Category Extension
This article covers meaning, importance & example of Category Extension from marketing perspective.
What is Category Extension?
Category extension is a strategy by which a company uses the same popular brand to enter into a completely unrelated product segment. The company leverages on the brand equity and success of its existing brand to introduce the new product to increase market acceptance. Category extension is one of the several brand extension strategies which a company uses.
Importance of Category Extension
The concept of brand extension is important in business wherein a company can focus on several growth strategies to increase their product line. The most important brand extension strategies are line extension, category extension, complementary product extension, customer franchise extension & brand lifestyle extension. Out of these category extension focuses on leveraging an existing successfully brand name and entering into different product categories or segments. This is useful for companies as customers already have a trust and positive mindset associated with a successful brand, and companies often use to leverage that benefit.
We can use the following matrix to identify the different brand strategies of any company & its sub-brands created from category extension.
Example of Category Extension
A prime example of a very successful of category extension is Amazon. Amazon originally was founded as an ecommerce website offering an online platform for buyers & sellers. Now, as a part of its successful category extension, the company has leveraged the powerful Amazon brand name which has a strong brand identity and recall among its users, and expanded into different categories. Amazon has expanded into various different product categories like Amazon Web Services for cloud services, Amazon Prime for video on demand service, Amazon Kindle for tablets etc. Thus, this shows that a strong brand name if used correctly can be successfully used for category extension.
Advantages of Category Extension
Some of the benefits of category extension are as follows.
1. Since it is leveraging an already existing brand, it saves costs & time for the company for launching a new product category.
2. Due to a strong affinity with the brand, there is already a large customer base for the company for the new product category.
3. Increasing the product portfolio enhances the brand image for the company.
Disadvantages of Category Extension
1. Very often, category extension can lead to confusion wherein a customer is unable to associate a brand name with a different product category.
2. Too much category extension can also lead to dilution of brand and also product cannibalization.
3. Managing too many product categories can be harmful to the company as they tend to loose focus on their main flagship product & brand.
Hence, this concludes the definition of Category Extension along with its overview.
Browse the definition and meaning of more similar terms. The Management Dictionary covers over 1800 business concepts from 5 categories.
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