Understanding Brand Extension
“Brand extension is using the leverage of a well known brand name in one category to launch a new product in a different category.”

The philosophy of brand extension is not well understood and as a result, brand extension is often implemented incorrectly.

Note the components of this definition of brand extension:
  • It is a new product.
  • It should use a well known brand.
  • The brand should have leverage with customers of the new category.
Well known brand: One client wanted us to help extend Crosse and Blackwell (a sauce brand). Research showed people did not recognize the brand or incorrectly thought they made electric drills! (Black & Decker)!

Leverage with customers of the new category: Remember that by definition, a brand extension is a product in a different category from the parent brand. Our study of Snickers revealed that ice cream bars do not necessarily sell to the same people who buy Snickers candy bars. What is important therefore is what ice cream bar customers know of and think of Snickers. In practical terms, leverage means that customers in this new target category would perceive the new brand extension to be superior to existing competitive products on an important dimension. This is extendable equity.

Leverage is not the same thing as consumer acceptability: Marketers often spend too much effort on extending brands into categories just because consumers allow it. If our Dole research had revealed that consumers thought Dole vegetables was a reasonable sounding brand extension, does that mean it is a good one? Not necessarily. If there is no competitive advantage of Dole vegetables versus existing brands of vegetables, it will likely fail. Entering a new category is always a risky undertaking. There is a steep learning curve in production, distribution, promotion, etc. But most of all, we are competing for consumers’ business where they have loyalties to established brands. Why should anyone switch to something new and untested? That is what a new brand extension (like any other new product) must provide: a strong reason why the consumer in the new category will prefer us to what they are buying now.

Note the connection and leverage of this brand extension: