When a company uses an established brand name to introduce a new product or when a new brand is combined with an existing brand, this is known as brand extension. A brand extension can also be a sub-brand, and the parent-brand is the brand that gives birth to a brand extension. If the parent brand is already associated with multiple products through brand extensions, it’s called a family of brands.
There are two main types of brand extensions:
1. Line Extension
2. Category Extension
Now let’s look at these extensions in detail.
Line Extensions
Marketers apply the parent brand to a new product that targets a new market segment within a product category with adds a different flavor, ingredient, or size.
There are two types of line extensions:
- Horizontal line extension
When an established brand name is used to enter a new segment of the market in the same product class - Example – Coke to launch diet Coke.
- Vertical line extension
Same name used to introduce a related brand in the same product category but with a different price and quality balance.
- Example – Dove.
1.Upscale – Higher price/Better quality
2.Downscale – Low price/quality drop
Line Extensions Advantages
- Diversity of customers
- Customer need for variety
- Pricing breadth
- Capacity utilization
- Increasing profitability
- Competitive reasons
- Trade demand
- Counter competition
- Image benefit
Category Extensions
Marketers apply the parent brand to enter a different product category from the one it currently serves. There are 3 types of Category extensions.
- Category related extension – Launches a brand related to the same category as the parent brand
- Image related extension – Same brand image used to introduce a brand in a different product category
- Unrelated extension – Brand diversification meaning new product categories.
Importance of Brand Extensions
•Improve brand image & clarify brand meaning
- Reduce risk perceived by customers
- Increase the probability of gaining distribution
- Increase efficiency of promotional expenditures
- Reduce costs of introductory & marketing activities
- Avoid cost of developing a new brand
- Allow for packaging & labeling efficiencies
- Permit consumer variety-seeking
- Bring in new customers into brand franchise
- Revitalize the brand
- Permit subsequent extensions through equity
Drawbacks of Brand Extensions
- Can confuse or frustrate consumers
- Can encounter retailer resistance
- Can fail or harm parent brand image
- Can cannibalize sales of parent-brand
- Can diminish identification
- Can dilute brand meaning & identity