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Journal of Product & Brand Management

Emerald Article: Consumer evaluations on brand extensions: B2B brands extended into B2C markets Sebnem Burnaz, Pinar Bilgin

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To cite this document: Sebnem Burnaz, Pinar Bilgin, (2011),"Consumer evaluations on brand extensions: B2B brands extended into B2C markets", Journal of Product & Brand Management, Vol. 20 Iss: 4 pp. 256 - 267 Permanent link to this document: Downloaded on: 26-09-2012 References: This document contains references to 30 other documents To copy this document: This document has been downloaded 2138 times since 2011. *

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F. Mge Arslan, Oylum Korkut Altuna, (2010),"The effect of brand extensions on product brand image", Journal of Product & Brand Management, Vol. 19 Iss: 3 pp. 170 - 180 Isabel Buil, Leslie de Chernatony, Leif E. Hem, (2009),"Brand extension strategies: perceived fit, brand type, and culture influences", European Journal of Marketing, Vol. 43 Iss: 11 pp. 1300 - 1324 Eva Martnez, Jos M. Pina, (2010),"Consumer responses to brand extensions: a comprehensive model", European Journal of Marketing, Vol. 44 Iss: 7 pp. 1182 - 1205

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Consumer evaluations on brand extensions: B2B brands extended into B2C markets
Sebnem Burnaz and Pinar Bilgin
Faculty of Management, Istanbul Technical University, Istanbul, Turkey
Abstract Purpose This paper aims to examine whether companies in business-to-business (B2B) markets can leverage their brands extended into business-toconsumer (B2C) markets and how consumers evaluate these extensions. Design/methodology/approach A model is developed by combining Aaker and Kellers brand extension model with theories from B2B branding as well as other consumer branding literature, and analyzed both qualitatively and quantitatively to have an insight about how consumers evaluate brand extensions. Findings In the context of B2B brand extensions into B2C markets, consumers use brand concept consistency, product-level relatedness and transferability of skills and resources as major cues to evaluate extensions. Perceived quality, innovativeness and environmental concerns are also relevant cues. Practical implications As a consequence of these ndings, branding strategies that stretch B2B brands into the domain of consumer markets can be successful in cases where consumers perceive a t with respect to skills and resources, brand concept, and existing products, and when the parent brand is perceived as being high quality, innovative and environmentally responsible. Originality/value The main contribution of the study is to replicate the analysis of brand extension evaluation in a different context, namely B2B brand extension into the B2C market. Keywords Brand extension, B2B, B2C, Regression analysis, Business-to-business marketing, Consumer marketing, Consumer behaviour Paper type Research paper

An executive summary for managers and executive readers can be found at the end of this article.

1. Introduction
The changing market dynamics and severe competition of the global economy have amplied the role of brands to an incomparable level. Brand marketers seek ways to achieve growth while reducing both the cost of new product introductions as well as the risk of new product failures. A popular way of launching new products has been brand extensions to leverage the equity of an existing brand into a new product category. The leverage of a strong brand name can substantially reduce the risk of introducing a product in a new market by providing consumers the familiarity of and knowledge about an established brand. Also, brand extensions can decrease the costs of gaining distribution and increase the efciency of promotional expenditures (Aaker and Keller, 1990). Brand extensions implying launching new products, a key issue is to what extent these extensions are successful. Keller (2003a) stated that:
[this] is not a question of whether a brand should be extended, but rather where, when, and how it should be extended. Simply put: extend the brand if it is possible.

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Journal of Product & Brand Management 20/4 (2011) 256 267 q Emerald Group Publishing Limited [ISSN 1061-0421] [DOI 10.1108/10610421111148289]

Actually, over 80 percent of all new products are categorized as brand extensions (Mortimer, 2003). This is not to say that brand extensions are risk-free it is crucial to know where the boundaries of the brand are. For instance, whilst the stretching attempt of deodorant brand Lynx into hair care market was unsuccessful; Gillette, the razor brand of Procter & Gamble, was a successful attempt to stretch into after shave and deodorant markets. Thus, even if the product category of the extension is intuitively related to the product category of the parent brand, there can still be a lack of t. Additionally, brand extensions do not necessarily have to stick to their parent category. The famous department store chain Marks & Spencer launched nancial services, although it was a totally different area than retailing. It worked well, because its customers associated both the parent brand and the nancial services with trust (Keller, 2003a, b). Unfortunately, all discussions of branding are structured in consumer marketing context. However, some of the worlds most powerful brands are in business-to-business (B2B) markets; such as ABB, Caterpillar, Cisco, DuPont, FedEx, GE, Hewlett Packard, Intel and Boeing (Webster and Keller, 2004). The question then could be raised as follows: what if a company wants to extend its B2B brand into consumer (B2C) market? There are various examples about powerful B2C brands, which have once been B2B brands and now serving as consumer brands. For instance, global mobile phone brand Nokia started out in forestry industry (B2B) in 1865, and then began selling rubber boots in 1960s, and it was not famous until it started making mobile phones in 1980s. Other examples including Philips, Mitsubishi, Microsoft, Caterpillar and IBM underlines the fact that a stretch from B2B to the B2C market is not that uncommon (Tang et al., 2008). In order to determine whether a brand extension is able to gain prot from its parent brand, it is essential to understand 256

Consumer evaluations on brand extensions Sebnem Burnaz and Pinar Bilgin

Journal of Product & Brand Management Volume 20 Number 4 2011 256 267

how customers evaluate the extensions, since the success is largely dependent on this evaluation (Klink and Smith, 2001). A landmark study in this area was conducted by Aaker and Keller in 1990, followed by various academic researches (Park et al., 1991; Bottomley and Holden, 2001; Patro and Jaiswal, 2003; Volckner and Sattler, 2007). However, there is a paucity of research investigating brand extensions into the B2B markets. Recent researches are more focused on corporate brand identity and communication of intangible brand attributes. The study of Tang et al. (2008) on B2B extension in information and communication technology (ICT) industry in Taiwan is the major academic research that the authors were beneted from. The present study aims to investigate B2B brand extension evaluation into the B2C market. The objectives of this research can be stated as follows: . to determine whether a replication of Aaker and Kellers (1990) brand extension model is feasible in B2B context; . to examine whether factors evaluating brand extensions can be successfully combined to form an effective model for predicting extension acceptance in the research context; and . to determine the relative importance of these factors affecting the evaluation of brand extensions. The study consisted of two consecutive research steps. First, an exploratory research was undertaken and ve mini focus groups were conducted, each comprising a sample of ve people, to get insights of the consumers brand extension evaluations and a take a general picture. The qualitative phase was followed by a descriptive research using the survey method and investigating the extent of the relationship between selected variables. Hence, the quantitative phase tried to formally assess the consumers evaluations of brand extensions through measuring attitude for different variables. Hypotheses were operationalized based on a developed model adapted mainly from Aaker and Keller (1990).

factors inuencing the success of the extension were: the attitude toward the original brand (QUALITY), t between the original and extension product classes and perceived difculty of making the extension (DIFFICULTY). They also dened three dimensions of t as: the extent to which consumers view two product classes as complements (COMPLEMENT), the extent to which consumers view two product classes as substitutes (SUBSTITUTE) and how consumers view relationships (design or making) in product manufacture (TRANSFER). Finally, the dependent variable was the attitude toward the extension, operationalized by the average of the perceived quality of the extension and the likelihood of trying the extension measures. Aaker and Keller (1990) hypothesized that the consumers attitude towards the brand extension is a positive function of the quality of parent brand, the t between the parent s brand category and the extension category (measured in terms of the transferability of skills and expertise from one category to the other and the complementarity and substitutability of one category and the other), the interactions of quality with three t variables, and the degree of difculty in designing and making a product in the extension category. Formally, the following model was tested: Y a b1 Q b2 T b3 C b4 S b5 QT b6 QC b7 QS b8 D 1 where the independent variables are Q Quality, T Transfer, C Complement, S Substitute, D Difcult, a Intercept and 1 Error term. The dependent variable Y, as the consumers evaluation of brand extension was measured with two variables: the perceived overall quality of extension and the likelihood of purchasing the extension. Average of these two variables was used to represent the consumers evaluation of extension. Aaker and Kellers (1990) research provided valuable insight into which extension constructs inuence the attitude of consumers towards the extended brand. Since, research on the eld has followed the seminal work around the world (e.g. Sunde and Brodie (1993) in New Zealand; Nijssen and Hartman (1994) in The Netherlands; Bottomley and Doyle (1996) in UK; Van Riel et al. (2001) in The Netherlands, Patro and Jaiswal (2003) in India). Despite the wide acceptance and diffusion of Aaker and Kellers (1990) ndings, almost all the replications gave varying results and thus questioning the empirical generalizability of the original ndings. 2.1 Research motivation and hypotheses As this study aims to offer a replication, the original model of Aaker and Keller (1990) is modied in order to be consistent with the scope of the study. The dependent variable is the overall attitude towards the B2B brand extension into B2C markets. It is predicted that perceived quality, perceived t and perceived difculty variables inuence brand extension evaluation. First, the underlying assumptions of the proposed research are discussed, and then hypotheses are developed to test the direct and interaction effects of the variables on consumer extension evaluations. Perceived quality of parent brand Zeithaml (1988) denes perceived quality as a global assessment of a consumers judgment about the superiority 257

2. Conceptual background
Keller and Aaker (1992) dene brand extension as the use of an established brand name to enter new product categories or classes. Then an important body of empirical evidence was developed on consumer attitude in respect of brand extensions. Studies that were conducted by Boush et al. (1987) and Aaker and Keller (1990) respectively initiated systematic research on consumer behavior towards brand extension. While the research of Aaker and Keller (1990) has always been showed as the landmark study of the eld, many replication studies followed them (e.g. Park et al., 1991; Boush and Loken, 1991; Loken and John, 1993; Broniarczyk and Alba, 1994; Dacin and Smith, 1994; Bottomley and Holden, 2001; Klink and Smith, 2001; Balachander and Ghose, 2003; Tang et al., 2008). These research ndings have also been treated from an applied managerial perspective. Leveraging existing brand equity into new product categories attempts to avoid the risk associated with establishing a new brand, through convincing consumers that the positive attributes associated with the original brand are relevant to the new product and/or simply beneting from the awareness of the original brand. Aaker and Keller (1990) proposed an attitude-based brand extension model where

Consumer evaluations on brand extensions Sebnem Burnaz and Pinar Bilgin

Journal of Product & Brand Management Volume 20 Number 4 2011 256 267

or excellence of a product. She concludes that perceived quality is at a higher level of abstraction than a specic attribute of a product. The impact of perceived quality on the attitude towards the extension should be unambiguously positive. If the brand is associated with high quality, the extension should benet; if it is associated with inferior quality, the extension should be harmed (Aaker and Keller, 1990; Boush and Loken, 1991). Besides, previous research on consumer evaluations of brand extension except for Aaker and Kellers study shows that consumers brand extension evaluation largely depends on the perceived quality judgment of the original brand. Once the product is activated as a category, the consumer will immediately infer cognitive judgments associated with the product. If the product is associated with high-perceived quality, the consumers memory rehearsal about the new brand will center on pleasant thoughts in relation with his expected value. As ones perceptions of quality towards the original brand increase, trust of the new brand and satisfaction will also increase. Therefore, the following hypothesis is proposed: H1. Higher quality perceptions toward the B2B parent brand are associated with more favorable attitudes toward the brand extension into B2C market.

Perceived t A brand extension in a new product category is viewed as a new instance that can be more or less similar to the brand. The number of shared associations between the extension and the brand characterizes perceived t. TRANSFER is the rst dimension of t and it pertains how consumers view relationships not only in product usage, but also in product manufacturing. Specically, TRANSFER reects the perceived ability of any rm operating in a given product class to make a product in another product class. It is important whether the consumers feel that the people, facilities, and skills a rm uses to make the original product would transfer and be employed effectively in designing and making the product extension or not. If not, the perceived quality of the brand or beliefs about the brand in the original product class may not transfer to the extension. In fact, if a rm appears to be stretching excessively beyond its area of competence, negative reactions might be stimulated and lead to negative associations (Aaker and Keller, 1990). Likewise, according to Boush and Loken (1991) that inuence associated with the parent brand is transferred to the extension when the similarity between two products is high. In conclusion, if consumers see a t between the brand and extended product, their quality perception will be transferred to the extension. Thus, the second hypothesis is as follows: H2. The transfer of B2B parent brands perceived quality is enhanced when the product classes t together. (When the t is weak, then the transfer is inhibited.)

substitutes. On the other hand, as B2B extension through B2C market can be accepted as extra-sectoral movement, it is not possible for the brand extension to substitute or complement the original brand, since the customers of parent B2B brand and extended consumer brand could be possibly different. Hence, SUBSTITUTE dimension will be omitted and COMPLEMENT dimension will be modied. Broniarczyk and Alba (1994) propose an alternative measure for complementarity stating that, consumer do not only evaluate the brand extension based on the perceived product category t, but also that their assessment are driven primarily by the associations of the brand. Thus, if consumer perceives a brand extension to be relevant with the original brand concept, the attitude towards the extension will be positive. Park et al. (1991) also reveal that when consumers evaluate a brand extension, they do not take into account only information about the product features similarity, but also the concept consistency between the brand concept and the extension. The brand concept consistency is more about the brand image than the physical features. The more the consumers think the extension is consistent with the parent brand concept or image, the more favorable their attitudes are toward the extension. Thus, those extensions that are very different physically from the parent product category can be perceived as tting with the parent brand, as long as they have consistent images and concepts with the parent brand. Park et al. (1991) found that rings could be a good extension for Rolex but a bad extension for Timex, although these two brands have the same parent product -watches-, but rings were more consistent with the luxury and high status image. The third hypothesis is put as: H3. If the brand associations of the consumer brand extension are consistent with brand concept of B2B parent brand, the attitude toward the brand extension is positive.

Two other dimensions of t are COMPLEMENT and SUBSTITUTE. If the parent brand product and the extended product can be consumed or used jointly, then they complement each other. Conversely, if the extended product can be used instead of the parent brand product, they substitute each other. However, Bottomley and Holden (2001) state that only a few brand extensions represent true 258

Relatedness is another word used to describe the t between the extension product and the original brand. Herr et al. (1996) dene it as the strength of the association between the brands parent category and the target extension category. They also indicate that relatedness is a similar concept to similarity; it depends on the similarity of common features, complementarities in a common-usage situation, and substitutability in providing a common function (Farquhar et al., 1990; Herr et al., 1996). On the other hand, relatedness is a more inclusive construct than similarity (Herr et al. (1996), the last one only referring to the common physical features between the original product category and the extension category. It does not accommodate the notion of conceptual coherence; that is, sometimes two product categories are perceived to be related to each other conceptually but not physically. For example, CD players and digital cameras can be seen as related to each other, even though they have very different physical attributes. Thus, Herr et al. (1996) conclude that relatedness offers a broader view of similarity. The forth hypothesis is as follows: H4. If the brand associations of the consumer brand extension are related to the existing products of B2B parent brand, the attitude toward the brand extension is positive.

Consumer evaluations on brand extensions Sebnem Burnaz and Pinar Bilgin

Journal of Product & Brand Management Volume 20 Number 4 2011 256 267

Perceived difculty of making the extension Aaker and Keller (1990) dene another factor as the perceived difculty in designing or making the extension product, termed as DIFFICULT. When consumers perceive the extended product class to be trivial or very easy to make (i.e., DIFFICULT is low), a potential incongruity occurs. The consumers may view the combination of a quality brand and a trivial product class as inconsistent or even exploitative. The incongruity itself may trigger a rejection or might lead to a judgment that the quality name will add a price higher than is justied and necessary for such a product. It implies that rms should avoid extending quality brands to trivial product classes for fear that the extension is perceived as incongruous (Aaker and Keller, 1990). Then, the fth hypothesis accordingly is: H5. The relationship between the difculty of making the consumer product class of the brand extension and the attitude toward brand extension is positive.

Corporate social responsibility of parent brand Companies unquestionably have responsibilities for their community and these responsibilities must be elucidated and adjusted with the core businesses (Kitchin, 2003). As these responsibilities are affairs and promises, corporate social responsibility (CSR) is eventually a function of the brand. Similarly, Keller and Aaker (1997) dene CSR as a rms philosophy to improve the quality of life in local communities through various activities and programs. They state that marketing efforts towards environmental awareness and community involvement increase the perceived likeability and trustworthiness, however could not nd signicant effect on the extension evaluation. Then the seventh hypothesis is: H7. Perceptions of CSR of the parent B2B brand has no effect on the attitudes toward the brand extension into B2C market.

Keller and Aaker (1997) observed how various types of corporate marketing activities would affect corporate credibility and hence how they can have positive inuence on evaluation of brand extension. They presented four ctitious corporate brand extensions and corporate descriptions that focused on one of the following three attributes: 1 reputation of a rm for being innovative and launching technologically advanced products; 2 rms strategy of offering environmentally friendly products and manufacturing environmentally safe; and 3 rms corporate social responsibility. The ndings show that corporate marketing attempts can be useful as they improve perceptions and evaluations. Building a good corporate image and managing an outstanding corporate brand strategy help new product acceptance (Keller and Aaker, 1997). Therefore, innovativeness, corporate social responsibility and environmental concern are also considered in the context of this study. Perceived innovativeness of parent brand An innovative brand image involves being perceived as being modern and up-to-date, investing in research and development, utilizing state-of-the-art manufacturing technologies, and introducing the latest product features (Keller, 2003a, b). Studies about marketing innovativeness have focused mostly on the area of consumer innovativeness and the innovation diffusion (Roerich, 2004). Marketing activities underlining innovation have a major impact on the evaluation of corporate brand extension as it leads to positive corporate expertise perception and beliefs that the corporate brand extension will also be innovative (Keller and Aaker, 1997). Underlining the innovativeness is an important marketing activity that improves the perceived similarity of customer through the brand extension. Thus, emphasizing innovation in marketing attempts considerably enhances both perceived quality and likelihood of purchasing for the brand extension. The sixth hypothesis is proposed as follows: H6. Higher perceptions of innovativeness toward the B2B parent brand are associated with more favorable attitudes toward the brand extension into B2C market. 259

Parent brand environmental concern Environmental concern is dened by Keller and Aaker (1997) as:
[. . .] a rms policy to sell environmentally friendly products and to manufacture products in an environmentally safe fashion.

Corporate marketing attempts can improve the perceptions of corporate credibility, showing that the corporate brand extension has environmental responsibility. Marketing efforts emphasizing environmental concern have proved to have only a modest impact on extension evaluation, leading to the eighth hypothesis: H8. Perceptions of environmental concern of the parent B2B brand has no effect on the attitudes toward the brand extension into B2C market.

Interaction factors Aaker and Keller (1990) state that the perceptions toward the parent brand and the t between the parent and extension product classes have an interactive effect on the nal evaluations of a brand extension as well. The t between the parent B2B brand and the new B2C extension classes might also have a positive effect on the attitude toward brand extensions. Tang et al. (2008) considered the interaction effect with the factor of brand concept consistency, since a complementary or substitute relationship between the parent product and the extension categories is not applicable in the case of B2B-to-B2C extension. They also examined the interaction between transferring skills and assets from B2B-to-B2C products and the perceived quality during the transfer. The following hypotheses will be examined then in order to have the opportunity to make comparisons: The interaction effects of perceived brand quality and brand concept consistency between the parent B2B brand and the B2C extension will inuence evaluations on the perceived quality of the parent brand and the B2C extension product. H10. The interaction effects of perceived brand quality and the perceived transferability of the parent B2B brand to effectively employ its skills and assets in designing and producing the B2C extension will inuence evaluations on the perceived quality of the parent brand and the B2C extension product. H9.

Consumer evaluations on brand extensions Sebnem Burnaz and Pinar Bilgin

Journal of Product & Brand Management Volume 20 Number 4 2011 256 267

The above interaction effects state that consumers evaluations of the perceived quality will be affected by the brand concept consistency between the parent B2B brand and the B2C extension (H9) or perceived transferability of the parent B2B brand to effectively employ its skills and assets in designing and producing the B2C extension (H10). These two hypotheses describe the interaction effects.

3. Methodology
The study uses both exploratory and descriptive approaches integrating qualitative and quantitative methods. The objective of the qualitative phase of the research is to see what types of associations will emerge from a thought-listing about the original brands and the extensions, and thus gain insights about why evaluations are more favorable towards some of the extensions than towards others. First, four B2B brands and related brand extensions are set, and then focus groups are conducted to investigate mainly the determining factors on consumer evaluation toward B2B-to-B2C brand extension. Focus group interviews are made by taking into consideration different education levels and age ranges in order to ensure the heterogeneity among the groups and to determine whether there is a relation between education level and age ranges and awareness of and attitude toward B2B brands. The quantitative part aims to assess the consumers evaluation of brand extensions through measuring attitude for different variables. H1-H10 were operationalized through a model adapted mainly from Aaker and Keller (1990) and other replication studies discussed beforehand. A questionnaire consisted of various questions on two wellknown global B2B brands and six hypothetical consumer brand extensions are developed, data collected are analyzed using the statistical software application SPSS (Statistical Package for the Social Sciences) and multiple regression analyses are conducted. 3.1 Selection of the stimuli Since this study aims to analyze B2B brand extensions into the B2C markets, it was necessary to make a selection among a variety of valuable B2B brands. In order to include both service and product brand categories, four brands are selected as two distinct product brands carrying minimum service features and two distinct service brands carrying minimum physical product features. Those B2B brands were chosen based on the criteria that Aaker and Keller (1990) proposed: as relevant to the respondents, perceived as high quality, eliciting relatively specic associations, and not broadly extended before. Aaker and Keller (1990) also stated that the use of low quality brands would have tended to generate extensions that would be less realistic; therefore, industry leaders perceived as high quality brands were chosen. After the selection of four B2B brands, next step was to attempt to select product categories for parent brand and the extension. However, the hypothesized brand extensions had to be reasonable, but also providing heterogeneity on the t measures of the model. To achieve this, some extensions were consciously chosen barely related and barely consistent, thus allowing variance with respect to the perceived quality of extension. Table I shows the four selected B2B brands and hypothetical brand extension products. 260

3.2 Sample and data collection In the original Aaker and Keller (1990) study and in most of the replication studies, the samples were drawn from student populations. However, this includes an obvious limitation in terms of the representation of the population and generalization of the ndings. As it was observed during focus group research, brand awareness levels differentiated based on the education level; highly educated people were more eager in understanding the questions and showing interest to the topic. Thus, the survey questionnaire of the study was distributed to high educated people both online and via face to face method, and it was aimed to cover variety in age, gender and income levels. Finally, data from 314 respondents on six product extensions are collected. Respondents varied in age between 20 and 53 year-old, 50.5 percent were male and 49.5 percent were female, with the average age of 30. 3.3 Variables and measurement The questionnaire was prepared in two parts (for each parent brand) and the same questions were asked to the respondents in the same order. However, an open-ended question was placed in each part as preliminary question, in order to get more knowledge about brand awareness levels. Besides, a multiple-choice question measuring the brand characteristics and image was created based on the focus groups ndings. Quality perception (Q) indicates consumers perception toward the overall quality of each parent brand (1 inferior, 5 superior), which is the overall brand attitude (Aaker and Keller, 1990; Park et al., 1991; Broniarczyk and Alba, 1994; Tang et al., 2008). Transfer (T) indicates the perceived ability (1 strongly disagree, 5 strongly agree) of the rm operating in the rst product class to another product class (Aaker and Keller, 1990; Park et al., 1991; Broniarczyk and Alba, 1994; Tang et al., 2008). Brand concept consistency (B) measures the extent to which the consumer perceives the extension to be consistent with the parent brand (1 very inconsistent, 5 very consistent) (Broniarczyk and Alba, 1994; Park et al., 1991). Relatedness (R) shows the strength of the association between the brands parent category and the target extension category (1 very unrelated, 5 very related) (Farquhar et al., 1990; Herr et al., 1996). Difculty (D) presents the perceived difculty of making the extension (1 not at all difcult, 5 very difcult) (Aaker and Keller, 1990; Park et al., 1991; Tang et al., 2008). Product innovation (I) denotes the consumers perception of the parent brand as innovator in research, design, new technology and services (1 low innovation, 5 high innovation) (Aaker and Keller, 1990; Broniarczyk and Alba, 1994; Tang et al., 2008). Corporate social responsibility (C) presents the marketing activities directed towards environmental awareness and community involvement (1 low responsibility, 5 high responsibility) (Tang et al., 2008). Environmental concern (E) refers to the consumers perceptions of the B2B rms environmental concern during the production process and use of material inputs (1 total neglect of environmental protection, 5 emphasis on environmental protection) (Aaker and Keller, 1990). Finally, consumers evaluation of the brand extension (Y) is measured by the perceived overall quality of the extension (1 inferior, 5 superior) and the likelihood of purchasing the extension (1 not at all likely, 5 very likely). The average of these two variables is used to represent the

Consumer evaluations on brand extensions Sebnem Burnaz and Pinar Bilgin

Journal of Product & Brand Management Volume 20 Number 4 2011 256 267

Table I Overview of B2B brands and hypothetical B2C extensions

Original brand Boeing Intel Original product/service Commercial jetliners, military aircraft, satellites, missile defense, human space ight, and launch systems and services Advanced integrated digital technology products, primarily integrated circuits, microprocessors, chipsets, wired and wireless connectivity, motherboards Audit, consulting, nancial advisory, risk management, and tax services Assurance, tax, transaction and advisory services Hypothetical extension Digital wristwatch, ight simulation computer game and travel luggage Mp3 player, notebook and LCD TV

Deloitte Ernst & Young

Finance Academy and nance books Accounting Academy and account books


consumers evaluation of the extension (Aaker and Keller, 1990; Broniarczyk and Alba, 1994; Tang et al., 2008).

4. Findings of the study

4.1 Qualitative phase ndings The data gathered by focus group research were evaluated in terms of original brand associations and brand extension evaluations. Original brand associations Two of the brands received high quality ratings (Boeing and Intel), whereas the other two received below the average (Deloitte and Ernst & Young). The brand awareness and brand knowledge of B2B service brands were signicantly low. This situation leaded to low quality ratings, because only a few people knew those brands while they had no experience with the offering, and no idea about the actual quality. Participants with higher education levels were familiar with these brands. Although the original aim was to select one product brand and one service brand, the level of brand awareness of Boeing and Intel brands were signicantly high when compared to service brands Deloitte and Ernst & Young. Well-known brands were selected in case of inappropriate responses related to the lack of knowledge about brand. Therefore, questionnaire was designed to include two product brands (Intel and Boeing) and concerned extensions. Brand extension associations Another aim of the qualitative phase was to test the recommended brand extensions in terms of differentiation. Hypothetical brand extensions had to differ from each other in terms of difculty, perceived quality, consistency, etc. One problem with low rated extensions was lack of perceived similarity or consistency between the original and extension product classes. For instance, some subjects reacted to the idea of Boeing manufacturing a digital wristwatch by stating Boeing should stick to aero-technology and would have no credibility as a watch. For the same extension, there was a second problem which was the huge association of Boeing (n 7). Respondents commented that Boeing made them think of something big and durable, and watch as an accessory was supposed to be well-designed and aesthetic. Thus, Boeing wristwatch made them think of a very ugly watch that no one would ever want to wear. Challenging results were also revealed for Intel and extensions. Among the 261

chosen B2B brands, Intel was not only the one with highest level of brand awareness, but also with the highest level of perceived quality. That brand image of Intel made subjects to assume that Intel could handle any electronic-technology related product. Table II summarizes the associations of ten brand extensions. 4.2 Quantitative phase ndings The regression model developed for consumer evaluations of B2B-to-B2C brand extensions is as follows: Y a b1 Q b2 T b3 B b4 R b5 D b6 I b7 C b8 E b9 QB b10 QT 1 where Y (Evaluation) is the average of the perceived quality of the extension and the likelihood of purchasing the extension, Q (in relation with H1) is the overall perceived quality toward the parent brand, T (H2), B (H3) and R (H4) are the t measures for transferability of skills and assets, consistency of brand concept and relatedness respectively. D (H5) is the perceived difculty of making the extension, I (H6), C(H7) and E (H8) are the perceived innovativeness, corporate social responsibility and environmental concern of the parent brand company, and QB (H9) and QT (H10) are moderator terms between the perceived quality and brand concept consistency or transferability, respectively. The dependent variable was attitude towards the extension, operationalized by the average of perceived quality of extension and the likelihood of purchasing the extension measures. The use of two indicators provided a more reliable measure of attitude construct, as the correlation between the two was 0.52 suggesting a reliability of 0.68. As some terms interact with one another, the multicollinearity of regression model was examined at rst. High variance inuence factors (VIF . 10) for interaction terms indicated a high degree of multicollinearity among these variations. Therefore the residual centering approach, as suggested by Lance (1988), was adopted to diminish the degree of multicollinearity and then analyses conducted. Regression model was formally tested by means of linear regression. The analysis included the data from 314 respondents, giving a total sample size of 1686. The signicance of the regression model as a whole was tested by SPSS, and F statistic was computed as 211,344 which is signicant at p 0.000, theoretically indicating that one or

Consumer evaluations on brand extensions Sebnem Burnaz and Pinar Bilgin

Journal of Product & Brand Management Volume 20 Number 4 2011 256 267

Table II Summary of brand associations for brand extensions: number of respondents mentioning item
Brand extension

n 2.38 3 3 1 4 5 3.57 11 11 9 5 3.15 8 2 6 7 8 2 3.13 3 5 8 5 5 3.85 7 5 4 7 9 3.38 4 4 9 7 1 3.20 13 5 6 2.12 13 8 3 1.97 2 9 1 2 2.90 9 4

Boeing digital wristwatch Complicated Expensive Male watch Bad or low quality Would not buy Boeing ight simulation computer game Professional Expensive High quality Genius Boeing travel luggage Durable Heavy Ugly/not esthetical Expensive Huge Blue Intel mp3 player Would not use Not user-friendly Ugly/not esthetical Cheap Bad or low quality Intel notebook Professional Expensive Light Small Fast Intel LCD TV Senseless Low quality No technical knowledge Would not use Cheap Deloitte Finance Academy Good idea Expensive Benecial Deloitte nance books Would not buy Poor content Bestseller Ernst & Young acc. books Poor content Would not buy Not benecial Bestseller Ernst & Young Accounting Academy Good idea Expensive

Notes: Numbers in italics are the average quality ratings; associations and ratings are based on four mini focus groups (composed of ve persons in each group)

more regression coefcients have a value different from zero. The adjusted R2 for the present model is 0.56 which compares favorably with the original Aaker and Keller (1990) model and replications studies. Results of regression analyses are given in Tables III and IV at both aggregate level and brand level. A comparison of the present study with the original and replication study is displayed in Table V. The coefcients of determination for brand extension models in previous studies have been increasing ever since the researchers paid attention to multicollinearity and started to use residual centering method developed by Lance (1988): Aaker and Keller (0.26), Sundie and Brodie (0.43) (not adjusted for multicollinearity); Nijsen and Hartman (0.49), Bottomley and Doyle (0.43 for NZ study and 0.48 for UK study), van Riel et al. (0.54) and Tang et al. (0.63) (adjusted for multicollinearity). Consumers are familiar with new product introductions through brand extension. In general, the variables that have the largest effects in explaining extension attitude are the two t variables Transfer and Brand Concept Consistency. This is in line with previous studies where the effect of t variables surpassed those of other variables. However, the ndings of the present study are, however, mixed when compared to traditional consumer-based brand extensions. At the aggregate level, the t variables, especially brand concept consistency, have the most substantial impact on the extendibility for B2B brand to B2C products. This is similar to the ndings of Volckner and Sattler (2007) which assert that consistency of brand concept (B) is more effective on consumer evaluations toward the B2B-to-B2C brand extensions than is the transferability (T) of skills or assets. This contrasts to that of the consumer based brand extension. It appears that brand concept consistency is more important as a dimension of t than the transferability of skills or assets in consumer evaluations of B2B-to-B2C brand extensions. Besides, the ndings indicate that the product-level relatedness (R), unlike the previous studies, which was only considered in the present study as the third t variable, has an important effect on B2B-to-B2C brand extensions. Thus, if the extended B2C product is perceived as related to the existing products of parent B2B brand, consumers tend to accept the extension and product-level relatedness also needs to be taken into consideration as a t measure. Unlike other studies, the perceived image of quality for the parent B2B brand extended to B2C products was found not to be affected when there was a high brand concept consistency. Besides, the extent of transferring skills or assets in producing the extension had little effect on the image of perceived quality for the parent B2B brand. In addition, parent brand quality (Q), perceived innovativeness (I) and environmental concerns (E) have effect on the attitude towards the extension. What is surprising is the commitment to environment having higher effect than parent brand quality and this result differentiates from the ones of the previous studies. The difculty of making the extension (D) has a negative beta but is insignicant, which is consistent with other studies except for Van Riel et al. (2001) and Tang et al. (2008). While Tang et al. (2008) note that the consumers tend to accept the cross product-class extension only if the extended consumer product is easy to produce and to market, this present study found no such indicator. 262

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Journal of Product & Brand Management Volume 20 Number 4 2011 256 267

Table III Aggregate regression model of the consumers evaluation of B2B-to-B2C brand extension
Standardized regression coefcient 0.065 0.062 0.021 0.094 -0.021 0.105 0.533 0.148 0.015 0.044 Regression coefcient 0.082 0.060 0.020 0.096 -0.020 0.088 0.417 0.134 0.014 0.041

Independent variables QUALITY (perceived quality of original brand) INNOVATIVE (perceived ability in product innovation) CSR (corporate social responsibility) ENVIRONMENT (commitment to environmental protection) DIFFICULT (perceived difculty of making extension) RELATEDNESS (relatedness between the existing products of parent brand and extended product) CONSISTENCY (Brand concept consistency between the parent brand and extension) TRANFER (transfer of skills/assets from parent to extension product class) QB[residual] (interaction term between quality perception with consistency) QT[residual] interaction term between quality perception with transfer

3.34 * * 3.12 * * 0.97 4.52 * -1.23 4.69 * 21.94 * 7.01 * 0.72 2.06 * * *

Notes: Sample size 1,686; Adjusted R2 0.56; *p , 0:001; * *p , 0:002; * * *p , 0:05; italicized values represent highest inuential factors

Table IV Standardized regression coefcients full model at brand level

Parent brand quality (Q) 0.023 0.105 * Innovative (I) 0.019 0.112 * CSR (C) 0.043 20.002 Environmental concern (E) 0.118 * 0.075 * * Difcult (D) 20.001 20.043 Relatedness (R) 0.141 * 0.027 Brand concept consistency (B) 0.501 * 0.608 * Transfer (T) 0.172 * 0.109 *


Q*B 20.010 0.040

Q*T 0.016 0.067 * *

Notes: After residual center approach; aSample size 842, Adjusted R2 0.53; bSample size 825, Adjusted R2 0.59; *p , 0:001; * *p , 0:05

Table V Comparison with the original and replication studies

Aaker and Keller (1990) 20.01 0.12 0.17 * * * 0.08 * * * 0.24 * * * 0.12 0.25 * * 0.18 * * * 2,140 0.26 Sunde and Brodie (1993) 0.25 * * * 0.03 0.30 * * * 0.18 * * * 0.26 * * * 0.08 * * * 0.05 * * * 2 0.01 1,558 0.43 Nijssen and Bottomley and Bottomley and Hartman Doyle Doyle Van Riel et al. (1994) (1996) NZ (1996) UK (2001) 0.24 * * * Omitted 20.00 0.06 * * * 0.60 * * * 0.08 * * * 20.02 20.07 693 0.49 0.25 * * * 0.03 0.30 * * 0.18 * * 0.26 * 0.08 * * 0.05 * * 20.01 1,559 0.43 0.22 * * * 0.01 0.31 * * 0.18 * * 0.31 * 0.08 * * 0.05 * * * 0.03 1,358 0.48 0.16 * 20.16 * 0.20 * 0.19 * 0.40 0.08 * * * 20.01 20.01 808 0.54 Tang et al. (2008) 0.116 * 0.127 * 0.002 20.157 * 0.541 * 0.149 * 0.062 * 0.006 1,512 0.63


Present study

0.065 * * 0.062 * * 0.021 0.094 * 2 0.021 0.105 * 0.533 * 0.148 * 0.015 0.044 * * * 1,686 0.56

Notes: *p , 0:001; * *p , 0:01; * * *p , 0:05; beta coefcients are taken from the full model. Since the variables of the present model are different from the variables of the original and replication studies, a formal comparison is not suitable. The comparison is nevertheless interesting on an intuitive level

At the brands individual extension level, the brand concept consistency appears as the dominant factor that affects consumer evaluations towards the extension. The ndings show that there is an opportunity for industrial companies to leverage brand equity into consumer markets if the concept of the extension product is consistent with the parent brand. In 263

addition, brand concept consistency, the transferability of assets, and environmental concerns are the only three factors that inuenced respondents attitude toward the B2B brand to B2C extension across two industrial brands. The present study shows that it is indeed possible to extend B2B brands into the B2C market. The brand extension model

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Journal of Product & Brand Management Volume 20 Number 4 2011 256 267

of Aaker and Keller (1990) was modied to t the context of this study by drawing theories from Farquhar et al. (1990), Boush and Loken (1991), Park et al. (1991), Broniarczyk and Alba (1994), Herr et al. (1996), Keller and Aaker (1997) and Tang et al. (2008). This study provides evidence that in the context of B2B brand extensions, consumers use the brand concept consistency with the parent brand category and transferability of skills and resources as major cues to evaluate extensions and product level relatedness has a considerable affect on the attitude towards extension. Besides, corporate branding attributes such as innovativeness and environmental concerns also play a major role. The goodness of t of the present model seems to be higher than the previous studies except for Tang et al. (2008).

6. Implications
The implications of the study may be evaluated both from theoretical and managerial perspectives. Bottomley and Doyle (1996) called for further research on the role of brand concept consistency as an important factor in determining how consumers form attitudes towards brand extensions. The present study has proven, at least in this context, that brand-specic associations are more important than category similarity in consumer attitude formation toward B2B brand extensions. Hence, Broniarczyk and Albas (1994) claim that the brand in brand extension as superior to category-based similarity is supported by the present study. The present study has also proven that variables of Keller and Aakers (1997) corporate brand extension model can be used in the original model, showing further evidence that the original model can be contextually adapted. By replacing irrelevant variables of the model with contextually relevant concepts and theories as discussed above, the present study shows that a broad empirical replication of Aaker and Kellers (1990) model is both possible and valuable for additional explanatory power and insight in more specic cases. Finally, unlike many of previous research, the present study used a qualitative study and inserted some additional questions in quantitative research survey to get more data about the brand images and brand awareness. These data were used to discuss and interpret the ndings more properly. The decision of extending a B2B brand into the B2C market remains as a predominantly managerial topic. What the present study has shown is that it is possible to do so. Brand extension strategies will be most successful when there is a t between the parent brand and the extension. This t is determined by the extent to which consumers perceive that the skills and resources of a company are useful in making the extension, and whether the extension is consistent with the brand concept of the parent brand. Any extension must therefore begin with examining the parent brand itself. The quality of the parent brand plays a less important role in brand extension acceptance, although quality should not be sacriced since consumers can assess brand equity in different ways than measured by the present study. Corporate brand attributes such as environmental concerns are highly important and can be achieved by supporting local communities through various activities and programs. It is, however, unclear whether commitment to environment is treated as a trend or whether it will remain as sustainable attribute. Nevertheless, a B2B company should be aware of the difference in perception of ethical values of consumers and industrial buyers. Another corporate brand attribute that facilitates brand extension acceptance is innovativeness. Therefore, a company should strive to build an innovative reputation and establish a philosophy of constantly launching advanced products or services. An important practical constraint with respect to the present model is that it is only tested on B2B brands. The validity or importance of the model is hence not conrmed for cases after a brand makes the transition from B2B to both B2B and B2C. It may be possible that after a transition is made, i.e. when the former B2B brand is both a B2B and B2C brand, consumers would evaluate the brand extensions anyhow according to the original model by Aaker and Keller (1990). This pinpoints the context-specicity of the 264

5. Limitations and directions for future research

The study is not free of limitations. The rst concern relates to the way the variables are measured. As single-item measures have been the object of serious criticism with respect to their unreliability and low validity (Churchill, 1979), it might be useful to develop more reliable, multi-item measurement scales as Bottomley and Doyle (1996) already suggest, although it has to be taken into account that a high Cronbachs alpha is not necessarily a guarantee for generalizability. The second concern relates to the one-sidedness of the present study; it measured only consumer acceptance of the brand extensions. A relevant question could also address the attitudes of existing B2B customers when launching consumer brand extensions. The reciprocal impacts of consumer brand extensions on brand equity can be measured with respect to buyers in both B2C and B2B markets. The third limitation relates to the number of brands used in the study. Only two product brands were used among the numerous well-known global industrial brands. Differences in adjusted R2 on a brand level suggest that there are attributes unique to each brand. A more detailed study on brand extensions could take into account several factors such as previous extensions (Keller and Aaker, 1992), effects of extensions on a company s brand portfolio (Dacin and Smith, 1994) or brand architecture. The fourth concern relates to the t variables. Because of the non-applicability of the t variables Substitute and Complement used in previous replication studies, three t variables were used (Transfer, Relatedness and Brand concept consistency) instead. As the present study have considered different factors, it was difcult to make a proper comparison with the previous studies (in terms of variable by variable). Brand concept consistency proved to be a useful factor, probably because of its abstractness. Future studies on brand extensions could include brand concept consistency and relatedness as well as the original t variables Substitute and Complement to examine whether the abstractness of the former or the concreteness of the latter three are superior in attitude formation. Another limitation is the way the brand extensions were presented. Since each brand extension is presented only as a non-branded generic product and without any accompanying text or visual cues, the extent to which a true assessment of the quality and likelihood of purchasing by the consumer might have been limited. Another problem in relation with the brand extension presentation is the absence of pricing. Van Riel et al. (2001) suggest that consumers may use price clues to assess (especially service) quality (Zeithaml, 1988).

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Journal of Product & Brand Management Volume 20 Number 4 2011 256 267

present model. However, the present model is still benecial for managers by pointing out the major important factors to take into consideration in their brand extension efforts.

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About the authors

Sebnem Burnaz is an Associate Professor of Marketing at Istanbul Technical University. She holds a PhD degree in Management with major in Marketing from Bogazici University. Her research interests are in the eld of marketing, retailing, decision making, and business ethics. She has published articles which have appeared in Advances in International Marketing, Sex Roles: A Journal of Research, Journal of Business Ethics, and Journal of Multi-Criteria Decision Analysis. Sebnem Burnaz is the corresponding author and can be contacted at: Pinar Bilgin is an MSc Graduate in the Faculty of Management, Istanbul Technical University, Istanbul, Turkey.

Consumer evaluations on brand extensions Sebnem Burnaz and Pinar Bilgin

Journal of Product & Brand Management Volume 20 Number 4 2011 256 267

Executive summary and implications for managers and executives

This summary has been provided to allow managers and executives a rapid appreciation of the content of the article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benet of the material present. Continuing expansion of the global economy has served to increase the signicance of brands. Heightened competition has increased the need for brand marketers to identify new avenues for growth without experiencing the huge costs and high failure rates typically associated with the launch of new products. Growth through brand extension has been the strategy adopted by many companies. Leveraging the name and reputation of a proven brand into a different product category helps signal to consumers the likely quality of the new offering. The assumption here is that consumers will associate positive attributes of the established brand with the extension. Through this approach, marketers are able to substantially reduce the risk of failure and its consequences. Lower distribution costs and more efcient use of marketing expenditures are other benets of extending a parent brand. The strategy is inherently risky though and much of the research conducted in this area has addressed where, when and how brands should be extended. One commonly acknowledged belief is that brands should only be extended into categories that are logically related to where the parent brand operates. Extensions should be compatible with the parent brand, although sufcient t is not guaranteed even when extension and parent brand product categories are intuitively related. Conversely, examples exist where brands have succeeded when extending into categories totally dissimilar to the parent one. In such cases, t between parent brand and extension may be at the conceptual rather than at product attribute level. Seminal research has identied various factors that might inuence consumer attitude towards a brand extension: . Consumer perception of the parent brand essentially, if parent brand quality is regarded as high, an unambiguously positive attitude towards the extension should emerge; . Perceived t a key premise here is that t incorporates three dimensions. The rst dimension is transfer and relates to whether or not a company is perceived to have the skills and capacity to operate within a product class different to one where it is normally associated with. The risk is to venture too far beyond recognized areas of competence. Another dimension of t is complement, which refers to situations where parent brand and extension can be jointly used or consumed. The third t term is substitute, reecting when parent brand and extension are used instead of each other; . Relatedness is closely associated with t and reects similarities between brand and extension in terms of common features, usage situations and common functions; . Perceived difculty in making an extension product the premise here is that rms risk negative perceptions if they extend a quality brand into trivial product classes. 266

Consumers may reject the extension or believe that the rm is exploiting the parent brand name in order to justify a high price tag for an inferior product; and Corporate marketing activities some evidence exists that consumers are inuenced by the perceived innovativeness of the parent brand. More specically, knowledge that the company invests heavily in research and development (R&D) and boasts hi-tech manufacturing capabilities might lead to favorable evaluation of an extension. A rms corporate social responsibility and concerns for the environment are other factors to consider, although indications suggest that their impact may be minimal.

The earlier research examined various interactive effects between certain consumer perceptions referred to above. To date, research attention to branding and extensions has almost exclusively been conned to the consumer marketing domain. This is in spite of the fact that business-to-business (B2B) markets play host to many of the worlds most powerful brands. Microsoft, Philips, IBM and Mitsubishi are among such B2B brands that have extended into business-toconsumer (B2C) markets. Nevertheless, B2B brands extending into B2C markets have attracted only minimal academic interest. Burnaz and Bilgin examine the above issues in a study that extends the earlier research using a combination of qualitative and quantitative methods. The overall aim is to examine what factors most inuence consumer attitude towards B2B-toB2C brand extensions. The aim was to choose brands considered relevant to respondents, of high quality, evoking fairly specic associations and previously not overly-extended. Focus group discussions led to Intel and Boeing brands being selected because of their high quality ratings and familiarity to respondents. Discussions led to suitable brand extension products for both brands being proposed, with the hypothetical extensions varying with regard to difculty, perceived quality and consistency. Another outcome of the focus group discussions was that education level inuences the degree of brand awareness, with correlation evident between education level and understanding. That being the case, the authors chose highly educated people for the quantitative study. For this phase, a survey questionnaire was distributed both online and face-to-face. The 314 subjects recruited were aged between 20 and 53 and almost equally divided by gender. Analysis of the questionnaire revealed that: . Brand concept consistency has the greatest inuence on consumer acceptance of a B2B-to-B2C brand extension. This shows that industrial rms have the scope to extend into B2C categories providing the concept of the extension remains consistent with the parent brand. . Transferability of skills and assets was also a signicant t dimension, albeit less powerful than brand concept consistency. . Product level relatedness was also shown to have an important impact on these extensions. Essentially, consumers were likelier to accept extensions when the extended B2C product was perceived as being related to existing products of the B2B brand. . Parent brand quality, perceived innovativeness and environmental concerns inuence attitude towards the extension. It was surprising to nd environmental concerns more inuential factor than parent brand quality.

Consumer evaluations on brand extensions Sebnem Burnaz and Pinar Bilgin

Journal of Product & Brand Management Volume 20 Number 4 2011 256 267

Marketers should realize that brand-specic associations appear more inuential than category similarity in respect of shaping consumer attitudes towards B2B-to-B2C brand extensions. In the authors opinion, some awareness of contextually relevant concepts will also help predict how consumers might respond. Fit between parent brand and extension is necessary, therefore efforts must be made so that consumers perceive that a rms capabilities and resources are relevant to making the extension. It is equally vital not to sacrice parent brand quality, despite its apparently lower impact on acceptance. A focus on corporate brand attributes is likewise recommended. Burnaz & Belgin suggest that rms could engage in programs and events to demonstrate commitment towards local communities. Whether supporting the environment is a trend or a more sustainable attribute is

not yet clear though. The signicance of innovation leads to suggestions that companies should regularly introduce innovative products or services to enhance their reputation in this area. Future research might consider a larger number of brands, both product and service. Different t variables could be introduced, while investigating the attitudes of existing B2B customers is another option. The authors additionally believe that presenting extensions within a study setting using text and/or visual cues and pricing information could impact on consumer response. (A precis of the article Consumer evaluations on brand extensions: B2B brands extended into B2C markets. Supplied by Marketing Consultants for Emerald.)

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