The literature on brand extensions has shown that a considerable amount of variables influence the evaluation of brand extensions. For the sake of this research, only the main variables were taken into account as they were expected to be more relevant in the evaluation of consumer durable extension from companies known for their products. The following paragraph formulates a few delimitations to confirm the focus of this research. Furthermore, the additional consequences of the brand extension as potential influence on the brand image will be focused upon. Especially, the feedback effects that the extension might have on the parent brand will be approached. The potential negative effects like brand dilution may occur due to the extension strategy will be dealt in this research. The external forces that act in the market place in general, such as competition and the financial crisis that is occurring at this time, which might influence or even dictate a company’s choice of brand extension, will be kept out. Main determinants that influence consumer attitude towards extension and the feedback effects of brand extensions on parent brand are already defined by past research works (for reviews see Grime et al., 2002; Czellar, 2003; Vo¨lckner and Sattler, 2006). The main factors related to extension success are mainly brand associations, perceived fit, consumer characteristic (Czellar 2003; Reast, 2005; Völckner and Sattler, 2006) . Hence, the present study considers the new product and it is fit with the parent brand. However, it is not enough for a brand to tell consumers what their brand means, but the understanding should help in bridging consumers fit perception. Similarity fit is considered to know how far the consumer perceives the extended product category is similar to the parent product (Smith and Park, 1992) or parent brand. It is typically believed that consumers have to perceive a consistent approach between the original brand and the extension at brand category level or image level, so that the new addition could explore, enlarge and enhance the brand meaning, image and recognition in a prospects mind. In brand extension research there is hardly any variable rather than fit given so much attention because of its weight age in the past literature. Perceived similarity is found to be the most relevant variable that can highly influence the acceptance of brand extension (VÖlckner& settler 2006). In many research perceived fit is always found to be a single construct. About fit definition, everyone can come up with his or her own typical association. The fit is actually both the dimensions on different perspective and the whole as a complete construct of the perceived dimensions. The positive influence of fit also occurs both in studies considering fit globally (Gutie´rrez and Rodrı´guez, 1993; Martı´nez and Pina, 2005) or focused on the dimensions of category and image fit (Boush et al., 1987; Boush and Loken, 1991; Park et al., 1991; de Magalhaes and Varela, 1997; Seltene, 2003). As well as leading to positive consumers’ attitude towards brand extensions, perceived fit can strengthen or dilute brand image of the parent brand. As an important consumer, characteristic consumer innovativeness is also taken into consideration. Innovative consumers show a better attitude toward brand extensions, whatever their perceived fit (Klink and Smith, 2001). Consumers’ knowledge plays an important role in understanding consumer behavior. Knowledge mainly determines whether there is a true understanding of what a brand stands for. Positive and accurate understanding of the brand amongst target consumer’s results in high association with the brand at category or image level. Brand/category knowledge, defined in terms of the product-related and non-product related associations linked to a brand/category in long-term consumer memory (Keller, 1993; 1998). The product-related associations refer to the functional and experiential attributes of the existing products of the brand/category. The non-product related associations comprise the symbolic benefits stemming from the brand name (such as human personality dimensions, prestige etc). In relation to brand association consumer knowledge andbrand image are also taken into consideration. Consequently, brand associations produce knowledge structures that affect consumer responses andultimately brand equity (Keller 2003). The importance of knowing what associations areactually transferred back to the parent brand when conducting a brand extension constitutesthe reason for choosing the brand image, one of the major dimension of brand equity perspective for our investigation. As per brand extension literature, association is nothing but transferring a brand’s image to an extension (Broniarczyk& Alba 1993). This means that a brand can be associated with a salient attribute, which should not associated with other competing brands and product category (Broniarczyk&Alba , 1993; phang , 2003). Aaker (1996) uses brand associations instead of brand image and defines it as ” anything linked in memory to a brand”. Brand image and knowledge have been identified in the marketing literature, often referred to as schema models of brand association (Anderson 1983; Sujan and Bettman 1989). The study proposes, the model includes the variables with the greatest impact on extension attitude (Aaker and Keller, 1990; Hem et al., 2003) and its later influence on parent brand image. More specifically our work tries to identify (1) the limits that the evaluation of new products imposes on the brand extension strategy; (2) those situations in which the introduction of brand extensions strengthen or weaken consumers’ beliefs towards the established brand. The findings may shed light on some conditions where we can employ a recognized brand name to support a new product launch, which is a new category for the company and/or for the brand.
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3. 5 Literature Review
3. 5. 1 Extendibility of a brand
The successful implementation of a new product becomes more difficult in recent years (Aaker 1996). Due to enormous effort and expenditure that is necessary to build strong brands, managers have intensified their search for alternatives to the in house development of new brands (Aaker 1991; p. 8 ; Keller 2003 , pp. 28). One prominent outcome of this process is brand extension strategies , which have found tremendous support in the field and been the subject of various investigations in the academic literature (Aaker and Keller 1990 ; Boush / Loken 1991; Reddy / Holak / Bhat 1993). Brand extensions capitalize on the above brand value. Brand extensions are often seen as an avenue for the company to increase growth in stagnant markets, to introduce new products, and/or to increase sales for a category or brand while obtaining cost efficiencies, especially in advertising and distribution (Tauber, 1988). A successful extension can increase the equity manifold. Dacin and Smith (1993) found that brand equity might be enhanced if high-quality products are added to the portfolio. The decision to use an extension is encouraged by various internal and external considerations that are intrinsic and extrinsic to the brand. Park et al (1986) stress the significance of distinguishing the functional- and emotional values, when evaluating a brand’s characteristics. Important factors when successfully conducting a brand extension are hence to clearly understand these values attached to a brand, what they stand for and thereby create a well developed plan of action for the brand’s equity. Thus, it is assumed essential for companies to gain comprehension of their consumers and what factors that adds value to a company’s brand equity, in order to decide on the areas where such positive aspects can be used in the brand extension (Murphy 1990). According to Kapferer (2001), not all kind of brands should hence rely heavily on brand extensions, meaning that managerial enthusiasm and an exciting product range are sometimes better alternatives to revitalize a brand. Brands can be extended in several ways. Line extensions are new products introduced within the same product category with new flavors, forms, colors, added ingredients, package sizes etc in the existing product line hardly having an appeal as a new and exclusive product. This paper will focus on brand extensions, which are introduced in a different category from the existing business (De Pelsmacker et al., 2007). In case of brand extension the appeal is there because brand stretching uses the same brand name but in a different product category. This is an important reason why companies continue to use brand extensions aggressively is to create excitement for a mature brand (Aaker, 1991). Extension of brand equity is brand extension. These extendibility Advantages significantly a brand’s financial value because they raise the estimates of its future revenues (Keller 2003, p. 399). Brand extensions are found to help companies increase their strength, customer base and long term viability (Keller 1998). Therefore, brand extensions seems more appealing to the consumers and success enhancing to the marketers.
3. 5. 2 Different types of extension
The terminology of brand extension has been used inconsistently in the literature (Ambler & Styles, 1997; Grime et al., 2002). Aaker and Keller (1990) refer to ” extension” as the general term for both line and brand extensions. Brands can be extended in several ways. The earliest form of extension is line extension, refers to using an existing brand name for a new product that belongs to the same product class (Aaker and Keller, 1990). Line extensions are new products introduced within the same product category with new flavors, forms, colors, added ingredients, package sizes etc in the existing product line hardly having an appeal as a new and exclusive product. A Line extension applies an existing brand name to a product in one of the firm’s existing categories (ex. Ponds cold cream and Ponds fairness cream). Whereas brand extension strategy consists of using an established brand name to launch new products (Keller, 2007). Tauber (1981) termed a phrase ” franchise extension” which further known as brand extension, refers to the use of the existing brand name but as a vehicle for the new product, enabling it to enter to a completely different (new for the brand) product class (Aaker and Keller, 1990; Reddy et al., 1993 , Tauber, 1981,). Line and brand extension in different terms namely, horizontal and vertical extension. Horizontal brand extensionIf a company uses a horizontal brand extension they apply or extend an existing product’s name to a new product in the same product class or to a product category new to the company. There are two different horizontal brand extensions, line extensions and franchise extensions. Line extension is the use of a current brand name to enter a new market segment in its product class. The type of extension that is investigated in this article are franchise extensions which are used to enter a product category new to the company with the use of a current brand name (Aaker and Keller, 1990). Vertical brand extensionVertical brand extension is launching a related brand in the similar product category but with a different quality point and price (Keller and Aaker, 1992). Just like by the horizontal extension, vertical extension gives two probable alternatives. The first alternative is the step down option, in this situation the brand extension is launched at a lower price and lower quality level than the core brand. The second alternative is the step up option, a higher price and quality level than the core brand (Chen and Liu, 2003). In this situation, the second brand name is most of the times introduced next to the core brand name this to make the link among the brand extension and the core brand name obvious (Chen and Liu, 2003).
3. 5. 3 Brand extension defined
When a parent firm decides to grow, there are four different strategies for them to choose from. They can bring up a flanker brand, which is the introduction of a new brand into a category where they already have a market position. A line extension is another strategy available to them. It is characterized by the use of an established brand for a new offering in the same product class or category, which differs from the parent brand in relatively minor ways, such as flavors, sizes, and compositions (Reddy, Holak & Bhat 1993). The third possibility is to enter a new category with a new brand name. However, this strategy entails substantial financial risks and the success rate of new products nowadays is less than 3% (Adoimagazine. com, n. d.), which explains why a lot of firms focus on the fourth strategy, brand extensions. Brand extensions are characterized by applying the parent brand to enter a different product category than the one it currently serves (Keller, 2008). The concept of brand extension is about thirty years old and was firstly referred to as brand franchise extension by Tauber (1981). The study adopts, brand extensions which are introduced in a different category from the existing business (De Pelsmacker et al., 2007). It seems that both line and brand extensions are more preferable than launching a new brand. The paper will focus on brand extensions imply that the firm moves outside its present business.
3. 5. 4 Foundation of brand extension research and theories
This chapter has reviewed and discussed five main brand extension theories related to this thesis topic, which have set the stage for identifying several research questions addressed in the following sections. Our critical review of research is organized around these theories, which correspond to the major stages of the extension evaluation process.
3. 5. 5 Theories related to initial brand image and consumer knowledge
Before introducing a brand extension in a given product category, consumers already possesses established attitudes towards both target extension product category and the parent brand. Just as the majority of models of consumer decision-making (see Jacoby 2002 for a review), the integrative model proposed here is process-based. It is dominated by knowledge and affect transfer processes in the following sequence. These attitudes are composed of cognitive and affective dimensions (Fishbein & Ajzen, 1975; Eagly, 1992; Fishbein & Middlestadt, 1995). Building on this theoretical framework, important processes surrounding brand image and knowledge have been identified in the marketing literature, often referred to as schema models of brand association (Anderson 1983; Sujan and Bettman 1989). Srull and Wyer’s postulates on prime brand evaluation are memory accessibility. Already associated brand schemas with consistent performances on relevant attributes and positive preferences are those concepts that are most likely to be retrieved first in a new purchase situation. The outcome strongly relies on relevance of attributes to the existing evaluative concept and consistent positive performance evaluations to cause a strengthened association between the brand and positive evaluations. However where attributes are relevant to a brand’s concept evaluation and a newly observed brand performance is inconsistent with the existing stored evaluative concept, then the postulates predict that significant cognitive activity surrounding the search, retrieval, association and reconciliation of all stored past brand attribute performances occurs. If there is enough information retrieved to form a new consistent, but initially weakly retrievable, evaluation of the brand this new concept and its associated evaluation will replace the previous stored concept and evaluation. If there is not enough information available for a new consistent brand concept evaluation, the old evaluation will remain but additional new brandperformances will be carefully monitored and processed until a new consistent evaluation canbe formed. This is consistent with the tightrope that successful brands and their managers walk every day with respect to maintaining their good brand image. Regardless of how good the past performance has been, or how relatively infrequently failures occur, it only takes one new, evaluative inconsistent, failure of a brand to deliver the expected quality or value to comprise a significant attitude-changing event for a formerly satisfied and loyal consumer. Once reformed, this attitude requires considerable resources, time and a similar attitude-changing event comprising inconsistent attribute performances with any new positively evaluated brand’s performance before the original positive brand evaluation may be reformed yet again. Indeed this explains the mechanism behind the initially confusing situation of brand usage being both an antecedent and a consequence of satisfaction (Boltonand Lemon 1999). A consumer’s preferred branded products being experienced more often by the consumer easily explain this. At each experience event of consumption , the relatively fixed, embedded probability of experiencing a failure of the product to meet expectations exists, and this probability is relatively independent between successive usage or consumption events, so the probability of a consumer experiencing an unsatisfactory event is approximately the product of the embedded failure rate times the frequency of usage. Thus, it can be seen that consumers are more likely to encounter an unsatisfactory usage event associated with their frequently used and preferred branded products. A third corollary of Srull and Wyer’s 15 associative memory postulates for branding is that once an overall brand preference evaluation has been formed from a consistent set of attribute performance information, other attribute information consistent with the preference and performance judgment will be irrelevant and will not be processed. In the context of the discussion on brand and brand extension evaluation, brand knowledge and brand image can be thought of as (a) independent of the salient process under discussion that is the transfer of brand equity to brand extensions, yet (b) frequently helpful of the general effects of congruency on cognition and amplification. There are many other consumer psychology theories relevant to brand and product information evaluation, such as the effects of elaboration (Costley and Brucks 1992), visual vividness (McGill and Anand 1989), the level of involvement (Hawkins and Hoch 1992), gender (Meyers-Levy 1988), mood and framing effects (Martin and Lawson 1998), image beliefs (Mittal 1990a) and many others (Tybout and Artz 1993).
3. 5. 6 Theories related to fit
One of the most important elements in a brand extension evaluation processes is the concept of congruence or similarity. Considering the scenario where a new category is proposed to a consumer for a brand with an existing positive preference, the evaluation of a brand extension, depends on the degree of congruence surrounding both the overall brand preference and the sufficient set of attribute. The relevant theories predict that if the concepts at all of the category, brand and attribute levels are congruent, then no additional significant cognitive processing will occur and the overall evaluation of the brand extension will be one of a positive preference. An important overlay to our understanding of the basic process is presented by categorization theory. Sujan (1985) is regularly credited as being one of the first researchers’ to use categorization theory to understand evaluations of consumer products. Categorization theory proposes that individuals use schemas to help them organize information about entities. A schema is a cognitive structure that represents knowledge about a concept or an object. Individuals form schemas for entities as relevant information about the entity becomes salient (for complete reviews see Fiske and Taylor, 1991). Studies have shown that where the extension category is a close enough fit to an existing exemplar in memory, this will more likely be employed as the parent brand referent when evaluating the extension than a higher order, broad brand prototype (Boush and Loken 1991). For narrow parent brands, higher-order prototype concepts may not exist. Extreme examples include the category-dominant brands, where the dominant narrow brand replaces the generic noun and verb in everyday speech, e. g. in some markets, consumers still ‘ Hoover’ their floors rather than vacuum them, even though the same firm also sells ” Hoover” branded washing machines into the same market. Recent papers explore the effect of enhancing elaboration on extension evaluation via various manipulation techniques such as the interactions between brand personalities, person beliefs and the level of elaboration (Ahluwalia 2008; Monga and John 2010; Yorkston, Nunes, and Matta 2010). An important overlay to our understanding of this process is offered by categorization theory. Sujan (1985) is regularly credited as one of the first researchers’ to use categorization theory to understand evaluations of consumer products. Categorization theory suggests that individuals use schemas to help them organize information about entities. A schema is a cognitive structure that represents knowledge about a concept or an object. Individuals form schemas for entities as relevant information about the entity becomes salient (for complete reviews see Fiske and Taylor, 1991). According to the associative network theory, the consumer mind contains a network of concepts (nodes) interconnected through associations (Anderson, 1983; Morrin, 1999). Any association about the parent brand that consumer recall in their psychological cell may create the basis of fit. In addition, they readapt their cognitive structure to assimilate the new associations (Park et al, 1993). On the other hand, the brand schema will be modified to accommodate examples that are far from current brand attitudes and beliefs (accommodation process). Following Weber and Crocker’s (1983) work, Gu¨rhan-Canli and Maheswaran (1998) suggest that the image modification could be reflected in the formation of a mental subcategory inside the brand scheme (sub-typing model) or in a complete modification of brand associations (conversion model). However, it is just possible that brand attitudes and beliefs would always change because of the new information, which is called the bookkeeping model (Weber and Crocker, 1983; Loken and John, 1993; Gu¨rhan-Canli and Maheswaran, 1998). Consumers could react according to the bookkeeping model when the information on the new product is highly accessible. Regardless of perceived fit, higher accessibility gives rise to an image enhancement, whereas lower accessibility has a negative effect on brand evaluations (Ahluwalia and Gu¨rhan-Canli, 2000). Extreme examples include the category-dominant brands, for an example consumers still ‘ Hoover’ their floors rather than vacuum them, even though the same firm also sells ” Hoover” branded washing machines into the same market. Also, we can reasonably hypothesize an ideal point, or inverted ” U” response to parent brand– extension similarity or congruence (Maoz and Tybout 2002), based both on Mandler’s. Theory for affective or intrinsic congruence (Mandler 1982 p 22; Meyers-Levy et al. 1994; Meyers-Levy and Tybout 1989) and similar arguments, empirically supported, for effective or cognitive fit (Ozanne et al. 1992) as discussed above. A recent paper explores this relationship from the reverse perspective by investigating how much atypicality an extension can possess and still enjoy a good level of evaluation (Batra, Lenk, and Wedel 2010). The key to the underlying processes invoked is clearly then the congruence between the original brand associations and the new category concepts. This is indeed the focus of the relevant marketing literature, referred to in this literature area as the dimension of ‘ fit’ (Tauber 1988). More helpfully and specifically, the concept of a dimension of congruence orfit has been operationalised as 4 separate items: complementarity, the extent to which the new category compliments the existing one, substitutability, the extent to which the new category could be viewed as a substitute for the original category, transferability, the extent to which the firm’s existing competencies in product manufacture and service delivery can be seen as able to be transferred to that of the new category, and the non-fit attribute difficulty, the perceived difficulty that the firm would face in producing the extension (Aaker 1990; Keller and Aaker 1992; Sunde and Brodie 1993). These fit dimensions are mainly product or object related. According to Murphy and Medin (1985), other than object to- object similarity relationships, they suggest that other aspects of a concept category, such as concept relationships among objects, need to be considered along with object similarity. Brand concepts are brand-unique abstract meanings (e. g., high status) that typically originate from a particular configuration of product features (e. g., high price, expensive-looking design, etc.) and a firm’s efforts to create meanings from these arrangements (e. g., ” the relentless pursuit of perfection” by Lexus).
3. 5. 7 Theories related to the influence of brand extension on parent brand image
The influence of brand extension on brand image is explained by several theories, most of them coming from Psychology. According to the ” associative network theory”, brand image may be understood as a mental scheme formed by a network of concepts(nodes) interconnected by linkages or associations (Anderson, 1983; Morrin, 1999). Park et al. (1993) explain that extensions that are coherent with the brand schemawill not lead to image dilution (assimilation process). On the other hand, the brandschema will be modified to accommodate examples that are far from current brandattitudes and beliefs (accommodation process). Following Weber and Crocker’s (1983)work, Gu¨rhan-Canli and Maheswaran (1998) suggest that the image modification couldbe reflected in the formation of a mental subcategory inside the brand scheme(sub-typing model) or in a complete modification of brand associations (conversion model). The sub-typing or conversion processes may occur when perceived fit or typicality between the extension category and the brand is low. However, it is just possible that brand attitudes and beliefs would always change because of the new information, which is called the bookkeeping model (Weber and Crocker, 1983; Loken and John, 1993; Gu¨rhan-Canli and Maheswaran, 1998). Consumers could react according to the bookkeeping model when the information on the new product is highly accessible.
3. 5. 8 Brand extension theory related to consumer innovativeness
The literature of consumer innovativeness has seen a stream of definitions and research interest (Midgley and Dowling, 1978, 1993; Rogers and Shoemaker, 1971; Manning et al., 1995; Im et al., 2003). In one of the seminal works on consumer innovativeness, consumer innovativeness is considered ” the degree to which an individual is relatively earlier in adopting an innovation than other members of his system” (Rogers and Shoemaker, 1971, p. 27). The contingent model of consumer innovativeness proposed by Midgley and Dowling (1978) posits that individual predispositions interact with personal characteristic traits such as age, education, and social participation. This interaction can account for new product adoption behavior. Consumer innovativeness is a personality construct possessed by all consumers at various degrees. The majority of consumers have adopted some products/services or ideas that are new to their individual experience over the course of their consumption (Citrin et al., 2000). Consumer innovativeness can presumably help marketers identify early adopters of their products. These early adopters can also provide important information about the new product and communicate to later adopters. In general, consumer innovativeness can ” facilitate the adoption process and communication of new products to potential consumers” (Citrin et al., 2000, p. 295). As Hirschman (1980, p. 283) asserts, ” The propensities of consumers to adopt new products can play an important role in the analyses of brand loyalty, decision making and communication”. Consumer innovativeness applies not only to manufactured product markets, but also to services (Flynn and Goldsmith, 1993). The dynamic nature of the marketplace can be enhanced by consumer innovativeness (Hirschman, 1980). Innovativeness is a personality trait tied to an individual’s openness to new ideas and disposition to try new methods and brands. The importance of innovativeness has been researched extensively in the literature on innovation diffusion (Rogers, 1983). Rogers (2003) argues that the response difference between earlier and late adopters reflects their propensity to take risks. Innovators tend to be more risk averse than late adopters. These theories justified the relevance of our proposed constructs for the present study.