What is brand extension? How brand extension can be applied into quite diverse and distinct markets?

Brand extension鈥?refers to the use of a successful brand name to launch a new or modified product in a new market. Virgin is perhaps the best example of how brand extension can be applied into quite diverse and distinct markets.
Brands and products

Brands are rarely developed in isolation. They normally fall within a business鈥?product line or product group.

A product line is a group of brands that are closely related in terms of their functions and the benefits they provide.

A good example would be the range of desktop and laptop computers manufactured by Dell.

A product mix relates to the total set of brands marketed by a business. A product mix could, therefore, contain several or many product lines. The width of the product mix can be measured by the number of product lines that a business offers.

For a good example, visit the web site of Hewlett-Packard (鈥淗P鈥?. HP has a broad product mix that covers many segments of the personal and business computing market. How many separate product lines can you spot from their web site?

Managing brands is a key part of the product strategy of any business, particularly those operating in highly competitive consumer markets.

With brand extension, you are using the strength of your brand equity to extend into another arena. A good example is Febreze.

It did an excellent job of boasting the title of THE product to freshen your home and furnishings, such as the couch or mattress. Now, it has extended into other brands, such as Tide Laundry Detergent.

Another interesting example (to answer your second question) is a brand that extends into a market completely contrary to its initial image. Think of Eddie Bauer. Known for years as the brand for the adventurous and the nature-driven, it connected with Ford to create the Eddie Bauer Ford Explorer and the Eddie Bauer Ford Expedition.

Years later Ford used this same strategy to build the Harley Davidson Ford F-150. In some ways, you are grasping the attention of a whole new audience who is loyal to one brand and extending it to another.

Brand extension or brand stretching is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category. Organizations use this strategy to increase and leverage brand equity (definition: the net worth and long-term sustainability just from the renowned name). An example of a brand extension is Jello-gelatin creating Jello pudding pops. It increases awareness of the brand name and increases profitability from offerings in more than one product category.

A brand's "extendibility" depends on how strong consumer's associations are to the brand's values and goals. Ralph Lauren's Polo brand successfully extended from clothing to home furnishings such as bedding and towels. Both clothing and bedding are made of linen and fulfill a similar consumer function of comfort and homeliness. Arm & Hammer leveraged its brand equity from basic baking soda into the oral care and laundry care categories. By emphasizing its key attributes, the cleaning and deodorizing properties of its core product, Arm & Hammer was able to leverage those attributes into new categories with success. Another example is Virgin Group, which has extended its brand from from transportation (aeroplanes, trains) to games stores and video stores such a Virgin Megastores.

In 1990s, 81% of new products used brand extension to introduce new brands and to create sales. Launching a new product, is not only time consuming but also needs a big budget to create awareness and to promote a product's benefits. Brand extension is one of the new product development strategies which can reduce financial risk by using the parent brand name to enhance consumers' perception due to the core brand equity.

While there can be significant benefits in brand extension strategies, there can also be significant risks, resulting in a diluted or severely damaged brand image. Poor choices for brand extension may dilute and deteriorate the core brand and damage the brand equity. Most of the literature focuses on the consumer evaluation and positive impact on parent brand. In practical cases, the failures of brand extension are at higher rate than the successes. Some studies show that negative impact may dilute brand image and equity. In spite of the positive impact of brand extension, negative association and wrong communication strategy do harm to the parent brand even brand family.

Product extensions are versions of the same parent product that serve a segment of the target market and increase the variety of an offering. An example of a product extension is Coke vs. Diet Coke in same product category of soft drinks. This tactic is undertaken due to the brand loyalty and brand awareness they enjoy consumers are more likely to buy a new product that has a tried and trusted brand name on it. This means the market is catered for as they are receiving a product from a brand they trust and Coca Cola is catered for as they can increase their product portfolio and they have a larger hold over the market in which they are performing in.