Are brand extensions good or bad?

A brand extension can be defined as the use of an established brand to introduce a new product. The theory is that having an established brand will facilitate market entry for new products and reduce the costs associated with advertising, brand recognition and the resulting value of that brand. This strategy can reduce the risk of failure of these “new” products, because new products launched with familiar symbols will be more readily accepted by consumers.

But there are several dangers associated with brand extension. Several areas have been examined where introducing a brand extension can harm it. The introduction of a new product can cannibalize existing products under the brand or the reputation / image of the brand can be harmed. It is important to consider four specific areas directly related to the negative impacts of introducing a brand extension:

• The extension will tend to dilute the brand image.
• The less fit there is between the mark and the extension, the more likely it is that there will be a deterioration of the mark.
• If the extension is of lower quality, it is more likely to damage the brand image.
• If the perceived manufacturing effort involved in producing the new product is less difficult than the original product, the extension will damage the brand.

All of these dangers point to a very real potential for harm, to the existing brand, that can occur when new products are introduced. But does that mean companies shouldn’t?

There is also a great deal to be gained by expanding and leveraging the social capital developed from an existing brand. Brand managers should be aware that creating a brand extension strategy, when supported by high-quality, similarly perceived products can enhance both the existing brand image and that of the new product, and, as a result, improve brand equity. When the market environment becomes more competitive, especially in a hostile market, it may be necessary for the business to draw on existing brand recognition and favorable customer loyalty to survive. A successful introduction of a new product, associated with a well-perceived existing brand, can further cement that brand status as a leader.

There are many things to be careful about when introducing a new product. But, if a company has an existing, positively accepted brand, and this product falls within its sphere of influence, there should be no reason not to associate the new product with the existing brand.