Brand Extension has become an essential part of modern marketing strategies. It allows companies to extend their brand equity into new or existing markets through the introduction of related products or services.
By extending the brand, companies can help build loyalty from existing customers, gain new customers, and boost sales.
In fact, brand extension has become a very popular marketing strategy over the years, and it’s easy to see why.
Brand extension is so popular because its effective and has a massive upside. If done correctly, companies can jump into another product category and be successful right away. This strategy is very popular with large established brands that are looking to capitalize on the brand equity they have already built.
In this blog post, we will explain what brand extension is and provide valuable advice on how you can design and implement a winning strategy within your business.
What is Brand Extension and How Does it Work
Brand extension is a marketing strategy used by companies to leverage the existing reputation of a brand to introduce new products or services. In essence, it is a way to extend the reach of an established brand to capture new markets and increase revenue streams.
For example, a clothing brand renowned for its quality and style may introduce a line of fragrances or accessories. This allows the brand to capitalize on its reputation while making more sales and expanding its customer base.
Brand extension works best when there is a clear connection between the original brand and the new product or service, as this helps to build trust and familiarity with consumers.
However, it is important to note that brand extension can also be risky, as it may dilute the existing brand identity or confuse customers. Confused customers are more likely to become distrustful of the brand and stop buying their products altogether.
Therefore, brand extensions need to be carefully researched and planned. An in-depth understanding of customers and brand sentiment is required before plodding headlong into a new category.
Advantages of Brand Extension
The main advantage of brand extension is that it allows companies to quickly and easily enter new product categories with an already established level of trust from existing customers. This allows you to test new product lines and make sales right way. You can skip the costly advertising campaigns that are usually required to reach new customers.
Another advantage of brand extension is the potential for increased revenue streams. Instead of selling more within an existing product category, you can create a new line and diversify your sources of revenue. Diversification helps insulate your company from market fluctuations.
Furthermore, when you enter new product categories you increase the size of your total addressable market (TAM). The TAM of your products and services determines the potential you have for growth – larger TAMs mean more revenue potential.
Finally, a successful brand extension will grow your brand equity. Brand equity refers to your brand’s value in terms of sentiment and perception in the consumer’s eyes. Therefore, a successful brand extension can increase the value that your company has simply by creating a good product in another category.
Overall, brand extension can be a very profitable and competitive strategy for an established brand name.
Examples of Brand Extensions
Not all brand extensions work, but when they do, they become massive hits. Here is a list of some of the brand extension pops and flops:
Nike is a world-renowned running shoe brand. After developing a reputation and a strong following for its shoes, Nike extended their brand to start selling other kinds of athletic wear. Today, they offer products in the athletic, casual footwear, and sports equipment.
What makes Nike’s brand extension so successful was its strong brand reputation and market-adjacent extension – people had already come to trust and love Nike’s shoes, therefore, selling athletic wear was not too far of a stretch.
One of the most classic and impactful brand extensions in history was Apple’s iconic launch of the iPhone. While the technology company had some success with selling computers, it wasn’t until 2007 that Apple completely changed the trajectory of their company (and the world).
Apple’s leveraged its established reputation with computers to jump into a new product category with flying colors. While this giant leap may have seemed somewhat sudden, it was actually one extension in a natural progression.
Apple hit the multimedia management market with the successful launch of iTunes in 2001. Building on that success, they forayed into the music player field with the iPod – another smashing success. From there, it was an easier jump to the mobile phone market because they had already won over the trust of the consumer.
The reputable toothbrush brand Colgate tried their hand at the brand extension game in the 1960s. The frozen food industry was hot in those days so Colgate thought it would be a no-brainer with their brand image.
Unfortunately, their attempts at selling frozen items such as chicken and crab meat entrees were a complete flop. As it turns out, a jump from the toothbrush market to the food market was just too great.
The popular woman’s magazine Cosmopolitan has built a loyal following over the years. After becoming one of the most popular women’s magazines in the world, they had the bright idea to sell yogurt.
After all, their trendy female readers should be into boosting their gut health. Apparently not. The Cosmopolitan yogurt line lasted a grand total of 18 months on the shelves because of falling sales.
It just goes to show, that even a close match sometimes doesn’t take. This is why it’s so imperative to research and heavily test a market before launching a brand extension.
Brand Extension vs Line Extension
Brand Extension and Line Extension are both strategies that companies use to expand their product offerings beyond their core products. However, they have a slight difference.
Brand extension involves using an existing brand name to launch a new product in a completely different category while retaining the brand’s core values. On the other hand, line extension involves extending the same product category by introducing new variations or flavors of the same product.
Both strategies have benefits and drawbacks depending on the company’s goals, target audience, and industry trends. While brand extensions can leverage existing brand equity and increase the total addressable market, line extensions can offer more choices to customers and increase sales within the same market.
Both strategies can be successful (or work together!). However, brand extension typically has a higher risk-reward differential because of its purpose of breaking into an adjacent market.
How to Successfully Implement a Brand Extension Strategy
You need 2 things to build a winning brand extension strategy:
Before launching into another product category, you must build up your brand image in one category before moving into another. Build up your reputation by doing as many brand strategy things as you can.
Get your brand out on the internet on social media, on Google, and with advertising. Once people are familiar with your brand, they’re that much more likely to follow you into another product category.
Selling one good product line that people love develops brand loyalty.
Make sure you understand what your customer thinks about you. Your brand is a reflection of your customer sentiment, not whatever you want it to be. you can figure out what your customers think about you by sending out surveys or looking at your testimonials and reviews. You can even interview them!
Once you know that you have a loyal customer base, its time to look for an opportunity to extend your brand.
The best opportunity to extend your brand is to find a category that is related to your core offering and also has overlap with your target audience.
Learning from the successful and unsuccessful brand extensions, we can reason what is related enough and what isn’t.
When you find an opportunity to try another product line, test it out! Make a prototype and send out complementary products to loyal customers in exchange for feedback. Customer feedback is essential when extending your brand.
In addition to feedback from existing customers, you need to do some market research to craft your offer. Look into things like:
- consumer demand
- emerging trends
- target audience pain points
- competitor analysis
- target market
- new sales channels
Once you’ve identified an opportunity, its time to extend your brand! Start advertising your new product to your existing and new customers. Start producing the product, and sell away!
Tips to Keep In Mind for a Successful Brand Extension
Make sure that you stay true to your brand’s values, vision, and purpose. If you undermine the credibility of your brand by trying to make a quick buck, you risk losing the sales and loyalty of your existing customers.
Launching a brand extension can be risky, but if you take the proper precautions, you can make sure that your existing product lines are safe, while also extending into new demographics.
Ultimately, your brand equity is a reflection of your brand’s integrity – a trusted brand is a profitable brand. Therefore, make sure to always stay true to your brand promise.
Branding is an important aspect of marketing that is often overlooked. With careful planning and execution, you can develop a brand extension strategy to kickstart a brand-new product line.
Your core brand can also benefit from a successful brand extension. Brand equity will go up if you win over the trust of the consumer.
Hopefully, these brand extension examples have given you some inspiration to do a brand extension of your own. Successful brand extensions such as Nike and Apple provide a framework for even smaller less-known brands to succeed.
Conversely, brand extension blunders like Colgate and Cosmopolitan serve as warnings to extend properly. Always test the market before going full-scale with a new line and make sure to stay true to your core brand promise.
For more marketing tips and tricks to take your online business to the next level, check out other articles on our blog.