Perhaps the time comes when maturity is inevitable whatever new augmentations are attempted. The brand managers still want to extract the most value from their assets but cannot see much more to be had in the existing market. Here their minds may turn to brand extension. As many as two out of three new product launches are examples of brand extension. This is where the existing brand is used to support the launch of a new product. The reasons are clear-new product lunches are very risky, most fail, and using the 'halo' of an existing brand can help to reduce that risk. If the market is also new, then the risk is even greater and the halo effect yet more important. The problem is that if a brand extension fails, the backlash will be felt by the original brand.

Brand extension comes indifferent forms, the simplest is the launch of the existing product in a new format. Soap powder takes on a liquid form under the same brand name, or Mars Bars are shrunk into bite-size pieces and launched as Mars Little Ones. Some would argue that this was really still brand augmentation, with the brand chasing much the same market with much the same product - or does the Mars Little Ones proposition target a new buyer in a new circumstance? This is more than playing with words- augmentation is relatively safe territory, dealing with what you know already; genuine extension enters the higher risk zone.

Next up the ladder of extension is the launch of what we might call companion products under the same name. Gillette razor blades will add Gillette razors, and the Gillete shaving foam. Once each brand extension is successfully established, the process for brand augmentation will recommence, adding Gillette shaving gel to the shaving foam range, and so on. The highest-risk brand extension is when the brand leaves its own territory. Virgin, as we have seen, is at this, reducing the risk through use of the brand halo effect, and ensuring that it translates the existing brand values to the new market.

Required

i. With reference to the above case, discuss the advantages and disadvantages of using brand extension as a strategy. (8 Marks)

ii. Discuss the factors you need to consider before extending a brand. (7 Marks)

iii. What possible mistakes can a company make when pursuing a brand extension? (5 Marks)