Brand extension is when an existing brand is leveraged to launch a new product under the umbrella of the parent brand

Brand extension is when an existing brand is leveraged to launch a new product under the umbrella of the parent brand. The launch of a new product category linked with a well-established existing brand name leads to the market reach of the debutant product to scale up considerably. The awareness created with the aid of existing products could be extended to the debutant products easily. The consumer satiation created in the past would aid better placement of the new product within short duration of time.
I believe Brand extension is a winning strategy for creating competitive advantage. The main justification for the brand extension strategy would be incremental is growth and profitability by introduction of new products with the aid of existing market presence. The case of using a reputed existing brand means new product will be able to leverage the loyalty and equity of the parent brand. In fact, the parent brand acts as the promoter and guarantor for the new brand, resulting in lower cost. It has been observed that often newer products use sales and distribution channels of the parent brand. This increases synergy and efficiency.
However, venturing into product categories which are different in interest and values from the parent brand results in huge gap in extension space. This exposes the brand to the risk of brand dilution. Sometimes the performance of the new brand may damage the goodwill of the parent brand. This is a huge risk. Also, there are chances of less awareness and trial because the management may not provide enough investment for the introduction of new product assuming that the spin-off effects from the original brand name will compensate.