The costs of introducing a brand into a consumer market
can be considerable, ranging above $50 million. It is a
considerable investment and like most investments
carries no guarantee of success. The recession of the
early 1990s focussed marketing managers on cost-saving
tactics to increase competitiveness. One of the most
important effects was to make brand extensions more
compelling. Leveraging the brand equity of a successful
brand promises to make introduction of a new entry less
costly by trading on an established name. In essence,
companies can be tantalized by the prospect of reaping a
second dividend from their initial investment in
advertising, research, and product development costs. As
support for this alternative, studies of consumer brands
in different markets found that successful brand
extensions spent less on advertising than comparable new
name products. Against the costs and considering the
savings, brand extension may seem like the only
alternative for some companies. pdf 1995
