Successful brand extension can reward the company with a well-endorsed product launch. This can boost their business profits and further reinforce the brand identity. On the other hand, a misfired brand extension can degrade the reputation of the parent brand.
How Does Brand Extension Work?You are free to use this image on your website, templates, etc, Please provide us with an attribution link Article Link to be HyperlinkedFor eg: Source: Brand Extension (wallstreetmojo.com) Brand extension is a popular marketing strategy that has been widely used since the second half of the 20th Century. It consists of utilizing a currently existing brand to launch a new product. Therefore, it is understandable for reputed and popular brands to bank on their trust over its other related products that are already enjoying a good market presence. Most of the time, the existing loyalty of the consumers helps companies widen their reach. Consumers have to make several choices in a short period whenever they’re shopping. So, naturally, they tend to base their decisions on their previous knowledge or experience. If they already know a brand and like it, it increases the chances of buying a new product from the same company. So even if they are not loyal customers, the brand’s brand awarenessBrand Awareness is a measure of consumer’s brand recall and brand recognition.read more may have a positive impact. A brand extension can help a company diversify its products and acquire a larger market share if done correctly. Also, the increased awareness created by the second product may even help the company to sell more of its core offering. Real-World ExamplesIt’s not hard to find excellent examples of brand extensions in real life. Amazon started as an online bookseller in 1995. After that, however, it started selling other products online, such as toys, electronics, etc. Today, Amazon has one of the largest e-commerce platforms, and it deals with streaming, technology, and other services. This report from Bloomberg portrays the company’s impressive growth from the beginning. It currently dominates 80% of the book sales online, 62% of toys, 51% office supplies, and 32% of food and beverages. Apple initially worked only with computers. But one of its most well-known and earliest products was the iPod, which was essentially an MP3 player. The change happened when the market was changing rapidly, and Apple saw the opportunity to enter this new technology niche. This report from Statistica shows how successful the company was with the iPod, selling over 22 million units in the first quarter of 2009 alone. Moreover, it cemented the path to launching new products like the iPhone, which sold over 77 million units in the first quarter of 2018. Another fine example is the popular American chain Starbucks. The company initially got famous around the world for its coffee shops. A few years later, it started to sell energy drinks as well. Energy drinks are naturally a different product from coffee and not something you would normally find at a coffee shop. However, the company used its popularity to sell something that could create a related effect. Both coffee and energy drinks are stimulants used for similar purposes. So the brand extension worked. Types of Brand ExtensionBrand extensions can use customers’ expectations and tweak them in profitable ways. There are mainly eight types of brand extensions:
Brand Extension StrategyBrand extension strategies are as varied as marketing strategies. However, they all follow the same concept: They maximize profit by leveraging existing reputation to back up the launch of a fresh and unknown product. There are different brand extension strategies, so it’s important to know which project will positively impact the customer base. It requires extensive studies about the client base and the new product. A brand extension needs to feel natural to the customers, or it may alienate them and cause brand dilution. Brand dilution will impact a business negatively. Take, for instance, the case of Amazon. They already sold books online, and hence selling music was just another small step and a smooth transition. However, when they tried to sell their smartphone, the Amazon Fire Phone, a completely new product, the company failed miserably. It wasn’t what people needed, and the only reason they launched it was that they wanted their clients to be on the platform all the time. The company had a $170 million loss with the product, and it became a classic case of a brand extension failure. Brand Extension vs. Line ExtensionOne should not confuse a brand extension with a line extension. In the first case, the company offers a new type of product that was not previously available under that brand. On the other hand, a line extension is launching a new product line from a product already on the market. Let’s use an example to make it clearer. When Starbucks started offering energy drinks, it was an extension of the brand because now people will relate Starbucks to energy drinks and coffee. However, if the company had launched a new type of coffee, it’s still coffee. So, in this case, it’s an extension of the company’s previously available line of coffee. You are free to use this image on your website, templates, etc, Please provide us with an attribution link Article Link to be HyperlinkedFor eg: Source: Brand Extension (wallstreetmojo.com) Frequently Ask Questions (FAQs)What is a brand extension example? Some popular brand extension examples are companies like Amazon, Starbucks, Apple, etc. Amazon has used its brand identity to start selling new products online. Initially one of the top sellers of books online, Amazon gradually started selling other items like toys, electronics, clothes, etc. They are now one of the largest e-commerce platforms in the world. Why is brand extension a popular marketing strategy? Brand extension is a powerful marketing strategy for an established brand. Since there are many options for a normal customer and shopping has to be done in the most effortless way possible, they tend to follow the brands that have already gained their trust. The brands can use this trust to introduce new products that will most likely be accepted. Why do brand extensions fail? Brand extensions that lack proper vision and strategy can fail. For example, a company selling clothes cannot just start selling electronic goods to their customer base one day. The brand extension should always be somehow related to the brand or the chain of existing products. Recommended ArticlesThis has been a guide to Brand Extension & its Definition. Here we explain how the brand extension works along with its types, strategies, examples, and differences from line extension. You may also have a look at the following articles to learn more –
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