It’s not an exaggeration to say that you have to leave no stone unturned to create a name in the industry while building a brand. Your effort means everything in branding to shape customer perception and form a loyal fan base. When you launch a new product that is different from your previous selling one, you are taking your company to a brand extension. Brand extension is a popular marketing strategy that, if done right, helps companies grow.
So, in this piece, we will take a dip into brand extension, its types, why it’s a popular marketing strategy with real-world examples.
What is a brand extension in marketing?
Brand extension is a strategy businesses use to offer a new product or service under their established, distinct brand. Rather than building a new brand from scratch, it enables businesses to use their successful brand, which already has a customer base.
When a brand implements it effectively, it amplifies sales and reaches new customers. Your brand doesn’t have to start from zero, as you have already moved the needle of your existing brand. But it takes a strategic move to introduce a new product, whether it be your success or your big failure.
Brand extension types
Generally, brand extension consists of 2 different types of marketing.
1. Line Extension
Line extension is a strategic way to introduce a new product in your current product category. This involves no risk, as consumers already know the product category.
For instance, Coca-Cola introduces Diet Coke, Coke Zero, and Cherry Coke. See, the category is the same, “carbonated soft drinks,” but the product is new. These new products target diet-conscious consumers who count on carbonated drinks but with no sugar and no calories.
2. Category Extension
In the second type of brand extension, a company introduces a new product in a new category that somehow relates to the established brand. This is referred to as category brand extension. The brand hops into a different market and charms target consumers with a new product.
Let’s understand it with a real-world example. Amazon started as an online bookstore, and over time, it expanded into different categories successfully. The new category extension covers
- Cloud computing via Amazon Web Services (AWS)
- Online advertising
- Digital streaming through Prime Video
- Artificial intelligence is like Amazon Bedrock.
Amazon gained brand recognition, company value, and favourable customer perceptions from its e-commerce business.
After that, Amazon strategically started creating new product categories and making an impact usefully on new consumers, as they had already built trust.
This makes them a leading player in the technology industry while boosting their market share and revenue stream.
Why is a brand extension a popular marketing strategy? Exposing the truth
Brands adopt the extension strategy by taking advantage of their developed brand and boosting its growth. Here are the prominent reasons why brand extension is a popular marketing strategy.
1. Consumers trust the new product
Presenting a new product and gaining trust for a new brand requires continuous efforts over the long run.
Suppose you are looking for a new hair growth serum and see a completely new brand; then you see a serum under the name Dove.
What do you trust more? Yes, you will pick a Dove serum, as they have already created a positive perception about their brand.
The first brand needs more time and marketing efforts to gain trust. Meanwhile, trust cuts out uncertainty and allows them to make decisions quickly.
2. Saves some bucks for the brand
Launching a recent product under a new brand takes a considerable investment. Either it raises brand awareness, marketing, education, and customers, or it all costs you more. Brand extension reduces these costs as a recognised brand has already done it and gained trust.
See Tesla as a brand extension example. First, they had been selling only electric cars, then they launched home batteries and solar panels. Customers already trust them. They focus on sustainability. And they didn’t have to start all over again with a new brand that eliminated extra cost.
3. Expand the market
Above all, brand extension empowers the company to enter new markets and appeal to different audiences without affecting its current customers. This helps the company retain and attract new consumers from different markets while increasing its market share.
That’s what a Dyson did. They began with innovative vacuum cleaners; later, they launched hair care products like
- Hair dryers
- Hair styling products
- Multi-stylers and dryers
- Wet-to-dry straighteners
- Straighteners
- Accessories and attachments
Their positive brand image and built recognition helped them extend and enter a new industry other than vacuum cleaners. It worked as their established brand gained authority in formulating creative products that make a difference in consumers’ lives.
4. Retain and gain new loyal customers
An established brand increases loyal consumer interest in trying new products, which gives you a significant competitive edge. Your most faithful customers turn into your brand advocates. They share their positive experiences in their circle and online, helping to strengthen your brand reputation and even increasing their loyalty to your brand.
For instance, LEGO successfully extends its brand while providing more benefits to its loyal customers. First, LEGO sold toys, and then it introduced new products.
- Video games (LEGO Star Wars)
- Movies (The LEGO Movie)
- Theme Parks (Legoland)
- Educational Products (LEGO Education).
Their new products and services resonate with their playful brand image, which promotes imagination, creativity, fun, learning, and caring through high-quality products.
In addition to kids, they target an adult audience, which helps them foster customer loyalty and reach a new audience.
5. Multiply your brand revenue
In marketing, when a brand successfully executes brand extension, it creates multiple revenue streams. Rather than depending on a few product sales, different and innovative product offerings amplify revenue.
Other than that, it eliminates the risk of relying on a single market as the industry fluctuates with time. Targeting a new innovative market that fulfils the demand of modern consumers is a smart move to get a healthy slice of the pie.
The Armani is a great brand extension example; it diversifies the brand while maintaining its core brand essence. Armani broadens its luxury fashion brand and joins new markets such as
- Armani Casa (home furnishings)
- Armani/Dolgi (sweets)
- Armani Hotels & Resorts
- Armani Beauty.
These all target different markets and specific consumers. In this way, Armani provides more experience to its consumers and amplifies its brand revenues. Now, through a rough brand extension, they gain billions of dollars in revenue from different industries instead of just relying on selling luxury fashion clothes. Their established brand equity helps them strategically extend.
What are the risks associated with brand extensions?
Brand extension is a two-edged sword. It can be a hit or miss for your company. If you do it strategically, it can help your business thrive and win the hearts of potential market audiences. However, if it is not done right, it can cause brand equity to suffer.
Brand dilution
It can dilute the brand image when you go far from it. For example, when you introduce your product and come with a message that is completely opposite to your brand identity, consumers may have questions and confusion about your brand. So, it’s significant to maintain your core brand identity while launching a new product.
Customer Confusion
Extending your brand with an unrelated product can spark confusion and make consumers reluctant to try it. For instance, if your brand is perceived as selling affordable and reliable cars, then you launch the luxury category. This can confuse your consumers, and they can’t reconcile the price tag with your brand image.
Impacts Brand Reputation
If your brand doesn’t invest in proper market research and strategic planning to execute an extension, it will damage the reputation of an established brand.
For that reason, it is important to keep your customer loyalty and brand perception in mind is important to avoid backfiring.
Takeaway
Brand Extension is a popular marketing strategy. If a brand executes a well-defined strategy, it will attract new consumers, boost customer loyalty, and increase revenue.
On the other hand, if you introduce an unrelated product category extension that is contrary to your brand image, it will fail and can damage your brand reputation.
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