HOW DO CONSUMERS EVALUATE BRAND EXTENSIONS – RESEARCH FINDINGS FROM INDIA

N. Thamaraiselvan J.Raja

In today’s intense competitive environment, companies launch new products to satisfy constantly changing consumers’ preferences. The new products are prone to failures due to many factors. Companies take efforts to reduce new product failure rates to maximize their returns for their stakeholders. A brand extension, leveraging existing brand names to new product categories is one such strategy to reduce the risk of new product failures. Despite two decades of research in branding, many vagaries are yet to be explored and understood. This study primarily focuses on how consumers evaluate brand extensions for FMCG (Fast Moving Consumer Goods) and service product categories in Indian market conditions. It explores how exactly the consumers evaluate different product categories based on factors like, similarity fit, perceived quality, brand reputation and perceived risk. It brings out the impact of brand reputation of the core brand and perceived service quality on the brand extensions evaluations. It highlights the role of perceived risk involved in the extended product category in brand extensions evaluations. Most importantly, this study establishes the relationships among similarity fit, brand reputation, perceived service quality and perceived risk in extended product categories through appropriate multivariate analysis.

INTRODUCTION

T

he ever-changing market characteristics have huge impact on the corporate decisions. The global environment also poses several complexities to the marketer in understanding the market. The companies constantly develop newer marketing strategies to stay ahead in the market and reap more benefits for its stakeholders. More number of companies are relying on launching new products in the market to meet the changing consumer needs and preferences. This strategy is proven but not without risk. Some authors estimate that 30-35 % of all new products fail (Montoyo et. al., 1994; Booz et.al., 1982). Others estimate more negatively in that only two out of ten products launched are successful in the market. Adding to the difficulty in accurately predicting the market dynamics, the promotion cost and shelf space cost makes the company’s new product launches even more difficult (Aaker 1996). Companies are taking hard steps to reduce these failure rates. One way of dealing with the rate of failures of new products is using a firm’s competence. Many business organizations are leveraging their brand names to reduce the risk of failure of new products. A brand extension is the use of well-known brand names for newJournal of Services Research, Volume 8, Number 1 (April-September 2008) ©2008 by Institute for International Management and Technology. All Rights Reserved.

44 How do Consumers Evaluate product introductions (Aaker and Keller, 1990; Keller, 2003; Klink and Smith 2001). For FMCG (Fast Moving Consumer Goods) as well as services more than 80% of the new products introduced are brand extensions (Rangaswamy, et.al., 1993; Ernest and Young and Nielsen 1999). Brand extension strategies are beneficial because they reduce new product introduction costs, and perceived risk in new product, hence increasing the chances of success (Aaker and Keller, 1990; Keller 1998). These benefits are largely due to the transfer of parent brand’s awareness and associations to the new product (Keller 1998). Like any other strategy it has both positive side and negative side to it. Brand extension strategy needs a careful analysis of the market before adopting it. If it turns out well in the new product category it will enhance the brand name; otherwise it will dilute the core brand value. This is the reason why many researchers are keen on continuously exploring the different dimensions of brand extensions. Managers assume they can exploit the equity of a well-known brand when entering new markets, capitalizing on recognition, goodwill, and any positive associations. Case studies abound of successful brand extensions. For example, Dettol, with its antiseptic liquid origin, successfully extended into shaving creams, toilet soaps and floor cleaner. Tata successfully extended into telecom and insurance sectors. However, caution needs to be exercised. For example when Ponds extended into toothpaste and was unsuccessful as it moved too far from its core values. Given the importance of brand extensions, a better understanding of this topic is needed. Researchers have predominantly investigated brand extensions among tangible goods. By contrast few have investigated the service sectors (Ruyter and Wetzels 2000; van Riel et. al., 2000). Notable brand extension activity has taken place in services. For example, ICICI entered into banking and insurance, Virgin moved into radio stations, airline, financial services, and bridal services. Likewise the Disney Company, which in the 1950s signified world-class animation, has extended into services such as television, publishing, software, Internet portals, theme parks, hotels and cruises. CONCEPTUAL BACKGROUND Brand extension strategies are used largely by companies because they believed that the brand extension strengthens the brand positioning, improves the brand awareness and enhances the quality associations and increases the trial rate by reducing the perceived risk involved in the new product. In India it is reported that more than 80% of new products additions are using brand extensions
Journal of Services Research, Volume 8, Number 1 (April-September 2008)

45 Thamaraiselvan. 1992). 2001). Mostly. A brand extension into same product and new product category enhances and improves their market share and brand equity in the long run (Lane and Jacobson. Keller and Aaker. Moreover. Moreover. Volume 8. reveal that there is a failure rate of around 80%. These researches throw some excellent insights on the different factors affecting consumer evaluations of brand extensions. Aaker and Keller. More than 50 research studies since 1987 have empirically analyzed and tested the impact of certain success factors on the overall evaluation of brand extensions. Companies are taking hard steps to improve the success rate of brand extensions.. REVIEW OF LITERATURE Two of the seminal studies (Boush and Loken. Number 1 (April-September 2008) . Brand equity built in a certain product catgory can also be exploited by licensing Journal of Services Research. The success or failure of brand extensions is vastly dependent on how the customers evaluate the brand extensions (Klink and Smith. al. In order to improve the success rate of brand extensions it is imperative to understand the parameters or factors affecting the brand extensions evaluations. Research carried out by Ernest and Young and Nielsen (1999) in the field of FMCG brand extensions in European countries. unsuccessful brand extensions can harm the parent brand. 1999. companies need to understand the significance of these factors and their relative importance to develop a right brand extensions strategy. 1998. image and features of the original brand product category to extended product category and difficulty of extending the product category by the parent company. 1995). Swaminathan et. 1987. Theoretical and managerial understanding of how a consumer evaluates the brand extensions is given substantial importance. still brand extension success is uncertain. which can result in substantial losses of brand equity (GurhanCanli and Maheswaran. If the company launches a high-quality product by exploiting existing weak brand. A good brand association reduces the chances of failure of new product launch. Raja strategies. New products are getting relatively easy acceptance among the target audience. Though. brand extension strategies tasted success in the past. 1990). 2001). Many studies have been conducted to understand the different vagaries of brand extensions and the area is growing larger. the consumer evaluation of brand extension studies focused on parent brand quality and similarity fit in terms of usage. al. have investigated several antecedents and consequences. the brand equity of existing weak brand increases due the positive evaluation of the high quality extended product category (Jun et..

2001. Sullivan. can result from competition from the extensions (Buday. al. Only one study addressed the importance of brand extensions in the services sector (Ruyter and Wetzels 2000). Reddy et. 2001. al. the higher the risk that if a disaster occurs to one of them. 1998).. Lane. Volume 8. 2000. Broniarczyk and Alba.. The majority of the previous studies basically used consumer surveys to investigate consumer evaluations of hypothetical brand extensions (i. 2000. Park et. The more products a company markets under one umbrella brand. John et. 1991).. 1990: Lane and Jacobson 1995). al. Only one study compared brand extension judgements between FMCG and durable goods (Broniarczyk and Alba. extension not introduced in the market).. 1996. The strategy is used to challenge major players in an industry (Branson 1998). Opportunities to create a new brand are also foregone (Aaker and Keller. or positively associate with the original brand (Boush and Loken 1991. 1994. Respondents in prior surveys rated the independent (success factors) and dependent variable (success of the extensions) on simple rating scales (Aaker and Keller 1990. Lane.. 1992. Barone et.46 How do Consumers Evaluate the well-known brand name to third parties for use in a related class. 1994. a research issue that has remained underexposed Journal of Services Research. 1991) Therefore. Klink and Smith. Sometimes the unsuccessful brand extensions create undesirable associations. Bottomley and Holden. Bottomley and Doyle. Most brand extensions research is involved with fast moving consumer goods and durable goods except for one study (Aaker and Keller. 1994. Dacin and Smith. 2001. 1994). The following strong research insights can be observed from the brand extensions literature. 1996. which put the company at a serious risk (Aaker and Keller. the effect will spill over to the rest (Sullivan 1990). Bottomley and Doyle. Cannibalization. 1990). 2000). Boush and Loken. a decrease in sales in the original category. Klink and Smith. Failure of brand extensions may weaken brand equity. 1991. Dacin and Smith. 1990) included McDonald’s as a service brand but they did not make any analytical distinctions between FMCG and services. Gurhan-Canli and Maheswaran. Broniarczyk and Alba.e. al.. 1994. 1991. 1991. 1990). Most previous research used students as subjects (Aaker and Keller. Number 1 (April-September 2008) . 2000. Keller and Aaker. 1994. Barone et.. A company can also exploit and overstretch its top quality brands. Boush and Loken. al. 1990. 1998. al. The chances are high for companies to exploit its high prestige brands to stretch to more remote product categories than brands with inferior reputations (Park et.

This research focuses more on the dominant factors involved in the consumer evaluation of brand extensions. Volume 8. We have also incorporated an additional factorperceived risk and its impact on brand extension evaluations. It discusses the hypotheses used in this research. RESEARCH APPROACH With this background literature. Raja concerns the extension of services to unrelated markets by making use of the corporate brand. For instance. corporate service brands may be used to reduce perceived risk and to influence frequently unobservable extension evaluation criteria. Further we try to find the different consumer evaluation mechanisms in service extensions and FMCG brand extensions. quality of the parent brand and brand reputation. quality and eventually customer patronage intentions. This seems particularly important when services are extended to markets in which the service provider has no proven expertise. such as telecommunications. this research paper intends to contribute to better understanding of how consumers evaluate brand extension in the Indian perspective. insurance sectors and transport and spurred a number of corporate service brand extensions. quite often used in research studies of brand extensions evaluations. Reliance. Number 1 (April-September 2008) . particularly service providers active in a myriad of other markets. Service providers attempt to acquire customer trust on the basis of their positive reputation in the market in which they have traditionally been active. This research encompasses the most important factors such as similarity effect. such as credibility. conclusions and managerial implications based on the study and finally the limitations and future directions are given. As services consist primarily of intangible properties. LIC. and SBI) to enter into service markets. similarity fit. the findings on the impact of independent variables like. service quality.47 Thamaraiselvan. deregulation and privatization caused many companies (TATA. These factors are Journal of Services Research. then the research design used for this study. Brands serve as cues for triggering image perceptions based on expressive values associated with the company name. This would help to get more insights on the impact of cultural background on consumer evaluation of brand extensions across different product categories. Yet. this type of service extension is becoming a prevalent phenomenon. This research paper has been organized in the following manner. brand reputation and perceived risk involved in the extended product category on the overall brand extensions.

Number 1 (April-September 2008) . Journal of Marketing and Marketing Science. features. This can be reduced with the best use of brand extensions. Journal of Marketing Research. performance. Moreover the well-known brand acts as a risk reliever and would increase the chance of product trial (Rao and Manroe. the authors strongly felt that it is better to take the most significant factors involved in consumer evaluation of brand extensions. The perusal of these studies revealed many factors involved in the success of the brand extensions. incidence of defects. The attitudes toward the parent brand are based on durability. The journals used for this purpose are International Journal of Marketing Research. Volume 8. similarity fit between the core (parent) brand with the extended product category. Here the overall attitudes towards the brand are perceived quality of the parent brand. Apart from the above-mentioned three factors the authors strongly felt that the main purpose of brand extensions is to cope with the risk involved in the purchasing of a product category. So it is significant to use the perceived risk involved in the extended product category as another stimuli to find the consumers evaluation of brand extensions. In order to find these significant factors. RESEARCH HYPOTHESES The perceived quality of the parent brand: Brand extensions are affected by the overall attitude towards the parent brand.48 How do Consumers Evaluate identified with the use of the research articles published in the peerreviewed journals of national and international repute. We assume that the perceived risk involved in the new product category would have some significant impact on the brand extensions evaluations. The factors are quality of the parent brand. From the literature review the following stimuli are considered for this study. Zeithamal (2003) concludes after reviewing research articles that the perceived quality is at a higher level of abstraction than a specific attribute of a product. For this research paper. serviceability. As services predominantly posses experience and credence qualities. 1989). the authors made analysis on the previous brand extensions studies and arrived at three important factors that are more often used to find out the consumer evaluation of brand extensions. and reputation of the parent brand. etc. the perceived risk is relatively high. Management Science. Journal of Consumer Research. Zeithaml (2003) considered perceived quality is the component of Journal of Services Research. Since services are more of intangible characteristics the SERVQUAL model is used to understand the perceived quality of the parent brand.

1991. the greater is the possibility of success. Therefore the hypothesis is: H3: If the similarity fit between the extended product categories with the original brand is high then there is high possibility that the extension evaluations will be positive. Journal of Services Research. Dacin and Smith. The perceived quality or and the overall attitude towards the original brand should have an impact if the brand has been extended to the new product category. This kindles an interest in the researches’ mind to explore and find the similarity fit effect in the brand extensions evaluations in services category. if perceived quality is low then it would harm the brand extensions. et al. it is clear that similarity fit is frequently considered for brand extension studies. Aaker and Keller. Similarity fit between the parent product and extended product category: Similarity fit is considered to know how far the customer perceives the extended product category is similar to the parent product (Smith and Park. 1990. then the attitude towards the brand extension is positive. complement and transfer dimensions. 2000. From the literature review. This fact has been further strengthened from the study conducted by Barone et. 1990). Boush and Loken. Further similarity fit may arise in substitute. Raja customer satisfaction. (Boush. al. With this review of literature the authors try to find if there is any relationship between the perceived service qualities of the parent brand with the brand reputation. Keller and Sood 2002). 1994.. This perceptual similarity fit had been considered in several studies and the findings reveal that the higher the similarity between the parent product and the extended product category. Hence the hypothesis is: H2: If the quality of the parent brand is high then the reputation of the parent brand is also high. Aaker and Keller (1990) in their study used perceived quality with this assumption but the results do not support the claim. If the perceived quality were high then the extension would get benefited.. Therefore the hypothesis is: H1: If the perceived quality of the parent brand is high. Volume 8. 1987. 1992). Number 1 (April-September 2008) . Brand reputation of the parent brand and service quality: The brand reputation has been defined in terms of consumer perception of quality associated with the brand (Aaker and Keller. Subsequent study in the brand extensions evaluation proved perceived quality as significant factor.49 Thamaraiselvan. We would like to know the impact of perceived quality in the brand extension evaluations in the services category.

1994. Journal of Services Research. The brand extension literature reveals that the consumers are largely relying on reputation of the brand to cope with the uncertainly level and risk involved in the products. risk perceived by the customers tends to reduce and a favorable attitude towards the product increase (Baker et al.50 How do Consumers Evaluate Brand Reputation of the Original product: One of the underlying principles for the brand extension concept is that stronger brands provide a better opportunity for the company to utilize this advantage to enter new product category products.. The findings of the previous studies reveal that the greater the brand reputation the higher is the possibility of favorable brand extensions compared to the less reputed brands (Aaker and Keller. Dacin and Smith. Volume 8. The perceived risk involved in the product category means customer perception of the risk involved in buying an average product in that product class. Number 1 (April-September 2008) . When a brand gets familiar with the customers through repeated exposure. The magnitude of the perceived risk differs from one product/service category to another product/service category. There is a distinction between the risk involved in the product category and product. 1990. With this assumption the author has developed a hypothesis: H4: If the brand reputation of the original brand is higher the greater is the chance of favourable attitude of customers towards the extended products. With this underlying assumption the authors have developed the following hypothesis: H5: If the perceived risk involved in the product category is high. This is also applicable to service categories. then the evaluation of brand extension is positive. 1996). Bottomley and Doyle. brand equity is predominantly considered as customer based brand equity rather than company based brand equity. Brand equity is defined in terms of brand strength articulated implicitly in terms of consumers’ predispositions towards the brand (Keller 1993). The perceived risk in the product however. Every purchase has some risk. Perceived risk involved in the extended product category: Brand extension has been widely used to reduce the consumers’ perceived risk. In brand extension research. 1986). A well-known brand acts as a risk reliever and increases the possibility of purchase trial of the new product. is about the risk involved in the buying of a specific product. The table 1 would give us a snapshot of hypotheses used for this research study.

1990). then the reputation of the parent brand is also high If the similarity fit between the extended product categories with the original brand is high then there is a high possibility that the extension evaluations will be positive. Brand Reputation H2 Perceived Quality H4 H1 Brand Extensions Success H3 H5 Similarity Fit Perceived Risk Figure1: Showing the Model of Factors Affecting Brand Extensions Evaluations RESEARCH DESIGN To test the above-mentioned hypotheses for this study. six brands are chosen based on the criteria used in similar kind of study (Aaker and Keller. then the attitude towards the brand extension is positive. 1986 H2 H3 H4 H5 The following figure would give better understanding of the above hypotheses. Raja Table 1: Hypotheses of the Study Hyp. To identify the brands the secondary data has been used. If the brand reputation of the original brand is higher the greater the chance of favourable attitude of customers towards the extended products.. Bottomley and Doyle 1996 Derbaix 1983 Baker et al. If the perceived risk involved in the product category is high. 1991 Sunde and Brodie 1993 Bottemley and Doyle 1996 Aaker and Keller. Dacin and Smith 1994. having strong brand image. 1990. If the quality of the parent brand is high... These brands were selected based on the survey on the most trusted services brands in India published in Journal of Services Research. al. then the evaluation of brand extension is positive. Number 1 (April-September 2008) . Source Boush et al.51 Thamaraiselvan. (ii) brand not having been broadly extended previously (iii) ability to elicit relatively specific associations. H1 Factors If the perceived quality of the parent brand is high. Volume 8. 1987 Smith and Park 1992 Sunde and Brodie 1993 Lane and Jacobsen 1995 Keller and Aaker 1990 Aaker and Keller 1990 Boush and Loken 1991 Park et. The criteria are (i) high quality.

So. similarity fit.52 How do Consumers Evaluate the business news daily. the reason being the substantial literature has been involved with FMCG brands and very little in services brands. They have been doing this kind of study for the past five years. Brand Equity column on December 14. Questions on the positive attitude. BSNL. The standardized constructs were used to measure the service quality. age. Questions on overlap between parent product category and extended product category. Two brands were chosen in the FMCG category and four brands were chosen in the services category. competence of the original services and people. satisfaction on the brand and positive association with the brand were used to find out the brand reputation of the core brand. The Economic Times. income and geography. These extensions were developed after conducting a small survey with the brand management students of National Institute of Technology. SBI. providing a total of 18 brand extensions (see Table 2). These extensions had to be relevant and logically connected with the parent brand. A structured questionnaire was developed to collect data on consumer evaluation of brand extension in services. Two brands from FMCG were Colgate (ranked 1) and Dettol (ranked 4). Data relating to possible future extensions and their relatedness to the existing core product/business were collected. definitely considered brand for purchase. price premium. care had been taken to make sure that the extensions provided sufficient heterogeneity to test the similarity fit and perceived risk dimensions. evokes a feeling of confidence and pride among users and a unique feeling associated with this. 2004.State Bank of India (ranked 2) and ICICI. Tiruchirappalli. India. facilities (resources) and skills were Journal of Services Research. has something that no other brands have. Separate questionnaires for all the 6 brands were developed. Times Intelligence Group and AC-Nielson ORG-MARG did the survey.Bharat Sanchar Nigam Limited (ranked 3). Number 1 (April-September 2008) . Volume 8. Four brands from services were LIC-Life Insurance Corporation of India (ranked 1). In order to test the framed hypotheses. with a sample of over 7000 distributed across socio-economic class.Industrial Credit and Investment Corporation of India (ranked 4). popular brand for many years. They have ranked the most trusted brands based on the brand attributes like: maintains high level of quality. to get a better insight on consumer evaluation of services brands four service brands were chosen. perceived risk and overall brand extension are used while developing questionnaire. This is the largest of its kind in India. brand reputation. These brands aptly fit in Indian conditions based on the criteria suggested by Aaker and Keller (1990). Each of the six parent brands was leveraged into 3 hypothetical extensions.

edited and fed into the SPSS package for analysis purpose. Table 2: Showing Hypothetical Brand Extensions S. Dettol 178. Hypothesis H5 (perceived risk) was supported in two cases. Educational Institutions (Medium) 3. The collected data were coded. IT & Technical Education (Medium) 3. Further it supports the assumption that brand reputation of the parent brand is influenced by the quality it commands in the customers’ perception. Hypotheses H1 (perceived quality) and H4 (brand reputation) were partially supported in FMCG category. Financial Consultancy Services (High) 2. Antiseptic Cream (Medium) 3. Theme Parks (Low) The subjects were the users of these brands in Tiruchirappalli. ICICI 121. India. we can infer. complement and transfer are positively evaluated. Tamil Nadu state. Real Estate (High) 2. Mouth Wash (High) 2. Breath Mint (Medium) 3. BSNL 125. After Shave Lotion (High) 2. Insurance (Low) 1. Pearson Correlation coefficient and multiple regression methods were used to test the hypotheses made for this study. Raja used to find out the similarity dimension. This study strengthens the previous studies in establishing the associations between similarity fit and brand extensions evaluations. Since the perceived risk involved in FMCG is relatively low. The hypotheses H2 and H3 supported all of Colgate and Dettol hypothetical brand extensions. No 1 2 3 4 5 6 Colgate Dettol Life Insurance Corporation of India (LIC) Bharat Sanchar Niagm Limited (BSNL) State Bank of India (SBI) Industrial Credit and Investment Corporations of India (ICICI) Original Brand Hypothetical Brand Extensions in Terms of Relatedness 1. SBI 119. So this study reiterates that similarity fit in terms of substitute. FINDINGS AND INTERPRETATIONS From the Table 3 showing the correlation coefficients for FMCG hypothetical brand extensions of Colgate and Dettol. that the H2 stating the relationship between brand reputation and quality of the parent brand and H3 stating the relationship between similarity fit and overall brand extensions were supported from the results. Networks (High) 2. LIC 124. and tangible cues are available to reduce the customers’ perceived Journal of Services Research. Hotels (Low) 1. Hospital (Low) 1. Number 1 (April-September 2008) . The valid samples for different brand users were Colgate 178. Satellite Channels (Medium) 3. Care was taken to include possible dimensions involved in perceived risk. Volume 8. The remaining four extensions did not have any impact by the perceived risk. Real Estates (Medium) 3. Dental Floss (Low) 1. Toilet Cleaner (Low) 1.53 Thamaraiselvan. Banking (High) 2.

137 0. SERVICE QUALITY AND OVERALL BRAND EXTENSIONS 2.078 0.136 0.757** 0. A strong positive relationship exits between perceived quality of the parent brand with its reputations.256** 0. SERVICE QUALITY AND OVERALL BRAND EXTENSIONS +VE +VE +VE -VE -VE -VE +VE +VE -VE +VE -VE +VE +VE -VE +VE +VE +VE +VE +VE -VE 2.683** 0.274** 0.050 0. Volume 8. We can infer that similarity fit is having a strong impact on the brand extensions evaluations.526** 0. BRAND REPUTATION AND OVERALL BRAND EXTENSIONS 5.185** 0.175* 0. Table 3: Results Showing the Correlations Coefficients for Colgate and Dettol HYPOTHESES 1. BRAND REPUTATION AND OVERALL BRAND EXTENSIONS 5. Perceived quality and brand reputation of the parent brand were having partial impact on brand extensions evaluations.680** 0.01 (2.137 0.036 0.253** 0.198** 0.027 0. SIMILARITY FIT AND OVERALL BRAND EXTENSIONS 4.570** 0.064 HYPOTHETICAL BRAND EXTENSIONS OF COLGATE 3.079 0. Perceived risk in the extended product category was considered least important because only in two out of six hypothetical extensions.683** 0. Table 4: Results of the Hypotheses Based on Correlations Coefficients HYPOTHETICAL BRAND EXTENSIONS COLGATE DETTOL ANTISEP TIC CREAM +VE +VE +VE +VE -VE BREATH MINT DENTAL FLOSS 1. PERCEIVED RISK AND OVERALL BRAND EXTENSIONS +ve = supports hypothesis.683** 0.SIMILARITY FIT AND OVERALL BRAND EXTENSIONS 4.54 How do Consumers Evaluate risk in FMCG purchase decisions are strong reasons for not considering perceived risk as one of the factor in FMCG brand extensions evaluations.509** 0. perceived risk had an impact.705** 0.680** 0.149* 0.176* -0. SERVICE QUALITY AND BRAND REPUTATION HYPOTHETICAL BRAND EXTENSIONS OF DETTOL AFTER MOUTH BREATH DENTAL ANTISEPTIC TOILET SHAVE WASH MINT FLOSS CREAM CLEANER LOTION 0.313** -0.054 0. PERCEIVED RISK AND OVERALL BRAND EXTENSIONS ** Correlation is Significant at the level of 0. SERVICE QUALITY AND BRAND REPUTATION 3. Number 1 (April-September 2008) TOILET CLEANE R -VE +VE +VE -VE -VE AFTER SHAVE LOTION MOUTH WASH HYPOTHESES . -ve = does not support hypotheses Journal of Services Research.tailed) Table 4 provides the snapshots of results of five hypotheses in Colgate and Dettol hypothetical brand extensions based on the correlation coefficients.680** 0.

191 ** -0. BRAND REPUTATION AND OVERALL BRAND EXTENSIONS 0. This supports the H1.281 ** 0. which aims at finding the relationship between perceived risk and overall brand extension slightly supports the possibility of extending the BSNL brand name to IT and Computer Education but not on other hypothetical extensions. This strengthens the notion that similarity fit. brand reputation were influencing the positive brand extension evaluations.246 ** 0. Similarity fit. brand reputation and perceived service quality strongly associated with the service brand extension evaluations. This is contrary to the assumption that brand name is risk reliever in services category.566** 0.035 0.265 ** 0. This strengthens the assumption that service quality augments the brand reputation of the core products thus supporting H2.728 ** INSURANCE 0. Perceived service quality shared a strong positive relationship with brand reputation.251 ** 0.343 ** 0. H3 and H4.627** 0.tailed) Table 6 shows the summary of results for the hypotheses.627 ** 0.01 ( 2.645 ** 0.341 ** 0.326 ** 0. the customers look more paramount important factors than brand name to evaluate the service brand extensions positively.071 -1. Number 1 (April-September 2008) . It shows that perceived risk in the extended product categories have very less association with service brand extensions evaluations.566 ** 0. This is one of the key results that needs to explored further.671 ** 0.55 Thamaraiselvan.148 0.619 ** 0.701 ** 0.SIMILARITY FIT AND OVERALL BRAND EXTENSIONS 4. brand reputation and similarity fit are having positive relationships in all the hypothetical extended category with the over all evaluation of brand extensions. Volume 8. Service quality is having a positive relationship with the brand reputation.154 0.259 ** 0. SERVICE QUALITY AND BRAND REPUTATION 3.723 ** 2.165 5. Journal of Services Research. Raja Table 5 shows the correlation coefficient and we can infer that the service quality.346 ** 0.566 ** 0.094 0. Probably. PERCEIVED RISK AND OVERALL BRAND EXTENSIONS ** Correlation is Significant at the level of 0. perceived service quality.232 ** 0. Table 5: Results Showing the Correlations Coefficients for LIC and BSNL HYPOTHETICAL BRAND EXTENSIONS OF HYPOTHESES 1. Perceived risk had a lesser impact on the brand extensions evaluations. This augments the theory that strong perceived quality will have high brand reputation. SERVICE QUALITY AND OVERALL BRAND EXTENSIONS LIC BANK REAL ESTATE HOSPITALS HYPOTHETICAL BRAND EXTENSIONS OF BSNL NETWORK IT&COMPUTER EDUCATION 0. But H5.627 ** 0.374 ** 0.

56 How do Consumers Evaluate Table 6: Results of the Hypotheses Based on Correlations Coefficients for BSNL and LIC HYPOTHETICAL BRAND EXTENSIONS BSNL HYPOTHESES NETWORK IT & COMPUTER EDUCATION INSURANCE BANK LIC REAL HOSPITALS ESTATE 1. SERVICE QUALITY AND BRAND REPUTATION 3.188** -. Table 7: Results Showing the Correlations Coefficients for SBI and ICICI HYPOTHESES 1.156** 0.225** -0.01 (2. Perceived service quality and brand reputation were largely positively associated. PERCEIVED RISK AND OVERALL BRAND EXTENSIONS ** Correlation is Significant at the level of 0.601** 0.053 0.344** 0. SIMILARITY FIT AND OVERALL BRAND EXTENSIONS 4.082 0. BRAND REPUTATION AND OVERALL BRAND EXTENSIONS 5.614** 0.156 0.097 0.681** 0.459** 0.066 HOTEL HYPOTHETICAL BRAND EXTENSIONS OF ICICI REAL SATELLITE THEME ESTATE CHANNELS PARKS 0.086 0. Number 1 (April-September 2008) . This gives a room for doing a further research and come with a strong support that there is possibility of customers viewing the evaluating the different types of service categories differently. similarity fit and brand reputation of the core product had a greater association with brand extensions evaluations.681** 0.635** 0. Volume 8.681** 0.635** 0.090 0.303** 0.138 0. The impact of similarity fit over the brand extension evaluations was strengthened again from SBI and ICICI brand Journal of Services Research. BSNL) perceived service quality shared a less significant relationship with brand extension evaluations.034 0.201* 4.650** 0.635** 0. SERVICE QUALITY AND BRAND REPUTATION 3.079 -0.719** 0.647** 0. SERVICE QUALITY AND OVERALL BRAND EXTENSIONS 2.SIMILARITY FIT AND OVERALL BRAND EXTENSIONS HYPOTHETICAL BRAND EXTENSIONS OF SBI FINANCIAL EDUCATIONAL CONSULTAN INSTITUTIONS CY SERVICES 0.560** 0. Perceived service quality and perceived risk involved in the extended categories were less associated with brand extensions evaluations.tailed) The Table 8 given below is showing the summary of results for the developed hypotheses. SERVICE QUALITY AND OVERALL BRAND EXTENSIONS 2. BRAND REPUTATION AND OVERALL BRAND EXTENSIONS 5.100 0. Contrary to previous service extensions (LIC. PERCEIVED RISK AND OVERALL BRAND EXTENSIONS +VE +VE +VE +VE -VE +VE +VE +VE +VE +VE +VE +VE +VE +VE -VE +VE +VE +VE -VE -VE +VE +VE +VE +VE -VE +VE +VE +VE +VE -VE Table 7 showing the results of correlations coefficients for SBI and ICICI.

10 and 11 give the information about the regression results of the hypothetical extensions for Colgate and Dettol. The adjusted R2 were on comparable and sometimes high with some of the hypothetical brand extensions. in parentheses.57 Thamaraiselvan. LIC & BSNL and SBI & ICICI. Except for Aaker and Keller’s (1990) study all other studies supported the impact of perceived service quality over the brand extensions evaluations. the corresponding t values are given. This is confirmed in this study also. Journal of Services Research. at the same time reinforcing the subsequent explanatory power of the used constructs. Volume 8. Service quality is supported only in one hypothetical brand extensions (LIC into Hotels) among the other hypothetical extensions used in this study. Perceived Risk considerably had a effect on two cases in FMCG category (Colgate into breath mint & Dettol into antiseptic cream). Although in varying degree it is been confirmed in all hypothetical extensions in this study. Brand reputation had a quite larger impact on service brand extensions evaluations. SERVICE QUALITY AND BRAND REPUTATION 3. Hypothesis stating the impact of similarity fit over the brand extensions evaluations has been supported over the years. PERCEIVED RISK AND OVERALL BRAND EXTENSIONS The following Tables 9. These tables contain the standardized regression coefficients and. Similarly brand reputation had a significant effect only in one case (SBI into Financial consultancy services). Perceived risk had a lesser impact on the brand extension evaluations. Table 8: Results of the Hypotheses Based on Correlations Coefficients for SBI and ICICI HYPOTHETICAL BRAND EXTENSIONS SBI ICICI FINANCIAL CONSULTANCY SERVICES EDUCATIONAL INSTITUTIONS 1. SIMILARITY FIT AND OVERALL BRAND EXTENSIONS 4. But this study supports the Aaker and Keller (1990) study. A possible explanation could be that brand extensions have become much more common over the years. Successful extensions could thereby have set or reinforced the standards for evaluation in consumers. Raja extension evaluations. SERVICE QUALITY AND OVERALL BRAND EXTENSIONS +VE +VE +VE +VE -VE -VE +VE +VE +VE -VE -VE +VE +VE +VE +VE HOTEL HYPOTHESES -VE +VE +VE +VE +VE -VE +VE +VE -VE -VE -VE +VE +VE -VE -VE 2. Number 1 (April-September 2008) THEME PARKS REAL ESTATE SATELLITE CHANNELS . BRAND REPUTATION AND OVERALL BRAND EXTENSIONS 5.

254 0.163) 0.415 0.121) 0.011) .552) 0.447 54.731) 0.646 (9. 878) -0.062 (0.049) 0.082 (1.621) 0.324 (4.071 (.357) 0.119 (1.027) 0.045) 0. 383 76.089 (1.244) 0.026 DENTAL FLOSS a(b) BREATH MINT a(b) AFTER SHAVE LOTION a(b) MOUTH WASH a(b) .707) 0.576 58.732) 0.059 (0.002 (.090(0.860) -0.543) -0.583) .591) .494 0.049 (-1.50 a = Beta Co-efficient (b) = t.102 0.454) 0.582 BSNL Constant Service Quality Brand Reputation Similarity Fit Perceived Risk Adjusted R2 R2 F (2.337) .033 (0.301 18.505 44.118) 0.378 0.284 0.000 level Journal of Services Research.095 (1.619 (8.133 (2.806 (2.201) .745 (14.255) 0.238) .112 (1.060) 0.026) -1.669 (2.475 0.142 (-2.420 86.07 (1.929) 0.193) 0.874 (1.036 (0.361 24.102) .009 (0.492) 0.346 0.719) 0.171 (2.101 a = Beta Co-efficient (b) = t. 479 111.691 (10.079 (1.799) 0. Number 1 (April-September 2008) INSURANCE a(b) (3.554) .038 (.648 (9.522) 0.297) 0.528 (8.150) 0.023 (0.518 0 .037 (.622) -0.016) 0.271 16.346 NETWORKS a(b) HOSPITALS REAL ESTATE BANKS FACTORS IT & COMPUTER E DUCATION a(b) a(b) a(b) a(b) TOILET CLEANER a(b) (4.703) .692 (10.39 (-.827) 0.011 (-0.Values Adjusted R 2 = Significant at 0.88) .833) .244) 0.114 (1.188 (3.Values Adjusted R2 = Significant at 0.271) 0.002 (0.840) 0.517 (7.841) 0.792) .122 6.023 (.469 0 .696 (12.355) 0.111) -.111 (-1.391 (1.188 (-1.214) 0. Volume 8.363) .58 How do Consumers Evaluate Table 9: Results of the Regression for Colgate and Dettol Factors COLGATE DETTOL ANTISEPTIC CREAM a(b) (4.159 (2.105 (1.320) .215) 0.068 (1.754) .954) 0.539 0.522 134.723 (11.567 0.088 (1.016 (0.059 (0.306) .000 level Table 10: Regression Analysis Results for LIC & BSNL LIC CONSTANT SERVICE QUALITY SIMILARITY FIT BRAND REPUTATION PERCEIVED RISK ADJUSTED R2 R2 F (1.244) 0.111 (-1.150 (1. 546 73.483 (6.720) 0.242 (0.683) .560) .

053 (-0.454) 0.431) 0. impact of perceived service quality.075 (-1.033 (0.537 (6.326 13.917) 0.897 REAL ESTATE a(b) SATELLITE CHANNELS a(b) . then there is every possibility that the brand extension is successful in a competitive market.051 (0.000 level CONCLUSION AND MANAGERIAL IMPLICATIONS This research paper augments existing literature on consumer evaluation of brand extension in the services category.766) -0.094 (1. significance of high brand reputation.59 Thamaraiselvan. This study also supports the earlier studies in terms of the relationship between the perceived service quality and brand reputation. The brand reputation could be enhanced by way of enriching the quality of the product or services offered by the company.987) 0. Volume 8.045 (0. Contrary to the earlier Journal of Services Research. Again.091 (1. and influence of perceived risk involved in the FMCG and services.303 0.529 0.194 (1.500 (6. These issues are to a large extent supported by brand extensions in the services category.086 (-0.281) 0.984) 0.345) 0.635 (8.255 (2.080 (0.207 a = Beta Co-efficient (b) = t.015) 0.778) -0. This examines the importance of similarity fit.805 (0.147) 0.634) 0.450 23.456) 0.126 (1.116 (-1. this study strengthens the earlier literature in terms of findings in the similarity dimensions.117) 0.751) -0.364 0.22) 0.533) 0.008 (0.709 (0. Similarity between the core products/services and extended products/services are considered most important whenever the consumer evaluates the brand extensions.934) 0. Interestingly.604 (8.144) 0. Number 1 (April-September 2008) THEME PARKS a(b) (0.002 (-0.106 (1.342 (0.696 (10.097) 0.567) 0.004 HOTEL a(b) Factors (0. If there is a strong brand reputation.779) -0.386 18.545 34.471) 0.447 23.150 (1.Values Adjusted R2 = Significant at 0.142) 0.085 (1.609 (8.430 21.431 0. the very purpose of using brand extension in creating familiarity among customers is fulfilled.842) 0.427 0.795) -0.492) 0.411 0.972) 0.555) 0.472) 0. Raja Table 11: Regression Analysis Results for SBI & ICICI SBI ICICI FINANCIAL CONSULTANCY SERVICES a(b) EDUCATIONAL INSTITUTIONS a(b) Constant Service Quality Brand Reputation Similarity Fit Perceived Risk Adjusted R2 R2 F (0.

Another option is to incorporate attributes of services Journal of Services Research. This might be due to the evaluation based on brand specific factors. Bottomley and Doyle (1996) mentioned in their study that brand concept consistency is a very abstract factor. Further customers do not use the reputation of the producer as an important factor for service extension quality than to consumable extension quality. when perceived risk is high in the extended product category. There is scope for developing a multi-item scale for this purpose. Volume 8. facilitating acceptance of extensions beyond the limitation of productrelated similarity. service quality and brand reputation are clearly revealed through the results of this study. usage relevance. there is possibility to do this study across all product/service categories. This study also paves the way for researchers to do a similar kind of brand extensions studies for the different categories of service sectors. Since the services by nature have the credence quality it is very difficult for consumers to perceive the risk involved in the services. Moreover this study strengthens the assumption that the service quality would enhance the reputation of the brand. The fit may be in terms of substitutability. Since the brand chosen does not represent whole range of product/service categories. Number 1 (April-September 2008) . then the brand extension would help us in reducing the perceived risk involved in the purchase of products/services.60 How do Consumers Evaluate findings. We see significant differences in explanatory power at the individual brand level. This research paper gives a comprehensive view of how the consumers evaluate the service brand extensions. The researchers may look into the features of perceived risk and its impact on the brand extensions evaluations in the future studies. LIMITATIONS AND SUGGESTIONS FOR FUTURE RESEARCH Similarity fit variables were strongly correlated in this study like it did in other similar studies. complimenting the core product. This could be because of the inherent difficulties involved in perceiving the risk involved in the services. or based on the core facilities used for developing and delivering the product/services. Managerial implications could be that the brand extensions strategy may be used most successfully in cases the similarity between the core product and extended product category should be there in some way. Generalizability is another problem with this research. The underlying parameters used in the consumer evaluation for service brand extensions are similarity fit. This may be because the items developed by Aaker and Keller (1990) and used in similarity fit in other studies have also been followed in this study. But this study does not support the above assumption.

A. (1998) ‘Making Brand Extensions Work’.. 13:4. D. Shipp. 26:3.. Hutchinson. 19-38. and Strobel. Allen. Booz. D. R. 27-41. pp. New York.A.J. Journal of Marketing Research. T. Baker. J.R. 365-377. S. Journal of Economic Psychology. (1986) ‘Brand familiarity and advertising: effects on the evoked set and brand preferences’. UT. Minshall. Lutz. 6:4. and Romeo. REFERENCES Aaker.M. (1983) ‘Perceived risk and risk relievers: an empirical investigation’. D. Vol 13. which would allow a more detailed model taking brand specific associations into consideration.W. D. Misurell. Miniard. C. B. E. Kennedy. (1994) ‘The effect of brand portfolio characteristics on consumer evaluations of brand extensions’. (1996) Building Strong Brands. Journal of Marketing Research. B. 84. Gencturk. J. Broniarczyk.L. Moore. L. 27-30. which has an effect on attitude towards extensions. D. B. Gürhan-Canli.. The Free Press. Journal of Consumer Marketing. (1991) ‘Capitalizing on brand extensions’. (2000) ‘The influence of positive mood on brand extension evaluations’. J. Number 1 (April-September 2008) . W. and Maheswaran.. 19-32. 150:11. P. and Doyle. 31:2. K. Journal of Marketing Research. Boush. Z. Buday. P. Rochford... and Keller. 3:1.W. P. (1991) ‘A process tracing study of brand extension evaluation’.C. J. Raja and find the explanation. 31:5.) Provo. Aaker. D. 35:4. Journal of Consumer Research. Generalizability can be brought by doing a number of studies of a similar kind in different services/product categories. Crockett. Sales and Marketing Management. 54:1. Association of Consumer Research. (1994) ‘The importance of the brand in brand extension’. D. and Alba.M. C.. Journal of Services Research.A..61 Thamaraiselvan.. International Journal of Research in Marketing. 4:3.B. Allen and Hamilton (1982) New Product Management for the 1980s. Barone. Journal of Marketing. and Hamilton Inc. Loken.R. Boush.A. D. and Nedungadi. John. Advances in Consumer Research. (1998) ‘The negative impact of extensions: can flagship products be diluted?’ Journal of Marketing. ‘Consumer evaluations of brand extensions’. 225-237 Branson. J. (1996) ‘The formation of attitudes towards brand extensions: testing and generalising Aaker and Keller’s Model’. S.. and Joiner.. and Smith.W. D. 62:3. This can be controlled in future studies. Dacin. M. Some of the hypothetical extensions brought no effect of perceived service quality over the brand extensions attitude.J. This could have been due to price clues used by the customers to assess the service quality. (1987) ‘Affect generalization to similar and dissimilar brand extensions’. 16-28. 214-228. (1998) ‘The effects of extensions on brand name dilution and enhancement’. Booz. and Loken. Ernst & Young and Nielsen (1999) New Product Introduction: Successful Innovation/ Failure: A Fragile Boundary. S. Derbaix. R. E. 464-473.M. Journal of Marketing Research. Bottomley. 386-400. Need of the hour especially in services is to bring out the general categorization or classification of services.. 28:1. Volume 8. 637-42. (1990). (ed. P. 229-242.. B. New York. Psychology & Marketing. Loken.

S. (1990) ‘Measuring image spillovers in umbrella branded products’. Journal of Marketing. 31:2. Swaminathan. (1991) ‘Evaluation of brand extensions: the role of product feature similarity and brand concept consistency’. and Managing.L.R.Y. and Robert. Burke. 63:1. S. Proceedings. N. D. New Jersey. and Monroe. Journal of Services Research. and store name on buyers’ perceptions of product quality: an integrative review’.A. R. (1993). Dr. (2000) “Extensions of ServiceBrands: Transfer of Consumer-Based Brand Equity”. and Smith. (1994) ‘Determinants of new product performance: a review and meta-analysis’. (1999) ‘Effects of technological hierarchy on brand extension evaluations’. Journal of Business Research. Milberg. (1994) ‘To extend or not to extend: success determinants of line extensions’.. 26:3. Van Riel. Ruyter. T. Tiruchirappalli. 18:2. Building. D. 47-53. Thamaraiselvan is faculty. 29:3. and Lawson. J.. 46:1.W. Sunde. Brand Equity. 10:1. 35-50. K. Marketing. and Aaker. and Brodie.R. V. Journal of Business Research. R. and Wetzels. (2000) ‘The role of corporate image and extension similarity in service brand extensions’. Volume 8. and Bhat. (2003) Services Marketing – Integrating Customer Focus Across the Firm. T. Lane. Fox. 38:3. Upper Saddle River. National Institute of Technology. and Head of the Department of Management Studies. Park.C. K. Keller. 21:6. 309-30.J.L. Tata McGraw Hill.62 How do Consumers Evaluate Jun. H. 31-43.R. S.C. Holak.R. (1992) ‘The effects of brand extensions on market share and advertising efficiency’. C. Journal of Marketing Research. Measuring. 61-75 Rao. 63-77.M. 575-583 Zeithaml. 351-357. Rangaswamy. (1992) ‘The effect of sequential introduction of brand extensions’. J. in the Department of Management Studies. 65:4. K. (2000) ‘The impact of ad repetition and ad content on consumer perceptions of incongruent extensions’. R. and Reddy. Lane. R. National Institute of Technology. Journal of Economic Psychology. S. and Ouwersloot. J.K (2001) ‘The impact of brand extension introduction on choice. S. and Calantone.. Raja is Assistant Professor.W. ‘Stock market reactions to brand extension announcement: the effects of brand attitude and familiarity’.C. and Raj. (1993) ‘Consumer evaluations of brand extensions: further empirical results’. (1993) ‘Conceptualizing.J. India. International Journal of Research in Marketing. Journal of Marketing Research. The Eric Langeard International Research seminar in Service Management. Tiruchirappalli.K. Journal of Marketing. (1989) ‘The effect of price. 243-262. and Oliva. 80-91. Journal of Marketing Research. S. IAE Aix-En-Provence. Reddy. (1998) Strategic Brand Management.L. Mr. Journal of Consumer Research. 59:1. Journal of Marketing Research. (2003) Strategic Brand Management. M. C. 639-659.A. K. (2001) ‘Threats to the external validity of brand extension research’. 1-22. Klink. D. L.. Smith. Economics. 1-15.. K. and Park. Journal of Marketing.L. V. Number 1 (April-September 2008) . R. Lemmink.. 57:1. Keller. M. Strategy. 11:5. measuring and managing customer based brand equity’. V. A. A. Prentice Hall.A. Journal of Marketing. S. Journal of Business. 29:2. Operations and Human Resources: Insights on Services Activities. A. 185-193. V.W. brand name. Sullivan. 326-335. (1995).P. Montoya-Weiss. D. International Journal of Research in Marketing.R. 10:1. 64:4. Mazumdar. M. Keller. Prentice Hall. “Brand Equity and the Extendibility of Brand Names”. 296-313.L.B. Journal of Product Innovation Management. Keller. R. K. 397417.

Reproduced with permission of the copyright owner. . Further reproduction prohibited without permission.

Sign up to vote on this title
UsefulNot useful