What are brand extensions?

Introduction

Brand extensions are a way to expand the brand of your product or service through new products and services, even across industries. They can be an effective strategy but can also dilute the brand if they’re not managed properly. 

In this post, we’ll help you learn more about brand extensions so that you can determine which one might work best for your business needs.

What are brand extensions?

Brand extensions are new products or services beyond the brand’s core offering. They’re a way to expand offerings, tap into recent consumer trends, and deliver further benefits. Brand extensions happen in an existing product category or beyond the boundaries of this category.

In the past years, we are observing more and more brand extensions beyond the industry’s traditional boundaries, with paradoxical examples of soft drinks adding a spiked version of their product while spirits brands are launching non-alcoholic versions of theirs.

It’s important to note that because of this relationship between brands, many factors are involved in whether or not a brand extension will succeed. For example:

• If another company already offers similar products on the market (like Pepsi and Coca-Cola), it’s more likely that people will buy their product instead of yours because they trust them more than yours.
• Suppose your target audience doesn’t fit into one specific niche but ranges across several age groups or demographics (such as Mountain Dew Throwback). In that case, it may be harder for customers to relate to your message precisely.

There are four types of Brand Extensions that we will take into consideration in this post:

1. Line Extensions
2. Flanker Extensions
3. Brand Extension Beyond the Core Category
4. Co-branding

1) Line Extensions

Line extensions are brand extensions of a parent brand that are in the same category as the parent. Line extensions include new benefits, flavors, formats, and more. These brand extensions can tap into consumption occasions or different shopping missions.

Line extension ideas are often generated from consumer insights, including product usage and shopping behavior patterns. For example: If a popular product has unique benefits that consumers love but also want more of something else (like the flavor), then developing another taste could be an effective way to expand your offering while maintaining the integrity of your core brand values and image.

2) Flanker Extensions

The flanker strategy uses a line extension to steal sales from your existing products. The product is designed to be as similar as possible to a current SKU but with just enough difference to stop it from being classed as a direct copy.

Flanker extensions are usually priced at par with the products that expect to cannibalize – otherwise, they will be seen as an inferior products and not sell well.

3) Brand Extension between Core Category

Brand extensions can be an excellent way to expand your brand beyond the original category. For example, Disney has brought its dream and experience to many new industries and classes, including theme parks, cruise ships, TV channel brands, movie studios, etc.

Licensing agreements are an easy way to achieve Brand Extensions: when the brand license emerges as a way to work with a partner with operational capability in the new industry. For example, many fashion brands license their brands to fragrance manufacturers and sunglasses producers to enter those markets.

But Brand Extension can also risk diluting your premium brand: there is a transparent trade-off between presence in multiple industries and becoming too available.

4) Co-branding

Co-branding is a type of brand extension where a company decides to partner with another company to create a new product, where both brands are visible. For example, you may have seen co-branded products like Coca-Cola/Starbucks or Nike/Jordan.

There are several advantages to using this strategy:

• It can add value to the existing brand by allowing it to expand into new product categories and markets. For example, Starbucks broadened its appeal by partnering with Disney on its “Disney Magic” line of themed hot cocoa mixes and beverages, including sprinkles and marshmallows.
• Co-branding can help companies increase their customer base through cross-selling opportunities (i.e., promoting complementary products together). For instance, purchasing an Apple Watch Series 4 at an Apple store might be enough for most customers—but if they’re also looking for headphones or earbuds, having Beats available will encourage them to buy those items too!

(We have a more detailed post on Co-branding here)

Pros and Cons of Brand Extensions

Brand extensions are a great way to expand your brand’s reach, increase revenue, and build brand awareness and loyalty. However, they can also be risky if not done correctly. Here are some things to consider before making a decision:

• High Risk of Brand Dilution: When you extend the same tagline to multiple products, it may dilute the trademark’s power. This is the case of brands like Pierre Cardin, once a top fashion icon, commoditized beyond repair because it was so widely available.
• Risk of Niche “Magic Ingredient Positioning”: a brand can leverage its positioning and products to become a secret ingredient in other brands’ offerings. But when the brand exploits the Magic Ingredient Factor too much, it risks becoming a magic ingredient that is empty on its own.
• Lack Of Common Brand Voice: Another issue with extending brands beyond their original lines is that they typically do so without any significant changes made on behalf of their overall goals within those areas where expansion occurs – meaning there isn’t always an opportunity for rebranding when necessary which results in inconsistent messaging across platforms (whether physical or virtual).

Conclusion

Brand extensions are a great way to generate more revenue for your business, but they can be risky if you don’t research or know what you’re doing. Make sure to keep these things in mind before making any decisions about extensions in your brand!