Abstract:
Brand Extension Strategies are frequently undertaken by the companies when they launch any new product. The companies try to reap benefit out of their established Brand Name and Brand Equity. Although the Brand Extension Strategy can generate a positive impact, it also involves significant risks.Brand Extension Strategy refers to the strategy in which a company uses the same Brand Name in order to promote products of different category. Many reputed companies of the world adopt Brand Extension Strategy with the aim of increasing Brand Equity.
It is commonly found that, a company which has already established its brand name in the market for a specific product category, uses the same Brand Name at the time of launching a new product of different category. In this case, the new product easily develops an acceptance range as the customers are already familiar with the Brand Name. The success of this Brand Extension Strategy depends on the extent of customers' association with the Brand Image. In the case, where Brand Loyalty is significantly present among the customers, there are strong chances that the new product will be able to gain substantial market share.
So, it is very clear that there are certain benefits of Brand Extension Strategy. If a company launches a new product with a new Brand Name then, the gaining significant market presence becomes a time consuming affair as the firm is required to establish the new brand in the market through a completely new way of Brand Positioning. Establishment of a new brand in the market not only requires time but also involves great expense. The Brand Extension Strategy can help the companies in saving both time and money. Moreover, this strategy lowers the financial risk of launching a new product as the new product is marketed using the established Brand Equity of the parent brand. The customers' already existing perception about the brand helps the company in marketing the new product.
But it should be mentioned here that along with the benefits there are certain risks associated with Brand Extension Strategy. A wrong Brand Extension Strategy can negatively affect the Image of the parent Brand. Poor communication programs undertaken for promoting the new product can devaluate the Brand Equity. It is surprising but true that, the failure rates of Brand Extension Strategies are higher than the success rates.
