Question

Given the two brand names Pepsi and BMW, choose two potentially new brand extensions that you believe will make sense and two that do not for each of them. Explain why?

Answer 1

A brand extension (some times called a category extension) is when a brand is known for one type of product starts selling a different type of product.

Example;

Apple: from personal computers into MP3 players.

Callaway: from golf clubs into footwear, apparel and golf accessories.

What makes some examples of brand extensions work, while others are disasters?

The success of the extension depends on how far the jump from one product category to the other. If they are close, then they can increase revenue. Too far and the result is brand dilution, or a loss of meaning for the brand.

Brand extensions / category extensions should be towards adjacent product categories.

For example, Apple started by making personal computers (Mac), and then jumped into personal audio (iPod) and then jumped again into smartphones (iPhone). Those were all good moves because now 62.21% of Apple’s sales come from iPhone.

But sometimes the products from brand extensions stray pretty far from the original product category the brand is known for.

Callaway started by making premium golf clubs, but now they make umbrellas, watches, towels, etc. These are all products are all designed for golfers but have entirely different engineering and construction methods than golf clubs. Callaway is pushing the limits of what their brand means; they risk diluting the brand.