Have you ever looked at a company and wondered how it could expand? What factors should be considered? This lesson takes a look at brand extension and how companies can expand.
What Is a Brand Extension?
You're standing in the ice cream aisle at the grocery store trying to choose what to buy. Suddenly, you see it. Snickers Ice Cream Bars! You love Snickers Candy Bars. Why wouldn't you love the ice cream? It just makes sense. This is an example of the concept we are going to talk about in this lesson, which explains how companies expand through brand extensions.
A brand is a distinguishing symbol, mark, logo, name, word, sentence or any combination of these, given to a group of products that are made by the same company to distinguish from others. A brand extension is when a company uses its leverage to launch a new product in a different category. Snickers Ice Cream Bars are a brand extension of the Snickers Candy Bars.
Brand Extension Strategies
Now that you understand what a brand extension is, we will discuss how to create one. There are eight different strategies.
1. Similar product in a different form from the original parent product - This is the strategy Snickers used to create Snickers Ice Cream Bars.
2. Distinctive flavor/ingredient/component in the new item - Hershey's chocolate milk uses this strategy. Consumers purchase this product because they know the taste of Hershey's chocolate.
3. Benefit/attribute/feature - Febreeze is known for smelling good. Extending into the car air freshener category made sense for this company.
4. Expertise - Honda is known for reliable engines, which made Honda lawn mowers a good move for the company.
5. Companion products - Aunt Jemima launched a pancake syrup to go with its pancake mix.
6. Vertical extensions - This strategy has the reputation of going backwards. For example, Rice Krispies are used to make Rice Krispies Treats. So Kellogg decided to offer a ready-to-eat version of this snack.
7. Same customer base - This strategy is used when a marketer knows they have a product that could be used by their current customers.
8. Designer image/status - Harley-Davidson found success with this strategy through its clothing line.
Examples of Brand Extension Failures
Strong companies can branch out into brand extensions. However, these extensions have to make sense. If a company does not have leverage in the category it wants to go into, it will likely fail. Let's take a look at a few famous brand extension failures.
Harley-Davidson perfume - If you've done much research on the Harley-Davidson brand, you know that it draws a loyal group of consumers. The company has launched a variety of products including motorcycles, clothing, wedding and animal accessories. All have been successful. Why not perfume? The problem was that consumers did not associate this brand with a good smell. Instead, consumers think of the smell of motor oil and sweat. Harley-Davidson learned from this mistake and is now focusing on its areas of expertise.
Gerber singles - Gerber found success in making small portion baby foods. When the company wanted to branch out, they decided to start making small portion adult foods. The problem was that adults did not want to eat mushy meat that looked identical to baby food. This brand extension goes down in history as one of the most famous brand extension fails.
Bic underwear - One of the most successful razor companies in the world decides to take on the underwear industry. What could go wrong? Everything! Who wants to wear underwear that they associate with razors? This didn't make sense, and it failed miserably.
Examples of Brand Extension Successes
As we determined before, a company has to have leverage in the category it wants to go into. Otherwise, the customer feels no incentive to purchase the product. It has to make sense. Let's take a look at a few brand extensions that found success.
Taco Bell salsa - Taco Bell is famous for offering Mexican food. It makes sense for this company to offer the brand extension of a grocery store salsa. Customers already know this brand can be trusted in this category and are willing to give it a try. It makes sense and is successful.
Duracell flashlights - Duracell is an industry leader in the battery industry. When approached about making flashlights, the company felt like this was a good option. Customers know that one of the most important components of a flashlight is the quality of the battery. Who wants to pick up your emergency flashlight when the power goes out and find that it doesn't work? Once again, it makes sense and is successful.
Honda lawn mowers - Honda has a reputation for offering strong, durable motorized vehicles. Having leverage in the motor industry made it a good move to take on lawnmowers. Customers trust that this brand will work and be a long-lasting purchase. Therefore, it makes sense and is successful.
A brand is a group of products that are made by the same company and given a particular name. A brand extension is when a company uses its leverage to launch a new product in a different category.
There are eight different brand extension strategies:
- Similar product in a different form from the original parent product
- Distinctive flavor/ingredient/component in the new item
- Benefit/attribute/feature owned
- Companion products
- Vertical extensions
- Same customer base
- Designer image/status
At the end of the video, you should be able to:
- Explain what a brand extension is
- Discuss some of the brand extension strategies
- Recall some brand extension failures