A market extension merger refers to the coming together of two companies that produce or sell the same type of product but to different markets. The main benefit of this type of merger is to give the companies that merge a larger market reach and client base as a result of its new capacity.

What is product extension approach?

A product line extension is when a company creates a new product in the same product line of an existing brand. The company is marketing the value and quality of the existing product line to introduce more choices to consumers. Product line extensions are fairly low risk because you already have a successful brand.

What is the purpose of brand extension?

Brand extension is the introduction of a new product that relies on the name and reputation of an established product. Brand extension works when the original and new products share a common quality or characteristic that the consumer can immediately identify.

Why do we need brand extension?

Brand extensions can also benefit the parent brand by creating a greater sense of loyalty, reaffirming the brand promise and consumer perceptions of the brand, and sustaining the parent brand’s relevance in its existing category. Extensions can also help to establish a brand’s position in new categories.

Why is brand extension a risky measure?

Brand extension in unrelated markets may lead to loss of reliability if a brand name is extended too far. An organization must research the product categories in which the established brand name will work. There is a risk that the new product may generate implications that damage the image of the core/original brand.

What are the risks of brand extension?

Extending the brand name too far may lead to a loss of reliability, especially if the brand extension happens in an unrelated market. Thus, companies have to know which product categories will work and where they can actually use the brand name.

Which of the following is an example of brand extension?

A brand extension (some times called a category extension) is when a brand is known for one type of product starts selling a different type of product. Some example of brand extension are: Apple: from personal computers into MP3 players. Callaway: from golf clubs into footwear, apparel and golf accessories.

What are the advantages of brand extension?

Advantages of Brand Extension The risk perceived by the customers reduces. The likelihood of gaining distribution and trial increases. An established brand name increases consumer interest and willingness to try new product having the established brand name. The efficiency of promotional expenditure increases.

What are disadvantages of brand extension?

Disadvantages:

  • Extending the brand name too far may lead to a loss of reliability, especially if the brand extension happens in an unrelated market.
  • If the new product is not that great, it may spell trouble for the core brand’s image.