Are brand extensions risky business?

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: 

1. 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.   

2. Brand quality provides freedom: Prestigious brands like Rolex have more flexibility to extend into different categories than functional brands.   

3. 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.   

4. Consider your core competencies: Successful extensions often leverage a brand's existing strengths and infrastructure. 

Successes: 

1. Uber Eats built on Uber's logistics expertise and brand recognition.   

2. Lego expanded from toys to movies, video games, and theme parks by focusing on imagination and creativity.   

3. Dove grew from women's soap to a multi-billion-dollar personal care brand for both men and women.

Failures: 

1. BIC's disposable women's underwear lacked alignment with the brand's core products and values.   

2. Harley-Davidson perfume didn't match the brand's rugged, rebellious image.   

3. 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. 

Listen in on our discussion. 

"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. 

Link to resource. 

“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 

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