Both vertical and horizontal brand extensions aim to maintain the “meaning” of a brand while modifying its offerings to be more helpful to customers and extend the brand’s reach. In the coming sections, we’ll break down what precisely each is and their pros and cons.
What Are Vertical Brand Extensions?
Vertical brand extensions refer to the relationship between a product’s benefits (and quality) and its price tier â offering various options to target different types of consumers. They exist everywhere, from cars to yoga memberships to streaming service subscriptions. A crucial qualifier for a product or service to be considered a vertical product extension vs. a horizontal extension is that the extension is part of a service that the brand is already associated with (think of a streaming service provider offering various subscription tier options.) There can be downscale extensions and or upscale extensions to any core offering. And naturally, the higher the price tier, the more benefits are added.
Pros & Cons Of Downscale Extensions
Pros:
- Ability to leverage an established brand with a new offering without starting from scratch on brand awareness
- Casting a wider net of possible customers
- Introduce brand and build loyalty with customers that don’t yet need (or afford) the core and or upscale offering
Cons:
- It could hurt the image of the brand if its identity is known for luxury and exclusivity
- Potential sales cannibalization of customers switching from the core offering to the downscaled version
- Typically lower profit margins
Pros & Cons Of Upscale Extensions:
Pros:
- Ability to leverage an established brand with a new offering without starting from scratch on brand awareness
- Introduce more options for loyal and or heavy-use customers wanting more features
- Can raise the perceived brand image the brand
- Typically higher profit margins
Cons:
- Counterintuitively, an upscale extension could hurt the brand’s image is known for value and affordability. I.e., the brand needs the proper cache to justify a deluxe-style extension.
What Are Horizontal Brand Extensions?
On the flip side, horizontal extensions involve a product type that the brand isn’t presently associated with (for example, Anthropologie or Urban Outfitters extending their product offerings from clothing to the addition of home goods as well.)
Pros and Cons of Horizontal Brand Extensions
Pros:
- Like vertical product extensions, it is more manageable and cost-efficient to use a brand that already exists to launch a new offering.
- Can complement the core offering that the brand is already known for (no risk of cannibalization)
- It provides more options for customers to express their identities via the brand. I.e., if someone likes the boho style of Anthropologie’s clothes, they’re also likely to want to decorate their home in a similar self-identifying way.
Cons:
- Possibility of brand dilution. If your core service is fantastic, but your horizontal extension stinks, it could hurt the brand’s overall perception.
- Possibility of brand confusion. If your horizontal extension doesn’t intuitively follow logic, it can confuse customers about what the brand “is all about.”
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