Brand extension or brand stretching

Brand extension or brand stretching is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category. The new product is called a spin-off. It depends on how strong consumer’s associations are to the brand’s values and goals. Good example is Virgin Group. Firstly Virgin Group was a record label than it has extended its brand into transportation and media stores all over the world such as Virgin Megastores. This is my example: “Snickers” extended its brand into ice cream.

Brand extension is one of the new product development strategies which can reduce financial risk by using the parent brand name to enhance consumers' perception due to the core brand equity.

While there can be significant benefits in brand extension strategies, there can also be significant risks, resulting in a diluted or severely damaged brand image. The failures of brand extension are at higher rate than the successes. In spite of the positive impact of brand extension, negative association and wrong communication strategy do harm to the parent brand even brand family.

Outsell Inc. recently published a report putting out some numbers. Estimated budget for advertising and marketing in the USA 2008: $412,400,000,000 (yep, about 412 billion dollar).

To put things in perspective: The Iraq war so far costs the USA: $558 billion according to zfacts.com.

The USA spends about $2 billion a year for international food aid (but only one third of that is actually being spend on food, the rest is paid for shipping services and other stuff).