1AN INVESTIGATION OF HOW SIMILARITY AND PRICE INFLUENCE CONSUMERS’ RESPONSES TO BRAND EXTENSIONS
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J O U R N A L OF B U S I N E S S A N D P S Y C H O L O G Y Volume 6, No. 2, Winter 1991
AN I N V E S T I G A T I O N OF HOW SIMILARITY A N D PRICE I N F L U E N C E CONSUMERS' R E S P O N S E S TO B R A N D E X T E N S I O N S William B. Dodds Jean B. Romeo
Both authors contributed equally to this manuscript. Address correspondence to J e a n B. Romeo, Carroll School of Management, Boston College, C h e s t n u t Hill, MA 02167. 247 9 1991 Human SciencesPress, Inc.
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JOURNAL OF BUSINESS AND PSYCHOLOGY
with a new product are lowered because both consumer and retailer acceptance is greater for a new product with an existing brand name than for a new product with a new brand name. A second reason is that people m a y be more apt to buy a new product with an existing brand name because the known brand provides the assurance that the new product is of the same quality as other product(s) well beyond the brand's original product category (e.g., Swatch Telephones, Adidas Cologne). However not all brand extension strategies are successful. Consumers' perceptions of the Campbell's brand resulted in the belief that Campbell's Spaghetti Sauce would be orangy, runny, and not authentic Italian. The company therefore introduced the sauce under a new brand, Prego. Thus, there appear to be limits to extending a brand name. However, the successes and failures in the marketplace do not provide a generalizable set of conditions under which a brand name m a y be successfully transferred to other products. Recent brand extension research has focused on understanding when a brand name will transfer successfully to a new product category (e.g., Aaker & Keller, 1990; Boush & Loken 1991; Chakravarti, MacInnis, & Nakamoto, 1990). Brand extensions tend to be unsuccessful when attributes associated with the family brand do not transfer to the extension's product category. In addition, brand extensions m a y fail because they have been inappropriately priced. A key issue that arises in setting an extension's price is how consumers use the price information to evaluate the quality, monetary sacrifice, and value of the product, and how price information influences consumers' attitudes and buying intentions. The purpose of this study is to investigate how an extension's similarity (defined in terms of product category) to the family brand and its price affect attitudes and buying intentions toward the extension. Attention is focused on understanding how consumers evaluate extensions that are in a new product category for the brand. Brand extensions are becoming more important as managers attempt to increase a brand's equity by spreading it to more diverse product categories. In their model of consumer evaluations of brand extensions, Aaker and Keller (1990), investigated the extent to which attitude toward an extension was influenced by: 1) the perceived quality of the original brand, 2) the transfer of skills/assets from the original to the extension's product class, 3) the degree to which the two product classes are complements and substitutes, and 4) the difficulty of making the extension. This study also investigates consumers' evaluations of extensions. The focus here is whether or not the price of the extension affects perceptions of similarity. In addition, the influence of similarity and price on the desirability of the extension, perceptions of perceived value and monetary sacrifice, and buying intentions is investigated.
Carroll School of ManagementTRACT: The purpose of this study was to investigate how an extension's
similarity to a family brand's product category and its price affect attitudes and buying intentions toward an extension. Two extensions were developed that varied in terms of similarity to the family brand. The extensions were priced either above, the same as, or below a competing product. The results indicated that a brand extension may be perceived as more desirable and requiring less monetary sacrifice when the extension's product class is similar to the family brand than when the product classes are dissimilar. The price at which the extension is offered influenced perceptions of value and sacrifice, but had little affect on quality, regardless of whether the extension was perceived as similar or dissimilar to the family brand. Consumers are exposed to a m ul t i t ude of messages daily, m aki ng it more and more difficult for advertisers to gain their a t t e n t i o n - - w h i c h is most important for a new product. One option for m a r k e t i n g managers is to use an existing name, familiar to consumers, on a new product i n t r o d u c t i o n - - a brand extension strategy. The new product could be in the same product category, but of a different form (Tide Detergent--)Liquid Tide Detergent) or in a category t h a t is new to the existing brand (Haagen Dazs Ice Cream--*Haagen Dazs Cream Liqueur). The idea of using a brand's equity to extend the company's product line is not new, yet along with the proliferation of brand extensions in the 1980's, the practice has drawn increased attention. Brand equity reflects the notion t h a t brands have value and should be viewed as assets to the firm. One reason for the recent proliferation of brand extensions is t h a t extending a brand na m e to new product introductions promotes m a r k e t i n g efficiencies. Promotion expenses and risk associated
AN I N V E S T I G A T I O N OF HOW SIMILARITY A N D PRICE I N F L U E N C E CONSUMERS' R E S P O N S E S TO B R A N D E X T E N S I O N S William B. Dodds Jean B. Romeo
Both authors contributed equally to this manuscript. Address correspondence to J e a n B. Romeo, Carroll School of Management, Boston College, C h e s t n u t Hill, MA 02167. 247 9 1991 Human SciencesPress, Inc.
248
JOURNAL OF BUSINESS AND PSYCHOLOGY
with a new product are lowered because both consumer and retailer acceptance is greater for a new product with an existing brand name than for a new product with a new brand name. A second reason is that people m a y be more apt to buy a new product with an existing brand name because the known brand provides the assurance that the new product is of the same quality as other product(s) well beyond the brand's original product category (e.g., Swatch Telephones, Adidas Cologne). However not all brand extension strategies are successful. Consumers' perceptions of the Campbell's brand resulted in the belief that Campbell's Spaghetti Sauce would be orangy, runny, and not authentic Italian. The company therefore introduced the sauce under a new brand, Prego. Thus, there appear to be limits to extending a brand name. However, the successes and failures in the marketplace do not provide a generalizable set of conditions under which a brand name m a y be successfully transferred to other products. Recent brand extension research has focused on understanding when a brand name will transfer successfully to a new product category (e.g., Aaker & Keller, 1990; Boush & Loken 1991; Chakravarti, MacInnis, & Nakamoto, 1990). Brand extensions tend to be unsuccessful when attributes associated with the family brand do not transfer to the extension's product category. In addition, brand extensions m a y fail because they have been inappropriately priced. A key issue that arises in setting an extension's price is how consumers use the price information to evaluate the quality, monetary sacrifice, and value of the product, and how price information influences consumers' attitudes and buying intentions. The purpose of this study is to investigate how an extension's similarity (defined in terms of product category) to the family brand and its price affect attitudes and buying intentions toward the extension. Attention is focused on understanding how consumers evaluate extensions that are in a new product category for the brand. Brand extensions are becoming more important as managers attempt to increase a brand's equity by spreading it to more diverse product categories. In their model of consumer evaluations of brand extensions, Aaker and Keller (1990), investigated the extent to which attitude toward an extension was influenced by: 1) the perceived quality of the original brand, 2) the transfer of skills/assets from the original to the extension's product class, 3) the degree to which the two product classes are complements and substitutes, and 4) the difficulty of making the extension. This study also investigates consumers' evaluations of extensions. The focus here is whether or not the price of the extension affects perceptions of similarity. In addition, the influence of similarity and price on the desirability of the extension, perceptions of perceived value and monetary sacrifice, and buying intentions is investigated.
Carroll School of ManagementTRACT: The purpose of this study was to investigate how an extension's
similarity to a family brand's product category and its price affect attitudes and buying intentions toward an extension. Two extensions were developed that varied in terms of similarity to the family brand. The extensions were priced either above, the same as, or below a competing product. The results indicated that a brand extension may be perceived as more desirable and requiring less monetary sacrifice when the extension's product class is similar to the family brand than when the product classes are dissimilar. The price at which the extension is offered influenced perceptions of value and sacrifice, but had little affect on quality, regardless of whether the extension was perceived as similar or dissimilar to the family brand. Consumers are exposed to a m ul t i t ude of messages daily, m aki ng it more and more difficult for advertisers to gain their a t t e n t i o n - - w h i c h is most important for a new product. One option for m a r k e t i n g managers is to use an existing name, familiar to consumers, on a new product i n t r o d u c t i o n - - a brand extension strategy. The new product could be in the same product category, but of a different form (Tide Detergent--)Liquid Tide Detergent) or in a category t h a t is new to the existing brand (Haagen Dazs Ice Cream--*Haagen Dazs Cream Liqueur). The idea of using a brand's equity to extend the company's product line is not new, yet along with the proliferation of brand extensions in the 1980's, the practice has drawn increased attention. Brand equity reflects the notion t h a t brands have value and should be viewed as assets to the firm. One reason for the recent proliferation of brand extensions is t h a t extending a brand na m e to new product introductions promotes m a r k e t i n g efficiencies. Promotion expenses and risk associated
