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
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.