To Extend or Not to Extend: Advantages and Disadvantages of Brand Extension Strategy

Abstract

Launching new products is one of the most used strategies for companies to grow. While line extension is the less risky one, more companies are using the strategy of brand extension as offering more opportunities for the business. The following article is intended to present the strategy of brand extension with its advantages and disadvantages. The purpose is to drive the attention of the management to what they can achieve while entering more categories with the same brand and which are the main risks they have to try to prevent or overcome and how they can do so. The main advantages being investigated are transferring of the brand associations to the new product, increased brand awareness, decreased marketing budget, economies of scale, increased brand visibility, consumer acceptance, prolonged brand life cycle, increased brand equity. On the other hand the company should be careful against diluting the image of the parent brand, adding negative associations, cannibalization, increased consumer expectations and the possibility of increased costs. By maximizing the first ones and minimizing the second group the brand can find place amongst some of the best practice examples which are to be seen in the article.