by Brand extensions are one of the most popular strategies for leveraging brand equity. By launching new products under popular brand names, firms hope that consumers will respond more favorably to the new offering, due to their familiarity with the parent brand, positive feelings toward the parent brand, and positive attribute and non-attribute associations they have with the parent brand.
A brand is the identity of a specific product, service, or business. Brand extension denotes to the corporate activity in which companies bring in new products, new product variants or product improvements by leveraging the brand equity of the existing parent brand.
It is believed that compared to launching a new product under a new brand name, brand extensions can increase the efficiency of promotional efforts, improve access to distribution channels, and reduce consumers’ perceived risk of purchasing a product or service (Keller, 2002). Another major factor for which Companies prefer to use brand extension is lower cost. Introducing a new brand into consumer market can be relatively much higher than introducing new product or product variants under the same brand name. This cost can range above millions of rupees and can not guarantee of any success. So instead of launching entirely a new product, most companies prefer brand extension. Successful examples such as Diet Pepsi and Diet Coke benefited from the brand franchise of their parent products. Coca-Cola introduced six extensions and captured a larger market share than the original brand. For example, Coke’s extension, Cherry Coke, was successful even without considerable advertisement.
Firms use brand extensions to influence consumers’ brand choices. Brand extension is a part of the marketing strategy to break the entry barriers between product categories through the carryover of a brand’s reputation.
The other benefits of brand extension are:
- In the opinion of Sengupta, a successful brand is like a powerhouse which contains enough energy to illuminate distant territories. This accumulation of the consumer-pulling power can be used beyond the boundaries of the brand’s traditional market.
- The acquaintance of the consumers with a brand increases the chances of accepting a new product by them, under the same brand name. Thus, brand extension reduces the risk associated with launching a product under new brand in the market. In fact the brand equity of an established brand makes the introduction of a new entry inexpensive.
- According to Moorthi; customers use established brands as quality cues i.e. they use brand name as an indirect measure of quality.
- The benefit of “Spillover of advertising” works for those products which are affiliated with the brand. In case of brand extension where a new product launched under same the same brand gets benefit of the advertising done for a product already existing under that brand name. Thus, it can be said that brand extension need less advertising support in comparison with new brand launches.
- Brand extension increases the visibility of brand.
- In times of intense competition, to cover every niche, the best strategy available to companies is to go for brand extension.
- Brand extension is helpful in catering lower or premium market segment.
- When a company extends its brand name to another category, competitors react back; this creates a dynamic environment in market.
- Brand extension helps the parent brand also in many ways; first it brings clarity in brand meaning, second brand extension can contribute to the parent brand’s association by either adding or strengthening this association.
- A brand diversified in different categories performs better than mono product or mono-activity brands. While comparing between those brands which are focused and those which are diversified, Court et al (1999) reported in a study that focused brands like Dell and Levi’s earn only 0.9% higher than industry average while diversified brands such as GE, Disney etc. earn 5% more than the industry average.
- A well-established brand has a well-defined brand image. The advantage of brand extension is that it instantly communicates the salient image of the brand.
- In addition to brand associations, extension can convey quality associations.
Effect of Brand extension on Brand Equity
Brand extensions can affect the brand and its equity in one of the four different ways:
- Certain extensions destroy the brands equity.
- Certain brands exploit the brand capital.
- Certain extensions have a neutral effect.
- Certain brand extensions help develop and nurture the meaning of the brand.
