It is assumed that the consumers already understand the usefulness of the core brand and therefore are likely to associate new products with it. The familiarity of the consumers with the firm and the core brand enhances acceptance of the new product. The brand extension may also be used to market a modified product of the core brand. For example, Unilever produces various products. Initially, the company produced a washing liquid, which had brand equity. However, the firm realized that washing powder would be preferred by some consumers. The firm extended fairy from a liquid brand to include powder. The new washing powder gained popularity among consumers mainly because of the existing fairy brand that had brand equity.
When firms identify investment opportunities in the market that have not been exploited, they can easily establish through extending their strong brands to ensure that all the needs of consumers are met by one firm (Chandon, 2004). Such strategy prevents other firms from the entry into the same market especially when the extended brand establishes. Companies such as Microsoft have used this strategy whereby they provide all that is needed in the market through brand extension thereby barring potential organizations from entry. There are opportunities for emergent companies to invest but they may not have a large market share for them to be profitable.