Extensions can potentially provide the following benefits to facilitate new product acceptance:
Reduce risk perceived by customers & distributors Decrease cost of gaining distribution & trial Increase efficiency of promotional expenditures Avoid cost (and risk) of developing new names Allow for packaging and labeling efficiencies Permit consumer variety seeking
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Advantages of Extensions
Besides facilitating new product acceptance, extensions can also provide feedback benefits to the parent brand and the company as a whole Enhance the parent brand image
Improve strength, favorability, and uniqueness of brand associations Improve perceptions of company credibility
Bring new customers into the franchise and increase market coverage
Disadvantages of Extensions
Extensions have risks, too. Certainly, they can fail. Moreover, extensions can potentially result in the following costs: Cannibalize sales of the parent brand Hurt the image of the parent brand
If the extension fails Even if the extension is successful
Forego the chance to develop a new brand name or market the parent brand differently (opportunity cost)
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