How can brand extension increase your company's revenue?

1 What is brand extension?

Brand extension is a form of innovation that allows your company to enter new markets or segments with a product that is related to your core brand. For example, Apple extended its brand from computers to music players, phones, tablets, watches, and streaming services. Brand extension can be horizontal, meaning that the new product is in the same price range and quality level as the original one, or vertical, meaning that the new product is either higher or lower in price and quality. For instance, Virgin extended its brand vertically from airlines to trains, media, banking, and space tourism.

2 Why is brand extension beneficial?

Brand extension can help your company increase its revenue in several ways. First, it can reduce the costs and risks of developing and launching a new product, since you can use the existing brand name, reputation, and distribution channels. Second, it can enhance the value and awareness of your brand, since you can offer more variety and solutions to your customers. Third, it can create cross-selling and up-selling opportunities, since you can encourage your customers to buy more products from your brand portfolio. Fourth, it can strengthen your competitive advantage, since you can differentiate your brand from others and create loyal customers.

3 How to plan a successful brand extension?

To plan a successful brand extension, you need to follow some steps. First, you need to conduct a market research and analysis to identify the opportunities and gaps in the market, the needs and preferences of your target customers, and the strengths and weaknesses of your competitors. Second, you need to evaluate your brand identity and equity to determine how well your brand name fits with the new product category, how much value your brand name adds to the new product, and how consistent your brand image and personality are across different products. Third, you need to design and test your new product to ensure that it meets the quality standards and expectations of your customers and that it delivers the benefits and values that your brand promises.

5 What are the risks and challenges of brand extension?

Brand extension is not a guarantee of success and it can also involve some risks and challenges that you need to be aware of and avoid. One of the main risks is brand dilution, which means that your brand extension can weaken or damage your original brand image and reputation if the new product is of poor quality, incompatible with your brand values, or too distant from your core product category. For example, Harley-Davidson extended its brand to perfumes and cakes, which were seen as irrelevant and inconsistent with its masculine and rebellious brand identity. Another risk is brand cannibalization, which means that your brand extension can reduce or replace the sales and demand of your original product if the new product is too similar or substitutes your existing product. For example, Coca-Cola extended its brand to Diet Coke, which reduced the sales of regular Coke. A third risk is brand confusion, which means that your brand extension can create ambiguity or uncertainty in your customers' minds about what your brand stands for and what benefits it offers if the new product is unclear or poorly differentiated from your original product or from your competitors' products. For example, Bic extended its brand to underwear, which confused its customers who associated Bic with disposable pens and razors.