The Analysis of Challenges and Opportunities in Brand Extension

Abstract: Over the decades, brand extension has been a core marketing strategy for a great number of companies. Brand extension enjoys a good reputation for bringing practical advantages to companies whilst it faces disputation at the same time because of a relatively high percentage of failures. Using modified Aaker’s brand equity model as the theoretical framework, the authors undertake a comparative case study to analyze the opportunities and challenges a company might face while using brand extension strategy, particularly in category brand extension: Yamaha Corporation as a successful example, and Virgin Group as a failure one. The analysis mainly focuses on the four elements in the modified Aaker’s brand equity model: brand awareness, brand loyalty, brand associations and perceived quality. The findings show that a company faces challenges when consumers have a more solid loyalty towards the competitor’s brand and when consumers are confused about brand associations. On the contrary, a company acquires opportunities in brand extension as long as a strong brand loyalty and a related connection between the parent brand and the extended brand exist.