Part One: Impact of Brand Extensions on Brand Equity
In today’s competitive marketplace it is vital to have a strong brand name. When a company develops a strong brand name of a certain product category they start thinking about the brand extensions, which will help the firm to capture new and unexplored market segments. According to Kotler (2003) a brand extension occurs when a company uses its well-established core brand name to introduce new products in either similar or different product category. In other words the parent brand gives a birth to extension brand or sub-brand. According to Mitchell et al. (2013) there are two main categories of brand extension strategy. The first one is vertical brand extension strategy which is used to introduce a new product or service with different quality or price, but in the same category as the core brand. The second one is horizontal brand extension strategy which is used to introduce a new product or service in either similar to core brand or completely different product category.
Consumers tend to be more receptive to a newly extended product or service, because they associate it with the successful core brand which they trust. There are numerous companies that extended their brands successfully, for instance, Nike was a company who started manufacturing sports sneakers and later transitioned to sports clothing, equipment, and watches. Another good example would be Kellogg’s who started manufacturing cereals and extended its brand with Nutri Grain bars, Special K porridge and many other products.
On the other hand the brand extension can be also unsuccessful to some companies.
There are many unsuccessful brand extensions cases that occurred in the past, for example, American Zippo lighters extended its brand with range of Zippo female perfume. Another example of unsuccessful brand extension would be Dr. Pepper soft drink brand which tried to extend its brand with Dr. Pepper’s marinade and BBQ sauce.
If a firm extends the brand too far from its core brand value as mentioned above, this can influence the brand equity in a negative way. According to Aaker (1990) unsuccessful brand extensions can...