Brand extension is a marketing concept that is used by companies to market new products using its already established brand. In simple words in the case of brand extension the company take advantage of goodwill which is created by its successful brand over the past many years to market its new product which has no or little relation with the existing successful brand. In order to understand this concept and its implications, one should look at some of the advantages and disadvantages of brand extension –
Advantages of Brand Extension
Brand Extension requires Less Marketing Effort
The first and foremost advantage of brand extension is that company will require less marketing effort because when you have already an established brand then it is easy to market a new product under the established brand as compared to creating a completely new brand. In simple words, brand extension is like a relay race as in relay race you do not have to run the complete race rather run only a part of the race in the same way new products do not require extensive marketing they just have to carry forward the goodwill of the brand.
Capture Market Share
Another benefit of brand extension is that due to brand extension it is easy for a company to capture market share in other unrelated industry because when you have a successful brand and you foray into another industry then consumers have faith in the brand and they will be readily consuming the product and hence the company can easily capture market share of other industry which in turn will help in the long term growth of the company.
Diversification
Brand extension can be a good strategy if the company wants to have diversification because dependence on one industry can be dangerous as dynamics of the industry can change anytime making the brand as well as company vulnerable to change which can be avoided if the company make use of the successful brand in creating demand and interest of consumers in new products of other industries and thus avoiding dependence on one industry only.
Disadvantages of Brand Extension
Complacency Factor in Brand Extension
The biggest drawback of brand extension is that it may create complacency in the minds of the people working in the company because they take it for granted that the new product launch will be successful due to the brand extension strategy. In simple words just like in a relay race you have to perform also and you cannot depend on other’s good performance in the same way the new product should have its uniqueness and features instead of focusing only on the brand extension.
Damage to Existing Brand
The thing with dreams is that we always take into account good things happening and forget that things can go wrong also the same thing applies to brand extension also because if it does not succeed then it will not only result in the failure of the new product but also will damage the existing brand as people will lose confidence on the company’s products. In simple words, it will have a contagion effect on the overall brand of the company and is not limited to the new product only.
Lack of Individuality
Brand extension can do injustice to the individuality of the new product also because every product has some uniqueness but due to brand extension that uniqueness may be lost and that product will always be in the shadow of a famous brand which will not do justice to the actual potential of the new product.
As one can see from the above pros and cons of brand extension that it is a very important strategic decision and that is the reason why the company should be careful because chances of this decision backfiring and damaging the existing brand also are high which is the reason why the company should carefully analyze the pros and cons of brand extension and then only should take any decision.