Brand extension is a marketing strategy according to which a company marketing a product or a service launches a new offering (product or service) that is related to the one of the existing brands of the company, but offers different benefits and/or targets a different segment. Organizations use this strategy to increase and leverage upon their brand equity. When a firm is introducing a new product, it has the following 3 choices on branding: 1. Developing a new brand for the new product
2. Using the existing brand for the new product
3. Combining the new brand and the existing brand
The use of 2nd and 3rd strategy is referred to as brand extension. Brands may be classified as one of the following: Parent Brand: If an existing brand gives birth to a brand extension, it is referred to as parent brand. Sub Brand: When a new brand is combined with an existing brand, it is called as sub brand. Family Brand: If a parent brand has links with multiple brands through brand extensions then it is called as family brand. Brand Extension Dimensions
There are a large number of ways in which brand extension can be accomplished. One of the vital differences is if the extension is in the same or different category of the product. Thus they can be classified as: vertical or horizontal extensions. Vertical extensions
Vertical extensions refer to the introduction of a related brand in the same product category but having a different price and quality balance. Vertical extensions offer the firm a quickest way to leverage upon the core product’s equity. As an extension strategy, vertical extension is widely practiced in many industries. For example, within automobile industry, the various brand models attempt to offer different price-quality bundles to attract various market segments. Often a product is extended in an attempt to just gain more of the market share. Vertical extension direction
New product introductions using vertical extensions can extend in 2 directions, upscale and downscale vertical extensions. The vertical brand extension is that type of new product introduction that seems to be carrying less risk and seemingly having more appeal to management. The new product which is being introduced is in the same category as the parent product; aims at a same market segment as the parent, and may or may not enjoy the same acceptance as the parent.
Upscale vertical extensions
Upscale extensions involve a new product introduction by the firm with higher price & quality characteristics than the original product. Downscale vertical extensions
It involves a new product introduction with lower price & quality characteristics than the original. Downscale vertical extensions may target sampling to a new segment, and bring some gain in market share.
Generally, horizontal brand extensions either use or extend an existing product’s name to a new product in the same product category or to a product category new to the organization. There are 2 types of horizontal extensions which differ in terms of their focus area. They are termed as line extensions and category extensions.
All the customers differ in terms of their usage needs. The brand has to fill the market with variety of products as per the needs of the segments. If a parent brand is used to brand a new product that targets a new segment in the market within the same product category that was previously served by the parent brand, it is called as line extension. Line extension leads to the addition of a new and distinct flavour or ingredient to the category. It sometimes might also lead to a new application for the brand or an introduction of a different form or size. For example, Bisleri is the pioneering brand in category of mineral water. Originally, Bisleri started off with 1 ltr bottle. But recently, the brand has launched bottles of different sizes and quantities.