Brand extension or brand stretching is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category. The new product is called a spin-off.
Organizations use this strategy to increase and leverage brand equity (definition: the net worth and long-term sustainability just from the renowned name). An example of a brand extension is Jello-gelatin creating Jello pudding pops. It increases awareness of the brand name and increases profitability from offerings in more than one product category.
In the 1990s, 81 percent of new products used brand extension to introduce new brands and to create sales.Keller, K.L. (1998), "Strategic Brand Management: Building, Measuring, and Managing Brand Equity", Prentice-Hall International, Hemel Hempstead. Launching a new product is time-consuming but also needs a big budget to create brand awareness and to promote a product's benefits.Tauber, E.M. (1981), "Brand franchise extensions: new products benefit from existing brand names", Business Horizons, 24(2), pp. 36-41. Brand extension is one of the new product development strategies which can reduce financial risk by using the parent brand name to enhance consumers' perception due to the core brand equity.Muroma, M. and Saari, H (1996), "Fit as a determinant of success", in Beracs, J., Baure, A. and Simon, J. (Eds), Marketing for Expanding Europe, Proceedings of 25th Annual Conference of European Marketing Academy, pp. 1953-63.Chen, K. F., & Liu, C. M. (2004), "Positive brand extension trial and choice of parent brand." Journal of Product & Brand Management, 13(1), pp. 25-36.
While there can be significant benefits in brand extension strategies, there can also be significant risks, resulting in a diluted or severely damaged brand image. Poor choices for brand extension may dilute and deteriorate the core brand and damage the brand equity.Aaker, D.A.(1990), "Brand extensions: 'the good, the bad, the ugly'", Sloan Management Review, pp. 47-56.Martinez, E. & Pina, J.M. (2003), "The negative impact of brand extension on parent brand Image." Journal of Product & Brand Management, 12(7), pp. 432-448. Most of the literature focuses on the consumer evaluation and positive impact on parent brand. In practical cases, the failures of brand extension are at higher rate than the successes. Some studies show that negative impact may dilute brand image and equity.Loken and John, 1993Roedder-John, D., Loken, B. and Joiner, C. (1998), "The negative impact of extensions: can flagship products be diluted?", Journal of Marketing, 62 (1), pp. 19-32 In spite of the positive impact of brand extension, negative association and wrong communication strategy do harm to the parent brand even brand family.Aaker, 1990; Tauber, 1981; Tauber, 1988.
A brand's "extendibility" depends on how strong consumer's associations are to the brand's values and goals. Ralph Lauren's Polo brand successfully extended from clothing to home furnishings such as bedding and towels. Both clothing and bedding are made of linen and fulfill a similar consumer function of comfort and hominess. Arm & Hammer leveraged its brand equity from basic baking soda into the oral care and laundry care categories. By emphasizing its key attributes, the cleaning and deodorizing properties of its core product, Arm & Hammer was able to leverage those attributes into new categories with success. Another example is Virgin Group, which was initially a record label that has extended its brand successfully many times; from transportation (aeroplanes, trains) to games stores and video stores such as Virgin Megastores.
Product extensions are versions of the same parent product that serve a segment of the target market and increase the variety of an offering. An example of a product extension is Coke vs. Diet Coke in the same product category of soft drinks. This tactic is undertaken due to the brand loyalty and brand awareness associated with an existing product. Consumers are more likely to buy a new product that has a reputable brand name on it than buy a similar product from a competitor without a reputable brand name. Consumers receive a product from a brand they trust, and the company offering the product can increase its product portfolio and potentially gain a larger share in the market in which it competes.
Types
Brand extension research mainly focuses on consumer evaluation of extension and attitude toward the parent brand. In their 1990 model, Aaker and Keller provide a sufficient depth and breadth proposition to examine consumer behaviour and a conceptual framework. The authors use three dimensions to measure the fit of extension. First, the "Complement" refers to consumers taking two product classes (extension and parent brand product) as complementary in satisfying their specific needs.Humperson and Quandt, 1980 Secondly, the "Substitute" indicates two products have the same user situation and satisfy the same needs, which means the product classes are very similar and that the products can act to replace each other. Lastly, the "Transfer" describes the relationship between extension product and manufacturer which "reflects the perceived ability of any firm operating in the first product class to make a product in the second class"Aaker, D.A. & Keller, K.L. (1990). "Consumer Evaluations of Brand Extensions," Journal of Marketing, 54(1), p. 30 The first two measures focus on the consumer's demand and the last one focuses on the firm's perceived ability.
From the line extension to brand extension, however, there are many different types of extension such as "brand alliance",Rao, A.R. & Ruekert, R.W. (1994). "Brand Alliances as Signals of Product Quality," Sloan Management Review, 36(Fall), 87-97. co-brandingMilberg, S.J., Park, C.W. and McCarthy, M.S.(1997), "Managing negative feedback effects associated with brand extensions: the impact of alternative branding strategies", Journal of Consumer Psychology, 6(2), pp. 119–40.Kalafatis, S., Remizova, N., Riley, D. and Singh, J.(2012), "The Differential Impact of Brand Equity on B2B Co-branding", Journal of Business and Industrial Marketing, Vol. 27, Issue 8, pp. 623–63. or "brand franchise extension".Tauber, 1981, p.36. Tauber (1988) suggests seven strategies to identify extension cases such as product with parent brand's benefit, same product with different price or quality, etc. In his suggestion, it can be classified into two category of extension; extension of product-related association and non-product related association.Tauber, E.M. (1988), "Brand leverage: strategy for growth in a cost-controlled world", Journal of Advertising Research, 28, August–September, pp. 26-30. Another form of brand extension is a licensed brand extension. In this scenario, the brand-owner works with a partner (sometimes a competitor), who takes on the responsibility of manufacturing and sales of the new products, paying a royalty every time a product is sold.
Brand extension can also be done through marketing strategies such as guerrilla marketing, where brands can promote their goods or services through unconventional means such as emotional connections to the brand by tackling social problems/dilemmas. These emotional connections are generally done through social experiments where brands express their concern and offer small solutions thereby making the brand standout and seem righteous. Guerilla marketing is a very effective way of connecting with the target market and reaching out to different markets, this extension into the vast demographic while creating brand awareness is highly effective for brands
Categorization theory Researchers tend to use "categorization theory" as their fundamental theory to explore the effects of brand extension.Park, C.W., McCarthy, M.S. and Milberg, S.J. (1993), "The effects of direct and associative brand extension strategies on consumer responses to brand extensions", Advances in Consumer Research, 20, pp. 28-33.Park, C.W., Jun, S.Y. and Shocker, A.D. (1996), "Composite brand alliances: an investigation of extension and feedback effects", Journal of Marketing Research, 33(4), pp. 453-66 When consumers are faced with thousands of products to choose amongst, they are not only initially confused, but try to categorise by brand association or image given their knowledge and previous experience. A consumer can judge or evaluate the extension product with his or her category memory. Consumers categorise new information into specific brand or product class label and store it.Park, C.W., Milberg, S.J. and Lawson, R. (1991), "Evaluation of brand extensions: the role of product feature similarity and brand concept consistency", Journal of Consumer Research, 18(2), pp. 185-93.Sheinin, D.A. and Schmitt, B.H (1994), "Extending brands with new product concepts: the role of category attribute congruity, brand affect, and brand breadth", Journal of Business Research, 31, pp. 1-10. This process is not only related to consumer's experience and knowledge, but also involvement and choice of brand.Nedungadi, P and Hutchinson, J (1985), "The prototypically of brand: relationship with brand awareness, preference and usage", Advances in Consumer Research, 12, pp. 498-503. If the brand association is highly related to extension, consumer can perceive the fit among brand extension. Some studies suggest that consumer may ignore or overcome the dissonance from extension i.e. perceived misfit with parent brand is ignored, and does not cause dilution of parent's brand equity.Kim, J.Y. (2003). "Communication message strategies for brand extensions," 12(7), pp. 462-476.Roedder-John et al., 1998.
Failure Literature related to negative effect of brand extension is limited and the findings are revealed as incongruent. The early works of Aaker and Keller (1990) find no significant evidence that brand name can be diluted by unsuccessful brand extensions.Romeo, J.B.(1991), "The effect of negative information on the evaluation of brand extensions and the family brand", Advances in Consumer Research, 18, pp. 399-406. Conversely, Loken and Roedder-John (1993) indicate that dilution effect do occur when the extension across inconsistency of product category and brand beliefs. The failure of extensionSingh, J., Scriven, J., Clemente, M., Lomax, W. and Wright, M. (2012), "New Brand Extensions: Patterns of Success and Failure", Journal of Advertising Research, Vol. 52, No. 2, pp. 234–242 may come from difficulty of connecting with parent brand, a lack of similarity and familiarity and inconsistent IMC messages.
"Equity of an integrated oriented brand can be diluted significantly from both functional and non-functional attributes-base variables", which means dilution does occur across the brand extension to the parent brand.Chen, C.H. Chen, S.K. (2000). "Brand dilution effect of extension failure - A Taiwan study." Journal of Product and Brand Management. 9 (4), p243-254. These failures of extension make consumers create a negative or new association relate to parent brand even brand family or to disturb and confuse the original brand identity and meaning.Ries and Trout, 1981; Loken and Roedder-John, 1993.