Product extensions, on the other hand, are versions of the same parent product that serve a segment of the target market and increase the variety of an offering. An example of a product extension is Coke vs. Diet Coke

A successful brand helps a company enter new product categories more easily.

Brand extension benefits:

• Brand extensions let a marketer take a brand with well-known quality perceptions and associations and put it on a brand in a new category. Not only can marketers capitalize on brand awareness, they can also leverage off of the associations consumers know about the parent brand.
• Second, consumers who favorably evaluate a parent brand are more willing to try and adopt the brand extension than an unfamiliar brand in the same category. They trust a known brand name.
• Brand extensions can also help a firm’s stock prices. Some academic research has found that Wall Street attend to brand extension announcements and that whether they like them or not depends on how much they like the parent band.
• Brand extensions can also help consumers understand the core meaning of the brand name.

One of the principal dangers of brand extension is that the parent brand equity may be diluted. If there is a misunderstanding of consumers’ perception of the brand, it could be moved into a sector that consumers view as “inappropriate.” Quite often the parent brand will have been available for some time, enabling it to build a level of equity and trust with consumers. It will have strong credentials. Over time, its marketing has sought to build and secure these credentials within its target market. An irrelevant positioning has the ability to undermine the parent’s credentials.

TippingSprung’s second annual survey of brand extensions, produced in collaboration with marketing newsweekly Brandweek, revealed which extensions are most effective, which have potential to dilute the brand, and what makes some brands more extendible than others. Major trends in brand extensions were also uncovered.

The Top Brand Extensions.

• best overall brand extension – Iams pet insurance
• best liquor brand extension – Starbucks coffee liqueur
• best co-branding/ingredient branding – The Motorola ROKR phone with iTunes
• best extension of a magazine onto new platform – hardcover books from O, the Oprah magazine
• most overdue brand extendion – The Tide to Go stain removal pen
• best furniture brand extension – Antiques Roadshow
• best extension of a not-for-profit – National Geographic

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1. Develop a beneficial cobranding deal with a good partner
Someone who brings something of value to the table that you don’t have. Starbucks’s deal with United Airlines put Starbucks coffee on United flights worldwide and allowed both sides to achieve important brand objectives.

2. Reach out for a brand extension.
Time magazine had a very popular section in the back of the book that featured interesting people. A brand extension turned that section into People magazine. People magazine was a dazzling success — so much so that it launched its own brand extension: Teen People magazine.

3. Leap into new distribution channels.
Putting Starbucks on United flights cobranded the cup of coffee. Putting whole-bean and ground coffees into more than 30,000 grocery stores created a complementary channel for an existing product.

4. Jump into new product categories.
Think about Ralph Lauren’s line of paints, which are now sold in home-improvement stores. The company unearthed a new category and a new distribution channel. Martha Stewart started with a cookbook. Today, if I need garden clogs, I’ll buy them from her. Starbucks became the maker of the best-selling coffee ice cream in grocery stores around the nation in less than six months.

5. Create a new subbrand.
Nike is a big brand — but Air Jordan is a tremendously successful subbrand. Toyota is a big brand — but Lexus is such a successful subbrand that most car buyers don’t even think of it as the child of a parent company (which may be the best compliment you can pay any subbrand).

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