A Business Encyclopedia

Brand Extension

Definition: The Brand Extension is the marketing strategy wherein a new product is launched under the existing brand name. The category in which product is launched may be related or unrelated to the brand’s current category. The brand that gives rise to a new product under its name is called “The Parent Brand”.

Dettol is one of the best examples of Brand Extension:

brand extension

Following are the advantages of Brand Extension:

Product finds the Acceptability:

  1. Consumers can easily relate to the new product and form expectations on the basis of their prior experience with the brand.
  2. Wholesalers and retailers can be convinced easily to maintain the stock of a new product on the basis of their relationship with the brand.
  3. The launching campaign will be less costly since it will not require the introduction of both the brand and the product. The full attention can be given to the product itself.
  4. The expenses incurred on labeling, packaging, branding, etc. reduces.
  5. The readiness of consumers to switch to a new product because of their prior experience with that brand.

Feedback benefits to the Parent Brand:

  1. The brand gets better recognition in the market through the launch of new product variant.
  2. The customer’s loyalty will be enhanced with the extension.
  3. Through extension parent brand can again gain the interest of customers who have left the brand.
  4. The successful extension will help in subsequent extensions.

Limitations of Brand Extension is explained below:

  1. There are chances that consumer no longer associates the brand with a particular product but instead focuses on a product itself and the competing products available in the market. This is well known as” Brand Dilution”.
  2. If the extension is done too far i.e. not in an appropriate category, the brand may lose the credibility.
  3. .The brand extension may result in spoiling the image of the parent brand due to the failure of the new product.
  4. The brand can have two or more related categories; there is a possibility that product in the particular category makes profits at the cost of another.
  5. Through Brand Extension, the company loses a chance of creating a new and an innovative identity for the product.

Hence, several companies go for brand extension to leverage the image of brand established so far along with its customer base with the objective of increasing profits for a new product.

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