When a well-known company utilizes its name to move its products to a new industry or uniquely alter a consequence, this is known as brand extension or brand stretching. This is a high-risk, high-reward technique, albeit a strong enough brand image can mitigate the danger.

Big corporations frequently expand their brand to create new items in fields with no market dominance. These activities are known as brand extensions, and they allow businesses to grow their revenue streams by leveraging existing brand awareness and equity.

Brand extensions are closely linked to the company's flagship product or core brands. You can build new items that consumers intuitively grasp the benefits of, even if they've never seen them on a shelf, by entering peripheral markets that preserve your brand's distinctive connotations and perceived quality.

On the other hand, a firm might use its brand to its advantage and, as a result, harm it. Suppose they launch a product in a market that isn't strongly related to their flagship product or core brand. In that case, audiences may associate the brand with negative connections, weaken its existing associations, and lower the perceived quality of its established items.

The following are some of the benefits of brand extension:

· It facilitates the acceptance of new products.

· It improves the image of the company.

· Customers' perceptions of risk decrease.

· The chances of getting a trial and distribution rise. A well-known brand name enhances consumer interest and readiness to try new products bearing the same name.

· The effectiveness of promotional spending improves. Costs of advertising, selling, and marketing are lowered. As advertising for the primary brand and its extensions support each other, economies of scale exist.

· The cost of creating a new brand is reduced.

· Consumers can now seek out a wide range of options.

· There are efficiencies in packaging and labeling.

· The cost of initial and follow-up marketing campaigns is decreased.

· The parent brand and the organization both gain from the input.

· The parent brand's image is improved.

· It breathes new life into the brand.

· It enables future expansion.

· The meaning of the brand has been explained.

· It expands market coverage by attracting new clients to the brand.

Customers link the original/core brand with the new product, and as a result, they have quality associations.

Brand Extension's Negative Effects

If a brand name is extended too far in unrelated markets, it may lose its trustworthiness. The organization must research the product categories in which the established brand name will work.

There's a chance that the new product will have negative ramifications for the core/original brand.

Because the management may not provide enough investment for introducing a new product, expecting that the spin-off effects from the original brand name will compensate, there is a risk of less awareness and trial.

They will fail if brand extensions do not provide a competitive edge over competing brands in the new category.