Brand Leveraging: Strategy & Benefits June, 2014 | Seite 2

What is Brand Leveraging?
When the company’s brand name is established, they often use it to launch a new product
category by linking the new product to an existing brand name. This is referred as brand
leveraging. The biggest advantage is the instant name recognition for the new product. Brand
leveraging is a risky process for established brands. For instance, if the new product fails in the
market, it will negatively affect the brand image of the established brand.
The methods used for leveraging the brand name to support new product category are line
extension, stretching the brand vertically, brand extension and co-branding.

Methods for Brand Leveraging
Line Extensions
This refers to extension of a brand name to other products within the category or subcategory.
Line extensions may include new pack sizes, new flavors, colors and forms. For example,
launching Diet Coke and Coke zero is a line extension. The primary risk is overextending the
product line and deteriorating the brand equity. Majority of the new products are line extensions.
Line extension expands the market opportunity for the product line by offering additional
variety. Some extensions however, encourage cannibalization. Market cannibalization occurs
where a new product "eats" up the sales and demand of an existing product. This affects the sales
volume and market share of an existing product negatively. Relying on line extensions as the
only source for innovation can be precarious.
Stretching the brand vertically
This is also a form of line extension, where the new product moves up or down in terms of price,
quality or features from the core brand. Example may include BMW 3 series, 5 series and 7
series. The benefits of this strategy comprise of shared costs (in terms of advertising and
distribution cost), market opportunities and leveraging distinctive capabilities. One major
drawback can be the damage to the core brand when moving down (such as lower price and
quality of a premium brand) or moving the brand to a higher price or change in quality level.
Brand Extension
This is the extension of brand name to other product similar or dissimilar categories. The new
product line may or may not be directly related to the brand from which it is being extended. For
example Quaker, a popular oatmeal producer, creating Quaker granola bars, also made with
oatmeal. The disadvantage associated with brand extension is, that most of the time these
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