What is a brand extension?
A brand extension is when a business expands their product line to include new items. This can be done in two ways: by creating new products that are related to the original product, or by branching out into new markets. If done correctly, a brand extension can increase profits and strengthen the company’s overall branding. Read on for tips on how to successfully extend your brand!
Examples of a brand extension.
Introduce new product categories, new product formats within a category such as a line extension, or new markets or market segments.
Another example of extending a brand new market is extending it down from the current position to the value segment or up from its current position to the premium segment. Often when extending into a premium version or offering, special words or phrases are used to associate with the brand-name such as platinum, Limited edition, signature collection, Premier, professional, elite.
How can a business go about extending their brands successfully?
There are many ways to extend the brand.
- You can manufacture of the product or supply the service yourself
- You can acquire a company that makes the product or supplies the service.
- You can use a white label product or service from another organization.
- You can license your name for use by another company that makes the product or supplies the service.
- You can form a joint venture with another company to supply the product or service.
What makes a successful brand extension?
The most common way to determine if a potential brand extension is a good idea or not is to look at current market trends. Some products that are going to do well over the next few years are already on the horizon – you just have to position yourself accordingly! The first step of doing this successfully is identifying products/services your target customers might want down the road.
In order for a brand extension to be successful, there should be some links between old and new brands although they needn’t be obvious links. In general, existing customers of the old brand will be less likely to buy the new product if there is no connection between them. There should also be some potential customers for the new product who aren’t customers of the existing brand.
Pros and Cons of brand extensions
I always weigh the pros and cons of the various methodsInclude speed to market, fit with core competencies, upside revenue and profit potential, asset risk, amount of control over the brand delivery, and a degree to which you are committed to the category in the long term. Include speed to market, fit with core competencies, upside revenue and profit potential, asset risk, amount of control over the brand delivery, and a degree to which you are committed to the category in the long term.
Benefits of a brand extension
For most businesses, the most profitable option is to begin with the most likely path for success- that is, developing new product categories or retail formats that are extensions from their current position in the market. A company that successfully extends its brand will already have a strong foundation and loyal following which will make it easier for them to expand their business and increase profits.
Launching new products or services under an existing brand if done properly significantly decreases perceived customer risk and increases product/service acceptance at a fraction of the cost that it would take to launch a new brand.
Risks of brand extension
It’s almost always a good idea to keep older, established brands away from new markets.
Extending an existing brand into a completely unrelated category can be disastrous. What makes this disastrous? A poorly executed brand extension could destroy your credibility as an expert in the industry. If one day people associate your brand with jeans and another person with high-end appliances, it can cause a decrease in sales for both categories.
Extending your brand up to a premium segment or down to a value segment has the greatest potential for a negative impact on your brand. Because you don’t want to create the perception that the original brand was overpriced.
For the most part, the goal you want to achieve by brand extension is an expansion of product offerings or services within your company. You do not want to be associated with low quality items or lose sight of who you are as a brand through these extensions. Brand dilution could occur if consumers begin perceiving that your products and services aren’t good enough for the original brand name.
The decision to extend a brand is not one that should be taken lightly. There are many risks and rewards associated with it, as well as considerations you must take before going through with the process of extending your business into another market. It’s best to go for a pro first by consulting with our team of experts on how we can help make your next launch successful.
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