Brand Extension: Definition, Types & Examples

KEY TAKEAWAYS

• Brand extension is when an established brand introduces a new product or service to its flagship offerings in an attempt to expand the business. 
• A successful brand extension increases brand offerings, improves brand awareness, and increases market share. All of these impact company profits. 
• There are five types of brand extensions that each require different strengths from the company and each aims to accomplish different goals.

What is a Brand Extension?

A brand extension is a marketing strategy that some companies use to grow their core business. A brand extension strategy involves using an established brand to launch a new product. The new product isn’t related to the brand’s flagship product. 

Brand extension turns brand equity into an effective tool. Companies that attempt brand extension rely on their loyal customer base to see success with new products. In most scenarios, brand extension is a risk. However, when a brand extension product is successful the company reaps many benefits.

There are many examples where a new product category fails during a brand extension. Not all customer bases will blindly buy new products from a brand they’re loyal to. There are characteristics that successful brand extensions have as well as lessons that can be learned from failed brand extensions. 

Successful Brand Extensions

Brand extensions are risky. But even with risk on the horizon, certain strategies increase the chances of success. 

• The extension product should be at least somewhat related to the brand’s original product category. There should be a logical connection between the existing product and the new product. 
• It focuses on niche market segments that weren’t originally covered by the company. 
• Brand values are identified along with customer perceptions. These are integrated into a plan that aims to increase value to the customer while maintaining core values. 

A successful brand extension diversifies company offerings. Allowing the company to make money through different channels and increase overall profits. When brand extensions go well, they go very well. You can expect other benefits like: 

• Improved brand reputations – When brands are known for a range of products, they’re able to build a larger loyal customer base. 
• Increased brand awareness – Some customers will know the brand for a specific line of products, while others will know it for extended products. The two may overlap, as well.
• Increased market share

Failed Brand Extensions

Sometimes, even with the best planning and strategy, brand extensions fail. There are some commonalities between failed brand extension campaigns.

• Too much focus on offering a variety of products. They release unrelated products instead of offering complementary products. When a company does this, they tend to offer a product extension that doesn’t apply to their brand. This can have disastrous consequences.
• Not performing an extension evaluation or consumer evaluation. Not keeping your target customer in mind is a big mistake.
• Extending with a product that creates a negative association
• Not lining up the product with your brand identity

A poor brand extension can permanently damage a company’s reputation. It can make customers perceive the company in a negative light. Some will be considered cheap, while others may be called greedy. If the release is bad enough, the company can actually fail. 

Types of Brand Extensions

There are several different kinds of brand extensions that a company can attempt. The chosen strategy largely depends on the type of customers that a brand has.

Line Extension

As the name implies, a line extension is the release of an entirely new product line. The new line exists within a product category the company carries and the brand’s customers are already familiar with it. This means the company doesn’t have to risk entering a new category. Instead, they’re just adding a new line of products that may be more successful than their current offerings. 

Because the customer base is already familiar with the brand’s category, this extension will likely do well. For the most part, line extensions are simple. It may include new flavors, colors, or scents, depending on the product. This type of brand extension carries the least amount of risk for a company.

Complementary Product Extension

Another successful brand extension strategy focuses on complementary products. A complementary product is a new product that works with the brand’s current products. Often, complementary products are accessories for main products.

The extent to which products are considered complementary depends on the industry. In sporting goods, complementary products may be a different kind of apparel than what the company normally makes. For toothpaste companies, toothbrushes and floss could be considered complementary products. 

Customer Base Extension

This brand extension strategy is almost exclusive to the largest companies in the world. A customer base extension requires a parent company or brand, and then sub-brands. Essentially, the parent company releases a brand new product line under its brand. This expands the parent company’s customer base and establishes a completely new brand.

There have been instances in which parent companies have released a brand under a customer base extension. That brand can then act independently, and branch out even further. This is an excellent business strategy for increasing a company’s market share. 

Company Authority Extension

Extending company authority requires a level of success that not all companies can claim. Company authority extension requires a company to have a large, general industry authority. The technology industry is a common area to find this. Having commanding authority allows these companies to release new products in a new category. These are normally successful releases, as well.

The best instance of this is a computer company releasing cell phones. Because the company already has authority in the technology space, customers can expect their new products to work well. Their authority allows them to release just about any product in the technology category with some success. A failed release will rarely impact the company heavily. 

A huge example of this is when Google began releasing smartphones, watches, and laptops. 

Brand Lifestyle Extension

Of all of the strategies listed here, the brand lifestyle extension may be the most difficult. Brand lifestyle extensions require a dominating brand personality. The brand itself has to be associated with a specific lifestyle, and the customer base has to be fiercely loyal to it. The brand that commands this lifestyle can release almost any product with success.

Brand lifestyle extensions tend to be seen with brands that are “hyped” up. Fashion brands can accomplish these kinds of extensions regularly. Brands that are run by celebrities also do well with this strategy.

Real-World Examples of Brand Extensions

Companies have been attempting brand extensions for decades. Increasing market share is important to companies, as it tends to increase revenue. Below you’ll find examples of good brand extensions, as well as some bad ones.

Good Brand Extensions

The brand extensions listed below are some of the most successful in recent times.

• Tesla Tequila: Tesla is an energy company that branched out to sell tequila. The liquor sold out within hours of release. This is, for the most part, due to the company’s brand personality and CEO, Elon Musk. It’s a great example of a brand lifestyle extension.
• Reese’s Puff Cereal: Popular candy brand Reese’s released a breakfast cereal with great success. This is an example of a customer base extension.
• Honda Lawn Mowers: Honda was able to use its company authority to successfully sell lawn mowers. Because of the dependability of their vehicles, customers were inclined to buy their small motor products, as well.

Bad Brand Extensions

Sometimes, brand extensions don’t go the way a company plans. Below are some of the biggest brand extension blunders in history.

• Levi’s Tailored Classics: Levi’s is branded as a rugged outdoor clothing company. When they attempted to break into the fine garments category, customers were skeptical at the least. The company’s suits didn’t sell well and damaged Levi’s original reputation to an extent.
• Colgate Kitchen Entrees: At one point in time, Colgate attempted to start selling food goods. This didn’t go well. Since most people associated the brand with oral hygiene, no one wanted to take a chance on their dinner products.
• Cadbury Mashed Potatoes: Cadbury attempted to move away from chocolates. They targeted mashed potatoes, which failed miserably. It actually damaged the company’s reputation for selling fine chocolates, as well.

Summary

Brand extensions are a great strategy for a business to expand their market, increase awareness and improve profitability. With the right planning and product choice, brand extensions are very beneficial to businesses. Although success could bring plenty of advantages, it’s still very risky to attempt without the right product plan or customer base.