BRAND EXTENSION: HOW TO REACH NEW MARKETS
According to the literature, the fashion industry is the main adopter of the Brand Extension marketing strategy for its brand management; but, which are the companies that used it and how did they use it?
One interesting example is represented by the Fendi case: in fact, thanks to the Brand Extension strategy it was able to reach an unknown market, which was unexplored till that moment: the Home&Hotel industry. Practically, this meant exploiting its experience and know-how in the style and fashion industry to create Hotel rooms, SPA, restaurant and lounge bar.
However, in this regard, the Home&Hotel Industry is not the only alternative solution. For instance, the Chanel case, demonstrates that another diffused application of the brand extension strategy regards the sport equipment business sector, including both clothes and accessories.
Finally, the Armani case is suggestive in that through brand extension it was able to enter the transportation market through the connection with Vespa, gaining a substantial opportunity to show off the brand.
Brand extension strategy
The brand extension strategy is the use of a consolidated brand to name a new product different from the traditional products mix of that brand. It is possible to distinguish two different typologies of brand extension: line and category extension. Line extension is practiced within a category where the company is already present, for example through the introduction of a new variety of taste, the addition of an ingredient or a new product configuration to reach a new market segment. In the category brand extension, instead, the brand is exploited in order to enter a fully new category of products. The Brand Extension strategy has a great impact on brand awareness, but it is also a very interesting way to exploit economies of scale by means of applying the same knowledges and experiences of brand management, reducing costs of advertising and promotion of products. Moreover, it facilitates customers’ acceptance of new products.
However, the disruption of this strategy can have also some drawbacks. The negative use of the strategy can disorient the consumer if the new product is too different from the brand’s category of reference, establishing potential damages to the brand. Therefore, the diversification of the value proposition cannot be made in all directions. The direction is defined by the brand itself, since the brand usually originates from a product or a service, but it is not the product or the service, but its meaning.
Brand extensions are an emotional topic because they are the first occasion on which the identity of a brand is redefined, when all the unwritten assumptions that may have been held for decades about the brand within the company are questioned.