Unlocking Opportunities: Can brand extensions work for your business?

Unlocking Opportunities: Can brand extensions work for your business?

Let’s say your business is going well. You’ve developed a strong brand and have a healthy customer base. But you’re looking for an effective way to grow your business. Could brand extensions be a good option?

What are Brand Extensions?

Brand extensions are when a company uses its existing brand name and reputation to introduce new products or services in different areas.

The significant advantage is that you don’t need to start from scratch. You can leverage the power of your existing brand to expand into new products or services.

It's all about building upon the trust and recognition you've already established with your customers to explore fresh opportunities and grow your business.

With an intelligent brand extension strategy, you can tap into the loyalty you've earned and ride that wave to new levels of success.

4 examples of successful Brand Extensions

When it comes to brand extensions, a few companies have used them well:

1.    Apple

Known for its innovative technology, Apple extended its brand from computers to other devices like smartphones (iPhone), music players (iPod), and smartwatches (Apple Watch). By leveraging its strong brand identity, Apple captured a broader market and created a loyal customer base across multiple product lines.

2.    Dove

Initially a soap brand, Dove successfully extended its brand into personal care products such as shampoos, conditioners, deodorants, and body lotions. Leveraging its reputation for gentle and moisturising products, Dove expanded their reach in the beauty and hygiene market.

3.    Amazon

Initially an online book marketplace, Amazon expanded its brand to include various product categories, such as electronics, clothing, home goods, and even cloud computing services (Amazon Web Services). By leveraging their established brand trust and customer base, Amazon became a one-stop destination for online shopping.

4.    Red Bull

Starting as an energy drink, Red Bull extended its brand into sports events and extreme sports sponsorships. By associating its brand with high-energy and adrenaline-pumping activities, Red Bull created a strong brand image and expanded its market presence beyond beverages.

Australian Brand Extension Failures

Of course, brand extensions don’t always go to plan. Here are three infamous Australian brand extension failures:

1.    Vegemite iSnack 2.0

Vegemite, our iconic Australian spread, faced a significant backlash when it attempted to rebrand and launch a new cheese-flavoured version called Vegemite iSnack 2.0 in 2009. Both consumers and the media lashed the company with criticism of the name and the concept. As a result of this negative public perception, the product crashed and burned.

2.    Qantas Airlines' Qantas Wallabies

Qantas entered sports sponsorship by becoming the official airline sponsor of the Wallabies, Australia’s national rugby union team. While the partnership seemed promising, Qantas faced challenges as the airline industry experienced difficulties, and the team's performance fluctuated. This brand extension did not yield the desired benefits, leading the company to reassess the value of the partnership.

3.    Dick Smith Electronics' Dick Smith Foods

The story of how Dick Smith Electronics, another iconic Australian brand, failed with its own brand extension is a sad tale. A specialist retailer in consumer electronics, the company’s founder attempted to extend the brand into the food industry with Dick Smith Foods. The line featured various food products, including spreads, sauces, and snacks. Despite initial success and a focus on Australian-made and owned products, the brand extension faced unsurmountable challenges. Company founder Dick Smith blamed increasing price competition, especially from German grocer Aldi, and shut down Dick Smith Foods in 2016.

International brand extension failures

Two of the best-known international brand extension fails are:

1.    Harley-Davidson Perfume

Harley-Davidson is renowned for its powerful motorcycles. Having carefully crafted its strong brand appeal based on a rugged, rebellious image, the company introduced a line of perfumes for men and women. It turned out that the disconnect between the product lines was too much for its target market, and the product crashed and burned into obscurity.

2.    Bic Underwear

Bic, well-known for its disposable pens and lighters, attempted to enter the fashion industry with a line of Bic-branded disposable underwear. However, consumer scepticism and a disconnect between the two types of products led to this brand extension failure.

5 Key Tips for Brand Extension Success

1. Stay true to your core values!

Make sure your brand extension aligns with your business values. Focus on what your customers already love about your brand. For example, a fitness apparel brand branching out into organic nutrition products makes perfect sense, while venturing into unrelated industries might confuse your audience.

2. Know your market

Understand your customers inside out. Dive deep into their needs, preferences, and shopping habits. This knowledge will help you identify the right opportunities for expansion so you can tailor your brand extension to suit their desires. Remember, happy customers are loyal customers.

3. Leverage your brand power

You've worked hard to build your brand, so why not use it? A brand extension allows you to leverage the trust, reputation, and loyalty you've earned, giving your new venture a head start. It's like having a secret weapon in your business arsenal.

4. Be consistent and authentic

Customers love consistency. They want to see your brand shine through in every aspect of your business. Keep your visual identity, messaging, and overall brand experience consistent across your core brand and the extension. This builds familiarity and trust, ensuring your customers feel right at home.

5. Address your customer’s concerns

When you introduce a brand extension, some customers might be worried about the quality or reliability of the new offering. Proactively address these concerns by communicating the value and benefits of the extension. Showcase testimonials from satisfied customers to instil confidence. By addressing their worries, you'll win them over.

Beware the risks of your brand extension strategy

Brand extensions can be a powerful growth strategy. But they also come with potential challenges and problems. Here are some common issues associated with brand extensions:

1. Brand Dilution

Brand dilution occurs when a brand extension fails to live up to the quality, reputation, or values associated with the core brand. If consumers perceive the extension as inferior or incongruent with the original brand, it can negatively impact the overall brand image. This can result in confusion, loss of trust, and diminished customer loyalty.

2. Cannibalisation

Cannibalisation is when a brand extension competes with and takes away market share from existing products or services within the same brand portfolio. This can lead to internal competition and reduced sales or profitability for both the core brand and the extension.

It’s essential to evaluate the potential cannibalisation effect carefully. Ensure that the new extension expands the market rather than redistributing existing customers.

3. Market Relevance and Fit

Sometimes, a brand extension may not align well with the target market. Or it may not have a precise fit within the brand's value proposition. If your new offering fails to meet the needs or expectations of your intended audience, it may struggle to gain acceptance or generate sufficient demand. It’s crucial to thoroughly assess the market relevance and fit of the brand extension to avoid wasting resources on ventures that don't resonate with your customers.

4. Overextension

Overextension occurs when a brand stretches itself too thin by introducing too many extensions across different product categories or market segments. Managing a wide range of brand extensions can become challenging. It can lead to difficulty maintaining consistent brand messaging, quality control, and customer perception. This can dilute the overall brand equity and strain resources.

5. Legal and trademark issues

Introducing a brand extension can sometimes raise legal challenges, primarily if existing trademarks or intellectual property rights are associated with similar products or services. It’s essential to conduct a thorough trademark search and seek legal advice to ensure that the brand extension doesn’t infringe upon existing rights, potentially leading to legal disputes and costly repercussions.

6. Consumer Confusion

When a brand extends into multiple categories or markets, there’s a risk of confusing consumers about the brand's core identity and offerings. If customers find understanding the relationship between the core brand and the extension challenging, it can decrease brand clarity and weaken brand perception. Clear communication and a consistent brand architecture can help minimise consumer confusion.

The secret to brand extension success

Brand extensions enable business owners to tap into the power of their existing brand. Having a good understanding of your customers and staying true to your core values makes it possible to grow your business without creating a whole new brand.

Of course, you need to tread carefully.

Always conduct thorough market research and carefully evaluate the fit and relevance of the brand extension. Manage consumer expectations and ensure consistent quality and messaging throughout the brand portfolio.

By addressing these challenges proactively, businesses can maximise the potential of brand extensions while minimising the associated risks.

Contact us if you want to grow your business through brand extensions. Call Katarina on 0415 128 804.