A Quick and Simple Guide to Brand Extension
Want to grow your brand and expand your customer base? If you’re already well established, you may benefit from brand extension…
When American Idol finalist Jennifer Hudson ventured into acting after achieving multiple music accomplishments, the entertainment industry wondered what would come of it. An Academy Award and plenty of accolades later, Hudson has become an entertainment icon, receiving numerous awards for her skills.
Any business that wants to grow can accomplish what Hudson did. It’s called brand extension. By extending your brand into different products and verticals, you’ll reach a larger market and expand your customer base.
Not all brands are as successful as Jennifer Hudson, however. A lot can go wrong when you're trying to stretch your brand into new verticals. This guide will outline what brand extension is, explain how to get started, and provide examples of good (and bad) brand extensions.
What Is Brand Extension?
Simply put, brand extension is a marketing strategy that entails a company using its well-known name to launch a new offering in the marketplace—extending its brand.
Let’s say you’re a popular bath soap manufacturer. You sell natural soaps and cleansers, and you want to create a new product that exfoliates the skin. You’re using your well-established brand name to launch a new product in a new category to your marketplace. The result (when successful) is early brand awareness and easier market penetration, as your existing customers will already be familiar with your soap brand. You're leveraging your brand salience and equity so loyal customers will latch onto your product idea more easily and will most likely purchase if they love your brand.
However, brand extension is not always successful, especially if the business strays too far from the original product niche. If you sell tires, expanding into women’s fashion might not be a great idea—unless, that is, you plan on creating clothing made of rubber tire scraps. Even then, it’s a gamble. There’s a limit to what the public will accept.
When your new product is not related enough to your original market and doesn't match your brand, there's a greater possibility of failure. Your new product or vertical should be closely connected to your customers’ values regardless of how far you stretch your brand. We’ll cover more brand extensions later in this article and provide some examples of successful and not-so-successful ventures.
Why Is Brand Extension a Popular Marketing Strategy?
According to Nielsen, brand extension (or brand stretching) has a likelihood of success five times that of new product launches. Extensions also leverage equity, increase efficiency, and enjoy faster consumer adoption. Nielsen also suggests that brand stretching is behind 30% of the revenue of the top 23 FCMG (fast-moving consumer goods) trusted brands.
Further, extension fast-tracks market acceptance because it leverages a brand’s equity, which helps meaningful brands make a more significant impact in their industries.
Brand extension has numerous benefits, but it also comes with some disadvantages. Let’s talk more about the pros and cons…
What Are the Pros and Cons?
Brand Extension Pros:
- Lowers perceived consumer risk – Consumers will trust a product more if they already know your brand reputation.
- Mitigates product costs and increases efficiency – You’re able to reuse labels, marketing campaigns, etc.
- Lowers marketing budgets and spending – You can also promote the extension when you promote your core offer, which saves money.
- Helps with reaching business goals faster – Extending your brand gives you new avenues to achieve your goals.
- Can revive a struggling brand – If your brand is struggling, a new product or vertical can revive your brand if it meets consumer needs.
- Can clarify brand messaging – Stretching your brand can also help further solidify your brand messaging, so customers understand exactly what you’re about.
Brand Extension Cons:
When you extend your brand without the proper preparation and research, the results could be less than expected. While brand equity and popularity will give you a jumping-off point, it shouldn’t negate the need to perform the proper research and allocate suitable funds to your new endeavor.
- Leaves you vulnerable to reputation loss – If you extend your new product category too far, you risk damaging your brand’s reputation.
- Can result in mismanagement of funds – You might miscalculate how much budget you need to market the new product or category because you relied too much on your brand equity, which wasn’t enough to carry it.
- Puts your product at risk of failure – Relying too much on your original product or brand’s popularity might also negatively affect your new product launch. Perform the necessary market and competitor research before you launch a new product or enter a new category. You still need a competitive advantage in your new vertical regardless of your current popularity.
What Are Some Examples of Brand Extension?
Brand extensions are common among well-known businesses. Let’s look at a few examples that were successful (and not so successful).
Successful Brand Extensions
Apple
Apple is an excellent example of brand stretching done right. The tech conglomerate started manufacturing computers and quickly branched into music players and other accessories. Its iPhone needs no introduction, as it has become one of the most popular smartphones in existence.
One of the reasons Apple was so successful was because it stayed close to its original category and didn’t stray too far for consumers to buy into. Even though the products differ, they all fall within the technology sector, and as a result, Apple was able to penetrate different markets quicker than if it started from scratch.
Sunkist
Sunkist was widely known and loved for its orange juice. So, extending into the vitamin market was a bit risky. But Sunkist didn’t create just any vitamins. The company manufactured vitamin C, which comes from oranges, so consumers could logically make the connection. The product has been a successful endeavor for Sunkist.
Unsuccessful Brand Extensions
Of course, not every brand extension is quite as successful…
Colgate
The infamous Colgate lasagna venture will go down in history as one of the most unsuccessful brand extension plays.
I don’t think we need to explain why this was a dismal failure, but if you’re wondering, think about the brand Colgate… What comes to mind? Chances are it’s not lasagna or any other food for that matter. Toothpaste isn’t even in the food category.
Colgate recovered from this failure, however, and exercised brand extension by stretching into the toothbrush market. This extension was successful, and you can likely see why. Toothbrushes are much more closely related to toothpaste than lasagna. Colgate extended its reach, but not so far that it alienated (and scared off) its customer base.
Frito-Lay
In the late 90s, Frito-Lay tried branching into the beverage market with a new lemonade product.
It’s not hard to see why this was a failure. When consumers think of Fritos, they envision a salty, crunchy snack, not a sweet, refreshing beverage. This product did not jive with the Frito-Lay brand, and its failure proved it.
How to Develop a Brand Extension Strategy
Developing a brand extension strategy starts with determining how you’ll approach your campaign. Below we outline three popular brand extension strategies to help steer you in the right direction.
Line Extension
Line extension is one of the most straightforward extensions and the least risky. A line extension doesn’t involve familiarizing your customers with a new category. Instead, you’ll introduce a new product in a category your customers already associate your brand with.
An example of a line extension is when a cosmetic company launches a new eyeshadow palette with seasonal colors, or a juice brand launches a new flavor. Consumers almost expect line extensions, as they stay within the same category as the original product.
Complementary Product Extension
Complementary products fall into new categories, but they’re companion products to the original because they’re so closely related.
Our earlier example of Colgate launching a toothbrush product shows a complementary extension. You need a toothbrush to use toothpaste, so though the products are different, they’re still closely related. Another complementary product for Colgate would be mouthwash or dental floss because they fall under oral care.
Expertise/Benefit Extension
If your company is known for a particular discipline or skill, you can easily branch into several related categories even if the products are entirely different. For example, LG, known initially as Goldstar, started making radios in Korea. The brand then expanded into air conditioners, TVs, refrigerators, and more. LG is known for its technical expertise, so it has successfully launched multiple products in different household categories. When you see the name LG, you immediately consider its long reputation for building quality household electronics.
As with a skill, a brand can also be known for its benefit, which can be used to create multiple products. People relate Arm & Hammer to neutralizing odors. So, in addition to baking soda, it made sense for the brand to expand into other products that eliminate odors (detergent, cat litter, etc.).
Creating a Brand Extension Strategy: First Steps
No matter which extension type you choose or the direction you take, it's critical to remember your customers' needs and how they already perceive your brand.
Before launching a new product or category, figure out the real value you bring to your audience. What are you known for? What does your reputation look like in your market? Answering these questions might require some customer and market research.
Then, ask yourself additional questions to determine if you’re ready to move forward:
- Have I done enough market and customer research to determine if my customers will respond positively to this extension?
- Have I discovered how consumers will benefit from this new brand or product?
- Will this new brand or product solve my customers’ problems?
If you answered yes to all of these questions, did proper market research, used sound data to develop a rock-solid strategy, and ensured your brand or product will meet your target audience’s needs, you’re on the right track. Remain consistent throughout the process and stay true to your brand’s core characteristics.
Will you always be successful? We hope, but success only comes with continued monitoring. Never stop monitoring and testing your brand to understand changing consumer perception and expectations, whether positive or negative.
Brand Extension: What You Need to Know
Growing your brand is an exciting venture. Reaching new customers and expanding your customer base can broaden your market and generate new revenue streams for your growing business.
But brand extension requires some research and setup before you pull the trigger. In this article, we outlined some real-world examples and defined some strategy guidelines to get you started. We discussed:
- What brand extension is and why it’s a popular marketing strategy
- The pros and cons of brand extension
- Successful (and not so successful) brand extensions
- How to develop a brand extension strategy
If you need assistance growing your brand and creating a brand extension strategy, we’re here to help. Get a comprehensive review of your marketing and branding efforts today by requesting a FREE Marketing Audit!
At Viral Solutions we are committed to seeing YOU succeed. It is our goal to grow your business with proven digital marketing strategies that will help your business for the long haul.
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