What Is Brand Extension? Definition, Types and Examples

Updated February 3, 2023

Brand extension can allow companies to reach a wider customer base by offering new products under an existing name. This marketing strategy is a technique to expand upon a parent brand and increase an overall brand image. Understanding the different types of brand extensions can help you manage your brand and find one that's right for your company.

In this article, we define brand extension, review the advantages and disadvantages of them and provide a list of different types of brand extensions.

Key takeaways:

Brand extension refers to an established company developing a new product under the same brand name as their other products.
Businesses that maintain commonalities between their products and remain consistent in their quality may find success with this approach.
There are many types of brand extension, and reflecting on the right one for your organization could help you execute an effective brand extension.

What is brand extension?

Brand extension is a marketing strategy in which a company uses an established brand name on a new product in a related or unrelated category. Releasing an item under a well-known company brand might allow the launch to receive support from existing loyal customers. This strategy, also known as brand stretching, matches the values of the existing company, or parent brand, to appeal to a similar customer base, while also generating new leads by entering a new market.

Advantages of brand extension

Here are some of the benefits of brand extension:

Grows audience: Brand extension often allows companies to reach new customers and demographics.
More earnings: It can also lead to increased sales due to the increased opportunities and potential for new markets, leading to overall boosted profit margins and equity.
Inexpensive marketing: Because brand extension relies in part on existing fans, organizations can save on money usually spent on promoting and marketing their company.
Trust from customers: It usually takes some time for new products to earn customers' trust, but consumers may be more open to trying a new product from a brand with established credibility.
Promotes the existing products: Releasing a new product may help garner attention to your brand, which serves as marketing for your existing products.

Disadvantages of brand extension

Here are some of the disadvantages of brand extension, along with tips for mitigating risk:

Potential changes to the parent brand's image: It could change your brand's reputation if your new product is less successful than your original offerings, but it can help to ensure the new product matches your vision and promises.
Possibility of over-saturation: Participating in too many industries could cause brand dilution as consumers tire of seeing your brand, so consider competing in a market that's related to your current market.
Smaller marketing budgets: Some organizations may rely too much on brand recognition to attract customers while saving money on marketing, so diversify your marketing tactics to generate interest in your product.

Types of brand extensions

Here's a list of some of the top types of brand extensions:

Product extension

Product extension occurs when a business releases new products separate from what they're currently offering. Often, the secondary item is one that complements the first one, referred to as a companion product. For example, a coffee bean roaster may decide to launch creamer in addition to their coffee beans.

Line extension

Businesses may offer a line, or product form, extension by providing more options for their current product. They may create a slight variation by offering something for a specific demographic or providing different size options. For instance, a toothpaste company may offer toothpaste for regular brushing and one for those with sensitive teeth. A soda company may offer a 12-ounce bottle option in addition to their normal two-liter option.

Customer franchise extension

An extension in customer franchise may occur when a business has a loyal customer base and is able to launch products beyond its current product category, targeting the same group of buyers. This gives the company a broader range of products while relying on the trust they've built with this market demographic. For example, a store selling soccer cleats might begin selling other sports gear to target athletes and active individuals, with whom they already have a reputation.

Company expertise extension

Company expertise extension is when a company creates related product categories based on a certain skill they possess. They can then use their expertise and reputation in another product category to reach more audiences. For example, a company may start out selling kitchen appliances and be popular for its innovative and visually appealing designs. They then may expand into offering home furniture with the same distinct style.

Brand distinction extension

Brand distinction extension occurs when a business has a unique brand known for its benefits. Using this distinctiveness, the company may begin serving new niches and industries with the same competitive advantages that brought it recognition originally. A way a business could do this is by offering products for distinct populations, such as an organic hand soap company providing special soaps for those with dry hands.

Transfer of component extension

If the public knows a brand for a distinct feature of their products, like their eco-friendly ingredients, bright color or soft fabric, the brand may offer a different product that also has this feature. These companies use their notable taste, ingredient or another element in other products to attract those who already like this feature on the existing product. For example, a perfume company with a wild vanilla scent may begin selling laundry detergent and candles with a wild vanilla smell.

Extension by leveraging a lifestyle

Extension by leveraging a lifestyle revolves around creating a culture and set of values for consumers. This gives customers something to relate to visually, such as an adventurous spirit or hardworking mentality. Once a company creates a recognizable lifestyle, it can expand to offer items related to it that may help customers embody that lifestyle. For instance, a stationary business may focus on offering elegant cards. This could lead them to expand and offer other elegant items, such as fountain pens, watches and dishes.

Tips for implementing a brand extension

Here's some advice to consider when applying a brand extension to your company:

Consider the needs. To help make sure your new product is something your customers actually need, consider their desires.
Remain loyal to your brand message. When selecting your expansion opportunities, make sure that it relates to your overall brand message and relates to the other products you sell.
Test before you launch. Before committing to a new line of products, consider testing with your current customers to get feedback from them.