Brand Extension Essay

In this section we focus on the acceptance of brand extensions for FMCG, durable goods, and services. Specifically, we focus on perceived similarity, reputation, perceived risk and innovativeness as factors influencing the acceptability of brand extensions.

(1) Similarity

Referent product-extension product similarity (hereafter referred as similarity) is the degree to which consumers perceive the extensions as similar to other products affiliated with the brand (Smith and Park 1992). From table 1 it is evident that the most frequently considered antecedent of brand extensions is the level of perceived similarity between the original and extended brand. Several studies reported that the greater the similarity between the original and extended

As can be seen in the widely noted definition of brand equity, brand strength has been articulated implicitly in terms of consumers’ predispositions towards the brand (Keller 1993).

In the context of brand extension research, brand reputation has been defined in terms of consumer perceptions of quality associated with a brand (Aaker and Keller 1990; Barone, et al. 2000, p. 390). It has been reported that high perceived quality brands can be extended further and receive higher evaluations than low perceived quality brands (cf. Aaker and Keller

1990; Keller and Aaker 1992; Sunde and Brodie 1993; Dacin and Smith 1994; Bottomley and

Doyle 1996). Reputation of a brand in these studies is considered as the outcome of product quality, the firm’s marketing activities and acceptance in the market place, i.e. more akin to the views of Fombrun and van Riel (1997).

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Brands with higher perceived reputation should provide consumers with greater risk relief and so encourage more positive evaluations than brands of lower reputation. This notion should be true for FMCG, durable goods, and particularly for services. When a new brand is launched in the services sector, consumers have neither experience, nor

These observations suggest that the evaluations of brand extensions could be even higher for brands extending in services than for goods. Therefore, we postulate:

H2: The higher the perceived reputations of the parent brand, the more favourable should be evaluations of the brand extensions. This should be true for brands in FMCG, durable goods, and particularly in the services sectors

(3) Perceived risk

Perceived risk is a multi-dimensional construct (e.g., Gemünden 1985; Roselius 1971) which implies that consumers experience pre-purchase uncertainty regarding the type and degree of expected loss resulting from the purchase and use of a product (Bauer 1960; Cox 1967).

Perceived risk is usually conceptualised as a two-dimensional construct (e.g., Bauer 1960;

Derbaix 1983; Gronhaug and Stone 1995; Mitchell 1999) i.e.:

(a) uncertainty about the consequences of making a mistake;

(b) uncertainty about the outcome.

The literature shows that a recognised brand is often relied upon by consumers as a mean of coping with perceived risk (Cox 1967; Roselius 1971; Rao and Monroe 1989). A brand which is extended into a new product category offers a new alternative to