The Pros and Cons of Brand Extension: What You Need to Know

Tags – Brand Extension

 

When it comes to brand extension, there are pros and cons that you need to consider. 

On the one hand, brand extension can help you reach new markets and increase your profits. 

However, on the other hand, it can also lead to confusion among consumers and damage your reputation. 

In this blog post, we will explore the pros and cons of brand extension in more detail so that you can make an informed decision about whether or not it is right for your business.

 

What is Brand Extension?

Brand Extension is when you use an established brand name in new product categories in the same broad market. 

And this new category can be related or unrelated to the existing product categories – it’s a lot easier to launch new categories when the brand is already successful. 

For example, Nike’s brand core product is shoes. However, they have since now released products like sunglasses,  footballs, basketballs, golf equipment and more. 

It’s worth noting here that if the new business’s customers share values and goals that are in line with those of the core business, and if these values and aspirations are represented by the brand, it’s more likely they will be accepted by consumers.

 

Example of a Successful Brand Extension

Dove: of course soap is not gender specific (we all need to clean ourselves!), Dove is mainly targeted towards women. However, Dove successfully created a line for men – they knew what their customers were missing and ran with it!

 

Example of a Failed Brand Extension

Coca-Cola: The problem with Coca-Cola is that they attempted to build a brand extension without first understanding the consumer base. They assumed that customers only cared about the flavour and taste, but this was incorrect. 

So even though the new Coke spent an immense amount of money on research and development, it never attained the same popularity as the old one.

 

Advantages of a Brand Extension

Extending a brand beyond its main product category can be useful in that it allows you to assess product category possibilities, identify resource needs, reduce risk, and measure brand relevance and appeal. 

That said, here are some of the main advantages of a brand extension strategy:

 

1. Easy Entry to Market

Because of the cutthroat competition, it’s tough for new items to break into the market. 

Brand extension allows a company to introduce new goods because of the reputation and strong image of its established brand.

 

2. Products Are More Likely To Be Accepted

As we all know, a strong brand helps to build consumer trust and loyalty. 

As a result, when a business introduces a new product or service under its existing brand name, it increases the likelihood of acceptance.

 

3. Save Costs

Costs associated with establishing a new brand are eliminated. It also reduces advertising and promotional expenditures. As a result, the company’s marketing budget is reduced.

 

4. Strengthen Brand Image

A brand extension helps to promote the parent brand and extend its market by drawing in new consumers. As a result, it can boost the parent firm’s image and reputation.

 

5. Provides Premium Pricing Opportunity

Because of the core product’s established reputation and image, a firm may charge a premium price for its new product or service. 

As a result, the company may earn higher profits on its new product.

 

Disadvantages of a Brand Extension

Despite the above advantages, there are always some risks involved with a brand extension strategy:

 

1. It Could Damage Reputation of Core Brand

When a new product fails to satisfy customer expectations, it jeopardises the company’s reputation. Negative feedback regarding an extended product may severely damage the image of the core brand.

 

2. Chance of Confusion

Customers may be confused by having a variety of items or services bearing the same brand name. This might have a negative impact on both core and new product sales.

 

3. Discourages Innovation

It discourages research, development, and innovation in the field of business if producers focus only on brand extension and attempt to bring new items under the same brand to save money and time.

 

4. Less Likely to Succeed

It is not suited for all sorts of goods, as various business and marketing studies have shown. As a result, brand extension through improper technique might result in cannibalisation, consumer dissatisfaction, and product failure.

 

5. Loss of Reliability

The term loss of reliability essentially refers to diving headfirst in a market that is far from the core product of the brand, which increases the chances of failure for the new product. 

To avoid such risks, it is strongly suggested that you conduct a thorough study of the market and categories in which the brand expansion will succeed before making a decision.

 

The Bottom Line

Given that a brand extension can help to widen the market of both core and newly launched products, lower marketing costs (related to advertising and promotional activities) and you can charge higher prices, there’s an opportunity for businesses to increase their profitability. 

However, there is always a risk involved. The brand extension may rely too much on the parent’s brand image, and if not marketed properly, it can cast the company in a negative light. 

With that in mind, ensure you perform the necessary steps before taking the decision to extend the brand – i.e. thorough market and consumer research.

 

To find out more, please get in touch today.

 

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