Consumer evaluation of technology-based vertical brand extension

He, Hong-Wei and Li, Y. (2010) Consumer evaluation of technology-based vertical brand extension. European Journal of Marketing, 44 (9-10). pp. 1366-1383. ISSN 0309-0566

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Abstract

Little research on brand extension observes the role of technological levels between parent brand and brand extension on consumers' attitudes toward brand extension. The present study aims to explore how consumers evaluate technology-based brand extension and how technologic direction interacts with brand loyalty and fit in affecting brand extension evaluation. A field experiment (n=200) was conducted. Participants were assigned to two equal-number groups that differed in the technological direction of brand extension (i.e. upward extension versus downward extension). This field study finds that downward brand extension is generally evaluated more favourably due to its positive effect on perceived fit; technological direction moderates the effect of fit on brand extension – fit has stronger positive effect on downward brand extension than on upward brand extension; fit moderates the effect of brand loyalty on brand extension – when fit is high, brand loyalty's effect is positive, whereas when fit is low, brand loyalty can have negative effect on brand extension; and the moderating effect of fit on brand loyalty is further moderated by technological direction of brand extension – for upward brand extension, the moderating effect of fit on brand loyalty is as general, but for downward brand extension, fit enhances the effect of brand loyalty. The results lend significant new insights to brand extension research by showing that the effect of brand loyalty on brand extension is moderated not only by fit but also by technological direction, and that the moderating effect of fit on brand loyalty's effect on brand extension is further dependent on the technological direction. For the management of upward brand extension – where a lower-tech brand extends to a high-tech product, more care and caution should be taken, since brand loyalty could have a negative effect if the upward brand extension is not perceived to fit the parent brand image. Thus, it becomes extremely important to manage the fit between the lower-tech parent brand and the higher-tech extended product. This is one of few studies examining the effect of technology on brand extension. The major original finding of this study is that the effect of brand loyalty on brand extension is moderated by fit, whose moderating fit is further moderated by technologic direction of brand extension.