The Importance Of Brand Extension

Introduction Companies need to distinguish themselves in highly competitive markets. The flagship product is not the only important aspect anymore. On the other hand, several factors must be taken into account as well. Branding is one of these aspects. Branding is one of the most valuable immaterial aspects for a company. It helps companies to differentiate from others while operating in the same product category. Thereby, branding helps consumers to choose between several brands. Some companies use a parent brand with several brand extensions or so called sub brands.

In this context the term brand extension arose and began to be used widely in the 1990s (Aaker & Keller, 1990; Sunde & Brodie, 1992). A brand extension is used by companies

Nevertheless, sometimes the meaning of the term brand extension is confused with a line extension. Therefore note the difference between a line extension and a category extension or as we call it, a brand extension. A line extension is used to brand a new product within the same product category, but the product targets a new market segment. A brand extension targets a new or even the same market segment and also enters a new product category. Both a line and a brand extension are served by the parent brand (Kapferer). The definition of the term brand extension as discussed above is what we mean with a brand extension in this

They recognized the relevance as it is an opportunity to benefit from the parent brand via their brand image and brand recognition to enter new markets in a new product category (Aaker & Keller, 1990). While there are few contradictory studies (Trout and Ries, 1981, 2000), many studies reveal some major benefits of brand extension strategies. Entering a new product category with a product which is served by the parent brand require lower introduction costs, for instance price promotions, advertising and trade agreements (Collins-Dodd and Louviere, 1991; Tauber, 1981, 1988). Besides, its benefits are minimizing the entry barrier, reducing the risks and maximizing the advantage of brand equity (Van Riel, Lemmink & Ouwersloot, 2001). With those major benefits in regard, we can state that brand extension is a relevant topic of