How do you evaluate the risks and opportunities of entering a new market or category with a brand extension?

1 Fit with core brand

One of the most important aspects of a brand extension is how well it fits with the core brand's identity, values, and promise. A fit can be based on functional, symbolic, or experiential attributes, or a combination of them. A high fit can enhance the credibility and relevance of the extension, while a low fit can confuse or alienate the customers. For example, a luxury car brand extending into perfume may have a low fit, while a coffee brand extending into ice cream may have a high fit.

4 Brand architecture and portfolio

A fourth factor to consider is the brand architecture and portfolio of the core brand and the extension. A brand architecture is the way a brand organizes and communicates its different offerings and sub-brands, and a brand portfolio is the collection of brands that a company owns and manages. A brand extension should fit into the existing brand architecture and portfolio, and avoid creating any confusion or cannibalization. For example, a parent brand extending into a sub-brand may have a clear brand architecture and portfolio, while a sub-brand extending into another sub-brand may have a complex or overlapping brand architecture and portfolio.

5 Resource allocation and capability

A fifth factor to consider is the resource allocation and capability of the core brand and the extension. A brand extension requires a significant amount of resources and capabilities to develop, launch, and sustain in the new market or category. A brand extension should have a clear and feasible business plan, and leverage the existing resources and capabilities of the core brand, such as distribution channels, customer relationships, or quality standards. For example, a hotel brand extending into airline services may require a lot of resources and capabilities, while a cosmetics brand extending into hair products may require less.

6 Feedback and evaluation

A sixth factor to consider is the feedback and evaluation of the brand extension's performance and impact. A brand extension should monitor and measure the customer response and satisfaction, the market share and growth, the profitability and return on investment, and the effect on the core brand's equity and image. A brand extension should also seek and incorporate the feedback from the customers, the stakeholders, and the experts, and make any necessary adjustments or improvements. For example, a soda brand extending into water may receive positive feedback and evaluation, while a fast food brand extending into healthy meals may receive negative feedback and evaluation.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?