Service Brand Extensions_Stijn Van Aert 2004

8/6/2019 Service Brand Extensions_Stijn Van Aert 2004

1/138

Name: A.T.H. van Aert

ID: I983168

Study: International Business

Supervisor: Drs. R. Pruppers

Maastricht University

Faculty of Economics and Business Administration

November 2004

"The Role of Service Quality Types in Consumer Evaluations

of Service Brand Extensions"


2/138

Oliver Wendel Holmes


3/138

The Role of Service Quality Types in Consumer Evaluations of Service Brand Extensions

ACKNOWLEDGEMENTS

Writing this thesis has been an interesting process that has known many ups and downs.

Generally, I can say that is has been a rewarding experience in terms of knowledge I have

gained and barriers I have overcome. I would like to thank everyone who helped me during

this experience, especially Roger Pruppers, for his ideas, help, critical comments, time,

flexibility and personal approach. Furthermore I thank my friends and family for their pretest

participation and my parents for their trust. Finally, I would like to thank Sandy, the love of

my life, for her mental and emotional support.

Stijn van Aert

Maastricht, November 2004

A.T.H. van Aert 1


4/138


EXECUTIVE SUMMARY

Todays economies are dominated by service firms, which actively search for innovative

ways to achieve a competitive advantage, increase customer loyalty and improve efficiency.

As a result service firms have become more aware of the relevance of clearly defining the

meaning of their services through branding.

This thesis particularly deals with the subject of service brand extensions. Although

considerable research has been conducted on brand extensions, little is known about the

extendibility potential of service brands to other service categories. The main objective of this

study is to identify if the heterogeneous nature of services has an effect on consumers

evaluations of service brand extensions. Service quality types have been used to further

examine this heterogeneity in terms of the qualitative information available. Service quality

classification is dependent on the ability to evaluate the qualitative information of a service at

a particular moment in the purchase and consumption process. Based on the quality types,

service extensions are suggested to be evaluated differently due to the service quality nature

of the extension itself or the qualitative nature of the parent-extension relationship.

Particularly, the different levels of uncertainty that are related to these quality types are

expected to have an effect on brand extension evaluations. In addition to an investigation of

the influence of service quality types, this study also tries to replicate the findings of existing

brand extension similarity theory to this study.

The conducted research failed to find support for the suggested quality type effects.

This result could indicate that consumers do not experience various levels of uncertainty in

the evaluation of service extensions and that therefore service quality types do not influence

extension evaluation. Nonetheless, it would not be appropriate to conclude that service

qualities do not matter at all, as it is possible that particular service qualitative effects are

present, but not measurable because certain effects cancel each other out within the

experimental design of this study. In addition to the lack of support for the main research

issues, further analyses suggested that the service quality nature of the parent brand might

influence its extendibility potential. This could mean that search brands have a greater ability

to extend their offerings relative to experience brands. Nonetheless, caution is required with

this suggestion as the support for the parental influence is not very strong. Finally, this study

did find strong support for the suggestion that consumers prefer service brand extensions to

related markets rather than unrelated markets. Consequently, service brands should at least try

to establish one relational match between parent object and extension, so consumers can

categorize the extension object as an appropriate member of the parent brand category.

A.T.H. van Aert 2


5/138


----TABLE OF CONTENTS----

ACKNOWLEDGEMENTS.....................................................................................................1

EXECUTIVE SUMMARY......................................................................................................2

1.

INTRODUCTION....................................................................................................................8

1.1 General Introduction...........................................................................................................8

1.2 Thesis Objective..................................................................................................................8

1.3 Contributions.....................................................................................................................10

1.3.1 Theoretical Contribution................................................................................................10

1.3.2 Managerial Contribution................................................................................................10

1.4 Outline of the Study..........................................................................................................11

1.4.1 Theoretical Part..............................................................................................................11

1.4.2 Empirical Part................................................................................................................12

BRANDING THEORY.........................................................................................................13

2.1 Introduction.......................................................................................................................13

2.2 Defining Branding............................................................................................................13

2.3 Brand Equity ....................................................................................................................14

2.4 Managing Brand Equity....................................................................................................17

THE BRAND EXTENSION CONCEPT.............................................................................19

3.1 Introduction.......................................................................................................................19

3.2 Extension Types................................................................................................................20

3.2.1 Line extensions..............................................................................................................203.2.2 Brand extensions............................................................................................................21

3.3 The Advantages of Brand Extensions...............................................................................22

3.4 Brand Extension Risks.......................................................................................................22

3.5 Brand Extension Evaluations ............................................................................................23

3.5.1 The Fundamentals of Similarity and Categorization.....................................................23

3.5.2 Brand Extension Similarity Studies...............................................................................27

SERVICE THEORY.............................................................................................................32

4.1 Introduction........................................................................................................................324.2 Defining Services...............................................................................................................32

A.T.H. van Aert 3


6/138


4.3 Service Characteristics: The SHIP Acronym.....................................................................35

4.4 Branding Services..............................................................................................................36

4.5 Service Brand Extension Evaluations................................................................................37

4.6 Service Quality Types........................................................................................................40

THEORY HYPOTHESES....................................................................................................43

5.1 Introduction.......................................................................................................................43

5.2 Research Questions...........................................................................................................43

5.3 Hypotheses Development..................................................................................................45

RESEARCH DESIGN AND METHODOLOGY...............................................................53

6.1 Research Design.................................................................................................................53

6.2 Stimuli Development.........................................................................................................54

6.3 Measurement......................................................................................................................59

6.4 Data Collection Method ....................................................................................................63

RESULTS...............................................................................................................................65

7.1 Manipulation Checks.........................................................................................................65

7.2 Hypotheses Testing............................................................................................................68

7.3 Additional Findings...........................................................................................................73

DISCUSSION OF THE RESULTS......................................................................................78

8.1 Introduction.......................................................................................................................78

8.2 Discussion.........................................................................................................................78

8.3 Theoretical Implications....................................................................................................84

8.4 Managerial Implications....................................................................................................86

CONCLUSION......................................................................................................................89

9.1 Conclusions.......................................................................................................................89

9.2 Limitations .......................................................................................................................90

9.3 Suggestions for Further Research.....................................................................................92

REFERENCES.......................................................................................................................95

----APPENDIX----.....................................................................................................................I

Appendix A: Pre-Tests..........................................................................................................IV

Pretest 1: Service Quality Classification.................................................................................IV

Pretest 2: Brand Name Appropriateness...................................................................................V

Pretest 3: Extension scenarios.................................................................................................VI

Appendix B: Online Questionnaires....................................................................................XI

Online Questionnaire Introduction E-mail..............................................................................XI

Online Questionnaire: Cover Page..........................................................................................XI

Appendix C: Manipulation Checks.................................................................................XXV

One-Sample T-Tests Familiarity.........................................................................................XXV

A.T.H. van Aert 4


7/138


ANOVA Treatment Factor Relatedness: Parent Search Service Extensions......................XXV

Posthoc-Test Treatment Factor Relatedness: Parent Search Service Extensions..............XXVI

ANOVA Treatment Factor Relatedness: Parent Experience Service Extensions.............XXVI

Posthoc-Test Treatment Factor Relatedness: Parent Experience Service Extensions......XXVII

ANOVA Treatment Factor Service Type: Parent Search Service Extensions................XXVII

Posthoc-Test Treatment Factor Service Type: Parent Search Service Extensions.........XXVIII

ANOVA Treatment Factor Service Type: Parent Experience Service Extensions.........XXVIII

Posthoc-Test Treatment Factor Service Type: Parent Experience Service Extensions.....XXIX

ANOVA Treatment Factor Service Type: Parent Services...............................................XXIX

Appendix D: Experiment Findings..................................................................................XXX

Full Factorial ANOVA: H1, H2 & H3, H4, H5 & H6 .......................................................XXX

Additional ANOVA Analysis H2......................................................................................XXXI

Additional ANOVA Analysis H3......................................................................................XXXI

Additional ANOVA Analysis H5.....................................................................................XXXII

Additional ANOVA Analysis H6.....................................................................................XXXII

Additional ANOVA Analysis Parent Search Scenarios .................................................XXXIII

Additional ANOVA Analysis Parent Experience Scenarios ..........................................XXXIII

Additional ANOVA Analysis H1, H2 & H3 Related Setting.........................................XXXIV

Additional ANOVA Analysis H1, H2 & H3 Unrelated Setting.......................................XXXV

----LIST OF FIGURES & TABLES----

Figure 2.1: Dimensions of Brand Knowledge. Source: Keller

(1993)........................................................................................................................................15

Figure 4.1: Industries classified within the Service Sector. Source: Zeithaml and

Bitner (2000)............................................................................................................................33

Figure 4.2: Tangibility Spectrum. Source: Shostack (1977).............................................34

Figure 5.1: Directional SEC Extension Model....................................................................44

Figure 5.2: Summary Research Questions & Hypotheses.................................................52

Figure 6.1: Research Design (Extension Scenarios) 1.........................................................54

Figure 6.2: Service Quality Type Items...............................................................................60

Figure 6.3: Service Quality Type compared Item...............................................................60

Figure 6.4: Extensions Relatedness Items............................................................................61

Figure 6.5: Service Extension Evaluation Items.................................................................62

Figure 6.6: Parent and Extension Familiarity Items..........................................................62

A.T.H. van Aert 5


8/138


Figure 6.7: Parent and Extension Product Category Involvement Items.........................63

Figure 7.1: Favorability Extension Service Types (H1)...................68

Figure 7.2: Favorability Extension Servtype * Parent Servtype (H2+H3).......................69

Figure 7.3: Favorability Consistency (H2) ..........................................70

Figure 7.4: Favorability Direction (H3)................................................................70

.....................................................................................................................................71

Figure 7.5: Favorability Similarity (H4)..............................................................................71

Figure 7.6: Favorability Similarity * (In)consistency (H5) ..............................................72

Figure 7.7: Favorability Similarity * Direction (H6).....72

Figure 7.8: Favorability Parent Service Type.....................................................................73

Figure 7.9: Favorability Parent Search Servtype Scenarios ............................................75

Figure 7.10: Favorability Parent Experience Servtype

Scenarios..................................................................................................................................75

Figure 7.11: Favorability Extension Servtype * Parent Servtype (Related)....................76

Figure 7.12: Favorability Extension Servtype * Parent Servtype (Unrelated)...............76

A.T.H. van Aert 6


9/138


Table 6.1: Means Pre-Test 3 Motion Car Rental................................................................58

Table 6.2: Means Pre-Test 3 Motion Leisure Car Trips...................................................59

Table 7.1: Manipulation Checks...........................................................................................66

Table 7.2: Consumer Reactions Means under different Extension Scenarios................69

Table 7.3: One Sample T-test Results Extension Scenarios..............................................77

A.T.H. van Aert 7


10/138


Chapter 1

INTRODUCTION

1.1 General Introduction

In every day life services have become a huge part of the total consumption pie. Especially

in developed countries the contribution of the service sector to the gross domestic product

constitutes for over two third of the economy (de Chernatony & Segal-Horn, 2003).

Unsurprisingly, the growth of services has gained a substantial role in global competition.

Recent deregulation and privatization efforts even increased competition in several service

industries such as energy utilities, telecommunications and postal services. Over the years the

transition to economies that are dominated by service firms has stimulated service

organizations to actively search for innovative ways to achieve a competitive advantage,

increase customer loyalty and improve efficiency. Consequently, companies have become

more aware of the necessity of branding. Well known service brands that have been created

include: American Express, Club Med, Fedex, Europcar, Hilton Hotels, Easyjet, etc.

It is very important to clearly define the meaning of services through branding, as

individuals perceive a great amount of risk in consuming services due to the fact that it is very

hard to evaluate a service (de Chernatony & Dall'Olmo Riley, 1999). Brands are able to lower

this uncertainty by signaling consumers to some extent what they can expect. Nevertheless

when looking at the top hundred brands suggested by Interbrand, it is remarkably striking that

this chart is dominated by goods (Brady, Hof, Reinhardt, Moon, Holmes, & Capell, 2004).

This observation can partially be explained, as several service sectors seem to be just entering

the brand age. Until recently these firms did not consider themselves as being part of it or

have just started realizing that they are (Kapferer, 1997). Based on the relevance of branding

among services it is necessary to focus special attention to branding strategies that service

firms can put into practice. By identifying the appropriate application of these strategies more

service organizations will be able to reap the benefits of having a successful brand in place.

1.2 Thesis Objective

A particular branding method that is more frequently applied by service firms after they have

established their parent brand is the introduction of extensions. Here firms launch products

into markets they have not been active in traditionally (Kasper, van Elsdingen, & de Vries Jr.,

1999). To develop effective branding strategies it seems logical to apply the well-knownprinciples, which are accepted in the area of manufactured goods. However, not all of these

A.T.H. van Aert 8


11/138


principles are appropriate to service industries. In many cases differences in characteristics

between goods and services demand an adjusted approach (de Chernatony and Segal-Horn,

2003). Still, branding research has particularly been conducted in the domain of tangible

products, which has also been the case for brand extensions. A focal point of brand extension

research has been the aspect of fit or similarity in certain product- and non -product related

attributes (Aaker & Keller, 1990; Broniarczyk & Alba, 1994; Park, Milberg & Lawson,

1991). According to these studies consumers perceive fit, if an extension is seen as similar to

the parent brand category. Consequently, consumers can easily transfer their existing mind-set

about the parent product1 to the extension. Initially, it seems logical that the corresponding

implications of traditional brand extension research are also applicable to the service context.

According to this way of thinking feature similarities and concept consistency between parent

brand and service extension are important factors, which should influence the evaluation of a

proposed new service. However, it needs to be examined if there are particular factors related

to services, which influence the evaluation of service brand extensions and should therefore

receive special attention.

This thesis will take the effect of similarity into account as a relevant factor on service

brand extension evaluations. Nonetheless, the influence of similarity is not the focal point of

attention. Parasuraman, Zeithaml and Berry (1985) have stressed that a consumers

expectation of a services performance level are considered as one of the most relevant

ingredients for its evaluation. Supplemented by the fact that the characteristics among

services are quite heterogeneous (Berry, 1984), it is suggested that the different nature of the

informational cues available among service extensions and between service parent-extension

relationships, have a relevant impact on service brand extension evaluations. The ability to

evaluate the qualitative characteristics of a service has been classified in terms of service

quality types, which are dominated by either search qualities, experience qualities or

credence qualities (Nelson, 1970; Darby & Karni, 1973; Zeithaml, 1981). This categorization

distinguishes the ability of the consumer to evaluate a product based on the information

available before and after purchase and will be used to examine the impact of different

qualitative cues on service brand extension evaluations. Thus in line with the above the main

focus of this thesis is to identify the relevant impact of service quality types on service brand

extension evaluations.

A.T.H. van Aert

1 In this thesis, the terms parent product and parent brand are used interchangeably as it is assumed that the parent brand is linked to a single

product category (Lei, Pruppers, Ouwersloot & Lemmink, 2004). Furthermore the term product can apply as well to a service as amanufactured good.

9


12/138


1.3 Contributions

The contributions behind this study are twofold as they can be approached from a theoretical

as well from a business perspective. At first the theoretical contribution is discussed,

thereafter the managerial one.

1.3.1 Theoretical Contribution

As noted earlier many researchers investigated the subject of brand extensions in the area of

tangible products. However, although services differ substantially from manufactured goods,

limited attention has been directed to this issue in the service sector (de Ruyter & Wetzels,

2000; van Riel, Lemmink & Ouwersloot, 2001). The dissimilarity between goods and services

is already one reason to investigate if there are specific service dimensions that influence the

evaluation of a service extension. Furthermore, the huge variety among services stresses the

need to investigate the extendibility within and between diverse service types.

1.3.2 Managerial Contribution

In general, there is a need among service providers to understand how their offerings are

evaluated. Specifically, when service brands consider to extent their offerings to other product

categories, the possibility exists that specific parent-extension combinations make more sense

to consumers than others. Therefore service providers need to carefully determine to which

product categories the parental brand name can be extended successfully.

Here it is suggested that a service extensions success is partially dependent on the

service quality nature of the extension and the parent extension relationship. For example, an

organization that has a parent product with experience qualities can extend its offerings to

product categories that are more complex to evaluate, less complex to evaluate or which are at

the same evaluation level of the parent service. Nevertheless, little is known on the

extendibility of services that have the same or diverse type of qualitative characteristics. For

that reason, it is necessary to examine what kind of impact these service qualities have on the

evaluation of service brand extensions proposed by different parent-extension combinations.

If an organization introduces an extension that is not considered as a good combination based

on the service qualitative characteristics, this can have severe consequences. For instance, the

organization can suffer a loss or even damage the parental brand as a consequence of an

unfavorable reaction towards the extension.

A.T.H. van Aert 10


13/138


1.4 Outline of the Study

The writings above described the main objective of this study and its contributions. Before the

main issue can be dealt with, it is necessary to gain a deeper understanding into the related

terms and concepts. Based on the relevant theory the problem statement has been split up into

three research questions, which are accompanied by several hypotheses. Thereafter the

second, empirical, part of this thesis tests if the proposed hypotheses are supported. Finally

the experimental findings are discussed.

1.4.1 Theoretical Part

At first chapter two deals with the importance of branding in general, and the link between

brand equity and brand extensions in particular. Thereafterchapter three builds further on the

previous chapter as it goes into detail on the brand extension concept and related issues. It is

identified which different types of extensions exist. Additionally, the advantages and risks of

extension strategies are taken into account. Furthermore an introduction is given into the

cognitive theory of similarity-based categorization, which acts as the primary foundation for

extension evaluation. Chapter three ends with an overview of the most important research

findings in the brand extension domain. Thereafter chapter fourfirst elaborates on the main

characteristics of the service sector and the adjustments that are necessary in marketing and

branding strategies due to the service specific features. Chapter four also reviews several

studies that have been conducted in the service brand extension field, to identify explicit

factors that influence service extension evaluation. Finally, this chapter ends by introducing

the three different service quality types. Chapter five concludes the theoretical fundamentals

and acts as a bridge to the empirical part of these writings. In this chapter the main problem

has been transformed into three research questions and six testable hypotheses.

The contents of the theoretical chapters, which are required as background knowledge to deal

with the fundamental issue of this thesis, have been summarized by means of the following

sub questions:

What is the relevance of brand equity in relation to brand extensions?

What is a brand extension and which different types exist?

What are the advantages and drawbacks of brand extensions?

A.T.H. van Aert 11


14/138


What is the relationship between similarity, categorization and evaluation?

What is the influence of similarity between a parent brand and an extension?

How can services be characterized?

Which factors influence consumers evaluations of a service brand extensions?

1.4.2 Empirical Part

Thesixth chapter introduces the second part of this study, which mainly covers the empirical

approach to test if service quality types are a relevant factor that needs to be considered in the

service brand extension domain. Chapter six will point forward the applied experimental

design and further deals with the research method. Next to the research design specific issues

covered in this chapter include: stimulus development, sampling and survey method.

Thereafterchapter seven provides the empirical findings and will state for each hypothesis if

it has been accepted or rejected. Chapter eight will discuss the hypotheses and additional

findings of the latter chapter and will provide implications for theory and practice. Finally,

chapter nine will present the main conclusions, the limitations of the conducted study and

suggestions for further research.

A.T.H. van Aert 12


15/138


Chapter 2

BRANDING THEORY

2.1 Introduction

Before the main theory on brand extensions is dealt with it is necessary to understand the

basics of branding itself. Thus, the purpose of this chapter is to emphasize the role of

branding, convey the broader meaning of a brand, provide insights on the importance of the

brand equity concept and finally discuss how a brand can be managed over time.

2.2 Defining Branding

During the 1980s organizations started realizing the importance of branding and directed

more focus towards their branding concepts. Prior to this brand realization moment the

business environment had been very reluctant against acknowledging the brand as a core

asset. The change in attitude came with a wave of takeovers, mergers and acquisitions.

Companies that had a well-known brand name were bought for greater sums than their

original stock market value (Kapferer, 1997). Before the brand revolution, a buyer acquired a

clothing manufacturer or a producer of airplanes. Now, companies want to buy entities with

brand names like Benetton or Boeing.

The main reasons why companies with established brand names are of interest, is

because their products offer sources of competitive advantage and financial returns. However,

before a product creates value to a company, consumers have to be convinced that it creates

value to them. Therefore the functions that a brand fulfills to its customers can be considered

as the essential reasons why brands started to matter. These functions have been identified by

Keller (2003) and are briefly reviewed. At first brands offer a means of identification of a

products source and create the ability to assign responsibility to a particular manufacturer or

distributor. Secondly, through experiences consumers learn about brands. Consumers realize

which brands satisfy their needs and which do not. As a result brands provide an easy way to

simplify product decisions. Thirdly brands fulfill an economic function in terms of search cost

reducer. Brands lower these search costs internally, because consumers do not have to engage

in a lot of additional thought when they use brands. Furthermore, from an external perspective

consumers save time in the purchase process as they spend less time on looking around for the

perfect product. Fourthly, brands reveal specific functional and symbolic benefits.

Functionally, consumers have certain expectations on consistent product performance and

appropriate pricing. Symbolically, a brand can act as a device, which allows consumers to

A.T.H. van Aert 13


16/138


project their self-image. The final function that a brand offers consumers is a signal of quality.

Basically the search, experience and credence classification, which this study suggests as a

relevant factor influencing service extension evaluation, is related to the different ways by

which branded products signal quality. A detailed description of this classification and its

suggested relevance in the service extension context will be elaborated upon later in the

upcoming chapters.

Now it has been clarified why brands matter to consumers it is necessary to define what

a brand exactly is. Several theorists have tried to answer this question. According to Kotler

(1997), a brand is a name, term, sign, symbol, or design, which is intended to identify the

goods or services of one seller or group of sellers and to differentiate them from those of

competitive products. As a result a brand is more than a product. Kapferer (1997) supports

this notion by emphasizing that a brand has a much broader meaning than just the legal

implications of a symbol. Fundamentally, the value of a brand comes from its ability to gain

an exclusive, positive and prominent meaning in the mindset of a large number of consumers.

Therefore the brand is not the product, but it gives the product meaning and defines its

identity in both time and place. When consumers, for example, buy a pair of Nikes these

individuals do not simply notice two sport shoes with swooshes sowed onto them. They see

all kinds differences compared to products from other sports shoe manufacturers. These

differences may be tangible, related to the product performance or intangible related to the

symbolic and emotional representation of the Nike brand. In essence, the key to creating a

strong brand is the ability to choose appropriate tangible and intangible attributes, also known

as brand elements, to identify the product and distinguish it from others.

2.3 Brand Equity

In the previous section it has been identified what kind of functions a brand fulfills and what a

brand exactly is. Therefore now it is time to pay close attention to what makes a brand strong.

The means to create value to the customer and eventually to an organization resides in the

concept ofbrand equity. Much attention has been directed towards this concept from various

perspectives. Simon and Sullivan (1990), conceptualized brand equity as a financial measure,

Aaker (1991) acknowledged it as a measure of behavior, and Keller (1993) suggested brand

equity to be a measure of consumers beliefs. Although most researchers agree that brand

equity can be described as the value a brand adds to a product, the latter author specifically

focuses on the differential effect a brand can have on a consumer. This perspective will be

used as a basis to further elaborate on the brand equity concept.

A.T.H. van Aert 14


17/138


Formally, Keller (1993) defines his customer based brand equity (CBBE) concept as the

differential effect that brand knowledge has on a consumers response to the marketing of a

brand. The basic premise of this model is that the power of a brand resides in what customers

have learned, felt, seen, and heard about the brand. Therefore brand equity all comes down to

the brand knowledge, which is stocked in the minds of the customers. Fundamentally, the

requirements to establish a high level of brand knowledge among customers is embedded in

the following two dimensions: brand awareness and brand image. These two elements are

typified as two crucial nodes of the associative network model proposed by Keller (see figure

2.1). The model reflects a consumers memory as consisting of a network of nodes and

connecting links, in which nodes represent stored information and links represent the strength

of association between this information.

Figure 2.1: Dimensions of Brand Knowledge. Source: Keller (1993)

A.T.H. van Aert

BRAND

KNOWLEDGE

BRAND IMAGEBRAND

AWARENESS

BRAND

RECOGNITION

BRAND

RECALL

ATTRIBUTES

BENEFITS

ATTITUDES

FAVORABILITYOF ASSOCIATIONS

STRENGTHOF ASSOCIATIONS

UNIQUENESSOF ASSOCIATIONS

TYPES OF

ASSOCIATIONS

15


18/138


Brand awareness is the first super node in the knowledge network model. It describes

the strength of the brand node or trace in memory, as reflected by the consumers ability to

identify the brand under different conditions and consists of brand recognition and recall

performance. Brand recognitionrelates the consumers capability to confirm prior exposure to

the brand when given the brand as a cue, whereas brand recall expresses the consumers

ability to retrieve the brand from memory when given the product category, the needs fulfilled

by the category or a purchase or usage situation as a cue (Keller, 2003). The second super

node, brand image, represents the perceptions about a brand as reflected by the brand

associations held in consumer memory. According to Keller the definition of customer based

brand equity does not make a distinction between the sources of these associations.

Essentially, all that matters is the resulting favorability, strength and uniqueness of these

brand associations. Successful results on all these dimensions produce the most positive brand

responses. The perceptions are again based on three types of associations in the memory

network model which are: attributes, benefits and attitudes. The attributes can be split up

according to product- and non -product related elements. Product related attributes are linked

to the products physical characteristics and can also be typified. Familiarly they are called

features. As an example, components, materials, programming capabilities and digital sound

are all product related attributes of a DVD player. Non-product related attributes are defined

as external aspects that relate to a products purchase or consumption. Four information types

are included: price, packaging, the identity of the typical consumer, and where and in what

situations the product is consumed. The benefit associations are again divided into functional,

experiential and symbolic associations, which represent the want satisfaction that product

features convey (Pitta & Katsanis, 1995). Functional benefits are connected to the intrinsic

features possessed by the product, mainly associated with a products performance.

Experiential needs are also linked to a product's features and pertain to how it feels to use the

product. The third type, symbolic benefits, relate to the consumers self concept and can be

associated with higher order needs such as social and self esteem needs. The last and most

important association is the consumers attitude towards a brand, which can be looked upon

as the response to the combination of product related, non-product related attributes and

benefits.

The different types of associations are of course also relevant in terms of brand equity

among services. Although the associations generally differ between tangible and intangible

products there is enough opportunity to create winning service brands as long as these

associations are perceived as favorable, strong and unique. Nonetheless will it be harder to

A.T.H. van Aert 16


19/138


create equity, because of their invisible character. This issue will be discussed further in

chapter four.

2.4 Managing Brand Equity

In order to build brand equity, companies must start with the basics. The CBBE model will be

a helpful tool to map what brand equity is and how it should be managed. Aaker (1996)

acknowledges that brand equity is supported in great part by the associations that consumers

have with a brand. Additionally, he emphasized that the creation of these associations is

primarily driven by brand identity. This identity contains a unique set of brand associations

that the brand strategist aspires to establish and maintain equity. Brand identity is for that

reason more concerned with building brand equity compared to brand image. That is why

today marketers consider brand identity as the core concept of brand management. Kapferer

(1997) supports this notion by stating that a company must first know who they are, before

they are questioning themselves how they are perceived.

Still once a brand has been established, its success is dependent upon the knowledge

structures present in the minds of the customers and the actions firms take to capitalize on the

potential offered by these knowledge structures (Keller, 1993). Thus when organizations have

specified and enforced the desired levels of awareness and favorability, strength, and

uniqueness of product- and non-product related attributes and benefits, resulting in an overall

attitude for the new brand, then brand managers have to take a long-term perspective for their

future decision making. It is important to understand that brands should be managed as a

creative process, because over time new products are introduced while others disappear.

Hence marketers will continually evolve and adapt every aspect of their marketing programs

to enhance the brand knowledge and subsequently guarantee brand equity of their products.

A way to manage equity long term is through leveraging equity, which has already been

created. Aaker (1996) identified several available options: co-branding, stretching and

extensions. In case of co-branding a company uses its own set of associations by linking itself

to other existing brands. It takes place when two or more brands are combined into a joint

product or are marketed together in the same fashion. These co-brands can belong to the

brand portfolio of the company itself or to other organizations. The second strategy involves

leveraging equity by vertically stretching the brand up or down in existing product classes.

Vertical stretching gained in acceptance since markets have become increasingly value

centered. Aaker (1996) argues that in todays markets companies have to cope with increasing

competition and technological change. As a result consumers are turning from prestige and

A.T.H. van Aert 17


20/138


luxury products to lower cost alternatives that deliver acceptable quality and features. This

trend toward value, which is related to lower margins, has forced companies to offer

vertical downscale versions of their products to meet customer demands. The horizontal

stretching strategy, however, provides companies with the opportunity to benefit from higher

margins in target niches that are less price sensitive. Horizontal stretching is applied when an

upscale product is put on the market that contains specific innovative features and or more

features than the standard product. The third option includes leveraging equity through

extension decisions and occurs when a firm uses an established brand name to introduce a

new product. The upcoming chapter will be entirely devoted to the clarification of this

strategy and the most important aspects related to it. As the co-branding and stretching

concepts are beyond the scope of these writings, they are not discussed in greater detail.

A.T.H. van Aert 18


21/138


Chapter 3

THE BRAND EXTENSION CONCEPT

3.1 Introduction

Before brands were commonly accepted as strategic assets, companies adopted the classical

conception of branding. This ideology can be represented through the following equation:

1 brand = 1 product = 1 promise (Kapferer, 1997). The main limitation of this classical

perspective is that the brand only embodies a newly introduced product in terms of its

technical or objective features. As a result the historical introduction of the brand is taken for

its long term reality and a long term evolution of the brand is not part of the classical branding

policy. The latter chapter made clear that this attitude towards branding has changed

significantly. This change has been partially contributable to the brand extension strategy.

With this strategy companies started offering products, which were beyond their initial parent

product know-how. Consequently, brands represented more than one product and conveyed a

broader meaning.

Currently, extending brands has developed into a common practice. Its main acceptance

dates back to the 1980s, when brand extensions were called the guiding strategy of product

planners (Tauber, 1988). One of the main reasons why brand extensions became a general

managerial procedure among marketers was that many organizations used it as a growth

strategy. With this strategy companies were able to save costs when introducing an extension

compared to launching a new brand name. Although brand extensions offer a vehicle for

growth and many other advantages to a company, not all extensions are considered a success.

Hence organizations should as well be aware of the potential drawbacks of this strategy. In

the third and fourth section of this chapter both these advantages and potential pitfalls of

brand extensions are described.When an organization wants to benefit from the potential advantages an extension has to

offer, it is dependent upon many strategic considerations that make an extension successful,

including the appropriateness of a company's corporate structure, applicability of capital

resources, and capabilities of personnel in the new market (Boush & Loken, 1991). These

factors are mainly focused on company sources that create the brand extension. Another

necessity is more of an external nature, as it depends on the consumer. Here a favorable prior

attitude towards the current branded products, which has the capacity to transfer to the

extension, is a crucial requirement for an extension to be successful. Understanding whether

A.T.H. van Aert 19


22/138


and how this transfer occurs, requires insights of the underlying cognitive processes present in

the minds of a consumer. Not only is it necessary to isolate the process that triggers the

evaluation of an extended brand, companies also need to be aware of the variables that

influence the perceptions of an extension. Brand extension researchers have tried to identify

the presence of fit perceptions or similarities between the parent brand and the extension as a

fundamental dimension that enables transfer of equity. Additionally, most of these researchers

acknowledged cognitive categorization theory as the central concept that supports the transfer

of similarity perceptions. A review of these main thoughts and findings of both categorization

theory and different similarity dimensions will be provided in the fifth section of this chapter.

Before going into depth on the advantages, risks and evaluative insights of brand extensions,

first a description will be given of the different extensions types.

3.2 Extension Types

There are two main extension types, which have the potential to leverage existing equity to

new products: line extensions and brand extensions. In branding literature not all studies

define these extensions in the same manner. Keller (2003), for example, states that brand

extensions consist of category and line extensions. Other academics (Aaker, 1996; Aaker &

Keller, 1990; Kapferer, 1997) stress that a line extension must be distinguished from a brand

extension, while the latter is a real diversification due to its availability in other product

categories and markets. For convenience and consistency reasons, the latter definition, which

states that a line extension is not a brand extension, will be the terminology this thesis

supports.

The brand extension strategy has been chosen as the focal point of attention instead of

line extensions, since this strategy generally offers a company greater growth potential.

Additionally, it is more difficult to create a positive consumer attitude toward a brand

extension relative to a line extension. Nonetheless a description of both the brand and line

extension strategy are given below to clarify the focus of this thesis.

3.2.1 Line extensions

Extending the range of brands can be regarded as a necessary step in the evolution of a brand

through time (Kapferer, 1997). Just as in Darwins evolution theory, if a brand wants to

survive it needs to adapt to its changing environment, the changing needs of consumers. By

creating sub species of the parent product, brand managers discovered that their brands had

greater potential. The main characteristic of the line extension strategy is the creation of these

A.T.H. van Aert 20


23/138


species within the same product class as the parent brand. Within a category, variety is

created through a different flavor or ingredient, a different form or size, or new packaging

options (Kotler, 1997). Since this approach allows a brand to stay close to its historical

promise, companies generally applied this strategy first before new products were introduced

in less related categories. In summary, a line extension creates an even finer segmentation by

changing or adding features to a product to better adapt the offer to the changing demands of

consumers.

3.2.2 Brand extensions

When an organization extends its current brand name to enter a product category new to the

company, this strategy is called: brand extension. Brand extensions involve a horizontal

differentiation as they focus on creating variation in the horizontal structure of a product line

(Randall & Ullrich, 1998). In early brand extension literature, Tauber (1981) typified this

tactic as brand franchise extension. A superior example of successful brand extension efforts

is the Yamaha brand (www.yamaha.com). This brand has been able to create products in

diversified categories, which include: organs, pianos, guitars, hi-fi equipment, golf clubs,

motorcycles and many more. Some of these examples are quite close to the historical core

product, Yamaha organs, which has been the initial focus of Torakusu Yamaha's

entrepreneurial efforts. On the other hand, golf clubs and motorcycles have little in common

with musical equipment; nevertheless do these products also carry the Yamaha brand name.

Thus, generally speaking brand extensions can again be split up in: extensions that are far,

and extensions that are close from the original brand territory. It cannot be stated which of

these two approaches is better than the other, as there are many factors influencing the

consumers attitude toward an extension. However, one of the main criteria consumers use to

evaluate an extension is its relation with the parent brand category in terms of similarities.

Aaker and Keller (1990) conducted an important study in this field by investigating

dimensions of fit that enhance the transfer of quality perceptions between the parent brand

and the extension. After this key study a significant amount of research emerged on variables,

which have the potential to influence perceptions of fit and subsequently contribute to a

positive evaluation of the extension. The main arguments and findings of the extension

similarity literature will be reviewed in the fifth section of this chapter. First the advantages

and potential risks of the brand extension strategy are dealt with.

A.T.H. van Aert 21


24/138


3.3 The Advantages of Brand Extensions

Consumers perceive brand extensions as valuable products mainly based on the risk reduction

function of the parent product, which has already been previously described (see chapter 2,

page 9-10). However, the advantages brand extension offers to companies can be classified

into two varieties: benefits related to the introduction of the new product and benefits

provided to the parent brand. Basically, the first category of advantages all comes down to

the realization of efficiencies. These can be first of all created from a marketing

communications perspective. When a brand has already established a well-defined brand

image, companies do not have to create awareness for the brand anymore. Instead they can

direct their focus on communicating specific salient, unique, and favorable associations of the

new product. Smith and Park (1992) provided support for this notion and concluded that

brand extension facilitates greater levels of initial market share with less advertising

investments compared to products introduced under a new brand name. Next to these

promotional efficiencies, an existing brand name also generates greater acceptance among

retailers and distributors. These businesses will be more easily convinced to stock and

promote an extension compared to a new brand. Furthermore packaging and labeling

efficiencies can be achieved when introducing an extension (Keller, 2003).

Besides the advantages that are directly related to the introduction of an extension, the

parent brand can also benefit. Tauber (1981) acknowledged that a franchise extension can

increase sales of the parent brand. In this case a synergistic effect is achieved, as the

advertising and heightened awareness of the new entry has the potential to spill over to the

original offerings. Furthermore the parent brand can benefit, because the extension can clarify

and revitalize its meaning (Keller, 2003). Consequently, additional extensions can be

introduced under the parents brand name. These subsequent extensions have the ability to

make usage of associations from the updated brand image and allow for further stretch to less

related categories.

3.4 Brand Extension Risks

When consumers do not evaluate an extension as favorable, the probability is high that the

new product will not be accepted. Hence, organizations fear a negative attitude towards their

product, as the resources devoted to it will eventually not pay off. To avoid an unfavorable

evaluation, companies need to be aware of the factors leading to such an attitude. One of these

main factors causing the threat of failure is highly dependent on specific parent brand

associations that are considered as inappropriate to the extension (Pitta & Katsanis, 1995).

A.T.H. van Aert 22


25/138


Companies can try to identify these potential ineffective or negative brand associations, by

conducting concept tests with prospective customers. Thereafter, the findings can be used for

modification. Aaker and Keller (1990), for example, proposed an adjustment method to avoid

or minimize negative associations by providing elaboration of an extension attribute about

which subjects may be uncertain and which has the potential to damage the extension.

Although non-acceptance is one of the main drawbacks of the extension strategy,

companies should also be aware of the negative feedback impact brand extensions can have

on the parent brand image. The reciprocal effects were found to be mainly due to either

failure of the extension product or lack of fit between the original and extension product

categories. Loken and John (1993) investigated the latter issue by identifying extensions,

which hold certain associations that are in conflict with what consumers expect from the

family brand. They found that inconsistent extension judgments can produce dilution of

specific beliefs associated with the family brand name. Even if an extension initially

succeeds, a firm increases the risk that an unexpected problem with one of the products in the

brand family can hurt the image of some or all of the remaining products. Additionally, by

adding multiple products to a single brand, a firm has to cope with the risk that a brand name

can come to mean everything to everybody, which in turn means it becomes nothing to

nobody (Keller, 2003).

3.5 Brand Extension Evaluations

As noted in the previous section, an unfavorable evaluation is not what an organization opts

for when a brand extension is introduced. Therefore companies need to acquire a solid

understanding on what determines whether a brand extension can benefit from the potential

advantages and how potential pitfalls can be minimized or avoided. Fortunately, over the

years brand extension research has received much attention and in specific the perception of

fit has been accepted as a crucial factor in extension evaluations. A review of this literature

will be provided, but first of all it is necessary to understand the underlying cognitive process

that consumers make use of to generate (dis)similarity perceptions in their categorization

efforts and the relative influence of this process on extension evaluation.

3.5.1 The Fundamentals of Similarity and Categorization

Even though categorization theory is not the only psychological theory influencing the

attitude towards an extension, it is the basis for generating similarity perceptions between a

parent and an extension. This belief has been supported by many other theorists specialized

A.T.H. van Aert 23


26/138


in branding (e.g. Aaker & Keller, 1990; Boush & Loken, 1991). In particular, Dacin and

Smith (1994) stated that they consider categorization theory as the dominant conceptual lens

through which brand extension phenomena are viewed. The primary assumption of

categorization theory when applied to brand extensions is that consumers attempt to relate a

given brand extension to other products affiliated with that brand.

Categorization Models

Although similarity and categorization are very important processes in understanding parent

brand - extension relationships, the relevance and origin of these concepts covers a much

broader spectrum than extension evaluations. Philosophers and psychologists have identified

the importance of similarity and categorization as one of the foundations of most intelligent

human behavior, because the world humans encounter consists of a vast collection of objects

and events that can be infinitely partitioned and generalized (Hahn & Ramscar, 2001). As a

result the schemas or conceptual knowledge structures that humans create are a product of the

way they perceive and interact with their world. When individuals are confronted with a new

stimulus they will categorize it by comparing previously acquired knowledge, and classify it

according to its similarity with their pre-existing stored information. Until now many theorists

have questioned whether categorization is governed by only similarity connections. Yet

similarity is commonly considered as the best explanation of how most of our conceptual

categories function (Hampton, 2001). Three main similarity-based categorization perspectives

can be identified: the classical,prototype and exemplarmodel.

First of all the classical or rule based model views the exposure to new objects as a

search for necessary and sufficient attributes, which determines category membership.

Entities possessing the set of critical features are a member of the category, whereas entities

that lack even one of the attributes are not considered a member (Cohen & Basu, 1987).

Consequently all members of a category should be equally representative and learning a

category consists of defining its determining attributes. The classical theory can be typified as

an all or nothing approach, which does not align with reality. Developments in cognitive

psychology have therefore challenged this approach, because there are few categories for

which clear cut boundaries can be set and unique properties for all members of one group

exist. In essence, the classical perspective is only applicable to easily definable and

unambiguous concepts. Therefore it is not an appropriate perspective to describe the

categorization process in consumer settings and the service extension context in particular.

Because of the many limitations of the latter theory the prototype perspective emerged.

A.T.H. van Aert 24


27/138


A prototype theorist would argue that a category assigned to an object is determined by its

similarity to the prototype of a set of objects with a common name, relative to its similarity to

other prototypes (Sloman, Malt & Fridman, 2001). Essentially prototypes are ideal or central

tendencies around which categories are formed. This view de-emphasizes the search for

necessary critical features and emphasizes instead a goodness of membership, where the

degree of prototypicality is operationally defined by peoples judgments of how well various

objects fit with their thought of the meaning expressed by a category label (Cohen and Basu,

1987). Mervis and Rosch (1981) defined this degree as thegraded structure, which involves a

continuum of category membership, ranging from objects that are highly typical of the

category to objects that are clearly not category members. According to these authors it is the

nonequivalence of category members, or graded structure that sets categories apart from

unordered sets. People will perceive membership of most categories as varying in their degree

of representativeness of those categories. For example, a pigeon is perceived more typical of

the category bird than an ostrich. Furthermore non-membership also differs in how

representative non-member objects are of a category. For instance, an unrelated object such as

a car is more a nonmember of the category bird than an airplane. Hierarchically the latter is

less a non-member of the category bird than a car, based on the similar association that an

airplane and a bird both move through the air. When reflecting the notion of graded structure

to the brand extension context, it implies that some products are more representative of a

brand category than others (Boush & Loken, 1991).

The final model discusses the exemplar view, which is closely related to the prototype

perspective. Here the target objects are categorized by cuing the retrieval of specific category

exemplars, which have been experienced in some manner and stored in memory. The more

similar the target is to the concrete exemplars of a category, the more likely it will be placed

in that category. The main difference between a prototype and an exemplar is embedded in

the summary representation of the target category (Palmeri, 2001). Prototyping consists of

creating some sort of categorical summary of features experienced and stored in memory on

the prototyped object, whereas the exemplar model uses a holistic approach in the creation of

the categorical representation. For example, in case of the prototypical perspective the

cognitive schema developed on a natural object, such as a soccer player, would consist of an

idealized member that combines associations of several players, while the exemplar view

argues that one player, such as Ronaldo, represents the category in an individual's mindset.

Both models are of great interest in the brand extension domain. Particularly, the notion of

graded structure is of importance, because the typicalities or similarities of an extension to the

A.T.H. van Aert 25


28/138


parent brand category are considered key determinants in extension evaluations (Barone,

Miniard & Romeo, 2000).

From Categorization to Brand Extension Evaluation

Logically, categorization is intertwined with evaluation, because an affective response to a

particular entity may be derived from the identification as being a member of a specific

category (Cohen & Basu, 1987). Although the process of evaluation is highly dependent on

similarity-based categorization, the processes that individuals apply to form an attitude

towards an object can be described in more detail.

Two specific evaluation methods are: categorical and piecemeal processing (Aaker &

Keller, 1990). The level of representativeness, based on the earlier described graded structure

notion, has an influence on which processing type is applied. In the first, category-based

process, an extension would be evaluated as a function of some overall attitude toward the

original brand, whereby the attitude associated with the parent brand category can be

transferred to the extension. The overall attitude toward the parent object is transferred to the

new entity, since the new object is regarded as a representative member of the parent

category. Concerning the second process an attitude can be formed from specific extension

attributes and their assumed performance. Based on the detailed elaboration of specific

features this process has been typified as computational or piecemeal. When the second

process is applied, the new object is generally considered as less typical to its parent object.

Consequently a more careful comparison of defining features of the category is made to

determine whether the object is a member of the category (Boush & Loken, 1991). Both these

processes, however, cannot be regarded as mutually exclusive. Therefore two-step models,

which combine the overall retrieval of prior affect as well as detailed piecemeal judgments,

have emerged. The first step consists of an attempt to match the new object with a current

category. If categorization is successful, the affect associated with the parent category is

applied to the new product and the evaluation process is complete. However, if there is an

incomplete match then a second step, which consists of a computation of attributes is

initiated, which transfers particular beliefs of the parent object toward the extension.

Next to these evaluation processes Meyers-Levy and Tybout (1989) have found that

when a mismatch or incongruity occurs between a new product and the existing parent

product category, the level of incongruity has an impact on the favorability of an evaluation.

They created a hierarchical structure of the consumer knowledge structure on soft drinks and

suggested products with moderate incongruities to receive evaluations, which are more

A.T.H. van Aert 26


29/138


favorable than products that have a more complete match with the parent category. The

general categorization notion is accepted arguing that schema match or congruity leads to a

favorable response, because individuals like objects that have the ability to confirm to their

expectations. From the consumer's perspective the similarities or congruities are regarded as

predictable features of performance. Nonetheless, when consumers are confronted with

extremely schema congruent objects, it is less likely they will be stimulated to trigger

extensive extension elaboration as in the case of objects that are perceived as moderately

incongruent. The latter are suggested having greater novelty and as such increasing arousal

(Meyers-Levy & Tybout, 1989). Subsequently, greater evaluation efforts to resolve the

moderate incongruity or dissimilarity with the parent product category are initiated. It is not

discussed if the evaluation route that guides the efforts to solve moderate incongruities

includes piecemeal processing. However, this would be a likely event since categorical

processing mainly occurs when there is a complete match or mismatch with the parent

category, while piecemeal processing takes place when specific attributes are evaluated in

more detailed manner. Although Meyers-Levy and Tybout's theory has been based on new

product introductions where the relevant schema influence is not extreme, it is a fact that

when an extension is perceived not to match the parent category completely a more explicit

elaboration occurs (Boush & Loken, 1991).

In summary, the theories on categorization are fundamental to the brand extension

notion. All in all, the greater feature overlap between products, the greater the likelihood that

such products will be perceived to belong to the same cognitive category. Furthermore, the

level of favorability of a new object is again dependent on similarity-based categorization and

the resulting evaluation process. Nonetheless many similarity attributes can act as a

dimension of fit and the impact of these similarity variables can significantly differ. At this

point the cognitive processes underlying the classification and evaluation of introducing a

new product under the same brand name have been discussed. Therefore it is time to review

the most important studies conducted in the brand extension domain related to the similarity

notion.

3.5.2 Brand Extension Similarity Studies

In early brand extension literature the effect of similarity has already been identified. Tauber

(1988), for example, investigated a few hundred extensions and concluded that in general

every brand extension leverages some perceived consumer benefit or association with the

parent brand to provide an edge to the new product. In terms of the associative network

A.T.H. van Aert 27


30/138


model, described in chapter two, many different brand elements can be linked to the parent

brand. These elements can consist of product-related and non-product related attributes. This

diverse collection of features again creates many available options, which consumers can

apply to associate an extension as close in fit to the parent brand during their categorization

process.

Aaker and Keller's (1990) study on brand extension evaluations can be considered as a

pioneering piece of research in the brand extension field. The main purpose of their study was

to gain useful insights into how consumers evaluate brand extensions and why some brand

extensions fail, while others succeed. They founded their argumentation on the psychological

reasoning that the attitude towards an extension is based on the cognitive categorization with

the parent brand in terms of product category attributes. A collection of consumer reactions

on hypothetical extensions of well known brand names (e.g. Heineken popcorns and

McDonalds theme park) examined if the perceptions of fit, between the original parent- and

extension product categories, led to more favorable extension evaluations. The various bases

of perceived fit included: complementarity, substitutability and transferability. The first two

dimensions take a demand side perspective and consider the economic notions of substitutes

and complements in product use. Complementarity indicates the extent to which consumers

view two product classes as jointly consumable to satisfy a particular need, whereas the

substitutability notion argues that two products are perceived to have a common application

and usage context. Thus if a brand extension is perceived as a substitute of its parent, then it

can replace the parent product to satisfy the same needs. The third fit measure, transferability,

focuses on how consumers view relationships in the transferability of know-how from the

parent category of the original product to the extensions category. This supply side view

reflects the perceived ability of any firm to make a new product in another product class.

Aaker and Keller (1990) found that the degree of perceived quality for the original brand did

not directly influence the evaluation of an extension. The direct relationship between the

parent brand and the extension was strong only when there was a basis of fit between the two

product classes. Complementarity and substitutability did not directly guarantee the

extendibility of a product. The complement and substitute fit measures, however, did convey

an interaction effect with the perceived quality of the original brand. Hence brands with a

high perceived quality can hope to see this perception transferred, if the extension seems to be

either complementary or substitutable (Kapferer, 1997). This can be regarded as the

moderating effect of similarity. In contrast to the latter two dimensions, the transferability

dimension had a direct similarity impact on extension evaluations. Consequently, if a

A.T.H. van Aert 28


31/138


consumer perceives that a firm possesses the right competences and capabilities to produce

the brand extension in the relevant product class, a more favorable extension evaluation is

more likely to emerge.

The main limitation of the Aaker and Keller study, however, is that their model

exclusively rests on measures of perceived product category similarity or fit. The broader

meaning a brand is able to convey is not taken into account as a relevant dimension of fit.

Park et al. (1991) demonstrated that the perception of similarities does not primarily rely on

product-related associations alone. Therefore they made a distinction between fit in product

features and brand concepts. They acknowledged the notion of similarity among products as

an important basis of fit determination. Additionally, they argued that specific attention has to

be directed to brand concepts, which are defined as brand-unique image associations that

originate from a particular set of product attributes and benefits, and a firms efforts to create

meanings from these elements. To examine the impact of brand concept consistency in

extension evaluations, Park and his colleagues (1991) selected two brand names with widely

divergent concepts, which were present in the same product category: a function oriented and

a prestige oriented brand concept. A functional oriented branding concept can be understood

through its branded associations, which are related to a products performance, whereas the

prestige branding concept is mainly understood through a consumers perceptions of symbolic

attributes such as their self concepts or images. Since product feature similarity and brand

concept consistency were considered as the two main concepts influencing perceptions of fit,

both constructs were manipulated by using the same products as extension candidates for the

functional oriented brand and the prestige oriented brand. Although the two different branding

concepts were associated with the same product category, the potential of favorable extension

evaluations was greater when the functional brand extended its offerings to products whose

dominant associations related to product performance, and when the prestige oriented brand

was extended to product categories whose dominant associations reflected a consumers self

image. Next to the finding that concept consistency had a strong effect on the extension

evaluations of both brands; the branding concept appeared to have a relatively greater impact

for the prestige brand than the functional branding concept. This particular result suggested a

greater extendibility potential in case of a prestige concept compared to a functional branding

concept. Therefore the abstract nature of symbolic oriented branding concepts (e.g. luxury,

status) are considered to have a greater potential to trigger more favorable extension

evaluations in product categories that are less related to the parent brand. As such, brands that

are dominated by symbolic associations are expected to accommodate a more diverse set of

A.T.H. van Aert 29


32/138


products in contrast to functional brands.

Another relevant brand extension study conducted by Broniarczyk and Alba (1994) took

a perspective beyond similarities in product features. Compared with the Park et al. (1991)

study, Broniarczyk and Alba (1994) concur with the brand concept as a relevant fit variable.

Furthermore they agree that the best case scenario for success involves an extension of a

strong brand to a similar product class. Nonetheless this ideal situation is not always available

and also limits the brand in its meaning. As a result Broniarczyk and Alba (1994) emphasize

a more narrow approach by focusing on brand-specific associations. These associations can

simply be identified as attributes or benefits, which differentiate a brand from competing

options and are considered to have a huge impact on the consumers attitude towards the

parent brand. The most interesting finding of this study indicated that the opportunities to

exploit a brands equity are not only restricted to similar extension categories. As brand-

specific associations moderated the role of product category similarity in brand extension

evaluations such that a brand extension was more preferred in a dissimilar category, which

valued its association than in a similar category that did not value its key association

(Broniarczyk & Alba, 1994).

Next to these key brand extension studies several other theorists have elaborated upon

the similarity-extension relationship. For instance, Boush and Loken (1991), who attempted to

isolate the process underlying the evaluation of an extension. These authors examined an

extensions similarity to the parent brand, as one of the variables influencing extension

evaluation. The previous section already touched upon the direct implications of similarity-

based categorization for the resulting extension evaluation processes. Boush and his colleague

(1991) examined which evaluative processes (categorization or piecemeal) are applied

depending on the typicality between a parent brand and an extension. The results showed that

moderately typical extensions were evaluated in a more detailed or piecemeal manner, then

extremely typical or atypical extensions. The very typical or atypical extensions were

evaluated in a more categorical manner. Additionally, Boush and Loken (1991) found

evidence that brand breadth interacted with brand extension typicality. When a brand

produced a variety of products the perception of a particular extension was evaluated as less

typical, then when the brand only offered one branded product. Hence a broad brand has the

advantage that proposed extensions can be more easily regarded as moderately typical than

atypical in contrast to narrow brands.

Dacin and Smith (1994) further elaborated on the effects of various products associated

with a brand and examined the influence of brand portfolio characteristics on a brand's

A.T.H. van Aert 30


33/138


strength. The most interesting finding in line with this thesis' subject relates to the effects of

portfolio quality variance on the favorability of consumer evaluations. The authors found

support for the prediction of a negative relationship between portfolio quality variance and

subjects confidence in and favorability of extension quality. The experimental and survey-

based methods revealed that consumers are more confident and express greater favorability in

the evaluation of an extension, when the perceived quality levels of the brand portfolio

members are more at the same level. Alternatively extension evaluations of brand portfolios

with greater variance in quality are evaluated less positive.

After this extensive discussion of the main thoughts and findings in the brand extension

arena several conclusions can be drawn. First of all it has become clear that similarity-based

categorization is inextricably bound up with extension evaluations. Although early theorists

(Tauber, 1988; Meyers-Levy & Tybout, 1989) already stressed the ability of perceived

similarities to leverage equity from the parent object to a brand extension, Aaker and Keller

(1990) were the first to define what kind of similarities are essentially relevant. Next to Aaker

and Kellers, complementarity, substitutability and transferability similarity dimensions, Park

et al. (1991) stressed the importance

Service Brand Extensions_Stijn Van Aert 2004

Documents

Transcript of Service Brand Extensions_Stijn Van Aert 2004