What Is Brand Extension ?
It is a marketing strategy in which producers launch new products or services in the market by using existing brand name. Brand extension helps the firms to introduce new products and influence customers because of well-developed image of the core product and customer loyalty. There are some benefits as well as drawbacks of this marketing strategy which are discussed in this post.
Benefits Or Advantages Of Brand Extension
The main advantages of brand extension strategy can be described as follows:
1. Easy Market Entry
It is very difficult for new products to enter in the market because of cut throat competition. Brand extension helps the company to introduce new products because of the image and goodwill of the existing brand.
2. It Increases The Chance Of Product Acceptance
As we know that good brand helps to increase the consumer trust and loyalty. Therefore, when company launches new product or service with existing brand name, it helps to increase the chance of product acceptance.
3. It Saves Costs
Brand extension eliminates costs required to develop new brand. It also minimizes advertising and promotional costs . So, it lowers marketing budget of the company.
4. Improve Brand Image
Brand extension increases the visibility of the brand and helps to expand market by attracting new customers. So, it helps to increase image and goodwill of parent brand.
5. It Provides Premium Pricing Opportunity
Because of good reputation and image of the core product, company may charge premium price for its new product or service. So, company can earn more money from new product.
6. It Increases Profitability
It helps to widen the market of both core and newly launched product. It reduces marketing expenses related to advertising and promotional activities. Company may charge higher price for extended product. Market expansion, premium pricing and cost saving help to maximize the profitability of the firm.
Drawbacks Or Disadvantages Of Brand Extension
The main disadvantages of brand extension can be described as follows:
1. It May Damage The Reputation Of Core Brand
If new product fails to fulfill the expectation of customers, it loose the reliability of the core brand. Negative response of extended product may make huge damage to the image of core brand.
Also Read:
Advantages And Disadvantages Of Branding
2. High Chance Of Confusion
Different variety of products or services under same brand name may create confusion to the customers. This may adversely affect the sale of both core and new product.
3. It Discourages Innovation
If producers only give focus on brand extension and try to introduce new products with same brand to save costs and time, it discourages research, development and innovation in the field of business.
4. Less Likely To Succeed
Different business and marketing research have proved that it is not suitable for all types of products. So, wrong practice of brand extension may lead to cannibalization, customer frustration and product failure.
Pros:
- Due to the goodwill of the core brand, new product can be easily launched in the market and accepted by the customers
- It minimizes the marketing expenses such as advertising cost, packaging costs, promotional costs etc.
- It helps to widen the market
- It helps to increase the image of the company which encourages the company to launch more products with same brand name in the future
- Because of less marketing costs, market expansion and premium pricing, it increases the earnings
Cons:
- It increases the possibility of cannibalization
- It discourages innovation and company may lose the opportunity to create new brand
- Image and goodwill of original brand may be damaged
