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Brand Extension Strategy

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What is a brand extension strategy?

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Definition brand extension strategy

Brand extension strategy refers to the use of an established company’s name or brand to enter a new product class or industry.

Perhaps one of the most well-known giants of brand extension is Amazon. In 1995, Amazon began as an online bookseller. Since then, the brand has extended into everything from music, grocery delivery, consumer goods, movies and more. 

What are 4 possible extension strategies?

Now that you’ve got your core product, how do you extend your brand? Here are our top four ways to create a brand extension strategy.

Line extension

This refers to creating new products that already fall within a current product line or category. Think of it as upgrading an existing product or introducing new sizes or colors. This is probably the easiest strategy to implement because you’ll already have the product base. 

 It works especially well for products with a lower price point as customers often want a product in multiple sizes or colors. 

Complementary product extension

What other products go hand in hand with your product? Things that complement your existing products will increase your average basket spend. You could even compile the products into a bundle to increase revenue.  

An example would be a calendar company. They could offer complementary products, such as diaries, pens, and stickers. While you’ll be creating new products, they’ll still fall within the same niche.

Customer base extension

This is where your buyer personas and user segmentation comes into play. Focus on one specific demographic or quality to create a product to suit their needs.

Think about travel agents. Their customers love to travel. Instead of shopping around, travel agents can sell them their plane tickets and currency and travel insurance.

Company authority extension

Customers will know about your high-quality products if you have brand recognition in your industry. That means you can offer them a wide range of products they will buy. This works especially well for technology companies. 

Sky started as a telecommunications brand for television and broadband but now has a mobile phone network, streaming service, and Sky Glass smart TV. They’ve built a reputation and have expanded based on their brand recognition.

Pros and cons of brand extension strategy

By using an established brand name and recognition, companies can begin selling new products more easily because they’ve already earned consumer trust. 

If done right, brand extensions can even help to improve perceptions of the existing brand. 

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However, brand extensions must be carefully considered by the company that is looking to implement it. 

There are a few pitfalls that can spell trouble in brand extension strategy. For one, if the product category is not closely related to the company’s core product, customers may be confused or ignore the extension altogether. Or, if the brand’s new product is unsuccessful, it may lead to overall damage to the brand and its other products.

Examples of successful brand extensions

Apple - Apple began as a personal computer company. They have since extended into MP3 players, wireless headphones, credit card providers, a music streaming service, and more.

Google - Google started as a search engine in 1998. Now, they are also the top email service provider, a top business suite provider, and a leader in AI. 

Mailchimp - Mailchimp, a popular email marketing platform, recently extended into the paid display ads space (Facebook ads, etc.).

Examples of unsuccessful strategies

While there are many stories of successful brand extensions, there are plenty that didn’t work out quite as well. 

easyJet easyCinema

The company easyGroup, most famous for airline easyJet, decided to open their own cinema, charging as little as 20p per ticket. However, film distributors decided against showing their films in the easyCinema. easyGroup lost revenue and was unable to pay the rent. They rebranded as a DVD rental company, LOVEFiLM, before ultimately selling to Amazon.

Crystal Pepsi

Unsuccessful strategies can happen to the biggest companies too. Pepsi launched Crystal Pepsi back in the 1990s. Crystal Pepsi had the same cola flavor without the dye, making it crystal clear. But a mix of poor marketing and market research led to Crystal Pepsi flopping. Customers had no idea what the product was meant to be, and Pepsi soon shelved it.

Amazon fire phone

Amazon is well-known for being a go-to place to buy pretty much any product under the sun, but their own ideas don‘t always work. The Amazon Fire phone was set up to challenge Apple’s iPhone and Samsung’s Galaxy phones. But the Fire phone was too expensive to entice customers away from either competitor. The Fire phone was a case of a reactionary product launch, as opposed to innovative — it didn’t solve the problems customers actually had, merely added a product to a busy marketplace. 

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What is a Brand Extension Strategy

General FAQ

Why is brand extension a popular marketing strategy?
Brand extensions are a useful means of marketing a business. For one: companies may find selling new products easier after earning buyers’ trust and gaining a foothold in the market, as it imposes less risk on the consumer. But also a brand extension helps demonstrate a brand’s commitment to innovation and serving a wider, more diverse audience. When already an established brand name, customers are more likely to be intrigued by a brand extension from a well-known business.
When is brand extension a good strategy?
Companies may implement a brand-extension strategy when they have new products to launch but don’t want to set up a new brand. Brand extensions also have real potential for businesses who have a solid following and loyal customer base, but also want to diversify products and reach a wider audience.

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