The effect of brand extensions on parent-brand relationship quality

A recognized brand name that provides a competitive advantage is considered one of a firm’s most valuable assets. Many firms have benefitted from their well-established brand name by adopting the strategy of brand extension (Aaker and Keller, 1990). Many academic studies have examined the methods used to introduce successful brand extensions, and analysed how consumers evaluate the brand extensions (Aaker and Keller, 1990; Barone, 2005; Bath, 1997; Bottomley and Holden, 2001; Edelman, 2003; Fedorikhin, Park and Thomson, 2008; Kwun, 2004; Lockhart and Ford, 2005). Some researchers have suggested that brand extension strategies may carry the risk of diluting important consumer trust in the parent brand (Martinez and Pina, 2003; C. W. Park, Milberg and Lawson, 1991). Furthermore, some studies have focused on the role of the parent brand in brand extensions (Apostolopoulou, 2002; Bath, 1997; Bhat and Reddy, 2001; Yeung and Wyer Jr, 2005). Brand extensions may have a positive or a negative influence on the parent brand, so it is important to understand the specific impact on dimensions such as brand image, brand awareness, and customer-brand relationships. This study will carry investigate the effects of brand extensions on the relationships customers have with the parent brand.

Diminishing effects of perceived fit on vertical extensions

A common finding in brand extension literature is that extension’s favorability is a function of the perceived fit between the parent brand and its extension (Aaker and Keller 1990; Park, Milberg, and Lawson 1991; Volckner and Sattler 2006) that is partially mediated by perceptions of risk (Milberg, Sinn, and Goodstein 2010; Smith and Andrews 1995). In other words, as fit between the parent brand and its extension increases, parent brand beliefs become more readily available, thus increasing consumer certainty and confidence about the new extension, which results in more positive evaluations. On the other hand, as perceived fit decreases, consumer certainty about the parent brand’s ability to introduce the extension is reduced, leading to more negative evaluations. Building on the notion that perceived fit of vertical line extensions is a function of the price/quality distance between parent brand and its extension (Lei, de Ruyter, and Wetzels 2008), traditional brand extension knowledge predicts a directionally consistent impact of perceived fit on evaluations of vertical extensions. Hence, vertical (upscale or downscale) extensions that are placed closer to the parent brand in the price/quality spectrum should lead to higher favorability ratings compared to more distant ones.

Enhancing perceived fit on competitive settings

A common finding in the brand ex tension literature is that perceived fit has a directionally consistent impact on the extension evaluation. However, most of the literature ignores a more common marketplace reality, namely, competition. Drawing on categorization theory and on the notion t hat consumers evaluate brand extensions by a category - based processing, this research argues that consumers not only transfer quality perceptions about parent brand products from one category to another but also its competitive context and links. Results s how that when perceived rivalry between two brands in the parent category is transferred to the extension category, perceived favourability increases, regardless of the perceived fit between the parent brand and the extension category.

Corporate branding in marketspace

Many existing companies have set up corporate websites in response to competitive pressures and/or the perceived advantages of having a presence in marketspace. However, the effect of this form of communication and/or way of doing business on the corporate brand has yet to be examined in detail. In this article we argue that the translation of corporate brand values from marketplace to marketspace is often problematic, leading to inconsistencies in the way that the brand values are interpreted. Some of issues discussed are: 1) the effect of changed organizational boundaries on the corporate brand, 2) the need to examine whether it is strategically feasible to translate the corporate brand values from marketplace to marketspace, 3) the inherent difficulty in communicating the emotional aspects of the corporate brand in marketspace, and 4) the need to manage the online brand, in terms of its consistency with the offline brand. The conclusion reached is that a necessary part of the process of embracing marketspace as part of a corporate brand strategy is a plan to manage the consistency and continuity of the corporate brand when applied to the Internet. In cases where this is not achievable, a separate corporate brand or a brand extension is a preferable alternative.

The exploration of consumer power in online brand communities : a comparison case study in Australia and China

Aided by the development of information technology, the balance of power in the market place is rapidly shifting from marketers towards consumers and nowhere is this more obvious than in the online environment (Denegri-Knott, Zwick, & Schroeder, 2006; Moynagh & Worsley, 2002; Newcomer, 2000; Samli, 2001). From the inception and continuous development of the Internet, consumers are becoming more empowered. They can choose what they want to click on the Internet, they can shop and transact payments, watch and download video, chat with others, be it friends or even total strangers. Especially in online communities, like-minded consumers share and exchange information, ideas and opinions. One form of online community is the online brand community, which gathers specific brand lovers. As with any social unit, people form different roles in the community and exert different effects on each other. Their interaction online can greatly influence the brand and marketers. A comprehensive understanding of the operation of this special group form is essential to advancing marketing thought and practice (Kozinets, 1999). While online communities have strongly shifted the balance of power from marketers to consumers, the current marketing literature is sparse on power theory (Merlo, Whitwell, & Lukas, 2004). Some studies have been conducted from an economic point of view (Smith, 1987), however their application to marketing has been limited. Denegri-Knott (2006) explored power based on the struggle between consumers and marketers online and identified consumer power formats such as control over the relationship, information, aggregation and participation. Her study has built a foundation for future power studies in the online environment. This research project bridges the limited marketing literature on power theory with the growing recognition of online communities among marketing academics and practitioners. Specifically, this study extends and redefines consumer power by exploring the concept of power in online brand communities, in order to better understand power structure and distribution in this context. This research investigates the applicability of the factors of consumer power identified by Denegri-Knott (2006) to the online brand community. In addition, by acknowledging the model proposed by McAlexander, Schouten, & Koenig (2002), which emphasized that community study should focus on the role of consumers and identifying multiple relationships among the community, this research further explores how member role changes will affect power relationships as well as consumer likings of the brand. As a further extension to the literature, this study also considers cultural differences and their effect on community member roles and power structure. Based on the study of Hofstede (1980), Australia and China were chosen as two distinct samples to represent differences in two cultural dimensions, namely individualism verses collectivism and high power distance verses low power distance. This contribution to the research also helps answer the research gap identified by Muñiz Jr & O'Guinn (2001), who pointed out the lack of cross cultural studies within the online brand community context. This research adopts a case study methodology to investigate the issues identified above. Case study is an appropriate research strategy to answer “how” and “why” questions of a contemporary phenomenon in real-life context (Yin, 2003). The online brand communities of “Haloforum.net” in Australia and “NGA.cn” in China were selected as two cases. In-depth interviews were used as the primary data collection method. As a result of the geographical dispersion and the preference of a certain number of participants, online synchronic interviews via MSN messenger were utilized along with the face-to-face interviews. As a supplementary approach, online observation was carried over two months, covering a two week period prior to the interviews and a six week period following the interviews. Triangulation techniques were used to strengthen the credibility and validity of the research findings (Yin, 2003). The findings of this research study suggest a new definition of power in an online brand community. This research also redefines the consumer power types and broadens the brand community model developed by McAlexander et al. (2002) in an online context by extending the various relationships between brand and members. This presents a more complete picture of how the perceived power relationships are structured in the online brand community. A new member role is discovered in the Australian online brand community in addition to the four member roles identified by Kozinets (1999), in contrast however, all four roles do not exist in the Chinese online brand community. The research proposes a model which links the defined power types and identified member roles. Furthermore, given the results of the cross-cultural comparison between Australia and China showed certain discrepancies, the research suggests that power studies in the online brand community should be country-specific. This research contributes to the body of knowledge on online consumer power, by applying it to the context of an online brand community, as well as considering factors such as cross cultural difference. Importantly, it provides insights for marketing practitioners on how to best leverage consumer power to serve brand objective in online brand communities. This, in turn, should lead to more cost effective and successful communication strategies. Finally, the study proposes future research directions. The research should be extended to communities of different sizes, to different extents of marketer control over the community, to the connection between online and offline activities within the brand community, and (given the cross-cultural findings) to different countries. In addition, a greater amount of research in this area is recommended to determine the generalizability of this study.