What is it called when a firm uses an established brand to introduce a new product?

Brand extension is a strategy where a company creates a new product category under its well-known brand name. It helps launch new products easily, obtain higher profit, reduce costs necessary to launch a new business, and meet customers’ needs and wants.

In this video, you’ll learn what brand extension is and how to leverage it.

Why is brand extension important?

Increasingly competitive markets make it impossible for a company to stay ahead if it doesn’t present something new to its target audience. Entrepreneurs consider brand extension strategies to increase their market share, become more innovative, and create a new product category. It’s a critical step that helps boost their business and engage new leads.

To implement this technique successfully, brands need to study and analyze new trends. With the help of research, companies try to figure out the wants and needs of their prospective customers to create a product that will satisfy these requirements. Afterward, they strive to create a product that will be sold under an established company’s name and remain in high demand.

The process brings several benefits to businesses. Corporations obtain an increased brand image, save funds on the development of a new brand, use their costs on promotion efficiently, and gain more revenue.

With the help of brand extension strategies, companies can present products that their customers accept. Nowadays, the tactic is popular because businesses can assess their opportunities in new product categories, determine how relevant and appealing their brands are, and define the resource requirements.

Now that you know the reasons why many firms use a brand extension, let’s review the advantages of this technique.

Advantages of Drand Extension

It’s worth noting that brand extension helps upscale your business in various ways. Since the number of competitors in the market is constantly increasing, brands should prepare multiple strategies to stay ahead.

Companies can create new products, provide better customer experiences, present some innovations or new services to gain revenue. When you decide to extend your company and create a product or service, it can be related or unrelated to your business. Brands often leverage brand extension because it can:

• help launch products in new categories seamlessly;
• enable brands to meet their customers’ needs and wants;
• allow companies to receive higher revenue;
• reduce expenditures when launching and developing a new company;
• encourage customers to try a new product from a trusted brand;
• reduce the risks for customers because they can purchase different products from reliable brands;
• help spend costs on promotion efficiently;
• improve the overall brand image;
• provide consumers with a greater variety of products;
• enable brands to attract more leads;
• help revive a company.

As you’ve noticed, there is a list of reasons why a company should consider implementing brand extension. Now let’s review the types of this tactic.

Types of Brand Extension

1. Product form
2. Companion product
3. Company expertise
4. Brand distinction
5. Brand prestige
6. Transfer of components
7. Leveraging a lifestyle

There are different ways in which companies use this strategy, so it’s time to walk you through the types of brand extension.

• Product form. It is when a company decides to change the form of an existing product. This allows a product to compete in a different category. For example, Snickers used to launch ice cream bars.
• Companion product. Companion products are those that complement the main products. They belong to the same niche and relate to the original products. For instance, Colgate, famous for its toothpaste, decided to release toothbrushes under its brand name as well.
• Company expertise. This is when a company expands its production and designs a new product under an established name. Let’s take Fender, a brand known for its high-quality guitars. It extended its expertise to making earbuds.
• Brand distinction. Companies are often considered unique because of the exceptional benefits or experiences they provide. These advantages are usually associated with a certain brand name. Therefore, marketers use such companys’ names to compete in new markets and extend their brand equity. Let’s consider Parachute, a brand name for a variety of coconut oil-based hair products. These goods are manufactured by Marico, a consumer goods company famous in India that also produces other hair products.
• Brand prestige. This strategy involves a brand that creates a product unrelated to the main company’s expertise. BMW is a great example. The brand, widely recognized as a corporation that produces luxury vehicles and motorcycles, started to operate in the apparel industry and produce watches.
• Transfer of components. Sometimes brands try to use the successful elements of their old products in a new one. They strive to leverage this element and gain the same success. These components are flavor, ingredient, scent, and color. For example, Fanta, a brand that produces fruit-flavored carbonated soft drinks, has around 100 flavors worldwide.
• Leveraging a lifestyle. Some companies present a particular type of lifestyle that can be conveyed through a particular way of living, culture, values, or interests. They possess certain traits customers find relatable. Companies can have different types of brand personalities like “sincerity”, “competence”, “sophistication”, and more. Let’s take Jeep, for example. The company presents an outdoorsy lifestyle and uses this particular image for other products, such as knives, tents, bicycles, etc.

It’s time to proceed to the differences between brand and line extension.

By brand extension, we mean an established brand that creates a new product category that is assumed to meet the needs of consumers. In this scenario, a company heavily relies on its loyal customers who will be glad to see more products from a trusted brand. With a successful implementation of brand extension, a firm can reach new demographics, acquire new customers, boost sales, and increase revenue.

A line extensionis when a firm extends an existing product line. A manufacturer brings a new product to the product category that a company already manufactures. For example, a brand adds “Vanilla” or “Lemon” flavor to its cola line and creates a variety of products that are available for consumers.

Usually, line extension is associated with a product’s new scent, flavor, formula, color, and style in a current product line. The strategy is less risky than a brand extension as consumers are familiar with the product and will be eager to try it with a new twist.

Now let’s move to the next section to grab some inspiration from our examples.

12 Examples of Brand Extension

• Colgate
• Apple
• Coca-Cola
• Starbucks
• LifeBuoy
• Ferrari
• Sunkist
• Dyson
• Callaway
• SendPulse
• Fender
• Google

If you consider extending your product category, check out our list of brand extensions that will inspire your own.

Colgate

A company famous for its toothpaste made a new useful product, a toothbrush that is complementary to the main product. It turned out to be a great combination. This move allowed Colgate to enter the toothbrush market.

Apple

Apple, a technology company that is known for its computers and phones, also used brand extension. You can find Smart Watches and MP3 Players designed by Apple.

Coca-Cola

It might surprise you, but Coca-Cola sells not only carbonated soft drinks. The brand also produces Dasani water and Glaceau Smartwater.

Starbucks

A well-established company famous for its coffee beverages and unique approach to each of its clients has also entered the energy drinks market. The brand has made a foray into another booming market by launching a new line of low-calorie energy drinks based on fruit juice and green coffee extract.

LifeBuoy

LifeBuoy is a brand of soap marketed by Unilever. Over time, the company managed to enter other markets, such as the supply of sanitary towels and sanitizers that are always on hand. Now you can see LifeBuoy’s sanitizers that are ready to ensure your daily hygiene on store shelves.

Ferrari

Everyone knows this luxury sports car manufacturer. However, the brand didn’t limit itself to creating luxurious and expensive vehicles only. The company decided to develop an unrelated product line. Ferrari theme parks in different countries provide visitors with an authentic Ferrari experience, adrenaline, and fun.

Sunkist

The brand is usually associated with oranges, health, and energy. The company decided to make the most out of it. Sunkist’s production of vitamin C tablets spawned the business of vitamins and supplements.

Dyson

The company started with the manufacturing of vacuum cleaners and household appliances but further extended its products to desk lamps. Now the brand is popular among young people because of the hairdryers, bladeless fans, and stylers it produces.

Callaway

Callaway is known for its golf clubs, yet not only for them. This company also manufactures and sells equipment for golf and accessories like bags, gloves, and caps.

SendPulse

Another excellent example of brand extension is SendPulse, an email marketing service. The company has also introduced two new products: CRM and landing page builder. Now you can automate your communication with customers and create a landing page or an online store.

Fender

The company recognized as a manufacturer of guitars and amplifiers now also produces earbuds. Their products bring dynamic and high-quality sound to their owners.

Google

We all know and use Google as a web search engine. Nevertheless, it’s not the only product from Google. The brand extended to hosted email services. Google Workspace empowers brands to access great digital products (Google Drive, Cloud Search, Google Meets, and more) anytime and anywhere and provides security of your information.

Simply put, when you have an established brand admired by customers and want to release a new product category, just go ahead. It can bring many benefits to your business, such as increased profit and an opportunity to meet your clients’ needs and improve your brand image. If you have an excellent idea for your new product that your audience will accept, give it a try.

Resources:

1. This article defines the term and covers the advantages of brand extension and its types.
2. This article provides ten examples of good and bad brand extensions.
3. This article explains the difference between line extension and brand extension.

Last Updated: 12.07.2022