Brand Extension:

Brand extension is a strategy that is used by companies in the event that a new
brand name is needed for a new product or market segment. This method is
derived from the steep equity and familiarity of the existing brand that helps in
introducing new options and causes the requirement for the market and
advertising to be set aside.
Benefits:
1. Faster market acceptance: Existing brand's image can bring additional value to
the new products. Also, the existing brand’s loyal consumers are ready to try new
products using the same brand name.
2. Cost savings: Omitting or less of spending on marketing and advertisement in
the recognized brand before.
3. Increased credibility: Positive experience is already associated with brand
name increases the anticipation of new product quality.
4. Diversification: Brand extension gives firms additional opportunity for growth
by enabling them to target new markets and new categories. This expands their
customer base and market share.
Risks:
1. Brand dilution: Overconsumption can make customers unsure about what
exactly the brand is about, and the brand image can become negatively affected
as a result.
2. Cannibalization: New products can out-compete others including some of the
products we are already selling and resulting into reduction in the sales of the
other products being sold.
3.Reputation risk: The new product may fail or even have the flaw that can
damage the status of the main brand.
4. Overreliance: Having the brand developed around the familiarity of the existing
one may hurt the prospects of carving a unique niche for the new one in the
market.
Brand Licensing:
Brand licensing includes renting of the brand, logo, or other intellectual property;
the other company is then entitled to use of same for its products or services. This
strategy produces income by royalty among which brand name might advance.
Benefits:
1.Passive income: Royalties compared with the upfront income bring about
predictable revenues.
2. Global expansion: Brand licensing brings new markets and territories on board
which was not possible before through others brand licensing without a huge
investment.
3. Diversification: Licensing can push brands into adventurous new product
categories or fields which would never happen if the association did not exist.
4. Risk reduction: Partners entrusted with a license, as well as marketing and
production responsibilities.
Risks:
1. Loss of control: Licensing companies may have limited control over how their
brand is used.
2. Brand image risk: Poor quality or inappropriate use of the brand by licensees
can harm the brand's reputation.
3. Overlicensing: Excessive licensing can dilute the brand's image and value.
4. Dependence on licensees: Heavy reliance on licensing revenue may create
vulnerability if partnerships end.