how do consumers evaluate brand extensions

8/6/2019 How Do Consumers Evaluate Brand Extensions

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Journal of Services Research, Volume 8, Number 1 (April-September 2008)

2008 by Institute for International Management and Technology. All Rights Reserved.

In todays intense competitive environment, companies launch new products tosatisfy constantly changing consumers preferences. The new products are proneto failures due to many factors. Companies take efforts to reduce new productfailure rates to maximize their returns for their stakeholders. A brand extension,leveraging existing brand names to new product categories is one such strategy toreduce the risk of new product failures. Despite two decades of research in branding,

many vagaries are yet to be explored and understood. This study primarily focuseson how consumers evaluate brand extensions for FMCG (Fast Moving ConsumerGoods) and service product categories in Indian market conditions. It exploreshow exactly the consumers evaluate different product categories based on factorslike, similarity fit, perceived quality, brand reputation and perceived risk. It bringsout the impact of brand reputation of the core brand and perceived service qualityon the brand extensions evaluations. It highlights the role of perceived risk involvedin the extended product category in brand extensions evaluations. Most importantly,this study establishes the relationships among similarity fit, brand reputation,perceived service quality and perceived risk in extended product categories throughappropriate multivariate analysis.

N. Thamaraiselvan J.Raja

HOW DO CONSUMERS EVALUATE BRAND EXTENSI-

ONS RESEARCH FINDINGS FROM INDIA

INTRODUCTION

The ever-changing market characteristics have huge impact on

the corporate decisions. The global environment also posesseveral complexities to the marketer in understanding the market.The companies constantly develop newer marketing strategies to stayahead in the market and reap more benefits for its stakeholders. Morenumber of companies are relying on launching new products in the marketto meet the changing consumer needs and preferences. This strategy isproven but not without risk. Some authors estimate that 30-35 % of allnew products fail (Montoyo et. al., 1994; Booz et.al., 1982). Othersestimate more negatively in that only two out of ten products launchedare successful in the market. Adding to the difficulty in accuratelypredicting the market dynamics, the promotion cost and shelf space costmakes the companys new product launches even more difficult (Aaker1996).

Companies are taking hard steps to reduce these failure rates.One way of dealing with the rate of failures of new products is usinga firms competence. Many business organizations are leveragingtheir brand names to reduce the risk of failure of new products. Abrand extension is the use of well-known brand names for new-


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44 How do Consumers Evaluate

product introductions (Aaker and Keller, 1990; Keller, 2003; Klinkand Smith 2001). For FMCG (Fast Moving Consumer Goods) as wellas services more than 80% of the new products introduced are brandextensions (Rangaswamy, et.al., 1993; Ernest and Young and Nielsen1999). Brand extension strategies are beneficial because they reducenew product introduction costs, and perceived risk in new product,hence increasing the chances of success (Aaker and Keller, 1990;Keller 1998). These benefits are largely due to the transfer of parentbrands awareness and associations to the new product (Keller 1998).Like any other strategy it has both positive side and negative side toit. Brand extension strategy needs a careful analysis of the marketbefore adopting it. If it turns out well in the new product category it

will enhance the brand name; otherwise it will dilute the core brandvalue. This is the reason why many researchers are keen oncontinuously exploring the different dimensions of brand extensions.

Managers assume they can exploit the equity of a well-knownbrand when entering new markets, capitalizing on recognition,goodwill, and any positive associations. Case studies abound ofsuccessful brand extensions. For example, Dettol, with its antisepticliquid origin, successfully extended into shaving creams, toilet soapsand floor cleaner. Tata successfully extended into telecom andinsurance sectors. However, caution needs to be exercised. Forexample when Ponds extended into toothpaste and was unsuccessfulas it moved too far from its core values. Given the importance ofbrand extensions, a better understanding of this topic is needed.Researchers have predominantly investigated brand extensions amongtangible goods. By contrast few have investigated the service sectors(Ruyter and Wetzels 2000; van Riel et. al., 2000). Notable brandextension activity has taken place in services. For example, ICICIentered into banking and insurance, Virgin moved into radio stations,airline, financial services, and bridal services. Likewise the DisneyCompany, which in the 1950s signified world-class animation, hasextended into services such as television, publishing, software,Internet portals, theme parks, hotels and cruises.

CONCEPTUAL BACKGROUND

Brand extension strategies are used largely by companies because

they believed that the brand extension strengthens the brandpositioning, improves the brand awareness and enhances the qualityassociations and increases the trial rate by reducing the perceivedrisk involved in the new product. In India it is reported that morethan 80% of new products additions are using brand extensions


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45 Thamaraiselvan, Raja

strategies. A brand extension into same product and new productcategory enhances and improves their market share and brand equityin the long run (Lane and Jacobson, 1995). New products are gettingrelatively easy acceptance among the target audience. A good brandassociation reduces the chances of failure of new product launch.

Though, brand extension strategies tasted success in the past, stillbrand extension success is uncertain. Research carried out by Ernestand Young and Nielsen (1999) in the field of FMCG brand extensionsin European countries, reveal that there is a failure rate of around80%. Moreover, unsuccessful brand extensions can harm the parentbrand, which can result in substantial losses of brand equity (Gurhan-Canli and Maheswaran, 1998; Swaminathan et. al., 2001).

The success or failure of brand extensions is vastly dependent onhow the customers evaluate the brand extensions (Klink and Smith,2001). Companies are taking hard steps to improve the success rateof brand extensions. Theoretical and managerial understanding ofhow a consumer evaluates the brand extensions is given substantialimportance. In order to improve the success rate of brand extensionsit is imperative to understand the parameters or factors affecting thebrand extensions evaluations. Moreover, companies need tounderstand the significance of these factors and their relativeimportance to develop a right brand extensions strategy.

REVIEW OF LITERATURE

Two of the seminal studies (Boush and Loken, 1987; Aaker and Keller,1990), have investigated several antecedents and consequences. Manystudies have been conducted to understand the different vagaries ofbrand extensions and the area is growing larger. More than 50 researchstudies since 1987 have empirically analyzed and tested the impactof certain success factors on the overall evaluation of brand extensions.Mostly, the consumer evaluation of brand extension studies focusedon parent brand quality and similarity fit in terms of usage, imageand features of the original brand product category to extendedproduct category and difficulty of extending the product category bythe parent company. These researches throw some excellent insightson the different factors affecting consumer evaluations of brandextensions.

If the company launches a high-quality product by exploitingexisting weak brand, the brand equity of existing weak brand increasesdue the positive evaluation of the high quality extended productcategory (Jun et. al., 1999; Keller and Aaker, 1992). Brand equitybuilt in a certain product catgory can also be exploited by licensing


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the well-known brand name to third parties for use in a related class.

The strategy is used to challenge major players in an industry (Branson1998). The chances are high for companies to exploit its high prestige

brands to stretch to more remote product categories than brands with

inferior reputations (Park et. al., 1991). A company can also exploitand overstretch its top quality brands. Cannibalization, a decrease in

sales in the original category, can result from competition from theextensions (Buday, 1991; Reddy et. al., 1994; Sullivan, 1990). Failure

of brand extensions may weaken brand equity, or positively associate

with the original brand (Boush and Loken 1991; Gurhan-Canli and

Maheswaran, 1998; John et. al., 1998). Sometimes the unsuccessful

brand extensions create undesirable associations, which put thecompany at a serious risk (Aaker and Keller, 1990: Lane and Jacobson

1995). The more products a company markets under one umbrellabrand, the higher the risk that if a disaster occurs to one of them, the

effect will spill over to the rest (Sullivan 1990). Opportunities to create

a new brand are also foregone (Aaker and Keller, 1990).The following strong research insights can be observed from the

brand extensions literature. Most brand extensions research is involvedwith fast moving consumer goods and durable goods except for one

study (Aaker and Keller, 1990) included McDonalds as a service brand

but they did not make any analytical distinctions between FMCG and

services. Only one study addressed the importance of brand extensions

in the services sector (Ruyter and Wetzels 2000). Only one studycompared brand extension judgements between FMCG and durable

goods (Broniarczyk and Alba, 1994). The majority of the previousstudies basically used consumer surveys to investigate consumer

evaluations of hypothetical brand extensions (i.e., extension notintroduced in the market). Respondents in prior surveys rated the

independent (success factors) and dependent variable (success of the

extensions) on simple rating scales (Aaker and Keller 1990; Barone et.al., 2000; Bottomley and Doyle, 1996; Bottomley and Holden, 2001;

Boush and Loken, 1991; Broniarczyk and Alba, 1994; Dacin and Smith,

1994; Keller and Aaker, 1992; Klink and Smith, 2001; Lane, 2000).

Most previous research used students as subjects (Aaker and Keller,

1990; Barone et. al., 2000; Bottomley and Doyle, 1996; Boush andLoken, 1991; Broniarczyk and Alba, 1994; Dacin and Smith, 1994;

Klink and Smith, 2001; Lane, 2000; Park et. al., 1991)Therefore, a research issue that has remained underexposed


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concerns the extension of services to unrelated markets by making use

of the corporate brand. Yet, this type of service extension is becoming

a prevalent phenomenon. For instance, deregulation and privatizationcaused many companies (TATA, Reliance, LIC, and SBI) to enter into

service markets, such as telecommunications, insurance sectors and

transport and spurred a number of corporate service brand extensions,particularly service providers active in a myriad of other markets.

Service providers attempt to acquire customer trust on the basis oftheir positive reputation in the market in which they have traditionally

been active. As services consist primarily of intangible properties,corporate service brands may be used to reduce perceived risk and to

influence frequently unobservable extension evaluation criteria, suchas credibility, quality and eventually customer patronage intentions.

This seems particularly important when services are extended to markets

in which the service provider has no proven expertise. Brands serve ascues for triggering image perceptions based on expressive values

associated with the company name.

RESEARCH APPROACH

With this background literature, this research paper intends to contribute

to better understanding of how consumers evaluate brand extension inthe Indian perspective. Further we try to find the different consumer

evaluation mechanisms in service extensions and FMCG brand

extensions. This would help to get more insights on the impact ofcultural background on consumer evaluation of brand extensions across

different product categories. This research encompasses the most

important factors such as similarity effect, quality of the parent brand

and brand reputation, quite often used in research studies of brandextensions evaluations. We have also incorporated an additional factor-

perceived risk and its impact on brand extension evaluations. Thisresearch paper has been organized in the following manner. It discusses

the hypotheses used in this research, then the research design used for

this study, the findings on the impact of independent variables like,similarity fit, service quality, brand reputation and perceived risk

involved in the extended product category on the overall brand

extensions, conclusions and managerial implications based on the studyand finally the limitations and future directions are given.

This research focuses more on the dominant factors involved in

the consumer evaluation of brand extensions. These factors are


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identified with the use of the research articles published in the peer-

reviewed journals of national and international repute. The journalsused for this purpose are International Journal of Marketing Research,

Journal of Marketing Research, Journal of Consumer Research,

Management Science, Journal of Marketing and Marketing Science.

The perusal of these studies revealed many factors involved in the

success of the brand extensions. For this research paper, the authorsstrongly felt that it is better to take the most significant factors involved

in consumer evaluation of brand extensions. In order to find thesesignificant factors, the authors made analysis on the previous brand

extensions studies and arrived at three important factors that are more

often used to find out the consumer evaluation of brand extensions.From the literature review the following stimuli are considered for this

study. The factors are quality of the parent brand, similarity fit betweenthe core (parent) brand with the extended product category, and

reputation of the parent brand. Apart from the above-mentioned three

factors the authors strongly felt that the main purpose of brand

extensions is to cope with the risk involved in the purchasing of a

product category. Moreover the well-known brand acts as a risk relieverand would increase the chance of product trial (Rao and Manroe, 1989).

As services predominantly posses experience and credence qualities,the perceived risk is relatively high. This can be reduced with the best

use of brand extensions. So it is significant to use the perceived risk

involved in the extended product category as another stimuli to findthe consumers evaluation of brand extensions. We assume that the

perceived risk involved in the new product category would have somesignificant impact on the brand extensions evaluations.

RESEARCH HYPOTHESES

The perceived quality of the parent brand: Brand extensions are affected

by the overall attitude towards the parent brand. The attitudes towardthe parent brand are based on durability, serviceability, incidence of

defects, features, performance, etc. Here the overall attitudes towards

the brand are perceived quality of the parent brand. Zeithamal (2003)concludes after reviewing research articles that the perceived quality is

at a higher level of abstraction than a specific attribute of a product.Since services are more of intangible characteristics the SERVQUAL

model is used to understand the perceived quality of the parent brand.

Zeithaml (2003) considered perceived quality is the component of


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customer satisfaction. The perceived quality or and the overall attitude

towards the original brand should have an impact if the brand has beenextended to the new product category. If the perceived quality were

high then the extension would get benefited; if perceived quality is

low then it would harm the brand extensions. Aaker and Keller (1990)in their study used perceived quality with this assumption but the results

do not support the claim. Subsequent study in the brand extensionsevaluation proved perceived quality as significant factor. We would

like to know the impact of perceived quality in the brand extension

evaluations in the services category. Therefore the hypothesis is:

H1: If the perceived quality of the parent brand is high, then the attitude

towards the brand extension is positive.

Brand reputation of the parent brand and service quality: The brandreputation has been defined in terms of consumer perception of quality

associated with the brand (Aaker and Keller, 1990). This fact has beenfurther strengthened from the study conducted by Barone et. al., 2000.

With this review of literature the authors try to find if there is any

relationship between the perceived service qualities of the parent brandwith the brand reputation. Hence the hypothesis is:

H2: If the quality of the parent brand is high then the reputation of the

parent brand is also high.

Similarity fit between the parent product and extended product category:Similarity fit is considered to know how far the customer perceives the

extended product category is similar to the parent product (Smith andPark, 1992). Further similarity fit may arise in substitute, complement and

transfer dimensions. From the literature review, it is clear that similarity fitis frequently considered for brand extension studies. This perceptual

similarity fit had been considered in several studies and the findings revealthat the higher the similarity between the parent product and the extended

product category, the greater is the possibility of success. (Boush, et al.,1987, Aaker and Keller, 1990, Boush and Loken, 1991, Dacin and Smith,

1994, Keller and Sood 2002). This kindles an interest in the researches

mind to explore and find the similarity fit effect in the brand extensions

evaluations in services category. Therefore the hypothesis is: H3: If the similarity fit between the extended product categories with

the original brand is high then there is high possibility that the

extension evaluations will be positive.


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Brand Reputation of the Original product: One of the underlyingprinciples for the brand extension concept is that stronger brands providea better opportunity for the company to utilize this advantage to enternew product category products. Brand equity is defined in terms ofbrand strength articulated implicitly in terms of consumerspredispositions towards the brand (Keller 1993). In brand extensionresearch, brand equity is predominantly considered as customer basedbrand equity rather than company based brand equity. The findings ofthe previous studies reveal that the greater the brand reputation thehigher is the possibility of favorable brand extensions compared to theless reputed brands (Aaker and Keller, 1990; Dacin and Smith, 1994,

Bottomley and Doyle, 1996). With this assumption the author hasdeveloped a hypothesis:

H4: If the brand reputation of the original brand is higher the greateris the chance of favourable attitude of customers towards theextended products.

Perceived risk involved in the extended product category: Brandextension has been widely used to reduce the consumers perceivedrisk. The brand extension literature reveals that the consumers are largelyrelying on reputation of the brand to cope with the uncertainly leveland risk involved in the products. A well-known brand acts as a riskreliever and increases the possibility of purchase trial of the new product.

When a brand gets familiar with the customers through repeatedexposure, risk perceived by the customers tends to reduce and afavorable attitude towards the product increase (Baker et al., 1986).

There is a distinction between the risk involved in the product categoryand product. The perceived risk involved in the product category meanscustomer perception of the risk involved in buying an average productin that product class. The perceived risk in the product however, is

about the risk involved in the buying of a specific product. Everypurchase has some risk. This is also applicable to service categories.The magnitude of the perceived risk differs from one product/servicecategory to another product/service category. With this underlying

assumption the authors have developed the following hypothesis:

H5: If the perceived risk involved in the product category is high, thenthe evaluation of brand extension is positive.

The table 1 would give us a snapshot of hypotheses used for thisresearch study.


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the business news daily, The Economic Times, Brand Equity columnon December 14, 2004. This is the largest of its kind in India, with asample of over 7000 distributed across socio-economic class, age,income and geography. Times Intelligence Group and AC-NielsonORG-MARG did the survey. They have been doing this kind of studyfor the past five years. They have ranked the most trusted brands basedon the brand attributes like: maintains high level of quality, pricepremium, definitely considered brand for purchase, popular brand formany years, has something that no other brands have, evokes a feelingof confidence and pride among users and a unique feeling associatedwith this. Two brands were chosen in the FMCG category and fourbrands were chosen in the services category, the reason being the

substantial literature has been involved with FMCG brands and verylittle in services brands. So, to get a better insight on consumerevaluation of services brands four service brands were chosen. Twobrands from FMCG were Colgate (ranked 1) and Dettol (ranked 4).Four brands from services were LIC-Life Insurance Corporation ofIndia (ranked 1), BSNL- Bharat Sanchar Nigam Limited (ranked 3),SBI- State Bank of India (ranked 2) and ICICI- Industrial Credit andInvestment Corporation of India (ranked 4). These brands aptly fit inIndian conditions based on the criteria suggested by Aaker and Keller(1990).

Each of the six parent brands was leveraged into 3 hypotheticalextensions, providing a total of 18 brand extensions (see Table 2).These extensions were developed after conducting a small survey withthe brand management students of National Institute of Technology,Tiruchirappalli, India. Data relating to possible future extensions andtheir relatedness to the existing core product/business were collected.These extensions had to be relevant and logically connected with theparent brand. In order to test the framed hypotheses, care had beentaken to make sure that the extensions provided sufficient heterogeneityto test the similarity fit and perceived risk dimensions.

A structured questionnaire was developed to collect data onconsumer evaluation of brand extension in services. Separatequestionnaires for all the 6 brands were developed. The standardizedconstructs were used to measure the service quality, brand reputation,similarity fit, perceived risk and overall brand extension are used while

developing questionnaire. Questions on the positive attitude, satisfactionon the brand and positive association with the brand were used to findout the brand reputation of the core brand. Questions on overlap betweenparent product category and extended product category, competenceof the original services and people, facilities (resources) and skills were


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used to find out the similarity dimension. Care was taken to includepossible dimensions involved in perceived risk.

Table 2: Showing Hypothetical Brand Extensions

S. No Original BrandHypothetical Brand Extensions in Terms of

Relatedness

1 Colgate 1. Mouth Wash (High)

2. Breath Mint (Medium)3. Dental Floss (Low)

2 Dettol 1. After Shave Lotion (High)2. Antiseptic Cream (Medium)3. Toilet Cleaner (Low)

3 Life Insurance Corporation of India (LIC) 1. Banking (High)

2. Real Estates (Medium)3. Hospital (Low)

4 Bharat Sanchar Niagm Limited (BSNL) 1. Networks (High)2. IT & Technical Education (Medium)3. Insurance (Low)

5 State Bank of India (SBI) 1. Financial Consultancy Services (High)2. Educational Institutions (Medium)

3. Hotels (Low)

6 Industrial Credit and Investment

Corporations of India (ICICI)

1. Real Estate (High)

2. Satellite Channels (Medium)3. Theme Parks (Low)

The subjects were the users of these brands in Tiruchirappalli, TamilNadu state, India. The valid samples for different brand users wereColgate 178; Dettol 178; LIC 124; BSNL 125; ICICI 121; SBI 119.The collected data were coded, edited and fed into the SPSS packagefor analysis purpose. Pearson Correlation coefficient and multipleregression methods were used to test the hypotheses made for thisstudy.

FINDINGS AND INTERPRETATIONS

From the Table 3 showing the correlation coefficients for FMCGhypothetical brand extensions of Colgate and Dettol, we can infer, thatthe H2

stating the relationship between brand reputation and quality of

the parent brand and H3 stating the relationship between similarity fitand overall brand extensions were supported from the results. So thisstudy reiterates that similarity fit in terms of substitute, complement andtransfer are positively evaluated. This study strengthens the previousstudies in establishing the associations between similarity fit and brandextensions evaluations. Further it supports the assumption that brandreputation of the parent brand is influenced by the quality it commandsin the customers perception. The hypotheses H2 and H3 supported allof Colgate and Dettol hypothetical brand extensions. Hypotheses H1(perceived quality) and H4 (brand reputation) were partially supportedin FMCG category. Hypothesis H5 (perceived risk) was supported intwo cases. The remaining four extensions did not have any impact bythe perceived risk. Since the perceived risk involved in FMCG is relativelylow, and tangible cues are available to reduce the customers perceived


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risk in FMCG purchase decisions are strong reasons for not consideringperceived risk as one of the factor in FMCG brand extensions evaluations.

Table 3: Results Showing the Correlations Coefficients for Colgateand Dettol

HYPOTHETICAL BRAND

EXTENSIONS OF COLGATE

HYPOTHETICAL BRAND EXTENSIONS

OF DETTOLHYPOTHESES

MOUTH

WASH

BREATH

MINT

DENTAL

FLOSS

AFTER

SHAVELOTION

ANTISEPTIC

CREAM

TOILET

CLEANER

1.SERVICE QUALITY ANDOVERALL BRAND EXTENSIONS

0.198** 0.137 0.027 0.274** 0.253** 0.078

2.SERVICE QUALITY ANDBRAND REPUTATION

0.683** 0.683** 0.683** 0.680** 0.680** 0.680**

3.SIMILARITY FIT AND

OVERALL BRAND EXTENSIONS

0.757** 0.570** 0.705** 0.509** 0.526** 0.313**

4.BRAND REPUTATION ANDOVERALL BRAND EXTENSIONS

0.175* 0.136 0.050 0.149* 0.176* -0.054

5.PERCEIVED RISK ANDOVERALL BRAND EXTENSIONS

0.079 0.256** 0.185** 0.036 -0.137 0.064

** Correlation is Significant at the level of 0.01 (2- tailed)

Table 4 provides the snapshots of results of five hypotheses in Colgate

and Dettol hypothetical brand extensions based on the correlation

coefficients. We can infer that similarity fit is having a strong impact

on the brand extensions evaluations. A strong positive relationship

exits between perceived quality of the parent brand with its reputations.

Perceived quality and brand reputation of the parent brand were having

partial impact on brand extensions evaluations. Perceived risk in the

extended product category was considered least important because only

in two out of six hypothetical extensions, perceived risk had an impact.

Table 4: Results of the Hypotheses Based on Correlations

CoefficientsHYPOTHETICAL BRAND EXTENSIONS

COLGATE DETTOL

HYPOTHESES

MOUTH

WASH

BREATH

MINT

DENTAL

FLOSS

AFTER

SHAVE

LOTION

ANTISEP

TIC

CREAM

TOILET

CLEANE

R

1.SERVICE QUALITY AND

OVERALL BRAND EXTENSIONS+VE -VE -VE +VE +VE -VE


+VE +VE +VE +VE +VE +VE




4.BRAND REPUTATION ANDOVERALL BRAND EXTENSIONS

-VE -VE -VE +VE +VE -VE

5.PERCEIVED RISK AND

OVERALL BRAND EXTENSIONS-VE +VE +VE -VE -VE -VE

+ve = supports hypothesis, -ve = does not support hypotheses


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Table 5 shows the correlation coefficient and we can infer that theservice quality, brand reputation and similarity fit are having positiverelationships in all the hypothetical extended category with the overall evaluation of brand extensions. This strengthens the notion thatsimilarity fit, brand reputation and perceived service quality stronglyassociated with the service brand extension evaluations. Thissupports the H1, H3 and H4. Service quality is having a positiverelationship with the brand reputation. This strengthens theassumption that service quality augments the brand reputation ofthe core products thus supporting H2. But H5, which aims at findingthe relationship between perceived risk and overall brand extensionslightly supports the possibility of extending the BSNL brand name

to IT and Computer Education but not on other hypotheticalextensions. This is one of the key results that needs to exploredfurther. It shows that perceived risk in the extended productcategories have very less association with service brand extensionsevaluations. This is contrary to the assumption that brand name isrisk reliever in services category. Probably, the customers look moreparamount important factors than brand name to evaluate the servicebrand extensions positively.

Table 5: Results Showing the Correlations Coefficients for LIC andBSNL

HYPOTHETICAL BRAND EXTENSIONS OFLIC

HYPOTHETICAL BRAND EXTENSIONS OF BSNL

HYPOTHESESBANK REAL

ESTATE

HOSPITALS

NETWORK

IT&COMPUTER

EDUCATION

INSURANCE

1.SERVICE QUALITYAND OVERALL BRAND

EXTENSIONS0.232 ** 0.246 ** 0.265 ** 0.259 ** 0.341 ** 0.343 **

2.SERVICE QUALITYAND

BRAND REPUTATION0.627** 0.627 ** 0.627 ** 0.566** 0.566 ** 0.566 **

3.SIMILARITY FITAND OVERALL BRAND

EXTENSIONS0.645 ** 0.701 ** 0.671 ** 0.619 ** 0.728 ** 0.723 **

4.BRAND

REPUTATION AND

OVERALL BRAND

EXTENSIONS0.071 0.191 ** 0.346 ** 0.251 ** 0.326 ** 0.374 **

5.PERCEIVED RISKAND OVERALL BRAND

EXTENSIONS-1.154 -0.148 0.035 0.094 0.281 ** 0.165

** Correlation is Significant at the level of 0.01 ( 2- tailed)

Table 6 shows the summary of results for the hypotheses. Perceivedservice quality shared a strong positive relationship with brand

reputation. This augments the theory that strong perceived qualitywill have high brand reputation. Similarity fit, perceived servicequality, brand reputation were influencing the positive brand extensionevaluations. Perceived risk had a lesser impact on the brand extensionsevaluations.


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Coefficients for BSNL and LIC


BSNL LIC

HYPOTHESESNETWORK

IT&

COMPUTER

EDUCATION

INSURANCE

BANK

REAL

ESTATE

HOSPITALS


OVERALL BRAND EXTENSIONS+VE +VE +VE +VE +VE +VE


BRAND REPUTATION+VE +VE +VE +VE +VE +VE


OVERALL BRAND EXTENSIONS+VE +VE +VE +VE +VE +VE

4.BRAND REPUTATION AND


+VE +VE +VE -VE +VE +VE


OVERALL BRAND EXTENSIONS-VE +VE -VE -VE -VE -VE

Table 7 showing the results of correlations coefficients for SBI andICICI, similarity fit and brand reputation of the core product had agreater association with brand extensions evaluations. Perceived servicequality and perceived risk involved in the extended categories wereless associated with brand extensions evaluations. Perceived servicequality and brand reputation were largely positively associated.

Table 7: Results Showing the Correlations Coefficients for SBI andICICI

HYPOTHETICAL BRAND

EXTENSIONS OFSBI


OFICICI

HYPOTHESES FINANCIAL

CONSULTAN

CYSERVICES

EDUCATIONAL

INSTITUTIONS

HOTEL REAL

ESTATE

SATELLITE

CHANNELS

THEME

PARKS


OVERALL BRAND EXTENSIONS 0.344** 0.156 0.086 0.138 -0.034 -0.053


BRAND REPUTATION 0.681** 0.681** 0.681** 0.635** 0.635** 0.635**


OVERALL BRAND EXTENSIONS0.614** 0.650** 0.560** 0.719** 0.601** 0.647**


OVERALL BRAND EXTENSIONS0.459** 0.303** 0.15 6** 0.188** 0.082 0.097


OVERALL BRAND EXTENSIONS0.100 0.066 0.201* -.225** 0.079 0.090

** Correlation is Significant at the level of 0.01 (2- tailed)

The Table 8 given below is showing the summary of results for thedeveloped hypotheses. Contrary to previous service extensions (LIC,BSNL) perceived service quality shared a less significant relationshipwith brand extension evaluations. This gives a room for doing a furtherresearch and come with a strong support that there is possibility ofcustomers viewing the evaluating the different types of servicecategories differently. The impact of similarity fit over the brandextension evaluations was strengthened again from SBI and ICICI brand


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extension evaluations. Perceived risk had a lesser impact on the brandextension evaluations. Brand reputation had a quite larger impact onservice brand extensions evaluations.


Coefficients for SBI and ICICIHYPOTHETICAL BRAND EXTENSIONS

SBI ICICI

HYPOTHESES

FINANCIAL

CONSULTANCY

SERVICES

EDUCATIONAL

INSTITUTIONS

HOTEL

REALESTATE

SATELLITE

CHANNELS

THEMEPARKS

1.SERVICE QUALITY ANDOVERALL BRAND EXTENSIONS

+VE -VE - VE -VE -VE -VE



3.SIMILARITY FIT AND OVERALL

BRAND EXTENSIONS+VE +VE +VE +VE +VE +VE


OVERALL BRAND EXTENSIONS+VE +VE +VE +VE -VE -VE


OVERALL BRAND EXTENSIONS-VE -VE +VE +VE -VE -VE

The following Tables 9, 10 and 11 give the information about theregression results of the hypothetical extensions for Colgate and Dettol,LIC & BSNL and SBI & ICICI. These tables contain the standardizedregression coefficients and, in parentheses, the corresponding t valuesare given. The adjusted R2 were on comparable and sometimes highwith some of the hypothetical brand extensions. A possible explanation

could be that brand extensions have become much more common overthe years. Successful extensions could thereby have set or reinforcedthe standards for evaluation in consumers, at the same time reinforcingthe subsequent explanatory power of the used constructs.

Hypothesis stating the impact of similarity fit over the brandextensions evaluations has been supported over the years. This isconfirmed in this study also. Although in varying degree it is beenconfirmed in all hypothetical extensions in this study. Except for Aakerand Kellers (1990) study all other studies supported the impact ofperceived service quality over the brand extensions evaluations. Butthis study supports the Aaker and Keller (1990) study. Service qualityis supported only in one hypothetical brand extensions (LIC intoHotels) among the other hypothetical extensions used in this study.

Similarly brand reputation had a significant effect only in one case(SBI into Financial consultancy services). Perceived Risk considerablyhad a effect on two cases in FMCG category (Colgate into breathmint & Dettol into antiseptic cream).


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Table 9: Results of the Regression for Colgate and Dettol

COLGATE DETTOL

Factors

MOUTH

WASH

a(b)

BREATH

MINT

a(b)

DENTAL

FLOSS

a(b)

AFTER

SHAVE

LOTION

a(b)

ANTISEPTIC

CREAM

a(b)

TOILET

CLEANER

a(b)

Constant (2.840) (1.193) (1.731) (3.255) (4.045) (4.060)

Service

Quality

0.059

(0.860)

0.114

(1.355)

0.062

(0.841)

0.150

(1.622)

0.033

(0.363)

0.090(0.

878)

BrandReputation

-0.011(-0.163)

0.023(0.271)

0.009(0.121)

-0.111(-1.244)

.002(0.027)

-0.188(-1.929)

SimilarityFit

0.745(14.621)

0.528(8.454)

0.696(12.799)

0.483(6.719)

0.517(7.543)

0.324(4.215)

Perceived

Risk

0.036

(0.720)

0.159

(2.522)

0.068

(1.244)

0.016

(0.244)

-0.142

(-2.150)

0.059

(0.827)

Adjusted R2 0.567 0.346 0.494 0.254 0.284 0.102

R2

0.576 0.361 0.505 0.271 0.301 0.122

F 58.874 24.391 44.188 16.101 18.582 6.026

a = Beta Co-efficient

(b) = t- Values

Adjusted R 2 = Significant at 0.000 level

Table 10: Regression Analysis Results for LIC & BSNL

LIC BSNL

FACTORS

BANKS

a(b)

REAL

ESTATE

a(b)

HOSPITALS

a(b)

NETWORKS

a(b)

IT&

COMPUTER

EDUCATION

a(b)

INSURANCE

a(b)

CONSTANT(1.583) (2.238) (-.833) (2.754) (0.016) (3.011)

SERVICEQUALITY

.095(1.337)

.088(1.306)

.171(2.560)

.071(.954)

0.038(.492)

.112(1.703)

SIMILARITY FIT.648

(9.320).692

(10.554).646

(9.683)0.619

(8.732)0.691

(10.88).723

(11.591)

BRAND

REPUTATION

.002

(.026)

.07

(1.111)

.105

(1.201)

0.089

(1.214)

.133

(2.102)

.119

(1.792)

PERCEIVED RISK-1.049

(-1.049)-.111

(-1.707).037

(.552)0.079

(1.118).082

(1.297).023

(.357)

ADJUSTED R2 0.415 0.475 0.469 0.378 0.539 0.518

R2 0.420 0. 479 0 .447 0. 383 0. 546 0 .522

F 86.669 111.39 54.806 76.242 73.50 134.346


(b) = t- Values

Adjusted R2 = Significant at 0.000 level


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Table 11: Regression Analysis Results for SBI & ICICI

SBI ICICI

Factors

FINANCIAL

CONSULTANCY

SERVICES

a(b)

EDUCATIONAL

INSTITUTIONS

a(b)

HOTEL

a(b)

REALESTATE

a(b)

SATELLITE

CHANNELS

a(b)

THEMEPARKS

a(b)

Constant(0.471) (0.779) (0.766) (0.934) (0.795) (0.751)

Service

Quality

0.045

(0.472)

-0.053(-0.555)

-0.002

(-0.015)

0.094

(1.142)

-0.116

(-1.22)

-0.086

(-0.917)

Brand

Reputation

0.255

(2.533)

0.194

(1.987)

0.051

(0.456)

0.080

(0.972)

0.150

(1.567)

0.126

(1.345)Similarity

Fit

0.500

(6.634)

0.609

(8.431)

0.537

(6.842)

0.696

(10.778)

0.604

(8.281)

0.635

(8.984)

Perceived

Risk

0.106

(1.492)

0.008

(0.117)

0.091

(1.097)

-0.075

(-1.147)

0.085

(1.144)

0.033

(0.454)

Adjusted R2

0.431 0.427 0.303 0.529 0.364 0.411

R20.450 0.447 0.326 0.545 0.386 0.430

F23.342 23.004 13.805 34.709 18.207 21.897


(b) = t- Values

Adjusted R2 = Significant at 0.000 level

CONCLUSION AND MANAGERIAL IMPLICATIONS

This research paper augments existing literature on consumer evaluation

of brand extension in the services category. This examines the importanceof similarity fit, impact of perceived service quality, significance of high

brand reputation, and influence of perceived risk involved in the FMCG

and services. Interestingly, this study strengthens the earlier literature in

terms of findings in the similarity dimensions. Similarity between the

core products/services and extended products/services are considered

most important whenever the consumer evaluates the brand extensions.

This study also supports the earlier studies in terms of the relationship

between the perceived service quality and brand reputation. The brand

reputation could be enhanced by way of enriching the quality of the

product or services offered by the company.

Again, the very purpose of using brand extension in creating

familiarity among customers is fulfilled. These issues are to a large extent

supported by brand extensions in the services category. If there is a

strong brand reputation, then there is every possibility that the brand

extension is successful in a competitive market. Contrary to the earlier


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findings, when perceived risk is high in the extended product category,

then the brand extension would help us in reducing the perceived risk

involved in the purchase of products/services. But this study does not

support the above assumption. This could be because of the inherent

difficulties involved in perceiving the risk involved in the services. Since

the services by nature have the credence quality it is very difficult for

consumers to perceive the risk involved in the services.

This research paper gives a comprehensive view of how the

consumers evaluate the service brand extensions. The underlying

parameters used in the consumer evaluation for service brand extensions

are similarity fit, service quality and brand reputation are clearly revealed

through the results of this study. Moreover this study strengthens the

assumption that the service quality would enhance the reputation of the

brand. The researchers may look into the features of perceived risk and

its impact on the brand extensions evaluations in the future studies. This

study also paves the way for researchers to do a similar kind of brand

extensions studies for the different categories of service sectors.Managerial implications could be that the brand extensions strategy

may be used most successfully in cases the similarity between the coreproduct and extended product category should be there in some way.The fit may be in terms of substitutability, complimenting the coreproduct, usage relevance, or based on the core facilities used fordeveloping and delivering the product/services. We see significantdifferences in explanatory power at the individual brand level. This mightbe due to the evaluation based on brand specific factors. Further customersdo not use the reputation of the producer as an important factor for serviceextension quality than to consumable extension quality.

LIMITATIONS AND SUGGESTIONS FOR FUTURE RESEARCH

Similarity fit variables were strongly correlated in this study like it did inother similar studies. This may be because the items developed by Aakerand Keller (1990) and used in similarity fit in other studies have alsobeen followed in this study. There is scope for developing a multi-itemscale for this purpose. Generalizability is another problem with thisresearch. Since the brand chosen does not represent whole range of

product/service categories, there is possibility to do this study across allproduct/service categories. Bottomley and Doyle (1996) mentioned intheir study that brand concept consistency is a very abstract factor,facilitating acceptance of extensions beyond the limitation of product-related similarity. Another option is to incorporate attributes of services


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and find the explanation, which has an effect on attitude towardsextensions. Some of the hypothetical extensions brought no effect ofperceived service quality over the brand extensions attitude. This couldhave been due to price clues used by the customers to assess the servicequality. This can be controlled in future studies.

Need of the hour especially in services is to bring out the generalcategorization or classification of services, which would allow a moredetailed model taking brand specific associations into consideration.Generalizability can be brought by doing a number of studies of a similarkind in different services/product categories.

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Mr. N. Thamaraiselvan is faculty, in the Department of ManagementStudies, National Institute of Technology, Tiruchirappalli.

Dr. J. Raja is Assistant Professor, and Head of the Department ofManagement Studies, National Institute of Technology, Tiruchirappalli.


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how do consumers evaluate brand extensions

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