Product Line Extension

A product line extension is the use of an established product’s brand name for a new
item in the same product category.

The following seven important factors make companies pursue line extensions as a
significant element of their marketing strategies:

 Customer segmentation
 Consumer desires
 Pricing breadth
 Excess capacity
 Short-term gain
 Competitive intensity

1. Customer Segmentation

Line extension is perceived by managers as a low-cost, low-risk way to meet the needs
of various customer segments. And by using more sophisticated and lower-cost market
research and direct-marketing techniques, they can identify and target finer segments
more effectively than ever before.

2. Consumer Desires

There is widespread volatility in the consumer behaviour and brand loyalty has taken
more or less a back seat in many different categories of consumer goods and services.
More consumers than ever are switching brands and trying products they’ve never used
before. Line extensions try to satisfy the desire for “something different” by providing
a wide variety of goods under a single brand umbrella. Such extensions, companies
hope, would fulfill customers’ desires while keeping them loyal to the brand franchise.

3. Pricing Breadth

Managers have found a way of increasing profitability through line extension.

Managers often launch the superior quality of extensions and set higher prices for
 these offerings than for core items. In markets subject to slow volume growth,
marketers can then increase unit profitability by trading current customers up to
these “premium” products. In this way, even minimal sales are profitable – at least
in the short run.

In a similar spirit, some line extensions are priced lower than the lead product.

4. Excess Capacity

Line extension helps in utilizing the excess capacity of the production facilities of the
firm. In the 1980s, many manufacturing operations added faster production lines to
improve efficiency and quality. The same organizations, however, did not necessarily
retire existing production lines. The resulting excess capacity encourages the
introduction of line extensions that require only minor adaptations of current products.

5. Short-term Gain

Besides sales promotions, line extensions represent the most effective and least
imaginative way to increase sales quickly and inexpensively. The development time
and costs of line extensions are far more predictable than they are for new brands, and
less cross-functional integration is required.

In fact, few brand managers are willing to invest the time or assume the career risk to
introduce new brands to market. They are well aware of the following: major brands
have staying power; the cost of a successful new launch is now estimated to be higher
than for a line extension; Line extensions offer quick rewards with minimal risk.

6. Competitive Intensity

Mindful of the link between market share and profitability, managers often see
extensions as a short-term competitive device that increases a brand’s control over
limited retail shelf space and, its overall demand for the category for new branded or
private-label competitors and to drain the limited resources of third and fourth place
brands. Close-up and Colgate toothpastes, for example, both available in more than 15
types and package sizes, have increased their market shares in the last decade at the
expense of smaller brands that have not been able to keep pace with their new offerings.
Line extensions further explained

Let us look at what has happened to the Tangui brand of bottled water. Tangui is the
pioneering brand in the bottled water category. Originally, Tangui used to come in a 1.5
litre bottle. It’s 1.5 litre pack ruled the roost. Recently, Tangui has exhibited a spate of
innovations. The term ‘innovation’ generally conjures up an image of a product being
made superior or more efficient. But Tangui innovations were more of the marketing
type. The brand launched bottles of different sizes or quantities. The Tangui portfolio
now includes 0.5 litre, 1 litre, 1.5 litre, and 10 litre bottles. The product line is now far
more representative of customers’ varying quantity needs of water. It suggests the
presence of usage segmentation. That is, customers differ in terms of their usage
quantities. The brand has now filled the whole spectrum with products as per the needs
of various segments.

The Tangui example suggests that the company has been vigorously pursuing the line
extension strategy, which involves making entries into a brand’s existing product
category by using the same brand. These entries can come in the form of varying
product sizes, flavours, colours, ingredients, forms, etc. The two things that remain
constant in line extensions are: the brand name and the product category.

Line extension strategies

The following examples exhibit different types of line extension strategies followed by
the marketers:

 Product sizes; source du pays supermont comes in 10l, 1.5l, 1l, 0.5l, 0.25l
 Colours ; Ozil omo comes in pink, yellow and purple.
 Flavours; brasseries top comes in fifferent flavours; orange, grenadine etc
 Ingredient; colgate charcoal, colgate kids, colgate herbal etc
 Form; vim liquid, vim powder, vim bar
Brand Extensions

Line extension strategy involves launching various product variants in the same
category under the same brand name. The brand extension, on the other hand, involves
using an existing brand name to launch a product in a different category. The key
difference between the two strategies is the product category. In the line extensions,
product category remains constant whereas in brand extensions product category is a
variable. This is evident in the examples given below.

 LG brand has LG televisions, LG refrigerators, LG computer monitors, LG

microwaves, LG air conditioners, LG washing machines etc.
 Apple brand has apple TVs, iphones, macbooks, airpods, apple watches, ipads
etc

Why Brand Extension?

Brand extension strategy has found favour in the modern marketing world because of
the advantages it has over the other new product launch options. The important benefits
that it promises to deliver are as follows:

1. Cost of New Launches:

The marketing environment of today is characterized by highs and lows. These shifts
necessitate frequent introductions in the marketplace both as a defense against
competition and desire to grow. A new brand is expensive to develop, hence the huge
investments required to develop and launch a new brand act as a major deterrent. Brand
extensions, therefore, present irresistible options in such situations. By extending a
brand, the marketer can bring the costs down substantially while increasing the
probability of success.

2. Promotional Efficiency:

What happens when a company needs to support a large number of individual brands?
Its promotion cost structure goes up. Also, investment in one brand does not help the
other brands. When the Dettol brand of soap is advertised, it indirectly benefits other
brands which share the same name. The extensions enhance promotional efficiency.

Besides, at the time of new product launches, the marketer’s task is reduced because the
name awareness already exists. The brand awareness allows easy access to the mind,
whereas when one needs to launch a brand name, the task is more difficult and complex.
Evidence suggests that brand extensions need less advertising support in comparison
with new brand launches.

3. Consumer Benefits:

From the customer’s point of view, brand extensions offer a less risky route to a new
product category. What happens when a customer is familiar with a brand. In such
situations, the customer knows what to expect from the brand and can easily conclude
the likely make up and performance delivery of the brand. This is based on what the
customers already know about the brand

4. Feedback Effects:

Brand extensions are justified not only for what they deliver in terms of promotional
efficiencies and consumer benefits, they also help the parent brand in many ways, the
first benefit being the clarity in brand meaning that an extension can bring. Extension
can broaden the product meaning.

Types of Extensions

Brand extension essentially involves leveraging an existing brand to promote a product

into a different category. The product category definition must be customer-perception
based. If the extended product is perceived to be part of the existing brand category, the
extension classification would change accordingly. The brand must venture into an
unrelated category from a customer’s behaviour point of view in order to qualify as
brand extension. Brand extension can come in many forms. Some of them are given
below:
 a. Product Form Extension:

A product launched in a different form usually means line extension rather than brand
extension. But if a different product form constitutes an entirely different product
category, it would be called a brand extension from a customer behaviour perspective.
For instance; liquid and powder milk, chocolate bars and chocolate powder.

b. Companion Product:

Brand extensions in the form of companion products are perhaps the most common.
The idea perhaps is to capitalise on product complementarity. The consumer may view
both products jointly and hence, provide scope for launching brand extension. For
instance; colgate toothpaste and toothbrush.

c. Customer Franchise:

A marketer may extend a product range in order to meet the needs of a specific customer
group. Example: A company may launch a variety of products meant for, say, nursery
school children. The focus here is not customer base but the diverse needs of customers.
Example, moby bebe baby oil, moby bebe diapers, moby bebe powder, etc.

d. Company Expertise:

Brand extensions often come in the forms of different product category introductions
using a common name but emanating from a common expertise pool. This strategy is
particularly seen in Japanese companies. For example, Honda cars, Honda scooters,
honder gensets, etc.

e. Brand Distinction:

Many brands achieve distinction in the form of a unique attribute, benefit or feature
which gets uniquely associated with the brand. In these situations, a company can work
backwards to launch different products which essentially cash in on this distinction. For
instance, apple.
 f. Brand Image or Prestige:

A brand extension may involve a foray into unrelated product categories based on a
brand’s exclusive image or prestige value. Brand exclusivity or prestige bestows great
extension opportunities. This is particularly true of designer and haute couture brands.
For example, Hermes.

g. Distinctive Taste, Ingredient or Component:

A brand may develop equity based on any and/or combination of taste, ingredient or
component. When such a close association develops, a marketer can make entries into
unrelated product categories capitalising on these properties. For instance, Nescafé
enjoys proprietary association of distinctive taste. Accordingly, the brand could be
leveraged in other product fields.

Good, Bad and Ugly Extensions:

The primary lure of using a well-established brand name to promote a product belonging
to a different category is to exploit/leverage what the brand name stands for in the mind
of the customer. A brand is nothing but a network of associations which drive consumer
buying. The logic of brand extension is to transfer these associations in the extension
context so that the desired outcome is brand equity. However, brand extensions do not
always create desired outcomes. Five possibilities exist: the good, the better, the bad,
the ugly…and the more ugly.

 The Good Extensions:

When the parent brand contributes positively to the extended product, it is called good
extension. The parent brand can help the extension by providing brand associations,
quality associations and recognitions and awareness to the extended brand. Making a
foray into the toilet soap market is quite difficult because of overcrowding, consumers’
low involvement, and product similarity. Dettol’s extension into toilet soaps illustrates
how the extension acquired Dettol’s associations and became a successful soap. The
parent brand may also help extension by providing quality rub off. Brands can bestow
quality perception to extension. Brand name awareness and recognition play a very
crucial role in marketing under low involvement conditions. Brand extensions in such
situations build awareness and recognition very efficiently for the extended product.

 More Good Extension:

Sometimes, it is not just that the parent brand helps the extension; rather the extension
also aids the parent brand by way of positive feedback. That is, the extension may
enhance and strengthen the parent brand by increasing the brand visibility and
supporting the core associations. Example: The core associations of Dettol Brand are
strengthened by launching products which are antiseptic oriented like plaster, shaving
cream and toilet soap.

 The Bad:

It is not that the use of a brand or a product belonging to a different category is always
a beneficiary. Sometimes the name does not help the extension. This may happen on
account of two reasons: first, when the name does not add value and second, the name
passes on negative associations to the extension. Example: The Pierre Cardin name does
not add value to its range of writing instruments.

 The Ugly:

Sometimes, the extension succeeds but its success comes at a cost. The extension
damages the brand name by creating undesirable attribute associations, hurting quality
perception, and altering its existing associations. All these indicate negative feedback
to the parent brand by an extension which succeeds in the marketplace. An extension
would create its own associations. But some of these associations may damage the
brand. Example: If a premium brand like Rolex enters into the mid-priced clothing line,
it creates undesirable associations and hurts the parent brand.

In conclusion, brand extension is a common route followed by the marketers. But

commonness does not mean that extension is also a quick shortcut to launch new
products and services. The above discussion clearly spells out the potential dangers
associated with unplanned extensions. By simply putting a successful brand name to
any product one cannot be assured of success. Instead, the brand extensions can
backfire. This necessitates that the manager while planning for brand extensions, must
systematically analyze the possible opportunities.