When a brand is extended the costs and the uncertainty relating to launching a new brand name can be avoided.
What is Brand Extension?
A brand extension occurs
when an existing brand name associated with specific products is extended to and used in association with new products. In this context the term "product" is used in the broadest sense and includes a service.
Potential Benefits
There are significant risks and costs associated with launching a new product. Many new products fail. The risk can be reduced by extending an existing brand to the new products. When consumers see the core brand they will attribute its qualities to the new product.
The promotion of the new product can benefit all of the existing products in the product line. For example, the VIRGIN and NIKE brands have been extended across a diverse group of products and services. Such extensions may be carried out directly or by licensing a third party to manufacture and sell the new products under a licence from the brand owner. Typically there needs to be some logical connection between the core brand and the new product.
Developing a brand name which is derived from an existing brand name to create a family of brands with a common denominator is conceptually similar to a brand extension. An example is KODAK and KODACHROME. Care must be taken to ensure the variant is legally protected to avoid any negative impact on the distinctiveness of the lead brand name.
Risks
Unfortunately, there are potential risks associated with leveraging a brand by way of brand extension. First, if one of the products loses credibility, all of the products associated with the brand may be affected. Second, the core brand may become diluted. For example, a well-known brand associated with high-end scientific instruments would likely be diluted by the use of the brand in association with value priced printers.
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