Brand Extension Principles - Part 1: What Is a Brand Extension and Why Extend a Brand?

Your brand is doing great! It's growing, it's well-known, and has a loyal following. Wouldn't it be great if you could sell more products using that brand name? What if you could use that brand name to segue into new categories or markets? Extending your brand could be a great strategy for your business, and that's where my new series, Brand Extension Principles, begins -- answering two very important questions -- what is a brand extension and why do companies extend brands?

What is a Brand Extension?

When a brand is successful and has achieved a significant level of equity and value in terms of owning a place in consumers' minds, companies often try to leverage that success by extending the brand. Brand extensions come in two primary forms:

• Line extension: When new products are introduced within the same category as the parent brand (e.g., there are multiple extensions of Tide laundry detergent within the same category such as scent variations, sensitive skin variations, and so on).
• Category extension: When new products are introduced in different categories than the parent brand (e.g., Philadelphia Cream Cheese has extended into the novelty category with frozen desserts).

Why Extend a Brand?

There are a wide variety of benefits to extending a brand. First, it's far less expensive to launch a new product under a well-known brand than to launch an entirely new brand. While a new brand would require a great deal of awareness advertising and marketing to develop recognition and consumer perception, a brand extension has awareness and recognition built in. In other words, a familiar brand name instantly communicates messages to consumers based on the existing brand promise.

A well-planned and well-executed brand extension can benefit from what's known as the halo effect wherein the established brand promise and brand image of the parent brand carries over to the brand extension automatically. This positions the brand extension for greater and faster success than an entirely new brand.

Brand extensions can also benefit the parent brand by creating a greater sense of loyalty, reaffirming the brand promise and consumer perceptions of the brand, and sustaining the parent brand's relevance in its existing category. Extensions can also help to establish a brand's position in new categories.

What are the Risks of Extending a Brand?

Brand extensions aren't guaranteed to be successful and can actually damage the parent brand in some instances. For example, a poorly executed brand extension can tarnish the parent brand's image, and a brand extension into a category that doesn't fit appropriately with the original brand promise can confuse even the most loyal consumers causing them to switch to brands that do meet their expectations.

Even a line extension can result in consumer confusion if it doesn't fit the original brand promise. That's a lesson Jaguar learned when it launched the inexpensive Jaguar X-Type. This low-end, entry-level Jaguar debuted in 2002 with Ford claiming it would bump up Jaguar sales by 200,000 vehicles per year. Loyal consumers viewed the cheap Jaguar as nothing more than a cheap Ford with a Jaguar hood ornament and it damaged the brand's reputation in consumers' minds.

When extending a brand, it's important to consider consumer perceptions and fit. Will the brand extension appropriately align with consumers' existing expectations and fit for the brand? There is a reason why Bic razors, lighters, and pens succeeded but Bic underwear failed. The first three brand extensions fit with consumers' perceptions of the brand known for its affordable, useful, and disposable products, but underwear was a complete mismatch that consumers would not accept.

Similarly, is it surprising that Coors Sparkling Water failed? This is an extension that didn't fit consumers' perceptions and expectations for the brand and presented hurdles that the company couldn't get over.

Stay tuned for Part 2 of the Brand Extension Principles series where I'll discuss brand extension strategy, research, and planning.

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