Are Brand Extensions Good Or Bad?

A brand extension can be defined as using an established brand to introduce a new product. The theory is that having an established brand will ease entry into the market for new products and will reduce the costs associated with advertising do to brand recognition and the equity ensuing from that brand. This strategy can decrease the risk of failure of these ‘new’ products, because consumers will more readily accept new products launched under known symbols.

But there are a number of dangers associated with brand extension. Several areas have been examined where introducing a brand extension can actually hurt the brand. Introducing a new product can cannibalize the existing products under the brand or, the reputation/image, of the brand can be harmed. Four specific areas directly relate to negative impacts of introducing a brand extension are important to consider:

  • The extension will tend to dilute the brand image
  • The less fit there is between the brand and the extension the more likely there is to be brand deterioration
  • If the extension is of a lesser quality it is more likely to harm the brand image
  • If the perceived manufacturing effort involved in producing the new product is less difficult the original product the extension will harm the brand

These dangers all point to a very real potential for harm, to the existing brand, that can occur when introducing new products. But does that mean companies should not do it?

There is also much to be gained from extending, and taking advantage, of the equity developed from an existing brand. Brand managers should be aware that building a brand extension strategy, when supported by high quality products, which are similarly perceived, can enhance both the existing brand’s image as well as that of the new product, and as a result, enhance brand equity. When the market environment becomes more competitive, especially in a hostile market, it may be necessary for the company to call upon existing brand recognition and favorable customer loyalties to survive. A successful new product introduction, associated with an existing well perceived brand, can further cement that brand’s status as a leader.

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