Brand Extension

A brand is the distinctive logo, symbol, or design that is aimed at building a relationship between the maker and the ultimate consumer. Brands help identify the maker of the product and allow others to assign responsibility for performance to a specific manufacturer. It also has an important value to the firm as it simplifies product handling, organize inventory, provide legal protection, and predictability and security of demand for the firm (Kotler et al., 2012).

Recently, brand extension has become an important marketing strategy for many companies. Defined, brand extension is the introduction of a bunch of new products under a firm’s strongest brand names. The discussion of the pros and cons of brand extensions goes under the scope of managing brand equity and the importance of brand reinforcement to avoid value depreciation. It is important for a company to reinforce its brand equity by consistently relaying the meaning of the product in terms of what products represent, its core benefits, the needs it satisfies, the superiority that the brand offers to its products, and which strong associations should exist in the minds of consumers (Kotler et al., 2012). As an example, Nike developed its brand elements as being “memorable and meaningful” using easy to memorize tag lines like “just do it” , innovative and “likeable” in terms of quality and design, and “adaptable” by offering a wide range of products that can be adjusted to different sporting activities. Nike also focused on using hero athletes (ex: Michael Jordan) in its marketing strategy. Using its strong brand equity and its strong market position, Nike was able to extend its brand by going into the clothing wear. This turned out to be a successful brand extension strategy as clothes complemented and improved its brand name. So why do some brand extensions succeed while others fail? What are the criteria that companies should look for when deciding on brand extension?

To be labeled as a successful brand extension, a product should have “fit” and “leverage” (Tauber, 2012). Fit is the brand’s limits or boundaries and thus defines the categories accepted by customers for a specific brand. Leverage is the characteristic features possessed by a brand that provides competitive advantage to the brand extension (“owns something special”) (Tauber, 2012). There are different reasons on why a company chooses to extend its brand; some companies extend their brand to save money, add sales and increase their revenues on the short term (brand milking) rather than long term brand building, or increase their brand equity. However, successful brand extensions should originate from the consumer’s view point or understanding to the boundaries and leverage of a particular brand. For example, when searching for the boundaries of Duracell, customers where asked about Duracell flashlights and consumers accepted it; however when asked about Duracell cameras,