Understanding Brand Extension Strategy (With Successful Examples)

by Shreyas Nair  |  5th Apr, 2023 in Branding

Whether you are an entrepreneur, a businessman, a brand strategist or a branding agency employee, you must have stumbled around the concept of brand extension.

But have you ever wondered why brands adopt the brand extension strategy? And why is a brand extension a popular marketing strategy?

Most importantly, what exactly is a brand extension strategy? A brand extension strategy is a marketing approach that involves leveraging the existing brand equity and reputation of a company to introduce new products or services under the same brand name.

In other words, brand extension is a strategy where a company uses its well-established brand to launch new products or services in related or unrelated markets.

When is a brand extension a good strategy?

Brand extensions are smart and strategic decisions your brand can make when it has already established itself in the market and now wants to explore new categories in the same market or a different market altogether.

Brand extension strategy can take many forms, such as line extensions, where a company adds new products or variants to an existing product line, or brand extensions, where a company launches a new product or service in a new market under an existing brand name.

A brand extension strategy aims to leverage consumer trust and loyalty to drive sales of new products or services by leveraging the existing brand.

Some of the best examples of brand extension

Reliance Jio a well-known telecommunications company extended its brand into the wholesale supermarket and entertainment (advertising, video-on-demand and over-the-top streaming services), leveraging the brand’s reputation for quality and innovation to compete with established supermarket and entertainment brands.

Colgate is another great example of a brilliant brand extension strategy. The oral hygiene mogul extended its product line to various products other products including toothbrushes, mouthwash, dental floss etc.

Both these brands capitalized on their existing recognition and customer loyalty.

What are the different kinds of brand extensions?

There are several ways businesses employ the brand extension strategy, including:

  • Line extension: This involves extending an existing product line by adding new variations of the same product.

For example- Over the years, Dove, a popular shampoo brand has introduced new variations such as bathing soap, shampoos for dry scalp, breakage repair, body lotions and more.

  • Category extension: Category extension refers to the extension of a brand into a new product category that is related to the existing product.

For example- Doritos, the famous snack food (Nachos) brand extend its brand into the dips category by introducing a new line of Doritos spicy dips.

  • Complementary extension: As part of this brand extension strategy, a brand is extended into a complementary product category to its existing offering.

For example- (You might have already guessed it). Adidas, a multi-billion sports brand, creates a wide range of sports shoes, equipment, gear, and other sports-related products that go in harmony with each other.

  • Image extension: In this case, the brand is extended to a product category other than that of its existing product, but that shares a common image or personality with it.

For example- The global conglomerate ‘Tata Group’ offers luxurious watches under their brand Titan and at the same time, they have extended their brand into the fragrance category by introducing a line of high-end perfumes called Titan Skinn.

  • Ingredient branding: is a marketing strategy where a component or an ingredient of a product or service is pulled into the spotlight and given its own identity.

For example- Horlicks, a malted milk hot drink powder brand have successfully made their drinks a household name in India and across the globe by leveraging their branded ingredient; DHA.

Advantages & Disadvantages of a Brand Extension

Nevertheless, businesses looking to implement brand extensions must carefully consider the risks involved. There are a few pitfalls that can cause problems.

The brand may experience overall damage if its new product is unsuccessful, if it is not closely related to its existing products or if it is not closely related to its existing product categories.

Brand Extension Advantages

Brand recognition: Brand extension offers companies the opportunity to leverage their existing brand equity and recognition to introduce new products. This means that consumers are more likely to try the new product because they already have a positive perception of the brand.

Cost-effective: Introducing a new brand requires significant resources and investments in marketing and advertising to build awareness and create brand recognition. However, a brand extension can be a more cost-effective way of introducing a new product or service.

Diversification: By introducing new products under the same brand name, your business can diversify its offerings and reduce its dependence on one product.

Risk reduction: Brand extension can also help to reduce risk by providing a cushion against potential failures of new products. If a new product fails, it may not impact the parent brand as severely as it would have if it was introduced as a separate brand.

Brand Extension Disadvantages

Brand dilution: One of the biggest risks of brand extension is brand dilution, where the extension of the brand may harm the existing brand equity. If the new product fails or doesn’t meet consumer expectations, it may negatively impact the parent brand.

Consumer confusion: Brand extension can also lead to consumer confusion, particularly if the new product or service is too different from the parent brand’s core offerings. This can lead to lower sales and reduced brand loyalty.

Cannibalization: Brand extension can also lead to the cannibalization of sales from the parent brand. The parent brand runs the risk of losing sales if the new product or service competes with the existing product.

Limited appeal: In a new market or audience, the existing brand may not be as appealing. This can limit the potential success of the brand extension.

In summary, a brand extension can be a powerful strategy for businesses looking to leverage the equity they have built in their brand name to expand into new markets and drive growth.

However, before extending your brand to a new segment or product, you must carefully consider these factors.

It is important to assess the potential risks and benefits and ensure that the extension aligns with the overall brand strategy.

For more success and growth of your brand, you may even want to hire a branding agency that specializes in developing brand extension strategies.

Director, Litmus Branding Pvt. Ltd.
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