Brand extension means using a well-known brand in a product category different from its original one: a construction machinery brand selling shoes, a sports paper putting its name on a clothing line. It can be done in-house or under licence, with production handed to a specialist company that pays royalties. It works when the audience sees a link between the brand and the new product, and the product lives up to it.
Brand extension and line extension
A line extension stays in the same category: a new flavour, a different size, a sugar-free version. A brand extension changes category, putting the brand in front of an audience, shops and competitors it does not know. That is why it needs more checks: the brand must have something to say there too.
What research says
The most cited study on the subject, by David Aaker and Kevin Lane Keller, found that consumers rate an extension better when they see a fit between the original category and the new one and consider the parent brand to be of high quality; it also helps when the new product does not look too easy to make (Journal of Marketing, 1990). On the risk to the brand, later research showed that an extension whose attributes differ from the brand’s can weaken what consumers believe about the brand, and that the effect depends on how typical the extension seems for that brand (Loken and Roedder John, Journal of Marketing, 1993).
In-house or under licence
- In-house: full control over product and margins, but it takes new plants, skills and sales channels, with the investment and risk on the owner.
- Under licence: production goes to a company that already knows the category and has access to shops; the owner earns royalties and controls quality through approvals, but gives up part of the margin and depends on the partner’s reliability.
A well-known example is Caterpillar: Cat footwear is made by Wolverine Worldwide, the brand’s exclusive global footwear licensee (Wolverine Worldwide). The brand began with construction machinery, and each license builds on what it stands for: toughness and durability.
How to tell if it makes sense for your brand
- The link: would the audience understand why the brand is on that product, without explanation?
- The audience: do people who love the brand buy that category too, and in which shops?
- Quality: can the manufacturer make a product worthy of the brand?
- Risk: if the product disappoints, what will customers think of the main product?
- Rules: is the brand registered in that category and in the countries where it will be sold?
For the last point, and the next steps, see how to license your brand; for payment, royalties and minimum guarantees.
Where to start
Our portfolio includes licensing projects for brands born outside consumer goods, such as FIAT 500, Vespa, La Gazzetta dello Sport and San Siro Stadium. If you are thinking of taking your brand into a new category, write to us from the licensing service page: the first step is finding where the brand really has something to say.
