What Makes Brand Extension Successful - European Journal of ...

PP. 76 – 97

European Journal of Business and Social Sciences, Vol. 1, No. 4, pp 76 - 97, July 2012. URL: http://www.ejbss.com/recent.aspx ISSN: 2235 -767X

What Makes Brand Extension Successful: An Empirical Study of Direct and Indirect Effect

Muhammad Anees-ur-Rehman. COMSATS Institute of Information Technology, Pakistan. Email: [email protected]

Abstract: urpose of this study is to explore how brand extension's success gets influenced by direct and interaction effects. From past literature, we understand key success factors, but we don't know the dynamics of their direct and interaction effects. This study has analyzed direct and interaction effects of brand equity and extension similarity; where study has 2X2 research model. Author has used factorial design (experimental research design), where real brands were selected and made hypothetical extensions to test direct and interaction effect. Quota sampling used to recruit respondents and self-administered approach used to collect questionnaire.

P

Direct effect of factors were found positive and therefore endorse the findings of previous studies. In interaction effect, both factors had minimized the negativity of other factor while in High/Low scenario. But it was found that effect shall be more positive and negative, depending on interaction scenario, due to interaction effect on extension than direct effect. Research model was tested in soft-drink brands in Glasgow UK. Therefore, results of interaction effect are at early days and subject to further testing in other product categories and brands. Though, this study had contributed to our knowledge about behavior of success factors on brand extension success. Keyword: Brand Management, Brand Equity, Extension Similarity, Interaction Effect, Direct Effect

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Introduction: Brand plays important role of creating identification and differentiation within products and services for consumers (Hem and Iversen 2003). It means that brand is reference that consumers recognize and consider in their purchase decisions; and it also provides a medium for marketers to target and engage with their customers. By increasing market competition and fragmentation of products, both academia and business professionals have drawn their attention to effectiveness of Brands. Many different aspects of branding have been investigated including brand extension. Brand extension provides opportunity for sustainable growth by catching consumer value through famous brand names. The main advantages of the brand extension are it reduces the cost of communication, reduce the cost of brand name introduction and enhance the probability of success; and disadvantages of the extensions are it may change the beliefs and the parent brand and reduce the sales of the other produce for same and brand which ultimately cause the loss of equity (Buil et al. 2009; Keller 2008 pp. 581-597). Hence it inevitable to understand the success factors involved in making extension successful. Realizing the importance of this strategy both academic and professional experts have diverted their interest to this phenomenon and studied brand extension in great detail. Wide range of factors, such as: parent brand quality, parent-brand experience, retailer’s acceptance, perceived extension similarity, consumer innovativeness, brand equity, perceived risk, and subjective knowledge had been evaluated for extension success (Völckner and Sattler 2006; Hem et al. 2003; Hem and Iversen 2009). For this study, brand equity and extension similarity, were selected to understand their interaction and direct effect. These factors were selected because (1) both factors are generically different and they do not impact on each other (2) past researches had not studied interaction effect in-depth.

Research conceptual model:

Low Equity and

High Equity and

Low Equity and

High Equity and

Extension

High

Low

Low

High Brand Equity


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Since this study has to investigate direct and interaction effects, therefore each factor has divided into high and low levels. Therefore, then it makes 2 X 2 design which has 4 groups/treatments. These groups are following: 1. High Equity and High Similarity 2. High Equity and Low Similarity 3. Low Equity and High Similarity 4. Low Equity and Low Similarity Literature Review: Extension Similarity: According to Park et al. (1991), similarity is a function of both or either of “brand concept consistency” and “brand breadth”; where concept consistency is continuation of general brand image and brand breath refers to closeness of extended product category with existing product range. According to Huifang Mao and Krishnan (2006) those extensions do receive m o r e favorable response from the consumers when product category (brand breadth) similarity is high; however both generalized image and product category similarity do lead to successful brand extension (Huifang Mao and Krishnan, 2006; Loken and Ward, 1990). Herr et al. (1996); Bottomley and Doyle (1996); McCarthy et al. (2001) and Aaker and Keller (1990) findings confirmed that consumers shows positive response in evaluation of extension if the extension is being made into similar category as the parent brand in. The mechanism of perceived similarity is that it influence consumers to shift their beliefs and experiences from original/parent brand to new extension, so eventually consider the new product credible (Boush 1997; Buil et al. 2009; Batra et al. 2010). If the perceived similarity is low then consequently findings suggest that negative feedback is received towards brand extension evaluations, because consumers perceive that the extended product belongs to other category which parent brand does not have (Milberg et al. 1997). Judgment of perceived similarity is complex because it varies across consumers. Consumers can use different dimensions of similarity for judgment. These dimensions are, but not limited to, technology or competence/skill, usage situation, quality, information, attributes and functions which support similarity (Hem and Iversen, 2009; Martin and Stewart, 2001). These different dimensions and how it facilitates similarity have discussed below. Information: In developing the perceived similarity between the parent brand and extension, consumer required information (Bijmolt et al. 1998). Effect of similarity may in c r e a s e if the attributed information is added in stimuli through better communication, and with the frequent consumer exposure with extension (Klink and Smith 2001). Also when there is low similarity, then elaborative communication strategy which focuses to address the concerns of consumers improves the favorability of the extension evaluation (Bridges et al. 2000). EUROPEAN JOURNAL OF BUSINESS AND SOCIAL SCIENCES

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Skills: Both Aaker and Keller (1990) and Sunde and Brodie (1993) findings suggested that extension shall be positively evaluated if the consumers believes that parent brand has the skill required to make new product in new category. So it means that even if the product category is new for original brand, extension may be favorably evaluated if the consumers have confidence that original brand has skills to do so. It means that consumer have positive towards if they perceive high similarity in technology/skills. Similarly, Youl Jun et al. (1999) suggested that consumer’s attitude towards brand extension was found positive when technology same or similar. Endorsing above arguments, Hem and Iversen (2009) suggested that it is essential to have “high” perceived similarity in at least those dimension(s) or product features which are most relevant or desired. T hat is, new extension should have high similarity in those dimensions which are more critical for consumer’s perspective. This findings are also supported by Park et al. (1991) and Bottomley and Doyle (1996), Therefore this study has took precaution while selecting hypothetical extension. Category domination: Parent brand’s current product range defines its category domination. Most favorable situation is where when extension is made in the similar product category as parent brand for categorydominated brands. On the other hand, brands which have abstract associations (not categorydominated brand) enjoy more liberty to extend into different categories as compared to those brands which have concrete association with a product category (Batra et al., 2010; Dawar, 1996; Hem and Iversen, 2009; Boush and Loken, 1991). These implications shall be true if quality has been maintained for new extension (Dacin and Smith 1994). Facts which suggest otherwise: From above discussion, we understand that perceived similarity is suggested to be significant factor for a brand extension to be evaluated favorably. But on the other hand we also have evidence through some real time example that brand extensions are failed even with high perceived similarity. Crest toothpaste extension’s failure can be quoted as example. From 1960s Crest has introduced many variants of toothpaste. Each variant had focused on only one unique feature of toothpaste, like mint-gel and fluoride etc. In these extensions, similarity was high between the original brand and extension. Yet crest was failed to launch successful brand extension for fluoride toothpaste (Haig, 2005, p. 71-76). Another example can be given is of Pond’s toothpaste. We know that Pond’s is the famous brand for personal care and it has introduced many successful brand extensions, soap for instance. But toothpaste introduce by the Pond’s was failed extension (Haig 2005, p. 98). Considering these examples of failure, and findings of Völckner and Sattler (2007), Smith and Andrews (1995) and Meyvis and Janiszewski (2004), it may suggested that perceived similarity is not enough for extension’s success or its effect is not positive. Bottomley and Doyle (1996), which said that those extension which have moderate product perceived similarity (neither highly similar nor dissimilar) is to be the most favorable scenario were the consumer evaluate it positively. Further, according to Smith and Andrews (1995), the direct effect of perceived similarity is mediated by the customer certainty.


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Relation of Similarity with brand equity (interaction effect): According to Völckner and Sattler (2007) brand equity is also an important factor for brand extension success, however, influence of parent brand equity on the brand extension success is moderated by perceived fit and marketing power of company. Similarly Meyvis and Janiszewski (2004) suggested that for successful brand extension, “value(s)” which are associated with the original brand must transfer to new extended product and accessibility of these values are vital in making successful brand extension through high similarity. On the other hand we had view which suggest otherwise. Consumer who are in weak relationship (low brand equity) with a brand will evaluate the brand extension favorably if the perceived similarity is high than low (Boush and Loken 1991; Park et al. (2002). Brand Equity: Brands represent consumer’s feelings, their lifestyle, liking, disliking and much more. Brands vary in amount of power and value they have in market. A strong brand has high “brand equity”. High equity of brand is constituted by brand association, brand quality, brand loyally and brand awareness (Pappu et al. 2006). So brand equity provides a company/brand with many competitive advantages like customer loyalty, successful extension, etc. (Armstrong and Kotler 2004, pp 265-266). A h i gh eq u i t y b r an d en jo ys wide recognition and reputation. There are different implications and aspects of brand equity on consumer evaluation of brand extension and purchase intention. One of the implication is that high equity brand has a positive influence on consumer purchase intention for new extension because consumers have more trust on the brands with high equity than a low equity brands. Another implication is that high brand equity help to decrease risk which consumers perceive while evaluating new brand extension. And even high equity can turn asymmetry or low similarity extension into symmetrical and high similarity extensions. Detailed discussion follows: Consumers perceive risk when trying new product in the market. Therefore this perceived risk may keep away consumer from trying new extension, resulting in failure of the extension. One of the brand equity implications is that it helps to reduce the risk which is perceived by the consumer towards new brand extension. It suggests that similarity is not enough where the consumer perceive high risk; therefore it is argued that reputation of parent brand is crucial to reduce the risk level in consumers (Hem et al. 2003; Völckner and Sattler 2007) Strong brand can provide better and safe option for consumer to try new product (Reddy et al. 1994). It is because that the consumers are more likely to trust on famous brand. Hence it is l ikely that a brand extension will be successful if extension is launched by the reputed brand even if the similarity is low. The brand names hold very deep impact on the consumer purchase decision (Yoo et al. 2000). According to Buil et al. (2009, p 1301) “a high equity brand enjoys positive associations, high perceived quality, more recognition and more loyal consumers”. And consumers which are loyal to brand, evaluate extension positively (Hem and Iversen, 2003). Hence high brand equity has positive effect towards brand evaluation. This implication is also supported by the findings of (Cobb-Walgren et al. 1995), said that higher brand equity improves the purchase intention.


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Reddy et al. (1994) suggested that parent brand equity is the most significant contributor in making extension successful. Rangaswamy et al. (1993) also emphasized on the importance of the value associated with the consumers to increase the elasticity of brand, and to increase the value for the consumers brand should look into brand equity, particularly for category dominated brand. Consumer association with the specific brand is the most key determinant of consumer purchase intention for new product where similarity has no what so ever impact on consumer purchase intention (Park and Kim, 2001). Consumer evaluate extension favorably if consumer perceive brand with high quality; however this notion is only true if consumer also believe that brand has skill and manufacturing capability between the two product categories (Aaker and Keller 1990) and also brand name positively effect on consumer evaluation where the consumer involvement is low (Maheswaran et al., 1992). Brand marketers should build overall brand equity and should not focus on the product attributes. Therefore it could be suggested that strong brand, even it is of narrow category dominated brand, can launch successful extension by virtually extending into any product category and no maters how far it is from its original product category. Findings which suggest otherwise: According Volckner and Sattler (2006, p. 30) brand equity is not everything to make successful extension; they said that “extension products do not guarantee success on the basis of the brand name alone”. They further recommended that parent-brand characteristics/factors like consumers’ parent-brand experience and conviction are responsible for extension success. Since brand strength is not sole reason for success and it needs support from other factors, so it required knowing that how positive effect brand equity has on the consumer evaluation over extension? Relation of brand equity with extension similarity: According to Boush (1997), high equity brand can change the asymmetrical similarity into symmetrical similarity and suggested to result in successful brand extension even with low similarity. Perceived similarity also depends in symmetry of the product category of extension and natural product category structure (Boush 1997). Symmetry will be straight if the extension’s product category fall in accordance with the natural product category. For example magazines belong to product category of books. However, a single product may belong to more than one natural product categories as well. For examples, coffee is part of the drink and food as well. So if a brand makes extension in reverse order i.e. if magazine publisher introduce their books collection then it will be asymmetry similarity (low similarity) and extension is more likely to fail (Boush 1997). In other words, context of similarity depends on the brand product category structure. For example: Samsung is multinational Corporation composed of numerous international businesses. Under the brand name of Samsung, they have long list of products/services. Majorly their products belong to consumer electronics, heavy industry, life insurance, chemical industries, financial services etc. So there is very less similarity between their product ranges. So it may be said on the basis of this above review that then Samsung may has used its brand equity to enter into different world markets and in variety of product ranges.


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Research Questions: Literature review advocates that both factor’s effect is positive on consumer evaluation when they were high level and negative when they were at low level. However there are some Ifs and Buts conditioned with their effect. Some counter suggestions were also found. Like Broniarczyk and Alba (1994, p 226) said, “the impact of brand-specific associations was found to be so influential that it dominated brand affect and product category similarity”. Following are research questions based on the aim and objectives of this study: 1. Does interaction effect of high/high scenario have more positive effect than low/low scenario? 2. Does brand equity and extension similarity together generate more positive effect than separately? 3. Does high brand equity support the negativity of low similarity to same extent as high extension similarity support for low brand equity? 4. Which interaction has highest and lowest positive effect on each dependent variable? 5. Does high level of extension similarity have more positive direct effect than low level of extension similarity? 6. Does high level of brand equity have more positive direct effect than low level of extension similarity? 7. Does brand equity and extension similarity have similar and equal direct effect? Research Methodology: Based on research objectives and research model of this study factorial design, an experimental research technique, was used because this study has two independent variables and their direct and interaction effect is required to measure on three dependent variables; as used and suggested by Buil et al. (2009) and Malhotra and Birks (2007 p. 267). Research model was tested on the carbonated drink brands. Because consumers have high familiarity with brands in this industry; a similar criterion was also used by (Rangaswamy et al. 1993). Since the research model require one high and one low equity brand, therefore deliberately those brands were selected which have difference in brand equity level, similar criteria used by Yoo et al. (2000) as well. Therefore Sprite, Irn-Bru, Tango and Orangina are carbonated brands which selected for this research study. Similarly, study requires extensions with high and low similarity. Hypothetical extensions were made of above brands, on similar concept of Hem et al. (2003). Hypothetical extensions were hot Beverages, alcohol Beverages, fast food restaurant and fashion clothing. Since selected brands and hypothesized extension were drawn as per perception of researcher, which may be biased. Therefore these four brands and four extensions were put into pilot survey to select 2 brands (high/low) and 2 extensions (high/low), and drop others, which ultimate be used in the main survey, as did by Hem et al ( 2003). Based on the pilot survey results, alcohol beverages was selected as extension with high degree of similarity and fashion clothing as low degree of similarity. And Irn-Bru was selected with highest brand equity and Tango was selected as lowest equity brand. These results were taken into main survey.


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Main Survey Effects of these factors were measured across dependent variables in main survey. Details are discussed below. Dependent Variables: This study has selected 3 dependent variables; these are overall extension evaluation, purchase intention and favorability. Overall extension evaluation was used by (Hem et al. 2003), purchase intention was used in (Park et al. 2002) and favourability was used in (Buil et al. 2009). 6 point semantic scale used for overall extension evaluation, this scale is same as used by (Hem et al. 2003). 7 point Likert scale used for purchase intention and scale items were taken from (Bruner et al. 2005, p. 438). And 5 point Likert scale used for favorability and scale was taken from (Bruner et al. 2005, p.134). Overall extension evaluation aims to measure the generalized response of respondents towards target extension. It measures overall impression of respondent towards the target extension while comparing all other relevant products/brands that popup in their minds. Response was measured on semantic scale as totally disagree/strongly agree; Dislike/Like; and One of the best/one of the worst. Scale items were: 1. Overall, I am very positive towards extension XYZ 2. What attitude you have towards extension 3. Overall evaluation of the potential extension relative to existing brands in the extension category: Purchase Intention measures purchase willingness towards the target extension. Scale item used in this variable asks consumer for their likelihood of purchase of target extension if they find it in stores etc. there were 4 scale items and 7 point scale as strongly disagree/strongly agree. Items were 1. Would you like to try extension XYZ? 2. Would you buy extension XYZ if you happened to see it in store? 3. Would you actively seek out extension XYZ (in a store to purchase it)? 4. I would patronize it. Favorability measure respondent’s willingness to give preference towards target extension when they are exposed to scenario where they have two or more options (one option is the target extension and other option is some other brand/product which has the same features as target extension has) to select from at same time. 5 point scale is used with responses as strongly disagree/strongly agree. This scale had four items, which are:


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1. It makes sense to buy extension XYZ from brand ABC instead of any other brand, even if they are same. 2. Even if another brand has the same features as extension XYZ from band ABC, I would prefer to buy extension XYZ. 3. If there is another same product is as good as extension XYZ from brand ABC, I would prefer to buy extension XYZ. 4. If another same product is not different from brand ABC in anyway, it seems smarter to purchase extension XYZ from brand ABC. Independent variables: This study has two independent variables i.e. brand equity and extension similarity. Each variable has high and low levels. Pilot test was used to select brands for high and low brand equity level and product categories for high and low level of extension similarity. Please refer to pilot study and research context for more detail. Questionnaire Development: In total, four different questionnaires were designed which represent to each group/manipulation. But all four questionnaires have used same scale items to measure attitude on dependent variables. The only differences were the manipulation of brand equity level and similarity level as per varying scenario. Questionnaire begins with the introduction about the survey, followed by the co-variable to control the behavior of respondent towards the product category of extension. Like, one of the extensions was of alcoholic beverage and respondent usage behavior might be totally opposite. Therefore it was necessary to control the behavior of respondents towards usage of alcohol; and same is done for extension of fashion clothing i.e. second extension. 7 point Likert scale used for alcoholic beverage, taken from (Conner et al. 1999). For extension of fashion clothing, 6 point Likert scale used to control the respondents behavior towards this extension, taken from Bearden and Netemeyer (1999), p. 177. After co-variable, scenario was explained followed by scale representing all three dependent variables. In the scenario description it was informed to respondents that brand X is extending its product range by launching a new product Y. Respondents were recruited from quota sampling; where equal representation was given to male and female, and age range was between 18 to 30 years. Other demographic factors were kept open to encourage the diversity in terms of income, occupation, ethnicity etc. Before handing over the questionnaire, it was ensured that respondents are aware of brand and proposed extension. Research was conducted at Glasgow City. Research conducting method was self-administered (Wilson 2006, p.143). Questionnaire was handed over to the respondents, who are voluntarily willing to participate in this survey, and questionnaires were collected back after 5-10 min. 36 questionnaires were filled out for each group/scenario; of which 30 questionnaires per group were selected. Since this study has four groups therefore in total 120 responses were taken into for analysis. Responses of 120 respondents were coded into Snap and then exporter it to SPSS for statistical analysis.


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Data Analysis: Before analysis, reliability of the scales (both co-variables and dependent variables) were determined. Reliability of the scale is determined by Cronbach’s Alpha. All dependent variable and co-variable scale value were more than 0.7. To analyze the data, MANOVA and independent ttest were used. MANOVA is the best suitable because this study has experimental design and MANOVA is developed to measure effect of more than one independent variables on many dependent variables at the same time. Buil et al. (2009) used series of ANOVA for their analysis; since it has very similarly research design so it also supports the decision of using the MANOVA for this study. Analysis and Results: The results of this research study are divided into two sections, interaction effect and direct effect. Results are discussed in logical order, that is, interaction effect has been discussed before the direct effect because the analysis of the main effects depends on the result of interaction effect. MANOVA Assumption: Levene’s test shows non-significant values for all three dependent variables, i.e. values were above 0.05 (please refer to table 1). Therefore the assumption of homogeneity or equality of variance is met and proceeded for MANOVA analysis. Meeting this assumption allow for direct interpretation of the results without having to consider group sizes, level of covariates in the group and so forth (Hair et al. 2009, p 491). Also the alpha value (determining significant level) is set to be 0.05 for analysis further analysis.

Table 1: Levene's Test of Equality of Error Variances F

df1

df2

Sig.

Overall Extension

0.938

3

116

0.425

Evaluation Purchase Intention

1.199

3

116

0.313

Favourability

1.667

3

116

0.178

Interaction Effect For statistical analysis, “multivariate test” and “test between-subjects” (univariate test) results were analyzed; results are in table 2 and table 3. Both of these test results suggest the nonsignificant interaction effect of brand equity and extension similarity. This means that the effect of brand equity is same at each level of the extension similarity. Therefore the direct effect can be interpreted directly (Hair et al. 2009, p 469; Pallant 2007, p 262).


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Table 2: Multivariate Tests (Interaction Effect) Effect

Sig.

Partial Eta Squared

Pillai's Trace

0.108

.052

Wilks' Lambda

0.108

.052

Hotelling's Trace

0.108

.052

Roy's Largest Root

0.108

.052

Brand Equity and Extension Similarity

Table 3: Tests of Between-Subjects Effects (Interaction Effect) Independent Variables

Partial Eta Dependent Variable

Sig.

Squared

Overall extension Brand

Equity

and Extension

0.400

0.006

Purchase intention

0.854

0.000

Favourability

0.109

0.022

evaluation

Similarity

For easy explanation of the results, each treatment/group is assigned an alphabet which is used to represent treatment (group) in following discussion. These alphabets are written against each treatment in the following table.

Table 4: Groups Representation Group

Group description

Reference A

Low Equity and Low Similarity

B

High Equity and Low Similarity

C

Low Equity and High Similarity

D

High Equity and High Similarity


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Research Question: Does interaction effect of high/high scenario has more positive effect than low/low scenario? It is to be tested that if extension with high similarity and high brand equity receive more positive extension evaluation than extension with low similarity and low brand equity brand? In just one glance at Table 5, it is very clear that mean value of group D is higher than group A across all three dependent variables. Therefore high/high scenario has more positive effect than low/low scenario. Table 5: Descriptive Statistics

Overall Extension Evaluation

Brand Equity High

Low

Total

Purchase Intention High

Low

Total

Favourability

High

Low

Total

Extension Similarity High

Mean

Low

2.9556

3.0000

Total

2.9778

High

2.9667

Low

2.5667

Total

2.7667

High

2.9833

Low

2.7611

Total

2.8722

High

3.4750

Low

3.3417

Total

3.4083

High

3.1583

Low

3.1250

Total

3.1417

High

3.3167

Std. Deviati 1.0540 9 1.3005

N 30 30

5 1.1738 9 1.1981

60

8 1.0326 1 1.1271

30

3 1.1189 6 1.1806

60

5 1.1508 0 1.6299

120

3 1.4978 2 1.5534

30

0 1.5375 8 1.2573

30

1 1.3926 0 1.5790

60 60 120

30 60 60 30 60 30 60

Low

3.2333

Total

3.2750

4 1.3753 8 1.4750

High

2.8083

7.76475

30

Low

2.0500

.91066

30

Total

2.4292

.91722

60

High

2.4667

.66220

30

Low

2.1750

.80983

30

Total

2.3208

.74801

60

High

2.6375

.72985

60

Low

2.1125

.85671

60

Total

2.3750

.83515

120


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Research Question: Does high brand equity support the negativity of low similarity to same extent as high extension similarity support for low brand equity? This is very interesting analysis because it enables us to see that if high level of one factor (independent variable) can minimize or eliminate the negativity of low level of other factor. Please refer to table 5 for mean score. To answer this question results of group B is compared with C. Results revealed that only for overall brand extension evaluation (first dependent variable) both groups have the same mean score. This means that respondent’s attitude was the same towards overall brand extension when extension has high equity and low similarity and also when extension has low equity and high similarity. This also means that high equity equally supported the negativity of low similarity as high similarity supported the negativity of low equity for overall extension evaluation. For purchase intention (second dependent variable), extension with high equity and low similarity was evaluated more positively compared to extension which has high similarity and low equity. This also means that high equity in presence of low similarity managed to generate more positive effect towards purchase intention as compared to high similarity in presence of low equity. Therefore high similarity didn’t overcome the negativity of low equity to extent as high equity managed to overcome the negativity of low similarity. For favorability the trend noted was opposite to what we had for purchase intension. Respondents’ attitude towards favorability was high (positive) when extension has high similarity and low equity, and was low (negative) when extension has high equity and low similarity. This means that high similarity was managed to overcome the negativity of low equity more than high equity managed to overcome of low similarity. Research Question: Which interaction (manipulation) has highest and lowest positive effect on each dependent variable? This question has very practical significance, as the managers can improve consumer response for different consumer buying aspect. For example if marketers want to receive the positive response on Purchase Intention then what scenario should be ideal for an extension? To answer this question, mean scores of all treatments were analyzed for each dependent variable. It was noted that for all three dependent variables, extension with high equity and high similarity has the most positive effect on the consumer behavior. On the other hand, for overall brand extension and purchase intension, extensions with low equity and low similarity have the least favorable effect; and for favorability high equity and low similarity has the least favorable effect. Please refer to table 5. Direct Effect: Research Question: “Does high level of extension similarity has more positive direct effect than low level of extension similarity”? For all three dependent variables mean score for high level was greater than low level (table 8 and 9). However the difference in mean scores for favorability was found highest compared to other two dependent variables. These results suggest that high level of similarity had more positive EUROPEAN JOURNAL OF BUSINESS AND SOCIAL SCIENCES

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effect that low level, endorse the findings of Herr et al. (1996); Bottomley and Doyle (1996); McCarthy et al. (2001) and Aaker and Keller (1990). Further, effect of extension similarity was found significant (Wilk’s Lamba is 0.002). From univariate test, effect of extension similarity on favorability found significant where significant value is 0.00 (table 6 and 7). However the effect of extension similarity on other two dependent variables i.e. the overall brand extension and purchase intention was also found to be nonsignificant. Table 6: Multivariate Tests (Direct Effect) Effect

Value

F

Hypothesi

Erro

Partial Eta

s df 3.000

r df 114.000

.753

Squared .010

Sig.

Brand

Pillai's Trace

.010

.401a

Equity

Wilks' Lambda Hotelling's

.990

.401a

3.000

114.000

.753

.010

.011

.401a

3.000

114.000

.753

.010

.011

.401a

3.000

114.000

.753

.010

Extension Pillai's Trace

.118

3.000

114.000

.002

.118

Similarity Wilks' Lambda Hotelling's

.882

5.068a 5.068a

3.000

114.000

.002

.118

.133

5.068a

3.000

114.000

.002

.118

.133

5.068a

3.000

114.000

.002

.118

Trace Roy's Largest Root

Trace Roy's Largest Root

Table 7: Tests of Between-Subjects Effects (Direct Effect) Source

Dependent Variable

Type

Mean

df

III

Partial F

Sig.

Square

Sum of Overall extension Brand Equity

evaluation Purchase intention Favourability Overall extension

Eta Square

1.337

1

1.337

1.008

.317

.009

2.133

1

2.133

.965

.328

.008

.352

1

.352

.561

.455

.005

1.481

1

1.481

1.117

.293

.010

Extension

evaluation

Similarity

Purchase intention

.208

1

.208

.094

.759

.001

Favourability

8.269

1

8.269

13.185

.000

.102


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Table 8: Extension Similarity Mean Scores (Direct Effect ) Dependent Variable Extension Mean Similarity

Std. Erro r

95% Confidence Interval Lower

Upper

Bound

Bound

Overall

High

2.983

.149

2.689

3.278

extension

Low

2.761

.149

2.467

3.056

High

3.317

.192

2.936

3.697

Low

3.233

.192

2.853

3.614

High

2.637

.102

2.435

2.840

Low

2.113

.102

1.910

2.315

Purchase intention

Favourability

Table 9: Brand Equity Mean Scores (Direct Effect) Dependent Variable

Brand

Mean

Std. Error 95% Confidence

Equity

Interval Lower Upper Bound

Bound

Overall

High

2.978

.149

2.683

3.272

extension

Low

2.767

.149

2.472

3.061

High

3.408

.192

3.028

3.789

Low

3.142

.192

2.761

3.522

High

2.429

.102

2.227

2.632

Low

2.321

.102

2.118

2.523

Purchase intention

Favourability

Research Question: Does high level of brand equity has more positive direct effect than low level of brand equity”? Results of Multivariate and Univariate test results suggested that high equity has more positive effect than low equity; however the effect of equity was found non-significant. Also mean scores were higher for high brand equity across all three dependent variables compared to brands with low brand equity (refer to table 6,7,8 and 9). These results suggest that high equity brands have more positive effect than low equity brands, and support findings of Reddy et al. (1994); Hem et al. (2003) and Nijssen (1999). Particularly with the findings of Cobb-Walgren et al. 1995 and Yoo et al. 2000.


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Research Question: “Does brand equity and extension similarity have similar and equal direct effect”? Table-10 compares the mean scores of brand equity and extension similarity at both levels. There is negligible difference measured in the mean scores for all three dependent variables. Therefore effect is suggested to be similar, however subject to further analysis. From multivariate results advocate that only extension similarity has significant effect, of which effect was statistical significant for favorability only. Further this study has used “eta squared” for Effect Size measurement. The effect size of extension similarity is higher than brand equity in both multivariate and univariate tests. Please refer to refer to table 6 and 7. Based on these above results, it can be concluded that both brand equity and extension similarity has similar effect because mean score are quite same. However the effect of these two factors is not equal based on the findings of statistical test and effect size.

Table 10: Mean Scores Comparison (Direct Effect) Brand

Extension

Equity

Similarity

(high)

(high)

Overall extension

2.97

2.98

Same

Extension

Equity

Similarity

(low)

(low)

2.76

2.76

Comments

Same mean scores

mean

evaluatio n Purchase

Comments

Brand

scores 3.41

3.31

Intention

Equity

Similarity 3.14

3.23

mean is high

mean is high

Favourability

2.43

2.63

Similarity

Equity 2.32

2.11

mean is high

mean is high

Research Question: “Does brand equity and extension similarity together generates more positive effect than separately”. It is noted that the interaction effect of high/high scenario has generated more positive effect across all three dependent variables compared to individual direct effects of brand equity and extension similarity when these both factors were at high level. But on the other hand, the interaction effect in low/low scenario was found least positive on all three dependent variable as compared to individual direct effects of brand equity and extension similarity when these factors were at lower level (refer to Table 11). EUROPEAN JOURNAL OF BUSINESS AND SOCIAL SCIENCES

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Therefore these results suggest that extensions that have low similarity and low brand is likely to get even more negative response due to interaction effect. But on the other hand an extension with high similarity with parent brand and strong brand is likely to get even more positive response due to interaction effect. Table 11: Means Score Comparison (Interaction Effect vs. Direct Effect) Dependent

Brand

Variable

Equity(High)

Similarity(High) Equity(High) X Similarity(High

Overall Extension

Interaction’s 2.97

2.98

3.00

Evaluation

mean is high

Purchase Intention

Comments

Interaction’s 3.40

3.31

3.47

mean is high Interaction’s

Favourability

2.42

2.63

2.81

mean is high

Dependent

Brand

Variable

Equity(Low)

Similarity(Low)

Comments

Similarity(Low )

Overall Extension

Equity(Low) X

2.76

2.76

2.56

Intention

3.14

3.23

3.12

Favourability

2.32

Evaluation Purchase

Interaction’s mean is low


2.17

2.17



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Theoretical Contribution: This study contributes towards our existing knowledge; however this study is confronted to limitations therefore generalization of results is not recommender. But certainly this study draws interest for further research i.e. to test this research model to other product categories. Key theoretical contribution is discussed below.

 Because of the interaction effect, high/high scenario has more positive effect on extension evaluation than direct effect of both factors (when at high levels). Oppositely, because of interaction effect, low/low scenario has more negative effect on extension evaluation than direct effect of both factors (when at low levels).

 High level of one factor (independent variable) neutralizes the negativity of low level of other factor (independent variable) during interaction effect. However, this implication is subjected to further investigation because this notion was not fully supported for all three dependent variables.

 Both, brand equity and extension similarity, has positive direct effect when at high levels compared to when at low levels. Further, extension similarity has more effect size than brand equity and extension similarity effect was statistical significant. Conclusion: This study results endorse the findings of previous work on direct effect by testing it on soft drinks brands, and extends theoretical knowledge to interaction effects. Based on results it can be concluded that both factors are very important contributor in making extension successful. These factors have a positive influence, both from interaction and direct effect, on consumer’s evaluation of extension if they were at high levels. Though, extension similarity has more effect size than brand equity in direct effect. Due to interaction effect, high brand equity managed to decrease the negative effect of low extension similarity, and vice versa. And the effect shall be the most positive if both factors were at high levels due to interacting effect; but managers should not extend brand if both of these factors are at low levels because it shall create more negativity because of interaction effect. This study provide appetite for further exploration (of direct and interaction) by using other important factors of brand extension’s success in different product categories.


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