Retail Brand Extensions - strategic thinking

Brand extensions are now a commonplace growth strategy for many companies. Considerations for their use are well documented for manufacturer brands. However, very little is known about how retailers can extend their brands. This article proposes and explains a new taxonomy for retailers to conduct brand extensions, based on a detailed examination of over one hundred retail brand extension cases.

Despite retailers being in a very different position to manufacturers in having different options for extending their brands, little research has focused on categorising brand extensions to act as a strategic planning tool, and there is almost no guidance specifically for retailers.

Traditional models of categorisation do not reflect the modern complexity of the retail marketplace or give sufficient guidance on all the possibilities a retailer now has for brand extensions. Although all brand extensions are a form of product entry, not all product entries are brand extensions. In this article we are only concerned with product entries which are brand extensions from the point of view of retailers wishing to use them as a growth strategy. The question arises - how can these retailers extend their brands?

Some authors suggest that brand extensions involve the use of a brand name established in one product class to enter another product class, whereas a line extension uses the established brand name for a new offering in the same product category. Line extensions therefore involve the launch of new products from the same category or product class under a familiar brand name such as Coca-Cola launching Diet Coke and Diet Caffeine-Free Coke.

An alternative view of brand extension is the market and channel perspective, which suggests that 'a brand extension means using a brand name successfully established for one segment or channel to enter another in the same broad market. However, what is meant by the term 'same broad market' is unclear in this case.

A third perspective suggests that brand extensions come in two primary forms: horizontal and vertical. A horizontal brand extension is when a brand name is applied to a new product or service in either a related product class or in a product category completely new to the firm, for example FHM Magazine launching a credit card. In essence, horizontal brand extensions describe those where a brand has diversified beyond its existing product class or market. In contrast, a vertical brand extension involves the introduction of a product or service in the same product category as the core brand, but at a different price point or quality level.