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Vertical Brand Extensibility: A Conceptual Framework Nicolas Pontes, Monash University, firstname.lastname@example.org Colin Jevons, Monash University, email@example.com
Abstract Brand extension have been discussed to a great extent during the past two decades, however, most of the work has focused horizontal extensions and little attention has been payed to vertical brand extension. To fulfil this imbalance of existing knowledge, in this article, we propose a conceptual framework that integrates existing brand extension knowledge with insights from the pricing literature. The conceptual framework shows that core-brand evaluations are affected by the step size. Moderating factors that influence this relationship are also identified, namely fit perception and direction of the extension. The framework is subsequently used to develop concrete research propositions to guide further research in the area. Keywords: vertical line extensions, fit perception, step size, core brand evaluation, price-limit theory.
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Vertical Brand Extensibility: A Conceptual Framework Introduction It has been suggested that brand extensions spend less in advertising and promotion when compared to new brands. Introducing a new brand in the market can be risk due to high failure rates and high costs of new products introductions (Aaker, 1991, Pitta and Katsanis, 1995, Reddy, Holak and Bhat, 1994). Brand managers have frequently used brand extensions to target new markets and segments reducing marketing expenditures, while increasing retail shelf share (Kadiyali, Vilcassim and Chintagunta, 1998). This practice is so often used that most of new product introductions are made through extension of existing brands (Kirmani, Sood and Bridges, 1999, Musante, 2007, Pitta and Katsanis, 1995, Reddy, Holak and Bhat, 1994). As Aaker (1991) stated, there are two types of brand extension: line extension and category extension. Category extensions stretch the brand to a new category or product class (Reddy, Holak and Bhat, 1994). It’s when a new product under the same brand name is introduced into a new category, such as Sony DVD players and Sony digital cameras. Line extensions are the use of the core-brand name in the new offering in the same product class as the parent brand, and they can be classified in either horizontal or vertical. Horizontal line extension is the introduction of a new product in the same category, into the same price/quality point as the parent brand but for a different segment, such as Coke and Diet Coke (Pitta and Katsanis, 1995). This type of extension can be related to flavour, colour or smell variations (Draganska and Jain, 2005, Nijssen, 1999). Vertical line extension is the introduction of a new product under the same brand name at a different point of price and quality, such as Intel Pentium and Intel Celeron or Giorgio Armani and Armani Exchange (Kim and Lavack, 1996). Although, in practice, line extensions account for most of new product introductions, most research in the brand extension literature is found on category extensions (Aaker, 1991, Kirmani, Sood and Bridges, 1999). Only few (Kim and Lavack, 1996, Kim, Lavack and Smith, 2001, Kirmani, Sood and Bridges, 1999, Lei, de Ruyter and Wetzels, 2008, Randall, Ulrich and Reibstein, 1998) have made the effort to better understand this marketing phenomenon. Therefore, this project will focus on vertical line extensions aiming to contribute to fulfil this imbalance of existing knowledge. The objectives of this research are stated as follows: first, by creating a compiled literature review we present the main argument of previous literature regarding brand extension and price-limits theory. Secondly, the conceptual framework is presented by highlighting the main factors affecting the core-brand evaluations following an extension introduction. Following this, a set of research propositions is...
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