If you’re looking to take your business to the next level, a brand extension is often the most logical strategy. It’s a great way to grow your offerings—and your customer base in turn.
Extending your existing brand equity into new frontiers can enable you to think beyond your company’s origin story and grow your business in ways that are effective as well as efficient.
In what follows, we’ll take a deep dive into all things brand extension, exploring the many varieties of this strategy and looking at some instructive brand extension examples as we go.
We’ll also break down the pros and cons for initiating a brand extension of your own, giving you the insight you need to make certain it’s a success.
- What Is a Brand Extension?
- Types of Brand Extension Strategies
- The Benefits and Risks of Brand Extensions
- How to Execute a Successful Brand Extension
- The Takeaway
What Is a Brand Extension?
A brand extension is when a company leverages existing brand equity to extend into new product lines or market categories.
Brand extensions enable businesses to expand more efficiently and effectively into new markets by leaning on brand equity they’ve already cultivated with proven, successful offerings. For this reason, brand extensions are essential to the brand strategy of many a successful company.
Think of Uber moving from transportation into food delivery, AirBnb’s shifting its focus from hospitality to include tourism through “experiences,” or Google venturing outside of its core search and advertising products into alternate arenas, with offerings like Maps, Flights, and its Pixel phones.
Often a brand extension, also known as a brand expansion, encompasses adjacent markets that are tangentially related to a company’s existing products—like Arm & Hammer’s development of oral care and laundry products, which capitalize on the essential cleaning properties of its baking soda.
Other times, brand extensions go a bit further. Consider Richard Branson’s Virgin Group, which has expanded well past its humble beginnings as a record label into completely unrelated industries like health and wellness, telecom and media, financial services, and even space travel.
Types of Brand Extension Strategies
As we’re beginning to see, there’s a wide variety of brand extension strategies to consider. And many of these approaches even overlap with one another. Let’s untangle a few of the most common brand extension strategies.
The Line Extension
A line extension, also known as a product extension, is when a business creates a wider range of iterations on a pre-existing product to broaden its portfolio.
The line extension is the most basic type of brand extension. Some would even argue it doesn’t qualify as a brand extension, because it only impacts nuanced facets of a product without pushing it into a new category. But while subtler than the other types we’ll explore below, a line extension is still a powerful way to extend brand equity into untapped reaches of an existing product line.
Within the line extension category, there are two sub-groups: horizontal and vertical. In a horizontal line extension, certain features of a product are altered, and the updated iterations are presented as novel offerings. From varying the colors and sizes of tech devices to tweaking the flavors or ingredients in food and beverage items, the adjustments made in horizontal line extensions do not change the essence of the original product.
Vertical line extensions, on the other hand, generate new “tiers” of products. These tiers can be more accessible, more premium—or even both.
The easiest way to understand the difference between horizontal and vertical line extensions is to look at examples of each.
Apple offering its MacBook Air in various shades, including “Midnight,” “Starlight,” and “Space Gray,” is a prime case of a horizontal line extension. Airline tiers, by comparison—like JetBlue’s “Blue Basic,” “Blue,” “Blue Plus,” “Blue Extra,” and “Mint”—are real-world instances of vertical line extensions. JetBlue’s various levels are segmented by quality and, as such, are each valued at a different price point.
The Companion Product Extension
Next in the brand extension taxonomy is the companion product extension. In this type of brand extension, an entirely new product is released to complement a business’s existing product line.
Companion product extensions are usually the result of a business’s natural growth into immediately adjacent markets. They are implemented with the aim of capitalizing on uncaptured demand that has arisen as a result of the business’s primary offering(s). Companion product extensions offer valuable opportunities for cross-promotion between products.
Take HubSpot. Originally, HubSpot was singularly focused on providing marketing software through its Marketing Hub offering. Later, it built a Sales Hub, a Service Hub, and more—each designed to support its initial marketing automation platform. Each of HubSpot’s extensions has provided the brand with additional opportunities to cross-sell and upsell its customers.
Companion product extensions are the most common type of brand extension, so there’s no shortage of other real-world examples. Gillette developed shaving cream to pair with its razors. Crest now not only produces toothpaste but also mouthwash and whitening systems—a perfect combination. (Unlike its failed line of frozen entrees. More on that below). Reese’s released Reese’s Puffs, a fresh take on its classic peanut butter cup candy in cereal form, to compete amidst other chocolatey breakfast options. The list is truly endless.
The Brand Prestige Extension
Also called an authority extension, brand prestige extensions enable a business to leverage its position as a category leader to jump into an unrelated lane. In this type of extension, brand equity, built from things like industry expertise, influence, and cachet, helps a business bridge the gap as it stretches into a new territory.
Dyson is a good example of a brand prestige extension, having shifted from an exclusive focus on high-end vacuum cleaners to successfully positioning itself as an expert in everything from hair dryers to lighting to fans—even air purifying headphones.
Dyson’s strategic decision was predicated on the assumption that the brand’s premium status and meticulous focus on engineering and design would seamlessly carry over to these other industries. So far, the bet has paid off.
The Lifestyle Extension
Then, there’s the lifestyle extension, which takes more incremental strategies—like companion product extensions and brand prestige extensions—to an entirely new level.
In a lifestyle extension, a brand pivots from merely offering semi-related products to delivering services that spark a sense of culture among its current and prospective audiences.
Case in point? Restoration Hardware.
Known in the past as an upscale home-furnishings company, RH (as the brand’s latest iteration is know) began investing heavily in real estate and beyond—developing everything from boutique hotels, wine bars, and spas to an impeccably designed private yacht and jet, which can be booked by customers via a soon-to-launch digital portal.
With these more experiential initiatives, the RH brand has transcended luxury furniture altogether, repositioning itself instead as an experiential luxury brand. In doing so, RH not only appeals to a more elite audience (with dramatically more disposable income), it has also positioned itself as an aspirational (yet still recognizable) brand in the eyes of less affluent audiences, capitalizing on the FOMO-driven social media algorithms that power today’s B2C market.
The Benefits and Risks of Brand Extensions
While a brand extension may feel like a natural next step for your business, it comes with pros as well as cons—both of which should be weighed carefully before embarking on the journey. As Wikipedia notes, “While there can be significant benefits in brand extension strategies, there can also be significant risks, resulting in a diluted or severely damaged brand image.”
Below, we unpack the biggest benefits and costliest risks associated with a brand extension.
The Benefits of Brand Extensions
Last year, Nielsen found that brand extensions comprised 96% of the consumer product “winners” included in their annual Breakthrough Innovation Report.
Why were brand extension products so successful? If your business is fortunate enough to have built a strong foundation of brand equity, any new products you release will have an inherent advantage in the marketplace.
The impact of this halo effect is considerable. It can facilitate an easier transition into new categories, thanks to the strong reputation of the existing brand. It can help you pitch the new product to pre-existing customers, who are already pleased with and loyal to your business. What’s more, existing brand equity also means that rolling out a new product is measurably more efficient and less expensive because you aren’t starting from scratch when it comes to building brand awareness and cultivating brand loyalty.
The Risks of Brand Extensions
While the potential benefits of a successful brand extension are many, the strategy is not without its risks. One need look no further than the scores of brand extension failures that have happened over the years, even from brands with world-class equity.
From Levi’s brief foray into the realm of three-piece suits to Colgate’s disastrous attempt at extending its brand into the frozen food aisle, it’s clear that not every brand extension is destined for greatness (or even a good idea).
When executed poorly, a brand extension has the potential to significantly weaken your master brand. Overextending your reach into entirely unrelated fields requires branding and marketing support that is beyond the capabilities of most companies. Releasing inferior products that don’t connect with your target audiences only dilutes your brand, leading to market confusion and eroded customer trust that will be readily apparent on your P&L sheets.
The truth is, the failure rate for brand extensions is fairly high—so if you’re contemplating attempting one, it’s critical to thoroughly think it through first.
How to Execute a Successful Brand Extension
If, after considering all of the angles, you think a brand extension is the right strategy for your business, the most important thing is to follow a proven and deliberate process. The following steps will help you create a compelling brand extension strategy—and bring it to market in the most efficient and impactful way possible.
1. Establish Your Goals and KPIs
Before starting, you’ll need to decide how to measure your success. Will the objective of your brand extension be to drive sales? Boost brand awareness? Capture a bigger percentage of market share in a different vertical?
Establishing real-world goals and measurable KPIs from the outset is key to the success of any brand extension.
2. Evaluate Market Trends
Once you’ve defined the criteria for a successful extension, you’ll want to get a read on the surrounding market landscape. What products are your current competitors bringing to market? What about the key players in the spaces you’re hoping to enter?
Only by understanding existing and projected competitive landscapes can you know how to differentiate your proposed extension and put yourself in the best position to capture market share.
3. Engage with New & Existing Customers
You may think you know what your customers are looking for, but you’d be surprised. In our experience, it’s always worth it to take time to actually ask customers themselves. Initiate customer research, including customer interviews and surveys, with both existing buyers and prospective clients.
What are the unique needs and challenges facing customers that you’re hoping to address with your new extension? How can you best position your new offering to speak directly to these pains and gains? Which value proposition will be central to your new extension?
It’s imperative to understand the extent to which your proposed brand extension will resonate with audiences who are already loyal to your brand. It’s equally as essential to understand what the new audiences you’ll be targeting are thinking as well.
4. Solidify and Assess Your Brand Extension Strategy
Once you have all the relevant data from the previous steps, the final step is to outline a detailed brand extension plan. It’s critical to define how your new extension will fit into your existing brand architecture, update your brand positioning to accommodate the new offering, and work with your marketing team to devise a cohesive plan for extending your brand identity.
Once these strategic elements are in place, you can think tactically, with a real-world go-to-market plan. The most important thing with any brand extension plan is to assess its viability with an honest cost-benefit analysis.
Do you have enough marketing dollars and resources to support the plan? Do you have the necessary infrastructure to roll it out smoothly? What are the risks to the existing equity of your brand if your extension flops? Are those risks worth the potential rewards of a home run?
Fully exploring all of the potential costs and benefits inherent in any brand extension strategy is key to mitigating for risk and optimizing for reward.
No matter what type of brand extension you’re looking to employ, extending existing equity into a new product line or market can boost not only your bottom line but also your brand image—but only if done right.
Bringing a new product to market—even one closely related to proven, successful offering—is no easy feat. Take your cues from the best practices outlined above and look to the successes and failures of brand extensions past before diving in.