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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"
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Oliver Wendel Holmes
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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
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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.
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----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
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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
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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
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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
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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
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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
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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.
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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.
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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.
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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?
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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.
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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
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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.
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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)
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BRAND
KNOWLEDGE
BRAND IMAGEBRAND
AWARENESS
BRAND
RECOGNITION
BRAND
RECALL
ATTRIBUTES
BENEFITS
ATTITUDES
FAVORABILITYOF ASSOCIATIONS
STRENGTHOF ASSOCIATIONS
UNIQUENESSOF ASSOCIATIONS
TYPES OF
ASSOCIATIONS
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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
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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
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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.
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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
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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
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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.
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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).
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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
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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.
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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
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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
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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
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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
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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
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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
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The Role of Service Quality Types in Consumer Evaluations of Service Brand Extensions
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