Concept Reading

Brand Extensions & Line Extensions

Brand extension or brand stretching is a marketing strategy in which a firm marketing a product with a
well-developed image uses the same brand name in a different product category. The new product is
called a spin-off. Organizations use this strategy to increase and leverage brand equity.
An example of a brand extension is Rex Jellies, extending its brand into Rex Pudding Powder.

It increases awareness of the brand name and increases profitability from offerings in more than one
product category. A brand's "extendibility" depends on how strong consumer's associations are to the
brand's values and goals.

Ralph Lauren's Polo brand successfully extended from clothing to home furnishings such as bedding and
towels. Both clothing and bedding are made of linen and fulfill a similar consumer function of comfort
and hominess.
Another example is Virgin Group, which was initially a record label that has extended its brand
successfully many times; from transportation (airlines, trains) to games stores and video stores such a
Virgin Megastores.
(Discussed Examples in class included:

1. Honda (Cars, Motorcycles, Gensets, Farm/ Gardening equipments)

2. Mahindra ( Autos, Finance, IT, Hospitality)

Brand Extensions add WIDTH to the Company’s presence in the Market by enabling it to either
extend into other unrelated Categories or spread into categories allied to its core line of
business simply leveraging their Brand’s Equity.

Line (product) extension

Line (Product) extensions are versions of the same parent product that serve a segment of the target
market and increase the variety of an offering. A company introduces a line extension (or extends its
product lines) by using an established product’s brand name to launch a new, slightly different item in
the same product category.

For example, Diet Coke™ is a line extension of the parent brand Coke™ in same product category of fizzy
soft drinks. While the products have distinct differences, they are in the same product category and the
extension (Diet Coke™) is very dependent initially on customer recognition of the brand name Coke™.
Line extensions do not compete with each other, since each answers different needs, and thus appeals
to a different market (even in terms of taste preferences or affordability)

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More than half of all new products introduced each year are line extensions. The adding of another
variety of a product to an already established brand line - New flavors, package sizes, nutritional content
or products containing special additives are included in this definition.

Product Line Extensions add DEPTH to an existing product line by introducing new products in the same
product category; product line extensions give customers greater choice and help to protect the firm
from a flanking attack by a competitor.

Line Extension Benefits

 Expand company shelf space presence

 Gain more potential customers - by offering customers more variety
 Greater marketing efficiency
 Greater production efficiency
 Lower promotional costs
 Increased profits

Line Extension Threats

 Potential for failure, which may damage products within the brand
 Possible intra-firm competition

Example:

For example, consider Knorr’s Soups™ – the strength of the Knorr’s ™ brand lowers costs of launching a
new flavor of soup, such as Creamy Chicken or Mixed Vegetable Soup, due to the established brand
name and package design. Consumers who have enjoyed Knorr’s Tomato Soup, or Chicken Soup, are
likely to try Knorr’s Creamy Chicken Soup or Mixed Vegetable Soup , even with minimal impact from
advertisements and promotions.

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