Brand extensions: case studies of three Swedish companies

University essay from Luleå/Business Administration and Social Sciences

Abstract: Brand extension as a growth strategy has increased in popularity the last
decades. The use of brand extensions as a branding strategy is considered
more effective and related to lower costs compared to a new brand launch.
The purpose of this thesis is to gain an increased understanding on how
Swedish companies use brand extensions as a part of their branding
strategy. The research explores, describes and tries to explain why
companies choose brand extensions as a part of their branding strategy, how
the brand extension process can be described and finally how a successful
brand extension can be described. A multiple case study including three
companies: Husqvarna, Salming and SAS and how these companies deal with
brand extensions, has been performed.

Our findings show that, the rationales are to: increase customer segments,
meet customers’ need and demand, achieve larger trial levels, increase the
awareness and the value of the brand, increase bargaining power with
retailers and other business partners, revitalize the brand image, provide
competitive advantage, and provide transferability of technological
expertise. The brand extension process is informal, although idea
generation, idea screening, forecasts, brand equity criteria, financial
criteria, launch, monitoring and evaluation are steps that are included. A
successful brand extension needs to fulfill the criteria of fit, meaning
that the extension needs to fit with the core brand, the brand image as
well as the product category. A positive evaluation of the brand by
consumers will lead to enhancement of the core brand a negative evaluation
will lead to dilution. Moreover, moderating factors and brand equity are
affecting the outcome of the brand extension.