There are 10 Principles that characterize a GREAT brand extension. Therefore, these rules should guide any work in order to increase the probability of success.
What is a GREAT Brand Extension?
- Large sales
- High margins
- Very profitable for the company
- Entry into large categories
- Logical fit for consumers
- Reinforces perceptions of parent brand
- Increases sales of parent brand product
- Leverages parent brand strengths on important dimensions to customers of the new category resulting in superiority to existing competitors in that category
- Expands opportunities for line extensions and other brand extensions by redefining the business of the brand in the consumers’ minds
- Provides a foothold or significant position in a new category where the company wants to become a major strategic player
Here is the list of the 10 Brand Extension Principles:
- Brands should be extended that are well-known, have high awareness and a good reputation among the new target market.
- Brand extensions must be a logical fit with consumers’ expectations.
- Brand extensions must have leverage in the new category. This is a transfer to the new product of a distinctive property associated with the parent brand that gives the brand extension a competitive advantage in the new category. The test: Just knowing the brand name, customers of the new category should be able to identify a reason why they might prefer the new brand extension to existing competition.
- Brand extensions should be launched in large categories. They generally obtain small market shares when launched. Therefore, if the new category is large enough, this small share business can be a sizable success.
- Brands that are synonymous with a category (generic) should rarely be extended.
- Brands change consumer perceptions and this can open the door to opportunities or create risks depending on the case. Sometimes, the upside potential of extending is worth the risk of dilution – e.g., Arm & Hammer.
- Brand extensions should create positive synergy for the parent brand. (Ask consumers whether their opinion of the parent would be lowered if the new brand extension were available.)
- Brand extensions must make business sense.
- Every brand extension should open a category for the firm. The whole point of brand extension is to efficiently and successfully enter a new category.
- A critical part of every brand extension research study is developing a brand plan. Short and long term possibilities should be identified up-front.
Brand Extensions Must Make Business Sense
Here we might discuss in more detail the last three points.
Many brand extensions are simply bad business ideas. Just because consumers would accept chocolate pudding from Nestlé doesn’t mean this is a good business idea. The category may be dominated by another company. Nestlé may not be able to efficiently manufacture the product. The margins in the new category may be too small to justify the investment, etc.
Every Brand Extension Should Open a Category for the Firm Creating New Opportunities
New opportunities should be contemplated in advance before launching a brand extension. Ocean Spray Cranberry Juice Cocktail opened the door for the company to enter the bottled juice business. A myriad of other flavors followed creating a sizable business. Launching a brand extension that is an orphan in the category can be a prescription for failure. A single product in a category cannot generate sufficient sales to be adequately supported and defended.
Strategic Brand Extension Book
I suggest you take a look at my book for all the examples that illustrate this. I believe it will be of tremendous help to managers and business owners.