avoiding common pitfalls in brand extension.

Assess the potential impact on existing products

Evaluate the potential impact on existing products during a brand extension. Consistency is paramount for success, making the extension appear seamless and reinforcing recognition of the brand’s unique personality and values in the new offering.

What a Successful Brand Extension Strategy Needs

A successful brand extension strategy involves elements that can transform the process from uncertain trial and error to a well-established success.

Strong brand reputation

A robust brand reputation is essential for a successful brand extension strategy. It upholds the hard-earned brand image, and even with quality products, the brand may take a backseat without a strong reputation. In brand extension, your recognised brand becomes crucial, preceding the product’s quality for existing and new customers, forming a solid foundation. Remember, brand reputation is delicate; it’s easier to break than build, so as you expand, prioritise building and maintaining your reputation.

Strong brand image

A flourishing brand extension strategy requires a robust, credible brand image. Establishing and maintaining a reliable brand identity is crucial for customer trust and product preference. A strong brand image ensures your new extension resonates with the audience and stands out in the market, contributing to overall success.

Brand relevance

Brand relevance is pivotal for a successful brand extension strategy. Ensuring the new offering aligns with the brand’s core values and resonates with the target audience establishes a meaningful connection. This relevance reinforces customer loyalty and strengthens the overall impact of the brand extension.

Engages with existing customers

Engaging existing customers is vital for a successful brand extension. You can integrate your new offering seamlessly into their lives by understanding their needs and passions. Prioritise planning and define goals, target markets and key performance indicators. A well-thought-out strategy enhances customer engagement, fostering lasting loyalty.

Successful Brand Extensions

A successful brand extension brings forth many advantages, including heightened brand equity, broader market outreach and cultivating customer loyalty. It leverages existing trust, thereby contributing to sustained growth and increased profitability. Below are examples of brands that have executed successful brand extensions.

Dyson: category extension

Dyson, renowned for innovative vacuum cleaners, air purifiers, and more, extended its brand into high-end lighting. These strategic extensions leverage Dyson’s technological expertise, addressing specific needs with innovative solutions in various product categories.\

Fender: line extension

Fender, known for its range of guitars, has extended into in-ear headphones. Bearing the iconic Fender logo, these latest additions promise high-quality sounds, showcasing the brand’s commitment to making music and the art of listening.

Unsuccessful Brand Extensions

When a brand extension is mishandled, it can lead to disastrous consequences. Extending the brand name too far may result in a loss of reliability, and a poorly received new product can adversely impact the parent brand. Below are some examples of where brands have failed to hit the mark.

Cosmopolitan yogurt: Brand lifestyle extension

Cosmopolitan magazine, available in 36 languages and 100 countries, attempted an ambitious lifestyle extension by associating its brand with dairy products. Based on a 1999 study linking bedroom practices and edible items, they introduced a pricey, “sophisticated” yogurt. However, the mismatch between intended use and packaging led to its swift removal from shelves within 18 months.

Virgin Brides: Category extension.

In 1996, entrepreneur Richard Branson ventured into the wedding dress industry with Virgin Brides, marked by his striking launch appearance in a bridal gown. However, the brand, comprising just two UK stores, faced losses in the intensely competitive market. By 2007, both stores closed due to profitability issues.

When executed well, brand extension strategies are a formidable tool to secure a larger market share, reach a broader customer base, boost brand awareness and amplify profits. Through this article, you should have better understood the tools to choose the right extension strategy for your brand. Still, the experts at Brandwell are always on hand to support you to elevate your business.