Brand Extension - Advantages and Disadvantages

When an already well established brand uses its name to extend outwards into other product categories, this is what is called brand extension.

Brand extensions are quite popular nowadays for multiple reasons. Let’s take Nike here as an example. Nike’s core products are shoes, and they’ve gathered a mighty following by selling all kinds of shoes. However, they’ve since extended and now also offer basketballs and sunglasses, just to name a few.

Now, Nike is a parent brand to its brand extensions. And, as you can see, these extensions don’t have to relate to the original product, as the whole point of them is to attract both current and potential new customers. Those who love Nike shoes will be much more inclined to try their sunglasses or basketballs as well. In essence, since Nike has a strong brand image and name, consumers will more easily accept the extension, as it has the same values and aspirations as the core brand Nike.

By extending a brand, businesses can evaluate product category opportunities. Furthermore, they can identify resource requirements and even lower their chances of failure. Moreover, they can get insight into how relevant and appealing the brand is.

 

Examples of successful brand extensions

Brand extensions can either be a total success or a complete failure. These are just some of the cases when they were successful:

  1. Wipro – the brand was originally geared towards computers, but has since extended into soaps, powders, and shampoos.
  2. Mars – today, we have not only Mars chocolate bars but also Mars ice cream, Mars chocolate drinks and many more extensions of the original product.

 

Examples of failed brand extensions

Nevertheless, the ones that have failed are still some of the most famous brands in the world:

Coca-Cola

The thing about Coca-Cola is that they’ve made a mistake when trying to create a brand extension. They thought that the consumers only cared about the taste, but that proved to be incorrect. Thus, the new Coke was never as popular as the original one, even though they’ve spent a ton of money on research and development.

Rasna Ltd.

Rasna is one of the most famous Indian soft drink companies. However, even they couldn’t predict how awful their brand extension called Oranjolt would be. Oranjolt was a fizzy fruit drink with a short shelf life that needed to be refrigerated. The extension bombed before they could even offer it on the market. Why? The retail practices were just not synchronised, and the drink itself had quality issues.

 

Advantages and disadvantages of brand extension

Advantages:

  • They can help the product be easily accepted.
  • They can also improve the overall brand image.
  • Consumers’ perceived risk can go down with brand extensions.
  • Since the company has established the brand name as trustworthy and popular, they can also increase the interest of consumers and make them consider a new product. That also leads to better distribution.
  • Companies spend less money on promotional expenditure, or the money is better used. By promoting the core brand, companies are also promoting the extension. The same goes if they are promoting the extension – the core brand will gain recognition as well.
  • Companies don’t have to develop a new brand from scratch and spend tons of money on it.
  • Consumers get more variety than before.
  • Packaging and labelling are more efficient, as the machines can print out the same labels and packages.
  • Less money spent on introductory and follow-up marketing programmes.
  • Feedback benefits, both for the parent brand and the company itself.
  • The parent brand gets a better image.
  • Brand extensions help revive the brand.
  • One brand extension allows for more extensions in the future.
  • The extensions clarify what the brand stands for.
  • They attract new customers, as the brand expands on the market.
  • The core brand is an association for the new product. Thus, if the core brand is also associated with quality, the new product will be too.

Disadvantages:

  • Extending the brand name too far may lead to a loss of reliability, especially if the brand extension happens in an unrelated market. Thus, companies have to know which product categories will work and where they can actually use the brand name.
  • If the new product is not that great, it may spell trouble for the core brand’s image.
  • Just because the core brand will lend its brand awareness to the new product, it doesn’t mean companies don’t have to invest at all. In fact, if they don’t, all their effort may even have the opposite effect.
  • If the competition in the new category is just better than the brand extension or has an edge over it, then it’s highly unlikely that the extension will be a success.

    Related content:
    Brand Management Knowhow – learn more about branding with our collection of educational articles.


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