Marketers have long recognised that strong brand names that deliver higher sales and profits (i.e. those that have brand equity) have the potential to work their magic on other products.
The two options for doing this are usually called “brand extension” and “brand stretching”.
Brand extension
Brand extension refers to the use of a successful brand name to launch a new or modified product in a same broad market.
A successful brand helps a company enter new product categories more easily.
For example, Fairy (owned by Unilever) was extended from a washing up liquid brand to become a washing powder brand too.
The Lucozade brand has undergone a very successful brand extension from children’s health drink to an energy drink and sports drink.
Brand stretching
Brand stretching refers to the use of an established brand name for products in unrelated markets.
For example the move by Yamaha (originally a Japanese manufacturer of motorbikes) into branded hi-fi equipment, pianos and sports equipment.
When done successfully, brand extension can have several advantages:
• Distributors may perceive there is less risk with a new product if it carries a familiar brand name. If a new food product carries the Heinz brand, it is likely that customers will buy it
• Customers will associate the quality of the established brand name with the new product. They will be more likely to trust the new product.
• The new product will attract quicker customer awareness and willingness to trial or sample the product
• Promotional launch costs (particularly advertising) are likely to be substantially lower.
http://www.tutor2u.net/business/marketing/brands_extension_stretching.asp
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