If you’re looking for a great way to grow your company, it might be time to focus on extending your brand. In this post, you’ll learn what a brand extension is, as well as its advantages and risks. We’ll also show you good and bad examples of company brand extensions.
What is a brand extension?
Investopedia defines a brand extension as using an “established brand name for a new product or new product category.” If done correctly, it’s a great way to increase brand awareness. However, bad brand extensions can wreak havoc on a company. We have plenty of examples of good and bad ways to extend your brand’s reach. For now, let’s look at the advantages and risks of extending your brand.
Advantages of extending your brand
After learning about what a brand extension is, it makes sense to want to do this for your business. While working to extend your brand, you can learn a lot about your company along the way. If you’re planning on starting to extend your brand, check out these four awesome advantages.
Expanding the reach of your company
A brand extension helps a company gain new customers and have loyal customers buy more products and services. By using your brand’s equity, your company is aiming to build more onto the foundation of this business.
For an example of how the right brand extensions can expand a company, McDonald’s is a good case study. McDonald’s enjoyed lots of success after launching its McCafe line of coffee beverages.
Why was the McCafe brand extension such a hit for McDonald’s? Being one of the largest fast-food chains in the world, it’s understandable to assume some of these diners (especially the morning crowd) would love to have a cafe-style coffee. By using this company’s brand popularity, it was able to reach such a large crowd of customers right away.
This concept was also a hit because McDonald’s knew how to provide products at low costs. Instead of going to Starbucks, customers already at McDonald’s could save time and money by purchasing a McCafe beverage.
Improving brand image
If done well, a brand extension can enhance a company’s image and create lots of brand advocates. Before you can create these advocates, it’s helpful to learn what they’re looking for from a company. Fortunately, there are many ways to listen to your company’s audience.
Many companies do this by taking to social media and searching for mentions of their respective businesses. By searching for what others are saying about your business on social media, your company isn’t often starting these discussions. Therefore, it’s a great way to find out what customers are saying behind your company’s back, so to speak.
We also have a great piece about how to create business surveys and why they’re so beneficial. These types of surveys are great for companies that have specific questions they need answered.
Regardless of which methods you choose, you’ll want to be asking these types of questions to find out more about what your audience wants:
- What do customers value about your business?
- What do customers dislike about your company?
- How can your company improve?
- What are competitors doing that your business isn’t?
Armani is a great example of how a luxury company can expand its image by expanding upon its brand message. This company first became known for its luxury line of clothing. After building a brand that the public associated with luxury, Armani wanted to expand upon this. Armani would achieve this goal by expanding into the luxury market with branded nightclubs, restaurants, and even a luxury Armani Hotel in Dubai. For its customers who enjoy a life of luxury, these extensions make sense.
Brand stretching creates buzz for your business
A major benefit of a brand extension is that it helps increase brand awareness. What better way to talk about a company that knows how to generate buzz than the aptly-named Bumble? Understandably, Bumble knows that dating apps aren’t for everyone.
However, this app succeeds at doing things differently from its competition. It achieves this goal by helping women meet friends with its BumbleBFF service and network with the help of BumbleBizz.
Regardless of how you feel about these apps, it’s impossible to deny their success. A recent Vogue piece reported that Bumble now has over 50 million registered users. This is a great story of how a company can use its mobile app to extend its brand.
Lower advertising and marketing costs
According to MIT Sloan Management Review, brand extensions lower introduction investments and increase your company’s success probability.
One reason for this is that, by building a brand, your company has already established an audience. If your company expands the right way, most of your audience will likely begin using a new complementary product or service.
Your company also won’t deal with the costs and time it takes to launch a product as a brand new company. Over time, your business establishes processes and learns how to complete launches.
Risks of extending your brand
There are many types of marketing strategies. With that in mind, brand extensions are marketing strategies that come with certain risks. Most of these risks are easy to avoid if you follow our tips. Here are the most notable risks that occur when a brand extension goes wrong.
Turning current customers away
At first, a brand extension can seem scary. This means entering into an area that your company likely doesn’t have a lot of experience with. If you veer too far away from what made people fall in love with your company, it can create disastrous results. Your company starts losing everything that made people fall in love with it. Once this happens, you run the risk of losing customer loyalty. After losing customer loyalty, there’s not much left for a company to lose.
As you’ll soon see, large brands can make these mistakes from time to time and come out fine. Unfortunately, the reality is that owners of small businesses might not find it so easy to recover from a branding mistake.
One of the most important things to avoid during a brand extension is going “off-brand.” This is a term given to a company that, in one way or another, does something that doesn’t align with this business.
This usually happens when a company enters into an industry or market segment it has no business being in. As a result, the company’s intended audience doesn’t make a connection with or want to purchase its products. Making matters worse, going off-brand can do even more damage by alienating a company’s audience.
We’ve got plenty of examples of what happens when a company goes off-brand below, in our bad examples section. For an example of an attempt at a brand extension that led to mixed results, consider IHOP’s recent campaign to rebrand itself as IHOB. Instead of being The International House of Pancakes, this company wanted to be The International House of Burgers.
As mentioned earlier, the results of this marketing campaign were mixed. One positive was that it led the company to see burger sales increase by 200%. In the process, it left many people understandably confused about this change. Would IHOB still offer pancakes? What about any kind of breakfast staples many of this restaurant’s clientele were familiar with? Consumers turned to social media to voice their concerns and confusion about IHOP. Several companies were also ready to take jabs at the company about its rebranding.
Sasha Strauss, someone with a history of developing brands, has a great way of explaining how to avoid going off-brand.
Overdiluting your company
It can be easy for certain companies to go overboard when it comes to brand extensions. Instead of rushing to try and come up with a million ideas, focus on a few that bring the most results for your business. It’s also wise to develop a brand message. This helps you avoid launching products and services that don’t align with the message your company lives by.
Oreo is a great example of a company who might be risking more than it’s worth to try and please everyone. Most people can instantly picture Oreo’s signature chocolate and vanilla cookie. It seems like almost every month, Oreo is offering new flavors and variations of this signature cookie to the public. As a result, this company is overdiluting itself and risks losing its brand identity.
Tips for how to extend your brand
After looking over the risks of brand extensions, it makes sense to be a bit wary of trying this for yourself. By avoiding this brand marketing tactic, you risk leaving a lot of results on the table. You’ll stay away from many of these risks by checking out the tips below.
Offer products and services that complement each other
Most logical brand extensions start when a business offers new products or services that pair well with what it currently offers. After a bit of research, it becomes easier to make logical decisions about what works as a brand extension and what doesn’t.
A great example of a complementary brand extension took place when Reese’s launched Reese’s Puffs cereal. It wasn’t a stretch of the imagination to assume that a sugary candy would take off as a sugary breakfast cereal. Fortunately, this decision paid off for Reese’s.
Consider a new delivery method
Extending your brand doesn’t have to mean entering into markets that seem unfamiliar to your company. Dr. Edward M. Tauber, a recognized branding expert, recommends that changing your company’s delivery method is a safe and great way to create a brand extension.
In his piece, “Extendonomics: 10 Ways to Extend Your Brand,” Dr. Tauber notes Highlights as a company that knows how to extend its brand. This children’s magazine is one that many people remember growing up with. Whether reading it at home, in school, or at a crowded doctor’s office, many adults remember this magazine.
As the popularity of digital media and applications grew, this company needed a way to stay relevant. So, Highlights created a mobile app that allowed users to play hidden image games.
Partner with another business
With the right partnership, licensing your company in a way that makes sense can be a great way to extend your brand. Certain companies create a “brand mash-up” by licensing their brands to other companies. It’s understandable if this sounds a bit confusing. Let’s look at a quick example of what a good licensing partnership can do for all parties involved.
In 1977, Star Wars debuted in theaters. The massive popularity of this movie meant that it didn’t have to depend on licensing deals. However, Bernard Loomis, who was head of the Kenner Toys, was willing to pay any price to establish a contract to be the official producer of Star Wars toys.
The results of this brand partnership led to 50,000 sales during the toy series’ initial run. Making things even better, sales would continue to climb for this toy series. By the end of 1978, Star Wars action figures would create $100 million in revenue for Kenner Toys. Even today, in the right condition, action figures in this series of toys can be worth up to $150,000.
Good examples of brand stretching
While researching how to extend your brand, it’s helpful to look at past examples of how companies achieved this goal. Here are four great examples of how companies have successfully extended their brands.
The Walt Disney Company knows how to extend a brand
If there was a business that could write a book on how to extend a brand that people love, it might be The Walt Disney Company. Because this company succeeds in so many mediums, it’s difficult to think of how this business started. Here’s a brief history of the company.
- In 1923, The Walt Disney Company began as a film and animation studio.
- Throughout the 1920s and 30s, this company released many classic animated films.
- In the late 1940s, The Walt Disney Company began producing live-action movies.
- In 1955, Disneyland opened in California.
- In 1965, The Walt Disney World Resort opened in Florida.
- In 1983, The Disney Channel began broadcasting.
- In 2006, Disney purchased Pixar.
- In 2009, Disney acquired Marvel.
- In 2019, Disney launched Disney Plus, its streaming network
What is there to learn from this quick history of The Walt Disney Company? One reason for its success was due to strategic partnerships and acquisitions. This business also understood the importance of using its brand’s reputation to begin an effective merchandising strategy. The image below illustrates how well a company can do if it knows how to extend its brand correctly.
Dove’s Real Women and Men + Care campaigns
As many companies projected the same definitions of “beauty,” many women became disengaged from these brands. Fortunately, Dove connected with this demographic after launching its 2004 Real Women campaign. What were the results of this company creating a more personal connection? A 700% increase in sales during the first half of 2004.
After this home run in the world of branding, Dove created another campaign. This time, Dove would place its focus on a male audience. Launching in 2010, Dove capitalized on an opening in the men’s grooming market. Instead of aiming for a younger male demographic, as similar companies were, it successfully targeted adult males.