Brand extension is a marketing strategy in which a firm markets a product with a well-developed image using the same brand name in a different product category. The new product is called a spin-off. Organizations use this strategy to increase and leverage brand equity (definition: the net worth and long-term sustainability just from the renowned name).
An example of a successful brand extension is Apple Inc.'s move from personal computers into the mobile phone category with the iPhone. Given the technology-driven synergies between personal computing and mobile communications, this extension was a logical step. Apple leveraged its reputation for innovative products and extended it to a new market, thus gaining a substantial foothold in the mobile phone sector.
Another illustrative case is the extension of the Virgin brand, which started with Virgin Records and expanded into airlines (Virgin Atlantic), telecommunications (Virgin Mobile), and even space tourism (Virgin Galactic). Virgin's brand extension strategy relies heavily on the strong personal brand of its founder, Richard Branson, and his reputation for challenging established markets and conventions.
Leveraging the loyalty and trust associated with its name, Toyota launched Lexus in the luxury car market. Despite being a new entrant, Lexus benefited from the positive associations of quality and reliability that Toyota had built over years, allowing Lexus to quickly establish itself as a credible competitor to established luxury car brands.
The Coca-Cola Company has made numerous extensions from its original Coca-Cola beverage, introducing Diet Coke, Cherry Coke, and Coca-Cola Zero, among others. These extensions cater to different tastes and dietary concerns while maintaining the core brand's promise of taste and refreshment.
In the fashion industry, Giorgio Armani extended its brand from high-end clothing into accessories, cosmetics, and home furnishings with lines like Armani Exchange and Armani Casa. These extensions have allowed the brand to reach different consumer segments and capitalize on Armani’s reputation for style and quality.
Conversely, brand extension can sometimes lead to "brand dilution" when the new product does not live up to the quality and standards of the original, potentially tarnishing the brand's image and credibility.
A classic instance of such risk is Harley-Davidson's attempt to license its brand to a line of aftershaves, which was met with confusion and disdain by its loyal customer base, who did not associate the rugged brand image with personal care products.
