One company isn’t necessarily just one brand. It can offer a lot of products and service under different brand names. That’s why creating the brand matrix is essential. The brand matrix allows you to see the current offer of the entire company, all brands and products included.
The brand matrix includes the product line and products portfolio. In other words, you can see the product category and brands for different product categories. Furthermore, the brand hierarchy indicates the connections between different brands. Together, brand matrix and hierarchy can suggest the right path for potential expansions, extensions, and launching new products.
What Are the Crucial Factors?
There are four strategies that any company can make good use of, depending on their current business state and their aspirations for the future. Based on what he focus is, the strategies are:
- Market Penetration Strategy – current products, current market
- Product Development Strategy – new products, current market
- Market Development Strategy – current products, new market
- Diversification Strategy – new products, new market
This means that expansions and problems that arise during the process of designing and naming new products can happen at any stage of company development.
Types of Brand Extensions
Extension in Form
Companies can decide to expand their product categories within the same brand. That’s expansion in form. It can be anything from adding new sizes of packaging to adding new flavours.
When a company wants to introduce an entirely new product category, it can do so under the current brand or a new one. That’s category extension. There are multiple options in this type of brand extension, as companies can also extend their brand by creating a new one and combining it with the existing one.
The Advantages of Brand Extension
Introducing new brands is no easy task. What’s more, the failure rate is very high. However, most companies try to do it at one point, because brand extension offers many benefits:
- The expansion can strengthen the existing brand image and influence how the consumers see the brand.
- Introducing new products isn’t as risky for established companies with high brand awareness as it is for new companies. Customers are more likely to react positively to the new product if they already have a good opinion of the brand.
- The risk is further diminished if the expansion is a reaction to a higher level of demand.
- Marketing costs aren’t as high as they would be when starting a new brand. If consumers are already aware of the parent brand and have a favourable opinion of it, marketing efforts don’t take as much time or money.
- The brand extension doesn’t require as much research and development efforts as creating an entirely new product does.
However, it isn’t just the parent brand that can positively influence the brand extension. Benefits also go the other way. Brand extensions can help parent brands affirm their position on the market and create more exposure. Furthermore, it keeps the image of the parent brand fresh in the mind of consumers. Not to mention that it raises brand awareness and brand image, thus strengthening brand equity.
The Disadvantages of Brand Extension
- Brand extension can create uncertainty in the minds of consumers.
- New products can overwhelm the distribution channels.
- Distribution channels may discourage brand extension.
- It can exceed the sales and profit of the parent brand.
- If the brand extension fails, the parent brand will suffer the consequences and see a decrease in sales.
Therefore, it’s clear that brand expansion carries a lot of risks. However, the payout is fantastic if you can make it. To accomplish that, you have to understand the levels of current brand equity and also do extensive research to see which strategies will get you where you need to be.