Advantages And Disadvantages Of Brand Extension

The method of launching a new product by using an existing brand name on a new product in a different category is called brand extension. The new product is called a spin off.

A company using brand extension hopes to leverage its existing customer base and brand loyalty to increase its profits with a new product offering.

Examples of Brand Extension:

• Starbucks coffee company created Starbucks ice-cream which is being sold at grocery stores and is based on coffee flavours.

 Worst case scenario of brand extension

In the worst case scenario of brand extension failure, the positive image of the parent brand is affected resulting in loss and negative feedback from the consumers. This causes damage to the original brand and new ideas might not be accepted by consumers resulting in a lack of popularity.

Example of worst case scenario of brand extension:

New Coke was introduced by Coca Cola which has forgotten what the core brand was meant to stand for. It thought that taste was the only factor that consumer cared about. It was wrong. The time and money spent on research on new Coca Cola could not evaluate the deep emotion al attachment to the original Coca- Cola and this resulted in a loss for the original brand and affected the brand name.

 Advantages of brand extension

Brand Extension has following advantages:

 New product is easily accepted.

 Brand image is enhanced

 Less quality risk for customers.

 Distribution of brand increases.

 Economies of scale occur.

