Using a Brand Extension Strategy to Explore New Markets
Brand extensions are an effective way of leveraging the success of your existing products and services to create multiple new ones.
This strategy is used by many companies to quickly expand their product lineup, as well as increase brand awareness and loyalty among consumers.
In this guide, we will discuss the different types of brand extensions and how to use them for success.
A brand extension is a strategy whereby a business takes an existing product or service and uses it as the foundation for creating additional products.
This could involve using the same brand name, taking elements of the original design, adding new features to create something completely different, or simply introducing an entirely new product under your existing brand.
The most common type of brand extension is a horizontal extension, which involves taking an existing product and creating a variant or version with slightly different features.
Examples may include creating a new flavor of an existing food product, or introducing a minor modification to an existing device.
Vertical extensions involve using the same technology or concept but adapting it for use in a different field.
For example, a company may create a smartphone app for organizational purposes, then create an enterprise-level version for larger businesses.
Another type of brand extension is related extensions, which involve taking the existing product and creating something completely different but in a similar area.
An example might include creating a line of clothing based on the same design principles as a popular food product.
Lastly, there's the totally new extension, which involves creating something completely different from the existing brand but using the same name and logo to signify that it is still part of the same company.
For example, a food manufacturer might create an entirely new line of home décor items under their existing brand name.
CocaCola Brand extension strategy is a great example of how an existing brand can successfully use this strategy to create multiple new products.
In the 1990s, CocaCola created a flurry of extensions, from flavored sodas to fruit juices and energy drinks; all under their existing brand name.
This allowed them to quickly expand their product lineup and build greater loyalty among their customers.
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Approaching New Markets and Audiences with Brand Extension
Brand extension is the process of extending a brand into new product categories or markets.
Coca-Cola Energy is just one example of this strategy that can be used when a brand has built up strong name recognition and positive associations with consumers, which makes it an attractive option for companies looking to expand their offerings, increase revenue, and grow their consumer base.
Several factors should be considered when deciding whether an extension is the right strategy for your brand's growth.
These include the brand's existing equity, brand distinction, how well-suited the brand is to a new category or market, and the potential impact on existing products or categories.
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Brand Equity
Brand equity refers to the overall value and strength of a brand in terms of consumer trust and loyalty. Strong brands may be able to leverage this equity when entering new product categories or markets, making a brand extension a potentially attractive option.
Brand Distinction
At its core, brand distinction refers to the ability of a brand to differentiate itself from other brands in a given product category or market. This is an important consideration when pursuing brand extension strategies, as it can help you determine which new product categories and channels are most aligned with your brand's mission and positioning.
When considering an extension, brands should also consider whether the product or service is well-suited for alternative categories or markets and whether there is demand within that category.
When Should a Brand Adopt an Extension Strategy?
There is no definitive answer to this question, as the decision to use brand extension will depend on a number of factors specific to your organization and its products or services. However, some common considerations can indicate whether the brand is well situated for growth.
consumer demand for your brand's products within its current category or market,
customer demand for an established brand within a new category or market,
established brand equity that can be leveraged in a new category or market,
the competitive landscape within potential categories and markets, and
synergies between your brand's existing products and those in the new category or market.
When analyzing data to draw conclusions and determine if an extension strategy is the right vehicle for brand growth, organizations may conduct market research to understand consumer demand better, work with brand experts to assess brand equity and develop brand extension strategies, and collaborate with other teams within your organization, such as customer service or product development.
Regardless of when you choose to use brand extension for your brand, it is critical that you execute your strategy effectively in order to maximize its impact and achieve success.
Types of Brand Extensions
There are many different types of brand extensions that companies can use to grow their brand.
For example, if a brand is already known for making high-quality athletic apparel, it may be a good fit for the athletic footwear market or the athleisure audience.
Similarly, if there is strong consumer demand for your brand's products in an alternate or perhaps unexpected category, a brand extension could be a good way to capitalize on this demand.
Entering a New Brand Category
A brand extension strategy can involve entering a new category within the same product group, such as extending apparel from the athletic market into casual wear.
It can also involve diversifying into related categories that share similar audiences or marketing channels, such as when brand extensions involve entering new product categories that complement existing offerings, such as energy drinks using the same flavor formulation of the originating brand.
Developing a Line Extension
Another type of brand extension is line extension, which refers to the process of expanding a brand's existing product line by adding new products or variants within the same category.
For example, a company may decide to launch multiple flavors or sizes for an existing product or to introduce complementary products that can be used alongside the brand's existing offerings.
Parent Brand Extension
Parent brand extension relies on the brand equity built by the core brand within a brand hierarchy, and it expands the brand through the introduction of new products, or child brands, that share naming conventions with its parent brand.
Vertical Brand Extension
Vertical brand extension refers to the process of expanding a brand's existing product line into new categories within the same industry or market, such as when a company launches multiple flavors or sizes for an existing product.
Horizontal Brand Extension
The horizontal brand extension involves extending the brand into new industries or markets that are entirely separate from the brand's existing offerings with the same range of products or services.
Both vertical and horizontal brand extension have their advantages and disadvantages, and the approach you choose will depend on your brand's specific goals and product portfolio.
For example, a vertical brand extension may be a good strategy if your brand already has significant brand equity in a particular category, as this brand equity and its product hierarchy can be leveraged to help drive success in the new category.
On the other hand, a horizontal brand extension may make more sense if your brand is newer or less established, as it allows you to build brand awareness and equity from scratch in a new market.
Hazards and Pitfalls of Brand Extension
While extension may appear to be a simple tactic for brand development and growth, it is also important to consider the risks and potential challenges associated with extending the brand.
Brand dilution refers to a decline in brand equity as a result of overexposure or inconsistent brand messaging.
One way to avoid brand dilution is to ensure that your brand extension strategy aligns with your overall brand positioning and marketing efforts. Set clear brand guidelines to promote consistent brand messaging across all of your marketing channels.
Further marketing tactics, including closely coordinating brand messaging, advertising campaigns, marketing campaigns, and other brand promotion efforts, can also help companies maintain their overall brand image.
New Market, New Competitors
When entering a new market, brands may come up against new competitors. Completing a competitive landscape review can help you understand where your brand stands in the new market and position your brand to stand out from its rivals.
A comprehensive competitive landscape analyzes those products that are directly and indirectly in competition for the attention of your target market. Be sure to review competitors for:
Positioning,
Messaging,
Product or service features, and
Marketing tactics.
Conducting a thorough review can provide valuable insight into the brand strategies and tactics that have worked for competitors in the past and help you identify potential areas of improvement for your brand while better serving consumers.
Maintaining the Quality Your Customer Expects From Your Brand
Another key factor in avoiding brand dilution is ensuring that your brand extension maintains the core brand reputation and offers high-quality, unique products or services that will appeal to new consumers.
Further to this, brand extensions should not cannibalize existing brand offerings. It is important to consider the needs and preferences of your existing customers and avoid alienating those tried and true consumers, as well as those of your potential new customers.
Collaborate with brand experts and other teams within your organization to develop innovative brand extension offerings that meet consumer needs. This may involve conducting market research to understand consumer demand in the new category better.
Create Strong Connections to Reinforce Brand Recognition
Stretching the brand too thin or into a marketing category with only a tenuous bond can potentially dilute brand awareness and equity. It is essential that the brand name is well-known to ensure a successful expansion into the new category.
Additionally, a brand extension may require significant investment in marketing and increased marketing and promotion to build brand awareness and ensure consumer demand, as well as develop new brand messaging and positioning for each new product or service.
As with any business decision, it is critical to carefully weigh the pros and cons of brand extension before moving forward with this strategy. Ultimately, by carefully considering these factors and taking steps to avoid brand dilution, you can help ensure the long-term success of your brand extension efforts.
Tools and Tactics for a Successful Brand Extension Strategy
Marketing research is an important tool for brand extension marketing strategies, as it can help you gain a better understanding of consumer demand in the new product category, the key needs and preferences of your target audience, and any existing competition in these product categories.
Source:Adloonix
This information can then be used to inform decisions about everything from branding and messaging to product development and distribution channels, ultimately helping you create a brand extension strategy that is aligned with market demand and has the best chance of success.
Additionally, marketing research can provide key insights into consumer response to brand extensions, allowing you to fine-tune your brand extension strategies over time based on real-world data and feedback.
Tactics for marketing research include platform analytics, customer surveys, A/B testing, and brand tracking. Be sure to review the performance of your brand extension over time and make necessary changes to ensure continued brand growth and customer satisfaction.
Identifying Brand Extension Opportunities
To identify potential opportunities for brand extension, begin by examining the brand’s core values, unique selling position, brand promise, and customer needs. Consider also, competitor activity, including mining competitor reviews for opportunities to better serve their customers.
Once you have identified potential brand extension opportunities, it may be helpful to evaluate each option based on factors like brand fit, brand impact, profitability potential, and market readiness. By considering these key criteria, you can develop a brand extension strategy that complements your existing brand positioning and product portfolio while also driving growth and building long-term success.
Apple's Successful Brand Extension Strategy
Apple is a great example of a brand that has successfully used brand extension as a growth strategy. Over the years, Apple has expanded its brand to include products like computers, smartphones, smartwatches, and more. These brand extensions have been highly successful for the company due to its strong brand recognition and positive associations with consumers.
In addition to creating new product categories, Apple has also diversified into related markets that share similar audiences or marketing channels. For example, the brand's popular iPhone line of smartphones has been used in a number of other products and services, such as wireless earphones (known as AirPods) and mobile payment systems (such as Apple Pay).
Overall, Apple's brand extension strategy has been hugely successful, and the brand is now one of the most valuable in the world. Whether you are considering an extension for your own brand or simply interested in learning more about this growth strategy, Apple can serve as a great example of how to leverage brand equity and consumer demand to drive growth successfully.
Further Typical Brand Extension Examples
A clothing brand that expands into accessories, such as jewelry and handbags.
A food brand that launches a line of health bars, snacks, or meal kits.
A cosmetics brand that expands into skincare products, such as cleansers and moisturizers.
A technology brand that offers an array of connected devices, such as smartphones, smartwatches, and voice-enabled speakers.
Unsuccessful Brand Extensions
Despite the best brand management and an established brand name, sometimes even the most strategic reach fails to meet objectives.
When Starbucks attempted to break into the grocery store market, despite being well-known in the coffee industry, the brand struggled to compete. More established brands, like Folgers and Maxwell House, had also developed strong equity and longevity, reducing consumer demand for the premium Starbucks brand in the grocery store market.
Brand Extensions as a Powerful Marketing Strategy
If you are considering a brand extension, it is important to carefully evaluate these factors and determine whether stretching the brand into new markets and categories is the best growth strategy for your brand.
By doing your research, developing brand guidelines that promote consistency and clarity, and identifying complementary brand extension opportunities, you can create a brand extension strategy that meets your business goals and drives long-term success.
If you need help determining if a brand extension is right for your product, developing brand strategies, or driving growth for your brand, contact us at The Branded Agency.
Here are some very specific step by step branding guides for: Real Estate, Lawyers, Accounting, Doctors, Dentists, Optometrists, Jewellery, Makeup & Beauty, Skincare, Pet Food, Fashion and Construction.
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Other Resources
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