Brand extension is when a company creates a new product with the same brand name as the original, usually closely related. It can be risky, but successful when the original brand has a good reputation and the new product has a similar focus. Product extensions are often the first step towards brand extension.
A brand extension is basically a derivative product with the same brand name as the main product. These new products are usually closely related to the original. A good example of a brand extension is Reese’s Peanut Butter. A company that was already known for its peanut butter candies has begun marketing a line of standard peanut butters, without the candies. Businesses use brand extensions to place their brand name in more places, increasing the number of times a consumer will see it during a shopping trip.
For brand extension to be successful, the original brand generally requires instant name recognition and a good reputation. It also helps if the spin-off product has a similar focus to the parent product, so consumers will associate the parent brand’s good reputation with the new product. In Reese’s case, the company produces a wide range of peanut butter candies that are available worldwide. As a brand it is almost synonymous with a product. As a result, the company was able to produce other products, such as peanut butter, chips, and peanut butter cookies. All of these products are similar to the original peanut butter candies, but different enough to have other competitors and locations in a grocery store.
A brand extension can be risky for the parent company. They often have to invest in research and equipment to make the new product, then spend money to commercialize it. A failed extension can lead to millions of dollars lost and potentially damage a company’s reputation. To see if their customer base is ready to try new products, many companies choose product extension as their first step. These are products that occupy the same position as the original product and attract the same customers. For example, Mountain Dew makes a branded soda, then offers more than ten varieties of Mountain Dew-based beverages. Each of these sodas appeals to the same market as a whole, but each has a slightly different niche audience.
Product extensions are often seen as the first step towards a brand extension. A company expands its reach in small increments through new products in its sphere of influence. As it gains market share in its original area, it can use the steady income and increase its flagship product’s consumer base to move into other areas and build brand extensions.
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