What Is Brand Extension?
A brand extension is when a company uses one of its established brand names on a new product or new product category. It's sometimes known as brand stretching. The strategy behind a brand extension is to use the company's already established brand equity to help it launch its newest product.
The company relies on the brand loyalty of its current customers, which it hopes will make them more receptive to new offerings from the same brand. If successful, a brand extension can help a company reach new demographics, expand its customer base, increase sales, and boost overall profit margins.
Key Takeaways​
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Brand extension is the introduction of a new product that relies on the name and reputation of an established product.​
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Brand extension works when the original and new products share a common quality or characteristic that the consumer can immediately identify.
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Brand extension fails when the new product is unrelated to the original, is seen as a mismatch, or even creates a negative association.
How Brand Extension Works
A brand extension leverages the reputation, popularity, and brand loyalty associated with a well-known product to launch a new product. To be successful, there must be a logical association between the original product and the new item. A weak or nonexistent association can result in the opposite effect, brand dilution. This can even harm the parent brand.
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Successful brand extensions allow companies to diversify their offerings and increase market share. They can give the company a competitive advantage over its rivals that don't offer similar products. The existing brand serves as an effective and inexpensive marketing tool for the new product.