Describe how brand extensions can be a useful means of introducing a new product into the...

Describe how brand extensions can be a useful means of introducing a new product into the market as compared to building a new brand “from scratch.” Give examples.

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Solution -

Brand extension is a strategy where the existing strength of the brand image is leveraged to market another new product in a different category. One such major example is of Nike Inc. which was a sports footwear company which extended its brand into the golf and other sports clothing as well as sunglasses and sports accessories. This allowed the company to grow as a sports company and leverage upon its already superior brand name. A brand extension strategy leads to not just increasing the product line of the company but also allows it to expand the company vision and enter into a bigger global space which was the effect on Nike as well.

The other brand that deployed the brand extension strategy was Ferrari - An Italian car manufacturing company which expanded into a theme park business and established its first theme park in Abu Dhabi where it can not just encourage revenue bit also advertize different products and stories of Ferrari and its fast cars. Ferrari theme park advertizes the fastest roller coaster and other attractions and today contributes as a major revenue stream in its total revenue structure. The brand extension strategy has allowed Ferrari to introduce a completely new revenue model. The brand extension strategy allowed Ferrari to enter into a new category and also assisted in adding more visibility to its existing brand.

Had the above two brands Nike and Ferrari were to start from scratch then there would have been many challenges to drive success for the new products. The major disadvantage would have been in the marketing function as with the existing brand the prospective customers have an association with the brand and just with the name they can associate the level of quality and get attracted to the offering. A new brand would require a lot of market support and financial investment for promotion but with brand extension strategy the marketing costs can be shared along with other logistic costs.

keosha answered 3 months ago

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