Lines Extensions and Brand Extensions
Organizations use line extensions and brand extensions to leverage and increase brand equity.
Diet Coke is a line extension of the Coke brand.
A company creates a line extension when it introduces a new variety of offering within the same product category. To illustrate with the food industry, a company might add new flavors, package sizes, nutritional content, or products containing special additives in line extensions. Line extensions aim to provide more variety and hopefully capture more of the market within a given category. More than half of all new products introduced each year are line extensions. For example, M&M candy varieties such as peanut, pretzel, peanut butter, and dark chocolate are all line extensions of the M&M brand. Diet Coke™ is a line extension of the parent brand Coke ™. While the products have distinct differences, they are in the same product category.
A brand extension moves an existing brand name into a new product category, with a new or somehow modified product. In this scenario, a company uses the strength of an established product to launch a product in a different category, hoping the popularity of the original brand will increase receptivity of the new product. An example of a brand extension is the offering of Jell-O pudding pops in addition to the original product, Jell-O gelatin. This strategy increases awareness of the brand name and increases profitability from offerings in more than one product category.
Another form of brand extension is a licensed brand extension. In this scenario, the brand owner works with a partner (sometimes a competitor), who takes on the responsibility of manufacturing and selling the new products, generally paying a royalty every time a product is sold.
Line extensions and brand extensions are important tools for companies because they reduce financial risk associated with new-product development by leveraging the equity in the parent brand name to enhance consumers’ perceptions and receptivity towards new products. Due to the established success of the parent brand, consumers will have instant recognition of the product name and be more likely to try the new line extension.
Also, launching a new product is time-consuming, and it requires a generous budget to create awareness and promote a product’s benefits. As a result, promotional costs are much lower for a line extension than for a completely new product. More products expand the company’s shelf-space presence, too, thereby enhancing brand recognition. For example, consider Campbell’s Soups™: the strength of Campbell’s™ brand lowers costs of launching a new flavor of soup, such as Healthy Request Roasted Chicken with Country Vegetables Soup™, due to the established brand name and package design. Consumers who have enjoyed Campbell’s Chicken Noodle Soup™ are likely to try Campbell’s Healthy Request Roasted Chicken with Country Vegetables Soup™, even with minimal impact from advertisements and promotions.
Overall, the main benefits of a line extensions and brand extensions are the following:
- Expand company shelf-space presence
- Gain more potential customers
- Offer customers more variety
- Greater marketing efficiency
- Greater production efficiency
- Lower promotional costs
- Increased profits