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Brand Extension is the use of an established brand name in new product categories. This new category to which the brand is extended can be related or unrelated to the existing product categories.
An existing brand that gives rise to a brand extension is referred to as parent brand. If the customers of the new business have values and aspirations synchronizing/matching those of the core business, and if these values and aspirations are embodied in the brand, it is likely to be accepted by customers in the new business.

Extending a brand outside its core product category can be beneficial in a sense that it helps evaluating product category opportunities, identifies resource requirements, lowers risk, and measures brand’s relevance and appeal.

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How brand extensions can endanger brands? 

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How brand extensions can endanger brands? 

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1. Brand extension in unrelated markets may lead to loss of reliability if a brand name is extended too far. An organization must research the product categories in which the established brand name will work.

2. There is a risk that the new product may generate implications that damage the image of the core/original brand.

3. There are chances of less awareness and trial because the management may not provide enough investment for the introduction of new product assuming that the spin-off effects from the original brand name will compensate.

4. If the brand extensions have no advantage over competitive brands in the new category, then it will fail.

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Brand extensions are important for brand growth strategy

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Brand extensions are important for brand growth strategy

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1. It increases brand image.

2. The risk perceived by the customers reduces.

3. The likelihood of gaining distribution and trial increases. An established brand name increases consumer interest and willingness to try new product having the established brand name.

4. The efficiency of promotional expenditure increases. Advertising, selling and promotional costs are reduced. There are economies of scale as advertising for core brand and its extension reinforces each other.

5. Cost of developing new brand is saved.

6. Consumers can now seek for a variety.

7. There are packaging and labeling efficiencies.

8. The expense of introductory and follow up marketing programs is reduced.

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Brand extensions are also considered to be the most natural progression for brands. When organizations spent a lot of investments into manufacturing and technology for launching the parent brand, they would not like to leave out any opportunity to capitalize on the capacity that they have created and maximize returns on investment.

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As the business environment is changing, the profile of the organizations as well as the way of conducting business is changing too. Use of technology and globalization has changed everything about business. Marketing is no longer what it used to be. Online marketing has changed the face of conventional marketing and both are incomparable by any standards.

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https://www.managementstudyguide.com/brand-extension.htm

Aaker, D. (1990). Brand extensions: The good, the bad, and the ugly. MIT Sloan Management Review, 31(4), 47.