Question

What are the problems of extending the brand to new segments? Discuss at least two reasons to support your answer.

Answer 1

Some of the problems faced when extending brand to new segments-

1) Large financial requirements
2) Competitors dealing in similiar products
3) Gaining customer trust in the new product
4) Selecting a right price for the new product that covers costs and generates profits.
5) Proving the new product's viability
6) Huge marketing costs

Two reasons
1) When a new product is launched or the brand extends to new segments, it enters a new line of business and has to start from scratch. Though, it enjoys existing goodwill but has to struggle to gain a strong position in market.

2) When the brand enters new line of business, it requires a lot of money to be spend on marketing, production, hiring labour etc. Entering a new segment is an expensive process. Moreover, proving the new product's viablity is also challenging.