Brand Extension is a marketing strategy according to which, a well known brand uses the same brand name to enter into a new product category. It is done primarily to leverage its existing customer base and brand loyalty to increase its profits with a new product. For example kingfishers which started its business from bear has done its brand extension through kingfisher mineral water, kingfisher airlines etc.
Building a brand is very costly for any company as they do a lot of expenses on advertisement to give a place to its brand in the mind of customer. So, once marketers built a brand they want to leverage its value by using the same brand name to other new categories.
We can classify brand extension into two category; extension of product-related association and non-product related association.
Example of extension in product-related association: Maggi which had started its business through Maggi noodles now their other products are Maggi masala, Maggi soups, Maggi sauce etc. All these products are related to food category so; it is brand extension in product related association.
Example of the extension in non-product related association: the above example of Kingfisher belongs to this category because kingfisher bear is different from kingfisher airlines as these belong to different industries.
Advantages of Brand Extension
- The risk perceived by the customers is reduced. An established brand name increases consumer interest and willingness to try new product having the established brand name.
- Advertising, selling and promotional costs are reduced.
- Distributers are easily become ready to sell the product of an established brand name.
- The expense of introductory and follow up marketing programs is reduced.
Disadvantages of Brand Extension
- Brand may loss its reliability if the extended brand name didn’t get success in the new category. So, organization must research the product categories in which the established brand name will work. So, we can say that our one mistake can damage all brand equity.