Brand Extension

Brand extension — or brand stretch — is a means for companies to enter new categories with existing brands. It is based on the premise that brands are valuable assets that can and should be strategically and selectively extended.

Rather than build a brand from scratch, stretch existing ones to new categories. This provides economic leverage, increasing the chance of new business success while also reducing costs.

Countless examples exist where brands have effectively extended into new product categories. When done right, it’s a win-win. Successful brand extensions build upon the equity of the parent brand and the entire portfolio benefits.

Business category analysis, focused ideation, and brand extension research are required inputs to stretching brands. When done effectively, brand extension should allow an organization to:

  • Further strengthen and build the brand franchise through line extensions

  • Enhance the chance of success of new business development
  • Reduce the cost of new business development

The benefits of brand leverage vs. new brand creation include immediate awareness, trust/comfort, accelerated trial, competitive insulation, distribution leverage, margin enhancement and spending efficiencies.

Brand Extension Strategic Approach

Brands can be highly elastic—the key is not to violate the “essence” of the brand. There are two basic ways to extend brands. The first involves a logical extension, where consumers naturally follow the brand to related categories. If you wear Nike running shoes and need tennis shoes, chances are you’ll at least consider Nike. It’s a logical extension from one category to the next.

The second approach uses focused ideation, brand research, and equity bridges that marketers create for consumers to cross. Nike used this strategy to enter golf equipment, with Tiger Woods serving as an equity bridge for its clubs, balls, and related equipment (categories the company would later exit).

While both approaches can be successful, the second requires more focus but offers a higher potential payoff. Companies extending into further-out categories are rewarded with greater business growth. Brand elasticity begets elasticity. The broader the brand platform, the easier it is to extend into other categories.

Brand Extension Research Issues

  • What are the core and extended associations (e.g., attributes and benefits) of the parent brand, and are those associations meaningful in the new categories being considered?
  • Can a relevant, differentiated and sustainable new product or service offering be developed within given time and resource requirements?
  • What is the size, growth, and competitive intensity of the new category? Can core competencies be leveraged in a meaningful way?

Brand Extension Research Approach

Extending brands involves defining existing equities, then identifying new opportunity areas through business analysis and concept optimization. Here are the steps:

  • Step 1: Confirm the brand awareness and brand image of the existing product. Start by taking inventory of brand and category associations. What are the attributes and benefits? Lower rungs on the benefit hierarchy are a great place to start.

  • Step 2: Brainstorm and assess potential categories. Next, consider new categories and evaluate their size, growth, and profit potential.

  • Step 3: Assess brand-category attractiveness. Drawing on steps 1 and 2, write simple one-sentence descriptions of each idea—linking the existing brand with the new category and unique benefit.

  • Step 4: Conduct the concept optimization research (CORE) process. After assessing initial ideas, use focused ideation and concept iteration to identify and screen opportunities.

  • Step 5: Develop an entry strategy and plan, including make-versus-buy decisions and portfolio management guidelines. Planning involves obtaining technical insights regarding how best to enter the new categories.

Unsuccessful Brand Extension Examples

While selective brand extension makes sense, brands can be stretched too far, risking equity erosion and poor business performance. There are a number of unsuccessful brand extension examples.

Remember the Starbucks Via instant coffee line? Or perhaps you had a beer or glass of wine at one of the 400 or more stores participating in Starbucks’ “Evening” program before it exited the concept.

Likewise, Nike has extended beyond running shoes to become a lifestyle brand, including apparel and equipment across multiple categories. They’ve also bridged to backpacks to store and carry shoes, balls, and equipment. Just because you can extend or license a brand, doesn’t mean you should.

Brand and product managers can be reluctant to stretch brands, and concerned about overextension. Lessen the risk by examining brand-category attractiveness through a structured approach and targeted brand research. If you do this and employ brand management best practices, significant, profitable growth is often just a brand extension away.

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As a leading brand extension consulting firm, we employ equity extension principles, processes and examples to assist clients in selectively extending their brand into new product and service categories. Contact us to learn more.
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