When an existing brand name is extended to a product of different category, it is called brand extension. To illustrate, Park Avenue, a brand name for shirts is extended to toiletries. Nirma, a detergent brand name is extended to Nirma toilet soaps. The distinction between a line extension and brand extension is the factor of product category. It is constant in line extension but is variable in brand extensions. Brand extensions are really speaking category extensions.

The brand extension route saves in promotion costs as the common brand name benefits all products falling under it . The reputation rubs off the range of brands. It reduces the cost of new product launches. Brand extensions also make it absolutely clear to as what the brand stands for.

Brand extensions are of various types. Generally, product form variations are called line extensions, but when the form is perceived to be a different category altogether, it can be treated as brand extension. Nestle can be extended from milk to condensed milk.

Brand extensions do bring about brand distinction based on the on attributes. A hair oil brand based on the hair care premise can be extended to shampoo. Brands can be extended to totally unrelated categories e.g. fashion design clothes to jewellery to writing instruments. Here the prestige associated with the brand is exploited. A good brand image has immense possibilities of extension. A brand can be extended to meet the diverse needs of a specific target audience e.g. a company puts the same brand name on a shampoo, diapers, after-bath talc and massage oil for babies. We can have brand extension on distinctive competence of a company e.g. Honda operates in two-wheelers, gensets and automobiles. Brand extensions can be based on distinctive taste, components or ingredients, say Cadbury can extend itself  from chocolates to drinking chocolate and biscuits.

If the parent brand contributes positively to the extended brand, it is a good extension. Sometimes even the extended brand contributes to the parent brand. It is better. Sometimes the parent brand may not contribute at all or contributes negatively to the extended brand. It is a bad extension. Sometimes extended brand weakens the parent brand. It is worse.