Characteristics of Successful Brand Extensions
Successful Brand Extensions have “Fit” and “Leverage.”

Fit: What categories consumers will accept from a brand. A brand’s stretch-ability or boundaries.

Leverage: Distinctive properties a brand “owns” that provide a competitive advantage to the brand extension in its new category.

Many manufacturers do not understand what makes a brand extension succeed. In some cases, brands are extended just to save money that would be needed to establish a new brand. In other instances, companies want to stretch a brand to as many categories as possible in hopes of just adding sales. The starting point of searching for successful brand extensions is research that profiles the consumers’ view of the boundaries and leverage of the brand.

The boundaries issue is what we call
"Fit". Research attempts to see what categories consumers will accept for the brand (its stretch-ability). For example, in our research, consumers accepted the concept of Duracell flashlights but when asked about Duracell cameras, said no. Duracell didn't have that expertise in their mind. Whether they did or not didn't matter. Perceptions dictated that Duracell cameras would be at a competitive disadvantage; the brand did not fit well there. If a brand extension is a non sequitur, it will likely perform poorly or fail.
Leverage is the impact of the distinctive properties that a brand “owns” that lead customers in the new category to perceive the brand extension as superior to existing competitive products on an important dimension.
Dissecting this defintion:
  • Parent brands considered for extension must own some distinctive properties (though not necessarily exclusive ones). Some brands “own” an ingredient - Toll House (chocolate chips), some own a benefit or attribute – Bounty (absorbency), and others own an expertise – Honda (experts in reliable engines). Brands that “own” nothing usually are not good candidates for brand extension. Being well known is not enough.
  • Some reasonable segment of consumers in the new category must want this property. The critical factor in a brand's extension success is whether the distinctive property owned by the brand is important in the new category and provides a competitive edge. If absorbency is important in peoples’ selection of napkins, then Bounty napkins might be a success. If absorbency is not important for polishing cloths, then a Bounty version will have no edge in that category. Another example: Honda has a unique expertise in reliable motorized products. A Honda lawn mower with a claim of superior engine technology and reliability offers distinctive benefits that flow from the essence of the brand’s reputation. The key here is the importance to lawn mower buyers of the attributes of engine performance and reliability. Honda lawn mowers, not surprisingly is a successful product. Note the issue is not just fit. Many mistakes are made in launching brand extensions because the consumer will “allow it.” Without leverage, a brand extension is a weak idea.
Studies conducted by Brand Extension Research have revealed that there is often an inverse relationship between fit and leverage. Brands that consumers will allow to be on a wide range of products have little leverage (own nothing special). Consumers may think, for example, the Betty Crocker brand would be fine on many food product categories. But if that brand brings little strength other than recognition and a general good feeling, it may have little leverage. In contrast, Philadelphia brand stands for cream cheese. This limits its extendibility but it means that any brand extension where cream cheese is an important ingredient (e.g., cheesecake) will find the Philadelphia brand to be a strong competitor.

Successful brand extensions are not that easy to identify, develop and position. Just sticking a known name on a new product does not guarantee its success. If it were that easy, companies with national brands would not have so much difficulty in launching big new product successes. One trap companies sometimes fall into is what we call the “great reputation” trap. Clients have told us that what their brand “owns” is a great reputation. Customers tell them that they offer a quality product, the best in its category, one of their favorites, etc. Unfortunately, hundreds of brands have a great reputation. What is relevant is whether customers in the new target category find some reason to prefer the new brand extension to current offerings. Having a great reputation for quality is not enough.

Note the supermarket version of Salsa from Taco Bell: