It seems that everywhere we look these days we see brand extensions. Jim Beam's name is now on barbecue sauce, Dannon is selling Dannon water. The Sony name is on everything from Playstations to Walkmans to digital phones, DVD players, notebook computers to even record labels. The list is endless- Jello Pudding Pops; Skippy Peanut Butter Bars, Ralph Lauren sheets. Bic even once tried to put its name on perfume.
What's the deal? Why do so many companies want to paste their brand name onto so many different products? What are the benefits? What are the risks? And how do we know whether doing so is a good idea?
WHY BRAND EXTENSIONS?
Brand extensions have many benefits. First, they let a marketer take a well known brand with well-known quality perceptions and associations and put it on a brand in a new category. Not only can marketers capitalize on brand awareness, they can also leverage off of the associations consumers know about the parent brand. If consumers know that Arm and Hammer Baking Soda is deodorizing, they will immediately infer that Arm and Hammer kitty litter will be deodorizing too.
Second, consumers who favorably evaluate a parent brand are more willing to try and adopt the brand extension than an unfamiliar brand in the same category. They trust a known brand name. For these reasons, brand extensions make new product introduction less expensive.
Brand extensions can also help a firm's stock prices. Some academic research has found that Wall Street attend to brand extension announcements and that whether they like them or not depends on how much they like the parent band. Brand extensions can also help consumers understand the core meaning of the brand name. When Arm and Hammer, extends its name from baking soda to deodorant, kitty litter, shoe inserts, its core "deodorizing" brand concept is enhanced. Arm and Hammer MEANS deodorizing—no matter what it is on. So, in this sense, brand extensions truly help to build equity in the brand name itself.
WHY NOT BRAND EXTENSIONS?
On the other hand, are brand extensions always a good idea? Not really.