Brand extension

Introduction:
Brand extension refers to the corporate activity whereby companies introduce new
products, new product variants or product improvements by leveraging the brand
equity of the existing parent brand. When Starbucks decided to launch its line of
bottled cold coffee called Frappucino (a mixture of coffee, water, milk and
different syrups), the logic used was to leverage the very strong equity of the
Starbucks brand in gaining wide spread acceptance for the new product line.

As such, brand extension is a type of short cut that companies opt, to minimize risk
and maximize their investment in the brand.

There are several aspects of considering brand extensions:

1. Product line extension without a sub-brand as (Rasna) has various variants.

2. Extending the brand with sub-brands (junior horlicks)

3. Extending the brand to related categories (Liril to Liril talcum powder)

4. Extending the brand to more related categories (Wipro in computers, finance,

edible oil, medical equipments, soaps and baby powder).

Some examples of successful brand extensions:-

 Horlicks come up with Horlicks junior

The credibility of its existing brands, which are positioned as health and energy
drinks, acts as an easy launch pad for new products in the foods market. The
company has successfully launched a variety of brand extensions of its popular
Horlicks brand such as ‘Mother Horlicks’, ‘Junior Horlicks’ and ‘Horlicks Three-
in-one’ sachets.
Essential factors that impact brand extension success:-

1. Fit between parent brand and brand extension – The fit between the parent
brand and the brand extension is probably the most important factor that impacts
(forces) the success of the brand extension. Fit can be analyzed from multiple
perspectives. But generally fit refers to the compatibility of the brand extension’s
product category, product attributes and associations to the parent brand’s product
category, product attributes and associations. Greater the fit between the parent
brand and the brand extensions, higher is the probability of the success of the brand
extension.

2. Parent brand conviction (confidence) and parent-brand experience – The

other important factor the influences the success of the brand extension is the
quality of experience that consumers would have had with the parent brand. Such
brand experience can include the physical quality of the product, the service
encounters, the price and value perceptions, the post purchase service, the retail
atmosphere and such. Also, the parent brand conviction, which refers to the extent
of support and commitment the parent brand has towards the brand extension, also
impacts the success of the brand extension.

3. Retailer experience – In spite of the ever increasing influence of the Internet on

shopping of even the branded products, retail spaces in the physical world still
continues to have a strong hold on distribution. If companies that extend their
brands are not welcomed by retail stores and are not offered marketing support and
push by the retail stores, then the success of such products are limited.

4. Marketing support – This is one of the important factors that determine the
success of brand extension that is under the control of the company. Given the
explosion of brands in the market, it is only natural that the company that invests
highly in promoting its brand extension eventually ends up in a better position.
Advantages and disadvantages of brand extension :-
brand extension is popular because it is less risky and cheaper compared to the
creation of a new brand

Advantages of brand extension :-

1. Consumer knowledge: The strong parent brand promotes the new product and
makes it easier to create awareness and images. The association with the main
brand is already done its work and the main task is communicating the specific
benefits of the new Innovation.

2. Consumer trust: The existing well-known-strong brands represent a promise –of

quality, useful features etc. - for the consumer. Thus, the extension will benefit
from this fame and this good opinion about the brand. A satisfied customer will be
more willing to repurchase the same brand. For example in the sport field, a
customer will more likely prefer a brand offering a complete equipment-shoes,
outfit and accessories.

3. Lower cost : compared to launching a new brand, brand extension strategy is

cheaper especially because the new product use the name of an already well-
known brand, the advertisement budget for brand extension are smaller than for
new brands.

4. Enhancement of brand visibility: when a brand appears in another field it can

“be a more effective and efficient brand-building approach than spending money
on advertising”. The relationship with loyal customers will be strengthen because
they will use the brand “in another context” and it is expected as well that they will
prefer this brand to the competitors’ one.

5. Provide a source of energy for a brand: The brand image-especially when the
brand is a bit tired- is expected to be reinforced by the extension. Indeed, this
extension gives energy to the brand because it increases the frequency with which
the brand is associated with good quality, innovations and large range of products.

6. Defensive strategy: An extension can prevent competitors from gaining or

exploiting a foothold in the market and can be “worthwhile even though it might
struggle”. For e.g. - Microsoft for instance has decided to operate in different areas
with the aim of limiting the “ability of competitors to encroach on core business
areas”.
Disadvantages of brand extension strategy are:-

1. Dilution of the existing brand image: The extensions are using the most
important asset of the company that i.e. its brand name. It can be a major
advantage for the extension but it represents as well a huge risk for the
existing brand because the brand image can be diluted.

2. Cannibalization: the extensions can cannibalize the

Existing products of the brand when there are positioned in a close market. It
means the extensions sales are increasing while those of the existing brand’s
products are following the Opposite curved. These good sales figures for the
extensions can not compensate the damage produced to the original brand’s equity.