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Brand Extension – 10 principles

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Mentioned here before, [tag]brand extension[/tag], is the application of a brand beyond its initial range of products, or outside of its category.

Many brand extensions are simply bad business ideas. Just because consumers would accept chocolate pudding from Nestl� doesn�t mean this is a good business idea. The category may be dominated by another company. Nestl� may not be able to efficiently manufacture the product. The margins in the new category may be too small to justify the investment, etc. Launching a brand extension that is an orphan in the category can be a prescription for failure because the item cannot generate sufficient sales to be adequately supported and defended.

Considering these, here are 10 basic principles to consider, regarding brand extensions:

  1. Brands should not be extended unless they are well-known, have high awareness and a good reputation among the new target market.
  2. Brand extensions must be a logical fit with consumers� expectations.
  3. Brand extensions must have leverage in the new category � a transfer to the new product of a distinctive property associated with the parent brand that gives the brand extension an edge in the new category. The test: �Just knowing the brand name, customers of the new category should be able to identify a reason why they might prefer the new brand extension to existing competition.�
  4. Brand extensions that could create confusion or a negative image for the parent should not be undertaken.
  5. Brands that consumers use synonymously with a category (generic) should not be extended to other categories.
  6. Brands should not be stretched to too many diverse categories risking dilution in the long run. (There are cases, however, where a brand dominates a modest sized category and has no room to grow. In these instances, the upside potential of extending is worth the risk of dilution)
  7. Brand extensions that will not create positive synergy for the parent brand should not be pursued. (Ask consumers whether their opinion of the parent would be lowered if the new brand extension were available.)
  8. Brand extensions must make business sense.
  9. Every brand extension should open a category for the firm. The whole point of brand extension is to efficiently and successfully enter a new category.
  10. A critical part of every brand extension research study is developing a brand plan. Short and long term possibilities should be identified up-front.

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