When Launching a New Product, It Is Better to Pursue a Brand Extension Strategy, Than to Develop a New Brand

When launching a new product, it is better to pursue a brand extension strategy, than to develop a new brand

Brand extension is a brand strategy which using the existing brand name to develop a new product or enter into a different product category market or industry. The new brand can be called as a “sub-brand”, and the original brand is referred as a “parent brand”. There are basically two different types of brand extensions. The first one is “line extension”, which means to launch a new product which is under the same product category as the parent brand. It usually involves more flavours or different sizes. For example, Coca-cola and Coca-cherry-cola. The other type is “category extensions” which means to launch a product in a totally different market to the parent brand, such as Yamaha which extends its product from musical instruments to bikes. Brand extension has become more and more popular these days, and has used by many organisations. According to Aaker (1991) , there are almost 9 out of 10 of new product introductions are actually brand extension.

There are some obvious advantages of brand extension which are to reduce costs and increase the efficiency of promotional expenditures. To launch a product using an existing brand name can avoid employing professional designer to create brand names, logos, packages etc. Similar packages and labels can decrease the production costs as well. These costs used to be a large amount of money. Also similar packages help to create a “billboard” effect in retail shops which means stocking some identical or similar packaging products together can increase their visibility, like Campbell soup. Besides, there was a research on 98 consumer brands in 11 markets, it found that sub brand spent much less on advertising than other new brand name product. (Mary W. Sullivan, June 1992). It is because there are more products using the same brand name, which would easily attract more people attentions, and even one advertisement can promote few different sub-brand products. So the costs of advertising decrease.

Although some people may think that brand extension can easily fail and hurt parent brand image, Virgin demonstrates that it is not essential. There are now more than 30 extended brands of Virgin (Uncommon Practice, 2002). It has become one of the world’s top 50 brands. The most popular extended brands are Virgin Atlantic, Virgin Trains, Virgin Mobile and Virgin Megastore etc. Will Whitehorn (Uncommon Practice 2002) who is the Corporate Affairs Director of Virgin say that “research shows that it hasn’t damaged the brand at all in the eyes of the general public.” It is because Virgin brand have high public awareness and consumers are familiar and confidence with

Virgin brand, as well as the other famous brand, Dunhill, which is the world’s leading luxury products brand. It has successfully extended the original product - cigarettes, into clothing and even male accessories. In these cases, they show that it is more likely to launch a new product under the existing brand which consumers is familiar with. As consumers normally have high expectation of the sub-brand products or services, so can also reduce the risk perceived by customers. Also, it can even improve both the parent and sub-brand image and if the company provide good quality of products and services,

Moreover, brand extension is a way to identify the growth opportunities and profitability. “More and more marketers are looking at brand extensions as a way of leveraging the value of their core brand assets,”said by Robert Sprung, who is the CEO of Tipping Sprung. (2004). It suggests that brand extensions not only aiming at the success of the new product launch, but also