The application of an established brand name for a new product or for a new product category is referred to as a brand extension. The major advantage of a brand extension is that it leverages the brand equity of a well-known brand to launch a new product.
Ideally there should be a logical association between the existing range and the extension because a weak association can result in brand dilution and harm the parent brand.
The cost of launching a new product through a brand extension is also lower.
It is majorly of two types:
When a variant of an existing product is launched under an existing brand name, it is called Line Extension. For example, a milk brand extends into condensed milk.
When a new category is launched under an existing brand name, it is called Product Extension. For example, a soap brand extends into shampoos.