An introduction to the advantages and perils of brand extension, based on the published findings of Aaker and Keller.
BRAND EXTENSIONS have been central to strategic growth for many companies for decades. We’re talking actual brand extensions but also ventures into apparel and accessories and the sale of products using licensed trademarks or brand names. Leveraging a brand name is powerful and can be irresistible when considering that the cost of introducing a new name brand can be massive without any guarantee of success, whereas using an established brand name can significantly reduce the initial investment and increase the probability of success. A company’s brand (or brands) is its most viable asset and an opportunity for growth. This asset can be used to penetrate new product categories or can be licensed to others for use in new product categories. Another option is to acquire a company with a brand name that can provide the platform for future growth through brand extensions. This is a potentially flawed strategy as a brand name can fail to help an extension or, worse, create associations that hurt the extension brand. Worse still, the extension can succeed and damage the main brand by weakening existing associations or adding new, unwanted ones.
Brand associations
Consumers’ decisions to buy or not to buy are often limited to very few product attributes. It can be difficult to create a credible and sustainable point of differentiation with respect to a key attribute; especially if one’s competitors have established themselves as exponents of the very attributes you hope to capitalize on.
Quality associations
The positioning of product attributes may prove futile and can force a brand into battle with competitors — which brand is the best, which offers the best support or has the lowest number of complaints, etc. Customers become confused, disregard competing claims and make their buying decisions based on a perception of quality that is not necessarily attributed to specific associations. To compete on the basis of perceived high quality is an attractive alternative, however, achieving a perception of high quality can be more difficult than actually delivering high quality. Using established brand names is a good way to do this. Their value exists in providing a feeling of quality. Perception of quality associated with a brand name is the key to successful brand extension. The perceived quality of a main brand is also the best predictor of how consumers will value an extension brand.
Brand awareness
The first step to creating brand awareness of a new product is to develop a brand name and to associate it with the relevant product class. Brand name awareness can affect decisions to buy or not to buy and will determine whether a brand will be able to transcend product categories. A reputable and recognizable name can result in a market advantage just as a reputation for quality, great customer service or product support and high recognition within a specific product category are all major competitive advantages. As an added bonus, successful brand extensions will spend less on advertising than similar new-name brands because the brand is already known.
Boosting the main brand
Extensions can and should enhance the main brand. Instead of weakening the brand name, the extension should strengthen the brand’s image, increase its visibility and thus support the main association, however, an extension brand may develop name recognition and associations to a different consumer group in its own right.
No added value
If a new brand name is only introduced to provide recognition, credibility, and quality association, there is a substantial risk that it will be vulnerable to pricing and competition. A brand extension may initially benefit from the brand name but may suffer if the name doesn’t add significant value in its product category and a more established competitor introduces an equal or superior product. Having a designer name associated with an extension brand doesn’t guarantee success, unless it adds value to the product. A brand attribute and an associated brand name may only appear beneficial. Asking potential customers - prompted only by the brand name - if they would be inclined to purchase the product and why can be helpful. If they can put into words why the new product would be attractive, then the brand does add value to the brand extension. If they can’t, it is unlikely that the brand name will add noteworthy value.
Negative associations
There is the risk that a brand extension will provoke negative associations when a brand name doesn’t match the concept of quality of the target segment. This will lead to associations with the main brand product, which will undermine the credibility of the brand extension.
Name confusion
A name can imply a very different product than is being offered. When a company names a new product, which is supposed to suggest one thing but really suggests another, potential customers are confused. If that is the case and the brand extension is markedly different from the product class of the main brand, consider changing the name to one that more aptly describes the product’s attributes, and you may successfully lessen the association with the main brand.
Congruence – finding a match is critical
The extension brand must match the main brand. A meaningful association common to both the brand and the extension brand can provide the basis for a match. If a match is to work, the two must not clash, incongruities will distract and cause confusion or ridicule. Customers will react adversely if they feel that a brand name is exploited and differentiation is only reflected in the pricing of the extension brand. On the other hand, if it is the perception that a brand has the skills to make the extension brand and provided the gap between the main brand and the new brand is not too big, customer response will be favorable.
Perceived poor quality
Even if a brand is mostly well regarded, some consumers may perceive it as low in quality. In this case, introducing an extension brand under the same brand name may limit market penetration.
Loosen the apron strings
It can be tempting to introduce a new brand at a low cost by relying on the dominance of the main brand name because you may achieve great sales with little advertising due to the strength of the brand name but if the extension brand relies too heavily on a brand name and you skimp on advertising because of it, it may not do so well – in that case, it may be time to loosen the proverbial apron strings and allow for the extension brand to differentiate itself in application as well as in name.
Damage to brand name
A brand name is often a company’s central asset and it can be all but irresistible to decide on an extension brand because of this fact alone. One should, however consider the possible damage to the brand itself. If the extension brand fails it is typically not nearly so bad as having it succeed and damage the main brand by creating unwanted associations – or changing existing brand associations - that wreak havoc on the perceived quality of the main brand.
Unwanted associations
An extension brand will often create new brand associations, some of which can damage the brand and hurt a company’s image but this transfer of negative associations doesn’t always occur and is less likely if the original brand associations are strong. Thus, if there is a marked difference between the main brand and the extension brand, and so long as the difference is not so extreme as to be inharmonious, it is possible to sidestep the transfer of unwanted associations.
Weakened existing associations
The brand associations created by an extension brand can muddle a brand’s image. This danger is particularly serious when a brand’s principal association is a product class and synonymous with a specific product category. If a company revises its strategy by switching to cheaper products, it is important to differentiate between adding new associations and diluting existing ones. The question is whether new associations will dilute the original brand association or simply add to it. The answer depends on the strength of the original associations; some brand names are more resistant to damage or change to existing associations than others.
Quality image is disturbed
For many businesses having a reputation for quality is the basis of sustainable competitive advantage. It poses a very real threat if a widely exposed extension brand of inferior quality diminishes the goodwill associated with the main brand. Attempting to capitalize on an established brand by lending the brand name to a wide variety of products and reaching into new markets can weaken the brand itself, and may erode the main brand’s perceived status. This is especially true when a brand name is attached to a lower-priced product: you run the risk that the quality image of the main brand is affected.
Brand cannibalization
An important part of brand’s equity is its customer base. If sales of a brand extension are achieved at the expense of the original customer base, the extension sales may not compensate for the damage to the brand’s equity, resulting in a cannibalization of the main brand.
Introducing a new brand name
Failing to rename an extension brand can result in missing out on the opportunity to establish new brand equity. A new brand name offers the promising prospect of creating new associations without being burdened with existing ones, and will also be a platform for future growth.
Strategy considerations
Consider a brand extension when the following conditions are present:
Useful considerations in addressing the extension decision:
Potential for future extension brands: To avoid losing out on significant opportunities for growth, first order of business is to think beyond the first extension brand and consider other growth areas.
Detachment: Second, be aware that the risk of developing a brand extension can be reduced if the brand name is not too closely coupled with the new product. Distancing the brand name from the extension brand is particularly helpful with vertical brand extensions if the brand is a lower-quality product.
Protect and nurture
Growing one’s business by introducing extension brands is founded on the equity of the established brand name. Accordingly, it is critical that the brand name is nurtured and protected. To accomplish this, the market must be managed when it comes to decisions that affect promotions, product composition, distribution, and pricing policies, which are all factors that can affect the brand. Consequently, the concept of brand equity should be central to discussions and decisions to launch extension brands. A decision to introduce an extension brand has strategic consequences and it can have a huge impact on a company’s direction and growth and should therefore be preceded by an exhaustive examination of all implications.
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BRAND EXTENSIONS have been central to strategic growth for many companies for decades. We’re talking actual brand extensions but also ventures into apparel and accessories and the sale of products using licensed trademarks or brand names. Leveraging a brand name is powerful and can be irresistible when considering that the cost of introducing a new name brand can be massive without any guarantee of success, whereas using an established brand name can significantly reduce the initial investment and increase the probability of success. A company’s brand (or brands) is its most viable asset and an opportunity for growth. This asset can be used to penetrate new product categories or can be licensed to others for use in new product categories. Another option is to acquire a company with a brand name that can provide the platform for future growth through brand extensions. This is a potentially flawed strategy as a brand name can fail to help an extension or, worse, create associations that hurt the extension brand. Worse still, the extension can succeed and damage the main brand by weakening existing associations or adding new, unwanted ones.
Brand associations
Consumers’ decisions to buy or not to buy are often limited to very few product attributes. It can be difficult to create a credible and sustainable point of differentiation with respect to a key attribute; especially if one’s competitors have established themselves as exponents of the very attributes you hope to capitalize on.
Quality associations
The positioning of product attributes may prove futile and can force a brand into battle with competitors — which brand is the best, which offers the best support or has the lowest number of complaints, etc. Customers become confused, disregard competing claims and make their buying decisions based on a perception of quality that is not necessarily attributed to specific associations. To compete on the basis of perceived high quality is an attractive alternative, however, achieving a perception of high quality can be more difficult than actually delivering high quality. Using established brand names is a good way to do this. Their value exists in providing a feeling of quality. Perception of quality associated with a brand name is the key to successful brand extension. The perceived quality of a main brand is also the best predictor of how consumers will value an extension brand.
Brand awareness
The first step to creating brand awareness of a new product is to develop a brand name and to associate it with the relevant product class. Brand name awareness can affect decisions to buy or not to buy and will determine whether a brand will be able to transcend product categories. A reputable and recognizable name can result in a market advantage just as a reputation for quality, great customer service or product support and high recognition within a specific product category are all major competitive advantages. As an added bonus, successful brand extensions will spend less on advertising than similar new-name brands because the brand is already known.
Boosting the main brand
Extensions can and should enhance the main brand. Instead of weakening the brand name, the extension should strengthen the brand’s image, increase its visibility and thus support the main association, however, an extension brand may develop name recognition and associations to a different consumer group in its own right.
No added value
If a new brand name is only introduced to provide recognition, credibility, and quality association, there is a substantial risk that it will be vulnerable to pricing and competition. A brand extension may initially benefit from the brand name but may suffer if the name doesn’t add significant value in its product category and a more established competitor introduces an equal or superior product. Having a designer name associated with an extension brand doesn’t guarantee success, unless it adds value to the product. A brand attribute and an associated brand name may only appear beneficial. Asking potential customers - prompted only by the brand name - if they would be inclined to purchase the product and why can be helpful. If they can put into words why the new product would be attractive, then the brand does add value to the brand extension. If they can’t, it is unlikely that the brand name will add noteworthy value.
Negative associations
There is the risk that a brand extension will provoke negative associations when a brand name doesn’t match the concept of quality of the target segment. This will lead to associations with the main brand product, which will undermine the credibility of the brand extension.
Name confusion
A name can imply a very different product than is being offered. When a company names a new product, which is supposed to suggest one thing but really suggests another, potential customers are confused. If that is the case and the brand extension is markedly different from the product class of the main brand, consider changing the name to one that more aptly describes the product’s attributes, and you may successfully lessen the association with the main brand.
Congruence – finding a match is critical
The extension brand must match the main brand. A meaningful association common to both the brand and the extension brand can provide the basis for a match. If a match is to work, the two must not clash, incongruities will distract and cause confusion or ridicule. Customers will react adversely if they feel that a brand name is exploited and differentiation is only reflected in the pricing of the extension brand. On the other hand, if it is the perception that a brand has the skills to make the extension brand and provided the gap between the main brand and the new brand is not too big, customer response will be favorable.
Perceived poor quality
Even if a brand is mostly well regarded, some consumers may perceive it as low in quality. In this case, introducing an extension brand under the same brand name may limit market penetration.
Loosen the apron strings
It can be tempting to introduce a new brand at a low cost by relying on the dominance of the main brand name because you may achieve great sales with little advertising due to the strength of the brand name but if the extension brand relies too heavily on a brand name and you skimp on advertising because of it, it may not do so well – in that case, it may be time to loosen the proverbial apron strings and allow for the extension brand to differentiate itself in application as well as in name.
Damage to brand name
A brand name is often a company’s central asset and it can be all but irresistible to decide on an extension brand because of this fact alone. One should, however consider the possible damage to the brand itself. If the extension brand fails it is typically not nearly so bad as having it succeed and damage the main brand by creating unwanted associations – or changing existing brand associations - that wreak havoc on the perceived quality of the main brand.
Unwanted associations
An extension brand will often create new brand associations, some of which can damage the brand and hurt a company’s image but this transfer of negative associations doesn’t always occur and is less likely if the original brand associations are strong. Thus, if there is a marked difference between the main brand and the extension brand, and so long as the difference is not so extreme as to be inharmonious, it is possible to sidestep the transfer of unwanted associations.
Weakened existing associations
The brand associations created by an extension brand can muddle a brand’s image. This danger is particularly serious when a brand’s principal association is a product class and synonymous with a specific product category. If a company revises its strategy by switching to cheaper products, it is important to differentiate between adding new associations and diluting existing ones. The question is whether new associations will dilute the original brand association or simply add to it. The answer depends on the strength of the original associations; some brand names are more resistant to damage or change to existing associations than others.
Quality image is disturbed
For many businesses having a reputation for quality is the basis of sustainable competitive advantage. It poses a very real threat if a widely exposed extension brand of inferior quality diminishes the goodwill associated with the main brand. Attempting to capitalize on an established brand by lending the brand name to a wide variety of products and reaching into new markets can weaken the brand itself, and may erode the main brand’s perceived status. This is especially true when a brand name is attached to a lower-priced product: you run the risk that the quality image of the main brand is affected.
Brand cannibalization
An important part of brand’s equity is its customer base. If sales of a brand extension are achieved at the expense of the original customer base, the extension sales may not compensate for the damage to the brand’s equity, resulting in a cannibalization of the main brand.
Introducing a new brand name
Failing to rename an extension brand can result in missing out on the opportunity to establish new brand equity. A new brand name offers the promising prospect of creating new associations without being burdened with existing ones, and will also be a platform for future growth.
Strategy considerations
Consider a brand extension when the following conditions are present:
- Strong brand associations provide a point of differentiation and advantage for the extension brand.
- The extension brand helps the main brand by reinforcing key associations, avoiding negative associations, and enhancing name recognition.
Useful considerations in addressing the extension decision:
Potential for future extension brands: To avoid losing out on significant opportunities for growth, first order of business is to think beyond the first extension brand and consider other growth areas.
Detachment: Second, be aware that the risk of developing a brand extension can be reduced if the brand name is not too closely coupled with the new product. Distancing the brand name from the extension brand is particularly helpful with vertical brand extensions if the brand is a lower-quality product.
Protect and nurture
Growing one’s business by introducing extension brands is founded on the equity of the established brand name. Accordingly, it is critical that the brand name is nurtured and protected. To accomplish this, the market must be managed when it comes to decisions that affect promotions, product composition, distribution, and pricing policies, which are all factors that can affect the brand. Consequently, the concept of brand equity should be central to discussions and decisions to launch extension brands. A decision to introduce an extension brand has strategic consequences and it can have a huge impact on a company’s direction and growth and should therefore be preceded by an exhaustive examination of all implications.
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