What is Brand Extensions? Types, Advantages, Disadvantages

What is Brand Extensions?

Brand extension is defined as attaching an existing brand name to a new product introduced in a different product category. In a typical brand extension situation, an established brand name is applied to a new product in a category either related or unrelated to capitalize on the equity of the core brand name.

When a new brand is combined with an existing brand, the brand extension can also be called a sub-brand. An existing brand that gives birth to a brand extension is referred to as the parent brand. If the parent brand is already associated with multiple products through brand extensions, then it may also be called a family brand.

Brand extensions occur when firms enter markets they had not previously been present under the name of one of their existing brands. The extended product’s qualities should not go against the consumer perception of the original brand name, e.g., Camlin’s effort to extend the stationery and art material brand name to cosmetics has not proved successful.

Similarly, Dettol antiseptic’s extension to Dettol beauty soap could not succeed, though after repositioning, there is some amount of success. Many companies in India have opted for line/brand extensions, e.g., Amul, Maggi, Lux, Clinicplus, Lakme, Bata, Milkmaid, etc.

By themselves, brand extensions do not spell out the success of a product which also depends upon other factors like quality, price, market characteristics, consumer perceptions, and promotional efforts. Wrong extensions damage not only the extended brand but also the original brand. Pond’s toothpaste is a very glaring example of an extended brand failing in India.

Lakme shaving cream failed to work as a brand extension due to Lakme’s strong feminine connotation. Similarly, Vicks Hot Sip did not work. Each brand has certain core values. When a brand extension is for dissimilar products, the brand has to draw more on its core values to be successful.

Besides, brand extensions creating new products must be symbiotic- the new brand puts something back into the mother brand and the mother brand rubs off its values to the new brand.

Types of Brand Extension

Brand extensions can be broadly classified into two general categories as horizontal extensions and vertical extensions.

Horizontal Extensions

In a horizontal brand extension, an existing brand name is applied to a newly introduced product in either a related product category or in a product class completely new to the company. These horizontal extensions can be further differentiated in terms of their focus termed line extensions and franchise extensions.

Line extension occurs when a current brand name is used to enter a new market segment in the current product category. (HLL has tried to counterattack the growing popularity of the “Fairever” brand of Cavin Care by extending the “Fair & Lovely” brand to “Fair & Lovely Saanwali”).

In contrast to this, a franchise extension uses a current brand name to enter a new product category. (Like Nestle has used the “Maggie” brand name to make a foray into the market of soups and sauces.)

Vertical Extensions

A vertical brand extension uses the core brand name to launch products in the same product category but at a different price point and quality level. In a vertical brand extension, a brand name is usually introduced alongside the core brand name, to establish the relation between the brand extension and the core brand.

Example: Sunsilk launched Sunsilk Fruitamins’, Sunsilk Black’ and Sunsilk Nutracare’. Vertical extensions can be viewed as the quickest way to leverage a core brand’s equity as the new product is in the same category as the parent; aims at a similar market segment as the parent; and may enjoy the same acceptance as the parent.

As a strategy, vertical brand extension is widely practiced in many industries, of which most commonly noticeable are automobiles. In automobile brands, various models are launched to offer distinct price-quality bundles to attract a variety of market segments. (For example, Maruti Alto is available in LX and VX models at different price points and different quality levels).

Vertical extensions can be made in two ways depending on the direction of the extension. A step-up extension is one involving a new product with a higher price and quality characteristics than the original (“Lifebuoy Gold” after the rocking success of ‘Lifebuoy’).

Step down extension is a brand extension that is introduced at a lower price and lower quality level than the core brand. (Videocon ‘Bazooka’ was launched to make inroads into the middle end of the market).

Another Classification of Brand Extension

Brand extensions are also classified into three types-product related extensions, image-related extensions, and unrelated extensions. The product-related extension is more popularly called ‘line extensions’. A line extension is typically a product or flavor or fragrance variant. It is used by companies to upgrade their customers.

Ex HLL upgrades Lux users to Lux International and Lifebuoy to Lifebuoy plus. Image-related extensions are those where the brand extension bears some logical or emotional relationship with the parent brand.

Such a fit exists when companion products are introduced, for instance, Pepsodent toothpaste and Pepsodent tooth brush, Prestige pressure cooker and Prestige pressure pans, Dettol antiseptic liquid, and Dettol soap. Unrelated extensions are those where the parent and the brand extensions have little in common but for the brand name.

A classic case of this is the brand name Godrej appearing on soaps, safety locks, almirahs, typesetters, hair dyes, refrigerators and other products. In unrelated extensions also, the match-making principles hold good. Sometimes unrelated extensions happen along the route as the organization evolves, e.g.

Tata started from steel and textiles but extended to diverse areas like power, cosmetics, automobiles, medicines, telecommunications, consumer electronics, computer consultancy and software, etc.

Strategies for Establishing Category Extension

Extensions become successful if the organizations show commitment, there is a matching of the brand and extension or organization and extension, and proper attention to the marketing mix of the extended brand. Brand extensions can come in all forms. There are seven general strategies for establishing a category extension.

Introduce the same product in a different form. Examples: Ponds Dream flower Talc in a newly designed pack, New Surf excel washing soap.
Introduce products that contain the brand’s distinctive taste, ingredient, or component. Examples: New Horlicks with extra minerals.
Introduce companion products for the brand. Examples: Coleman camping equipment and Duracell Durabeam flashlights.
Introduce products relevant to the customer franchise of the brand. Examples: Gerber insurance and Visa traveler’s cheques.
Introduce products that capitalize on the firm’s perceived expertise. Examples: Honda lawnmowers and Canon photocopy machines.
Introduce products that reflect the brand’s distinctive benefit, attribute or feature. Examples: Pepsodent toothpaste’s germi check formula, Hamam soap.
Introduce products that capitalize on the distinctive image or prestige of the brand. Example: Raymond shirtings and suitings, Porsche sunglasses.

Push Factors for Brand Extension

In recent years, industries have opted for a brand extension due to any one or more of the following reasons:

Government regime in their existing industry

A typical example could be the case of ITC. Wills has come out with clothing extensions and God Flake has come out with greeting cards.

Market dynamics

The changing faces of the market and consumers have forced many corporate to enter into new ventures. The Arumuga Group which was a leader in the Textile division in South India has recently entered into the spices segment with many pure and processed spice varieties.

Customer requests

This although may seem to be a welcoming sign on the part of the company, is a very serious issue that has to be very carefully handled.

Pull Factors

The current trend in management is no more reactive but proactive. One needs to be prepared to face rather than think after the sudden attack. Many factors have been identified by authors as pull factors that have aided many organizations to get to brand building and extensions.

Already established brands: Bajaj has a hold in the two-wheeler industry and also in electric appliances.
Increase Customer base: Brand extension can add up to increase the existing customer base by entering into new segments, and converting the users there to the brand.
Diverse portfolio: This helps in spreading the risk.
Building corporate image.
Extension of the USP to similar or diverse areas and, hence, maintaining unique product features.
Leverage the existing loyalty of customers.
Positioning is done more easily than that of a new brand.
Advertising and promotional measures are done with ease.
Leveraging core competency values, cultures and systems.

Advantages of Extensions

Well-planned and well-implemented extensions offer several advantages to marketers. These advantages can be broadly categorized as those that facilitate new product acceptance and those that provide feedback benefits to the parent brand or company as a whole.

Facilitate New Product Acceptance

Improve Brand Image: One of the advantages of a well-known and well-liked brand is that consumers form expectations over time concerning its performance.

Similarly, with a brand extension, consumers can make inferences and form expectations as to the likely composition and performance of a new product based on what they already know about the brand itself and the extent to which they feel this information is relevant to the new product.

These inferences may improve the strength, favourability, and uniqueness of the extension’s brand associations. For example, when Sony introduced a new personal computer tailored for multimedia applications.
Reduce Risk perceived by customers: One of the advantages of a well-known and well-liked brand is that consumers form expectations over time concerning its performance.

Similarly, with a brand extension, consumers can make inferences and form expectations as to the likely composition and performance of a new product based on what they already know about the brand itself and the extent to which they feel this information is relevant to the new product.

These inferences may improve the strength, favourability, and uniqueness of the extension’s brand associations. For example, when Sony introduced a new personal computer tailored for multimedia applications.

Increase the Probability of Gaining Distribution and Trial: Because of the potentially increased consumer demand resulting from introducing a new product as an extension, it may be easier to convince retailers to stock and promote a brand extension.
Increase Efficiency of Promotional Expenditures: From a marketing communications perspective, one obvious advantage of introducing a new product as a brand extension is that the introductory campaign does not have to create awareness of both the brand and the new product.

In general, it is easier to add a link from a brand already existing in memory to a new product than it is to first establish the brand in memory and then also link the new product to it.
Reduce costs of Introductory and Follow-Up Marketing Programs: When a brand becomes associated with multiple products, advertising can become more cost-effective for the family brand as a whole.
Avoid cost of Developing a New Brand: To conduct the necessary consumer research and employ skilled personnel to design high-quality brand names, logos, symbols, packages, characters and slogans can be quite expensive, and there is no assurance of success.
Allow for Packaging and Labelling Efficiencies: Similar or virtually identical packages and labels for extensions can result in lower production costs. If they are coordinated properly, it will result in more prominence in the retail store by creating a ‘billboard’ effect.
Permit Consumer Variety Seeking: Consumers may need a change in the product without having to leave the brand’s family. So the line extensions can encourage the customers to use the brand to a greater extent or in different ways.

Provide Feedback Benefits to the Parent Brand

Besides facilitating acceptance of new products, brand extensions can also provide positive feedback to the parent brand in several ways:

Clarify Brand Meaning: Extensions can help to clarify the meaning of a brand to consumers and define the kinds of markets in which it competes. Example: Johnson & Johnson extends its brand the products for babies.
Enhance the Parent Brand Image: According to the customer-based brand equity model, one desirable outcome of a successful brand extension is that it may enhance the parent brand image by strengthening an existing brand association, improving the favourability of an existing brand association, adding a new brand association, or a combination of these. The brand extension helps to clarify the core brand values and associations and affects the parent brand image.
Bring New Customers into the Brand Franchise and Increase Market Coverage: Line extensions can benefit the parent brand by expanding market coverage. By bringing attention to the parent brand, the new product’s sales may also increase.

Example: The introduction of Vim Liquid dish wash bar helps to expand the market coverage for Vim.
Revitalize the Brand: Brand extensions can help to renew interest and liking for the brand.
Permit Subsequent Extensions: One benefit of a successful extension is that it may serve as the basis for subsequent extensions For example, Goodyear’s successful introduction of its Aquatred tires sub-brand led to the introduction of Eagle Aquatred for performance vehicles with either wider wheels or a luxury image.

Disadvantages of Brand Extensions

Despite these potential advantages, brand extensions have several disadvantages.

Can Confuse or Frustrate Consumers

Different varieties of line extensions may confuse and frustrate consumers as to which version of the product is the “right one” for them. As a result, they may reject new extensions for tried and true favorites. Moreover, because of a large number of new products and brands continually being introduced, many retailers do not have enough shelf or display space to stock them all.

Can Encounter Retailer Resistance

It is impossible for a grocery store or supermarket to offer all the different varieties available across all the different brands in any one product category. Moreover, retailers often feel that many line extensions are merely “me-too” products that duplicate existing brands in a product category. They feel that it should not be stocked even there were space.

Can Fail and Hurt Parent Brand Image

If the brand extension fails it also harms the parent brand image. Unfortunately, these negative feedback effects may sometimes happen.

Can Succeed but Hurt the Image of the Parent Brand

If the brand extension has benefit association which are conflicting with those of the parent brand, it will change the consumers’ perception of the parent brand.

Can Cause the Company to Forgo the Chance to Develop a New Brand

One of the disadvantages of brand extension is that by introducing a new product as a brand extension, the company forgoes the chance to create a new brand with its unique image and equity.

Brand Extendability

The aim behind the brand extension is to transfer a set of associations accompanying the parent brand to the extended brand. Any extension, therefore, becomes successful depending upon the nature of the parent brand. All brands do not have the same degree of extendability. Brands are just names put on the products.

When consumers want to buy baby products they remember Johnson & Johnson brand. This name at the most identifies the product or its manufacturer. Such brands have scope for extension. Brand associations may be product-oriented. Some brands, however, serve such product-oriented associations and start reflecting the aspirations of their customers.

Cartier reflects high fashion and trendy style. It can be extended to spectacles, shoes, clothes, perfumes, furniture and a host of other products. Here the brand acquires a more intangible character. These brands can be extended to dissimilar categories. They connect to the inner urges of the customers.

Some Successful Brand Extensions in Indian Market

TTK Prestige Cookers,	Gas stoves, Mixer Grinders, Handy Mix, Juicers, Fizz drink maker
MTR	Ice creams, Masala Powders
TITAN	Watches, Writing Instruments, Wallets, Bags
AMUL	Cheese, Chocolates, Ice creams
MAGGI	Noodles, Ketchup, Tastemakers, Coconut milk flakes
DABUR	Chyavanaprash, Honey, Ginger-garlic pastes
DETTOL	Anticeptic lotion, soaps, Handwash

ARTICLE SOURCES

Investortonight requires its writers to base their articles on primary sources. This includes government documents, data, direct observations, and interviews with industry leaders. Additionally, we also incorporate research from reputable sources when appropriate. Our editorial guidelines detail the standards we maintain to ensure unbiased and accurate content.

U. C. Mathur, Product and Brand Management, Excel Books, New Delhi.
Harsh V. Verma, Brand Management, Excel Books, New Delhi.
Tapan K Panda, Building Brands in the Indian Market, Excel Books, New Delhi.
Kapferer, Strategic Brand Management, Kogan Page, New Delhi.
Kevin Lane Killer, Strategic Brand Management, Pearson, New Delhi.

What is Brand Extensions? Types, Advantages, Disadvantages