Brand extensions offer one way of leveraging a brand's assets and equity to market new products, increase sales, and (hopefully) produce profits. While there can be significant benefits in brand extension strategies, there can also be significant risks, resulting in a diluted or severely damaged brand.
There is a great deal at stake, and companies should always proceed with caution.
The most common brand stretches include line extensions within the same category. Coke's recent launch of Black Cherry Vanilla Coke and Diet Black Cherry Vanilla Coke are good examples.
A riskier form of extension involves stretching the equities of a brand by moving into a new category. Arm & Hammer's leveraging of its well-known brand equities—from its basic baking soda into the oral care and laundry care categories—is a great example. By emphasizing its key attributes, the cleaning and deodorizing properties of its core product, Arm & Hammer was able to leverage those attributes into new categories with success. Bottom line: The move made sense to the consumer.
Yet, a large number of brand extensions into new categories have proven to be dismal failures.
Brand Steps and Missteps
Many marketing managers think that it makes sense to "transfer" the promise and equity of their established brand. But that isn't always true. Companies sometimes go too far trying to extend into categories that are not a good fit, and they risk losing credibility in their flagship brands.
Let's look at a celebrated global brand: Virgin. The company was able to stretch its considerable brand equities from the entertainment to the travel industry. Virgin Airlines is a success.