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For a given company, there can be variety of product and services under different brands.

Brand-product matrix is used to better understand current offering of the company. This matrix helps companies understand product line (product category) and brand portfolio (brands for different products).

Similarly, brand hierarchy concept helps companies understand association among offered brands.

Brand product matrix and brand hierarchy are essential tools for companies when they are looking for brand extension or launching new products. But they are factors which affect brand extension and naming of product.

Typically, any given company would fall in any of the following four categories in terms future expansion strategies:

  1. with current products and current market companies deal with market penetration strategy

  2. with new products and current market companies deal with product development strategies

  3. with current products and new market companies deal with market development strategy

  4. with new products and new market companies deal with diversification strategy

Clearly companies have to tackle tactical and strategically brand extension and naming of new products almost at any stage of growth.

For a given brand extension, it can be in form, where companies decide to expand product category under current parent brand family. This sort of extension may be through adding new flavor, different size packing.

Another form of brand extension is category extension, here companies introduce new product category this may or may not be under the parent brand. Companies while introducing new brand has option either to create a new brand altogether or extend the current parent brand or combination of parent brand as well as new brand.

Although there is high rate of failure for introduction of new brands, companies do try to expand product category or introduce new product category at some point. Success of this has many advantages for the company.

  1. It enhances how consumer look at brand, if brand has strong consumer brand equity then new product would have high rate acceptance to further strengthen brand image.

  2. If a corporate brand or product brand, known for quality and robustness introduces a new product then this product has more recognition in consumer as they are aware of credibility thereby reducing risk associated with new product.

  3. If brand extension is due to great demand for the brand among consumers, then even distribution channel is more welcoming for the new product.

  4. Cost associated with marketing communication and sales promotion for new product as brand extension is reduced as consumers are already aware of the parent brand.

  5. Brand extension again helps eliminating cost associated with research and development of altogether new product and packaging of the new product.

Brand extensions also facilitates in different ways process of firming position of parent brand in mind of consumer.

It helps parent brand state its true positioning in the market. It helps cater to new customers there by creating exposure for parent brand in consumer mind. It helps rejuvenate the parent brand, meaning it increases brand awareness and brand image and lead way to further brand extension programs.

Brand extension also has share of disadvantages.

  1. First with increase in available product it can create uncertainty in consumer mind as to which product is right for her.

  2. Second, distribution channel may be overwhelmed with product offering from different brands that they may not encourage introduction of another brand extension.

  3. Third, if brand extension is too much success then it may jump on current sales of parent brand, if brand extension fails position of parent brand would also suffer in the market.

From the above it is clear that brand extension have advantages as well as disadvantages. But for any brand extension strategy to succeed companies need to comprehend current brand knowledge and also undertake market research to clearly understand consumer expectation before coming to brand extension decision.

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