Brand Extension

Today the brand name is important when launching new merchandise or a new product category (Blomquist and Holm 2004). According to Blom quist and Holm (2004) there is often difficult competition for organizations today within most every industry due to the fact that an increasing number of products become more similar to one and other. They continue to claim that when the margin decreases, the brand name importance increases for the consumer.

A greater position for the brand and an increasing influence on the perceived value from the brand has made extensions a popular strategy for expansion, especially in fast- moving lines of business (Ambler and Styles 1997). Massive costs and risks are associated with creating a new brand and product lines whereby m any attempts fail, extending an existing brand is then seen as a cost efficient method with lower risks. Extensions can be described as a strategy to launch new products within a current product-class or outside a product-class, with or without the corporate brand of the company (Chen and Liu 2004).

Marketers with multiple and diverse product-lines have the opportunity to use extension as an expanding-strategy. When expanding there is according to Tauber (1981) different expansion methods where two methods are extension-strategies, brand extension and line extension. Line extension is a minor addition within the same product category and within the corporate brand, such as introducing a new taste for a food product (Tauber 1981). Instead, brand extension aids in generating consumer acceptance for a new product by connecting the new product with a known brand or company name, but it also risks diluting the corporative brand image by reducing or harming the equity which has been built up within the corporate brand name (Aaker, 1990).

By investing on the reputation of established brands, companies can save high costs of launching new extensions instead of new brands (Xie, 2008). Aaker and Keller (1990) states that the chance of success for an extension is increased because an extension has an established br and positioning to use. Brand extensions should not be considered as guarantees for product success but a model to be able to get a greater starting point, extensions has been increasingly adopted in consumers view on the goods.

Brand extensions can be broadly classified into two:

1. Horizontal brand extension

2. Vertical brand extension

According to Kim and Lavack (2001) horizontal brand extension is dealing with factors when an existing brand is an application on a new product in a new category for the organization. An example is Ivory soap introducing