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Best Practices in Brand Extension:
Effective Application of Brand Recognition
BRAND EQUITY CAN BE DIVIDED INTO THREE COMPONENTS: EXPERTISE, EMOTIONAL ATTACHMENTS AND PRODUCT ATTRIBUTES
Brand extensions are an effective and popular method of gaining a competitive advantage when entering a new product area. Consumers are faced with an increasingly complex and confusing marketplace. The ability of a brand to act as a mental shortcut for consumers, thereby simplifying the decision-making process, makes it one of, it not the, most important asset for a company. The ability of a brand to influence consumer behavior, and its subsequent value to companies, will increase as consumers face a growing amount of information in the marketplace. By placing a well-known brand on a new product, a company can imbue that product with all the positive associations of that brand, thereby giving it a competitive advantage. With some estimates of the failure rate for new products at 90%, the added value of being associated with a trusted brand can be critical to a new product’s survival. Given the increasing value of established brands and the difficulty in launching new products, the popularity of brand extensions is understandable. However, the brand extension process must be carefully planned in order to insure the value of the brand is successfully transferred to the extension without jeopardizing the brand’s equity. To do so, a company must understand how consumers perceive their brand and how an extension might alter that perception. Brand equity can be considered a portfolio of three components. We believe that the best way to understand how consumers perceive a brand and evaluate its ability to extend is to consider the brand as a combination of three separate components. Consumers value a brand inasmuch as it can