Once you have an established brand, extending its reach with new products can help you to target new markets and drive sales. If executed properly, brand and line extensions can give you greater efficiency in production and marketing while decreasing your promotion costs. There are some inherent risks, however, so be sure that you have done all of your homework before launching any type of new brand.
A line extension is a product that incorporates a slight twist on an established brand. It utilizes the older brand’s name and imagery, and is usually in the same general product category. More than 50 percent of all new product launches each year are for line extensions that simply have a new flavor, size or nutritional content, according to Iowa State University. In the food and beverage industry, for example, many line extensions are simply diet, organic, whole grain or gluten-free versions of the original brand or are simply new flavors.
Like line extensions, brand extensions also utilize an existing brand’s name and imagery. What makes them different is that they sit in a completely different product category. Companies with well-established brands that have solid consumer loyalty often use brand extension tactics, such as Starbucks with its 2009 launch of a premium ice cream line and Kodak’s foray into batteries. In order for a brand extension to be successful, it must be distinctly different from the parent brand, but related enough so that consumers are not confused. Brand extensions that were confusing for the consumer, and ultimately failed, include BIC’s perfume and pantyhose, Colgate’s frozen foods and Frito-Lay’s lemonade drink. These extensions might have had a better chance of success if they had been launched under a new brand name, although it would have cost the manufacturer significantly more money.
Line extensions are often implemented with a very specific niche audience in mind, which is often geographical in nature. McDonald’s frequently uses this technique to add menu items that appeal to a regional audience, such as McLobster Rolls in Maine and McCuban sandwiches in southern Florida. This is a good way to cater to a local audience, while leveraging a strong brand presence and minimizing the cost of bringing the product to market.
If not executed properly, brand and line extensions can be risky business. Line extensions cannot only dilute or tarnish the parent brand’s image, they can also cannibalize its sales if it is not distinct enough. In the consumer goods industry, cannibalization occurs when a line extension appears to succeed but instead of creating incremental sales, its sales are all from consumers who would have otherwise purchased the parent brand.