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Positive Brand Extension

Positive Brand Extension

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Published by Hassan Hasan

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Published by: Hassan Hasan on Mar 04, 2011
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Positive brand extensiontrialandchoiceofparentbrand
Kuang-Jung Chen and Chu-Mei Liu
The authors
Kuang-Jung Chen
is Professor and
Chu-Mei Liu
is AssociateProfessor, both in the Department of International Business,Ching Yun University of Technology, Jung-Li, Taiwan, ROC.
Keywords
Brand extensions, Trials
Abstract
This article focuses on the possible relationship between theparent brand and a new brand extension. In particular, the studyfocuses on the impact of a parent brand on the trial of theextension and the reciprocal effect of a successful trial of newbrand extensions positioned horizontally and vertically on theparent brand. Results show positive influence of the parentbrand on the trial of the extension. Successful trial also helpedthe parent brand on a reciprocal basis, particularly among thenon-loyal users and non-users of the parent brand. Anotherfinding is the moderating effect of category positioning on themagnitude of the reciprocal effect of the brand extension on theparent brand. There is also an indication that prior parent brandexperience acts as a moderator of reciprocal effects.
Electronic access
The Emerald Research Register for this journal isavailable at
www.emeraldinsight.com/researchregister
The current issue and full text archive of this journal isavailable at
www.emeraldinsight.com/1061-0421.htm
An executive summary for managers andexecutive readers can be found at the end of this article.
Introduction
Firms in the corporate world have long recognizedthe strategic role of brand extension. Many firmscapitalize on brand equity through a brandextension strategy. Brand extension involves theuse of a brand name established in one productclass to enter another product class (Aaker, 1990;Tauber, 1988). For example, Ivory shampoo,Jell-O frozen pudding pops, Bic disposablelighters, and NCR photocopiers are successfulextensions of familiar brands to new productcategories.Brandextensionasamarketingstrategyhas become even more attractive in today’senvironment where developing a new productcosts a lot of money and can be time consuming.Literature on extensions dominantly addressesthe question of how the parent or core brand helpsthe new product during its launching stage.Although literature touches on the possiblereciprocal effects of the new product launching onthe equity of the core brand, their number islimited. This study examines the proposition thatbrand extensions’ launching performance couldaffect the equity of the parent brand.
Conceptual framework
Launching of a new product is usually donethrough brand extensions. The newly introducedbrand extension capitalizes on the equity of thealready established (core) brand name (DeGrabaand Sullivan, 1995; Pitta and Katsanis, 1995) oreven the company or corporate name (e.g. SanMiguel, Coca-Cola). Consumer familiarity withthe existing core brand name aids new productentry into the marketplace and helps the brandextension to capture new market segments quickly(Dawar and Anderson, 1994; Milewicz andHerbig, 1994). This strategy is often seen asbeneficial because of the reduced new productintroduction marketing research and advertisingcosts and the increased chance of success due tohigher preference derived from the core brandequity. In addition, a brand extension can alsoproduce possible reciprocal effects that enhancetheequityoftheparentbrand.Swaminathan
etal.
’s(2001) study affirms that the use of a brandextensionstrategycanresult ininducedtrial dueto
Journal of Product & Brand ManagementVolume 13 · Number 1 · 2004 · pp. 25-36
q
Emerald Group Publishing Limited · ISSN 1061-0421DOI 10.1108/10610420410523821
25
 
brand awareness and equity among existingconsumers of the parent brand.From a managerial point of view, extension trialshould also strengthen consumers’ propensitiestoward buying the parent brand unless theextension experience is negative and reduces theparent brand’s equity. This effect is mostpronounced among consumers who have lowlevels of loyalty toward, or exposure to, the parentbrand. On the other hand, while the possibility of equity reduction exist among highly loyalconsumers of the parent brand, its effect slowbecause of their strong attachment to the parentband resulting from previous positive experiences.
Common brand extension approaches
Brand extension strategy comes in two primaryforms: horizontal and vertical. In a horizontalbrand extension situation, an existing brand nameis applied to a new product introduction in either arelated product class or in a product categorycompletely new to the firm (Sheinin and Schmitt,1994). A vertical brand extension, on the otherhand, involves introducing a brand extension inthesameproductcategoryasthecorebrand,butata different price point and quality level (Keller andAaker, 1992; Sullivan, 1990). There are twopossible options in vertical extension. The brandextension is introduced at a lower price and lowerquality level than the core brand (step-down) or ata higher price and quality levelthan the core brand(step-up). In avertical brand extension situation, asecond brand name or descriptor is usuallyintroduced alongside the core brand name in orderto demonstrate the link between the brandextension and the core brand name.Although a brand extension aids in generatingconsumer acceptance for a new product by linkingthe new product with a known brand or companyname, it also risks diluting the core brand image bydepleting or harming the equity which has beenbuilt up within the core brand name (Aaker,1990). In the local setting of the present study, thecase of a popular high class restaurant chain usingits popular “Coveland” brand name in theintroduction of its “tourist car rental” venture is atypical example. The inappropriate brandextension created damaging associations, whichmay be very difficult for a company to overcome, asituation similar to the findings of Lane andJacobson (1995) and Reis and Trout (1986).While the brand extension must capitalize onthe core brand, it must create its own niche withinthe company’s brand-mix. In effect, whilecapitalizing on the equity of the parent, it must atthe same time try to break away from the existing“core brand loyalty” and ultimately establish itsown brand loyalty (new product). A centralinfluence on current purchase of the core brand isthe effect of its previous purchase which can beconceived as the inertial effect of consumerstending to rebuy the brand they purchasedpreviously. Previous purchase is distinct fromunderlying brand preference. Lattin (1987) andBucklin and Lattin (1991) captured the dynamic(previous purchase) and static (preference)components of brand “loyalty.” Enduring brandbeliefs and attitudes fall under the realm of thelabel static preference.When an extension is launched, currentadvertising is expected to have a positive influenceon its current purchase. The theory of hierarchy of effects (Aaker
et al.
, 1992; Aaker and Day, 1974;Lavidge and Steiner, 1961) points to the primaryrole of advertising as enhancing brand awarenessand beliefs and of announcing the existence of thebrand or persuading consumers that the brandpossesses various attributes. If these efforts aresuccessful, the consumer should be more likely topurchase the brand extension by switching fromthe core brand to the brand extension.Complimentary purchase could also happen.
Reciprocal effects
Positive reciprocal effects exist only when anaverage-quality parent brand (in comparison tocompetitors) introduces a successful extension(Keller and Aaker, 1992). Evaluations of parentbrands that are already well regarded will notchange significantly as a result of favorableextension experience. Furthermore, enhancementeffects exist for brand extensions that are similar totheparentbrand(Gurhan-CanliandMaheswaran,1998). On the other hand, negative reciprocaleffects can occur when the extension similarity tothe parent brand is extremely low. However, thiscan also happen when the extension is highlysimilar to the parent brand, but not obvious.Likewise, dilution of a family brand nameoccurs in response to incongruent and negativeinformation about the extension, particularlywhen theextension is perceivedto be similar to theparent brand (Gurhan-Canli and Maheswaran,1998). Negative reciprocal effects also exist at thebrand attribute level (Loken and Roedder-John,1993) but are not clear at the overall attitude level(Keller and Aaker, 1992).Usually a new product is tried by a group of consumers who are heterogeneous in their priorexperience with the parent brand: prior users,prior shifters, and prior non-users. A successfultrial results in a favorable experience and furnishesnewinformationregardingthebrandnametobothprior users and prior non-users. The learningprovided by the product experience will lead tostrongly-held beliefs regarding the extended brand
Positive brand extension trial and choice of parent brand
Kuang-Jung Chen and Chu-Mei Liu 
Journal of Product & Brand ManagementVolume 13 · Number 1 · 2004 · 25-36
26
 
(Hoch and Deighton, 1989; Kempf and Smith,1998). Roedder-John
et al.
(1998) viewed brandknowledge as a network of beliefs and associations.Hence, the beliefs regarding the extension brandare transferable to the parent brand. Keller andAaker (1992) and Loken and Roedder-John(1993) posited that two conditions must bepresent for the transfer to occur:(1) The extension information must be deemedrelevantto theparentcategory.This mandatessimilarity between the parent and theextension categories.(2) The beliefs about the parent brand mustundergo a change.Roedder-John
et al.
(1998) suggested, however,that the network of beliefs linked to the flagshipproduct tends to be extreme, strongly held, andresistant to change because of the accumulatedexposureandexperiencewiththeflagshipproduct.However, the beliefs associated with the parentbrand are likely to be different (varying strengths)across different segments of consumers.Consumers (prior users) who already have a highlevel of loyalty to the parent brand have awell-developed set of associations. It is expected,then, that new information from the experiencewith the extension brand will be unlikely toproduce a significant change.Conversely, consumers with low to moderateloyalty toward the parent brand, those who haveless exposure to the parent brand, and those thathave negative association, particularly the non-users, are more likely to be receptive to changetheir beliefs and are prone to try the new brand(extension).If trial results in an unsuccessful brandextension, it is likely that extension triers will getnegative or at least neutral information regardingthe extension. Among the prior users, the negativeresults of the extension trial can provide newnegative information that can contradict theirexisting knowledge structures. For non-users,choice of the parent brand is already zero – hence,there is no more effect of the negative informationon their current choice.The notion that advertising might interactpositively with experience is rooted in the work of Ehrenberg (1974). There is empirical evidenceshowing that advertising has a disproportionateeffect on those “loyal” to a brand (Raj, 1982).Smith and Swinyard (1983) provided a cognitivefoundation differentiating between lower orderbeliefs, which are held prior to brand usageexperience and are hence more tentative, andhigher order beliefs, which form after extensiveusage and are therefore more resistant to change.According to Smith and Swinyard, advertisingcould work by two possible advertising-usageinteractions. One would occur by advertisinghelping to establish source credibility. The otherwould occur by advertising setting up a“predisposition” for a favorable usage experience,and then the favorable experience woulddetermine subsequent purchase behavior.Deighton (1984, 1986) described advertising asa “frame” on the brand usage experience, eitherpredictive or diagnostic. Framing might occurbefore (predictive) or after (diagnostic) the actualexperience. Before the experience, the advertisingmight focus the consumer on the brand’s bestattributes so that when the consumer evaluates theusage experience, the result is more favorablebecause the consumer evaluated the brandprimarilyonthesecriteria.After theexperiencetheadvertising could suggest to the consumer how tomake sense of what he or she has just experienced,resolving ambiguities and influencing what isretained in memory. In both predictive anddiagnostic framing, the key is that advertisinginteracts with the usage experience to enhance thelikelihood of repeat purchasing.
Consumer evaluation of extension
It is generally believed that linking the verticalbrandextension with thecore brandwill be helpfulin gaining consumer acceptance for the newlylaunched brand extension (Broniarczyk and Alba,1994). However, introducing a vertical brandextension almost always has a negative impact onconsumer perceptions of the firm’s core brand(Dacin and Smith, 1994). By its very nature,introducing a vertical extension results in a brandextension which exists in the same narrow productcategory but which differs from its core brand interms of quality level. This difference in qualitylevel that is perceived between the core brand andthe brand extension leads to consumer concerns,questions, or dissonance about the quality level of the core brand. Perceived ambiguity about thequality level of the core brand and the brandextension will inevitably diminish the favorabilitywith which consumers view the core brand.Research indicates that regardless of whether thevertical extension is a step-up or a step-downextension, the impact on the core brand image isnegative (Dacin and Smith, 1994).Categorization theory can be applied to brandfamilies in an attempt to understand the dynamicsofcorebrandsandbrandextensions(Meyers-Levyand Tybout, 1989; Sujan and Bettman, 1989;Sujan and Dekleva, 1987). One model fromcategorization theory, the bookkeeping model(Queller and Smith, 2002), suggests that newinformation about a brand extension introductioncauses consumers to update their beliefs about thebrand family and the core brand. Since a newly
Positive brand extension trial and choice of parent brand
Kuang-Jung Chen and Chu-Mei Liu 
Journal of Product & Brand ManagementVolume 13 · Number 1 · 2004 · 25-36
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