Running a business comes with making tough decisions for a living. Sometimes, you know enough to make the right choice. Other times you just have to have to make a lucky guess. And this has little to do with competence.
Nonetheless, you have a responsibility to equip yourself daily with enough information to make guided choices. One of those decisions you will have to make is Brand Extension. And thankfully, there is enough for you to take a guided decision on this one. That's if you haven't made that decision already.
What is Brand Extension?
Brand extension is the use of an already established brand name to launch a new product in the market. The idea is to use the already established brand name to market the product and gain customers’ trust. The newly launched product or product category could be of the same industry as the former or an entirely different industry. It is a strategy that leverages the brand's success in one industry or sector, plus the loyalty of their customers to push for the acceptance of the new product.
However, brand extension is not as simple as taking an old name and slapping it on a new product, especially for an entirely new market. It is a decision that can make or mar your business. But it is also a decision you cannot avoid in business expansion. What brand extension does is that it unifies all your products in the mind of the consumer. And over time, quality becomes associated with the name rather than the specific product. Also, the customers’ loyalty becomes to the brand name.
For brand extension to be successful, there has to be a level of connection between the initial product and the new product. However, we have seen several exceptions to this rule. A good example is the Dangote brand. You will agree that there is absolutely no connection between Cement and Spaghetti. But we can also see the connection rule playing out in Dangote Salt, Sugar, Flour, Noddles, and Spaghetti. The chances of failure are higher when customers cannot establish a connection between your products because it becomes harder to unify your products in their minds.
Pros
Brand extension means cheaper marketing for the new product. People have already opened up the brand. There is an existing level of trust for the brand. All that is needed for the new product is awareness. The brand name will do the convincing.
Also, brand extension strengthens the brand image. People will begin to perceive the brand as a big and reputable brand that can be trusted. The perception of the brand as a big company works to assure buyers of product quality.
Distribution of new products is easier because the brand already has an existing trade relationship with its distributors. And these distributors can trust the brand name to market the product to their customers. This way, the new product can achieve market circulation in little time.
Brand extension is a cheaper option than setting up an entirely new brand image and administration for a new product.
Cons
Because brand extension unifies your products in the mind of the customers, it also means that an error in one product is perceived as an error in other products. One substandard product could lead to the perception of all other products as substandard.
The public perception of all products is tied to the brand name therefore, no product can rise above the overall perception of the brand regardless of how good it is compared to the other products. However, this is often limited to perception. The product could do better in sales.
The new product could damage the market perception of the existing product, especially when the new product is not logically connected to the original product. The company could be perceived as having divided attention and being incapable of maintaining quality across all products.
The company might over-rely on the original product and under-invest in the marketing of the new product. This is usually a result of having an exaggerated idea of the strength of your original product in the market.
A crucial part of brand extension we often miss is that a strong brand name does not necessarily stop existing competitions in their track. Neither will they leave the market because you have arrived. You will still have to deal with competition. You will have to compete for customers. Leveraging an established brand name without having a competitive product will fail. And that failure that will extend to the other brand products. Brand extension is in no way an easy way out. It is a risk.
