Profile of Great Brand Extensions

Here are some of the characteristics of GREAT brand extensions:

• Large sales
• High margins
• Very profitable for the company
• Entry into large growing 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

A great brand extension produces large sales to significantly impact the profitability of the parent company. Many brand extensions are novel but great brand extensions lead to higher profits of a substantial magnitude. This is often due to the value-added nature of these new products which contributes greater margins than the established mature parent products.

A great brand extension has to enter a large category to achieve this volume and profitability because it is likely to obtain a small share when it is launched. This is especially true for sizable companies that are looking for large percentage increases in sales and profits.

A great brand extension must be a logical fit with the parent brand. Brand extensions that are not deemed to be sensible by consumers are likely to fail or damage the brand if they succeed. Great brand extensions that do fit gain quick acceptance. They draw a reaction from customers: Why didn’t I think of this it is so obvious. As a writer said about my Clorox brand extensions: The reason (for their success) is obvious ... as soon as you read about it!

A great brand extension reinforces perceptions of the parent brand. If the brand, for example, is largely touting absorbency, then extending to categories where absorbency is an important determinant of brand choice increases the odds of success of the brand extension while reinforcing the values of the parent.

A great brand extension increases sales of the parent. Since brand extensions are, by definition, in new categories, cannibalization is usually non-existent or minimal. In contrast, the news value and advertising spending against the brand extension can increase sales of the parent given the increased ad pressure against the brand name.

A great brand extension leverages the parent brand’s strengths in ways to make it superior on important consumer dimensions to competitors in the new category. 

The way that I test for this:

“Just knowing the brand name, customers in the new category should be able to identify a reason why they might prefer the new brand extension to existing competition. “

People who bought disinfecting products thought a Clorox cleaner and disinfectant would be superior to Lysol because they understood that bleach kills germs. They did not have to receive any other information or proof. Just knowing the brand provided the reason to choose or switch brands. The brand name provided the competitive edge.

A great brand extension opens the door to new categories for the company allowing the launch of additional line and brand extensions over time. As consumer perceptions change when new brand extensions are launched, there is an increased probability that a wider range of brand extensions will become logical. Thus, companies can pursue a tactical approach of launching sequential brand extensions when consumers give permission that new products will seem appropriate.

As stated earlier: In any organization the opportunities for growth depend on how you define what business you are in. By broadening consumer perceptions of what the brand can represent, future new product opportunities emerge which were not logical or motivating to consumers previously.