This newsletter comes from the hosts of The Marketing Architects, a research-first show answering your biggest marketing questions. Find us on Apple Podcasts or wherever you listen to podcasts!
This week, we're talking about brand extensions. Are they a smart way to grow or a recipe for disaster? We'll explore the research and share some surprising successes (and failures).
—Elena
Brand extensions gain 8.3% more market share on average than new brands.
Extensions also have 8.7% lower advertising costs compared to new brands entering a category. However, they still come with risks, including potential brand dilution.
When Brand Extensions Work (And When They Don't)
Brand extensions can be a powerful growth strategy, but they're not without risk. Here's what you need to know:
- Perceived fit matters: Consumers are more likely to accept extensions that align with the parent brand's image, features, or benefits. However, moderately different extensions can sometimes outperform very similar ones.
- Brand quality provides freedom: Prestigious brands like Rolex have more flexibility to extend into different categories than functional brands.
- Marketing strategy and market research are critical: Successful extensions rely on thorough market research to identify opportunities and potential pitfalls, followed by effective marketing to communicate the extension's value.
- Consider your core competencies: Successful extensions often leverage a brand's existing strengths and infrastructure.
Successes:
- Uber Eats built on Uber's logistics expertise and brand recognition.
- Lego expanded from toys to movies, video games, and theme parks by focusing on imagination and creativity.
- Dove grew from women's soap to a multi-billion-dollar personal care brand for both men and women.
Failures:
- BIC's disposable women's underwear lacked alignment with the brand's core products and values.
- Harley-Davidson perfume didn't match the brand's rugged, rebellious image.
- Evian's water bra had little connection to the brand's premium water image and lacked market testing.
The key takeaway? Successful brand extensions require a delicate balance of innovation, brand alignment, and thorough market research.
"Beyond the Core: Expand Your Market Without Abandoning Your Roots"
This book by Chris Zook explores how companies can grow through strategic "adjacency moves," offering valuable insights for marketers considering brand extensions.
It’s a balancing act.
“A strong brand name is an invaluable asset; managers must know when to exploit it, when to protect it, and how to tell the difference between the two.”
— David Aaker, Professor Emeritus of Marketing Strategy at UC Berkeley
