Brand extensions offer one way of leveraging a brand's assets and equity to market new products, increase sales, and (hopefully) produce profits. While there can be significant benefits in brand extension strategies, there can also be significant risks, resulting in a diluted or severely damaged brand.

There is a great deal at stake, and companies should always proceed with caution.

The most common brand stretches include line extensions within the same category. Coke's recent launch of Black Cherry Vanilla Coke and Diet Black Cherry Vanilla Coke are good examples.

A riskier form of extension involves stretching the equities of a brand by moving into a new category. Arm & Hammer's leveraging of its well-known brand equities—from its basic baking soda into the oral care and laundry care categories—is a great example. By emphasizing its key attributes, the cleaning and deodorizing properties of its core product, Arm & Hammer was able to leverage those attributes into new categories with success. Bottom line: The move made sense to the consumer.

Yet, a large number of brand extensions into new categories have proven to be dismal failures.

Brand Steps and Missteps

Many marketing managers think that it makes sense to "transfer" the promise and equity of their established brand. But that isn't always true. Companies sometimes go too far trying to extend into categories that are not a good fit, and they risk losing credibility in their flagship brands.

Let's look at a celebrated global brand: Virgin. The company was able to stretch its considerable brand equities from the entertainment to the travel industry. Virgin Airlines is a success.

But does anyone remember Virgin cola? Virgin vodka? Virgin jeans? Obviously, these were not good category fits for the iconic brand. Trying to leverage Virgin's attributes into these categories made no sense to the consumer, else they would have been successful. Fortunately, the Virgin brand is so strong that these miscues have not damaged it.

Companies can also go too far with licensing and dilute their brands past the point of no return. Pierre Cardin presents one of the best examples. The successful designer clothing line extended its brand, via licensing, into way too many product lines. Most of them had absolutely nothing to do with the cachet that the brand had built in the couture business. Cardin was stretched into so many unsuitable categories that it lost its core customer (and eventually withered and died).

On the other hand, Emeril Lagasse—admired chef and American icon—has lent his name successfully to a branded line of cookware. Cookware manufacturer All Clad launched the Emeril line a few years ago, and his name has carried the line to a strong position (top 20) in a very competitive category. The Emeril brand and quality cookware are clearly a fit.

Celebrities cannot always ensure success in co-branded ventures. Remember Planet Hollywood? This celebrity driven chain of restaurants were gone in less than a decade. They were all about the celebrities, not the food. When restaurant brands don't ensure exceptional or differentiated food experiences, they are simply not going to endure, no matter whose names are associated with them.

The Answer: Research

A large number of brands are not extendible into many categories, if any. The key to successful brand extensions: the determination that the proposed extensions are consistent with core brand values. Most importantly, a determination must be made of the marketplace perception of the brand in the first place, and whether the proposed extensions resonate with the consumer. Brand extension ideas should not emanate from management's point of view, but from the consumer's.

A lack of understanding of the consumer and the marketplace can lead to failures that range from minor to catastrophic. Companies have far more at stake than the failure of new products. The wrong category extensions can create the perception of diminishment of the value of the brand.

If corporate brands and sales are already faltering, brand extensions are sometimes viewed as a way to save the company from additional erosion by nervous executives. This strategy has rarely worked.

Rather than considering extensions when the brand is already compromised, marketers should get back on track with meaningful brand management and stewardship:

• What made the brand unique and strong in the first place?
  
  
• Where has there been a disconnect between the brand's core attributes, image and heritage with the customer?
  
  
• What is the customer's sense of the brand today versus their past assessment of it?

Research will uncover this crucial information so that management can bring its brand back into alignment. When properly conducted, research should yield the following information about brand extensions:

• Customers' understanding of the brand's core attributes.
  
  
• Their ideas as to which kinds of products or services are logical and consistent with those values.
  
  
• Their view that the brand extension is credible and acceptable.
  
  
• Their perception that the core brand can be transferred to the specific product or service extension in question.

Surprisingly, many companies do not have the mechanism in place for this kind of research. They think that if they develop a product or service innovation to meet currently unmet needs in the marketplace... that alone will ensure success.

Not so. If consumer perception, based on research, does not corroborate that the proposed extension is a fit with the brand's values, it will not be a success, no matter how needed or exciting the new product is.

Once a brand extension is executed, it is still important to identify any changes, positive or negative, in perceived core brand values, using the consumer as the barometer for these measurements. Given the highly competitive nature of the marketplace in virtually every product and service category, and the high rate of brand extension failure, it is more imperative than ever to conduct meaningful research.

Companies should do everything in their power to ensure success when extending their brands into new products or new categories. Not merely should they be concerned about the possible failure of these extensions; they should be even more concerned about the dilution of their corporate brand. That is what is truly at stake when extending brands.

It takes years to build equity and loyalty in brands—and a few missteps to destroy them. Remember: A brand is a sacred trust, and it must be properly managed and protected, at all costs.