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Brand extension strategies: perceived fit, brand type, and culture influences

Buil, Isabel ; de Chernatony, Leslie ; Hem, Leif E. European Journal of Marketing 43.11/12 (2009): 1300-1324.

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The aim of this paper is to examine the impact of perceived fit, brand type and country's culture on the consumers' attitude towards brand extensions and on the parent brand equity. Data were collected in three European countries: Spain, UK, and Norway. A series of analyses of variance (ANOVA) were conducted to test the hypotheses. Brand extensions with high fit receive more favourable consumer evaluations and decrease the negative feedback effects of extensions on parent brand equity. Results also reveal that parent brandequity dilution is higher when the brand used to launch the extension has high equity. Finally, findings indicate different consumers' responses to extensions and effects on parent brand equity across countries. Important directions for future research would be to include other countries and carry out a more in-depth analysis to understand the effect of culture. Managers should launch extensions with high perceived fit. In addition, greater effort is needed to extend high equity brands, due to their greater dilution. Finally, managers need to understand that consumer evaluations and feedback effects of the same brand extensions can vary due to cultural differences between consumers. Therefore, standardised brand extension strategies should be carefully considered. The study focuses, not only on consumer evaluations of extensions, but also on the effects of extensions on the parent brand equity. Furthermore, this paper is one of the first to empirically examine and show that consumer evaluations of extensions and feedback effects on parent brand equity differ across countries.



Introduction Owing to the high costs of launching new products, brand extensions have been the basis of national and international strategic growth for many firms over the past few decades. Brand extension strategy consists of using an established brand name to launch new products ([50] Keller, 2007). One of the main advantages of using brand extensions is the reduction of communication costs ([94] Tauber, 1981; [1] Aaker, 1990; [6] Aaker and Keller, 1990) as a result of the synergies generated between experience and communication of any products of the firm ([36] Erdem and Sun, 2002). Furthermore, brand extensions reduce the costs of brandname introduction and enhance the probability of success since consumers transfer their perceptions and attitudes from the original brand to the extension ([94] Tauber, 1981; [6] Aaker and Keller, 1990). Brand extensions can also have positive effects for the parent brand. They can strengthen the brand meaning, help to build brand equity ([52] Keller and Sood, 2003), and encourage purchasing of other products from the firm, particularly amongst nonusers of the parent brand ([93] Swaminathan et al. , 2001).

Despite these benefits, the use of an established brand name to introduce a new product can be risky. Anextension may change prior beliefs of the parent brand ([58] Loken and John, 1993; [48] John et al. , 1998) and reduce the sales of other products marketed under the same brand ([31] Desai and Hoyer, 1993).Extension failures can also damage the parent brand, causing notable equity loss ([1] Aaker, 1990; [40] Grhan-Canli and Maheswaran, 1998; [93] Swaminathan et al. , 2001; [52] Keller and Sood, 2003). Therefore, the decision to extend a brand, as well as its characteristics, should be subject to cautious strategic planning with the aim of selecting the most likely extensions to succeed ([66] Mitchell and Edelman, 2003). This is particularly critical when the new products are launched in an international context. Previous research on brand extensions provides insights into the main determinants that influence theextension success and the feedback effects of brand extensions on parent brand (for reviews see [38] Grimeet al. , 2002; [24] Czellar, 2003; [102] Vlckner and Sattler, 2006). Amongst the multiple factors that may condition the result of an extension, two are of a particular interest: the perceived fit between the parent brand and the extension; and the characteristics of the parent brand used for the extension. Likewise, when the extension is launched in more than one country, cultural differences deserve special attention. Perceived fit is one of the most relevant variables that can influence the result of an extension ([102] Vlckner and Sattler, 2006). In general, a higher perceived fit involves a better evaluation of extensions ([6] Aaker and Keller, 1990) since the new product gains credibility amongst consumers. Similarly, an extension with good fit may reinforce parent brand equity dimensions such as brand image ([108] Zimmer and Bhat, 2004). The brand equity (e.g. high or medium) of the brand used for the extension, that is, use a brand with highbrand equity or medium brand equity, is another factor that influences consumer evaluations of brand extensions, and has a feedback effect on the original brand. In this respect, it is important for firms to have strong and well-known brands to leverage value through brand extensions ([84] Rangaswamy et al. , 1993; [82] Pitta and Katsanis, 1995). Thus, a high equity brand enjoys positive associations, high perceived quality, more recognition and more loyal consumers. This enables firms launching products under the same brand to benefit from the transfer of these positive associations and quality image. Furthermore, they are more likely to obtain the recognition of the brand name and the loyalty of those consumers that are already loyal to the parent brand ([2] Aaker, 1991; [49] Keller, 1993; [47] Hutton, 1997).

There is a great variety of contexts in which culture has been found to influence consumer behaviour. Literature shows that country cultural differences affect brand positioning ([86] Roth, 1995), service quality perceptions ([106] Witkowski and Wolfinbarger, 2002) and brand choice ([37] Erdem et al. , 2006). As such, consumer evaluations of brand extensions may differ across countries. Similarly, feedback effects on parent brand equity could be different according to the country where the brand is extended. Given the growing popularity of brand extensions, an understanding of how consumers evaluate brand extensions and how brand extension strategies affect parent brands is needed. However, despite numerous research on brand extensions, there are some issues that have received little attention. First, there are few studies that analyse the feedback effects that brand extension strategies have on parent brand equity ([21] Chen and Chen, 2000). Research related to the feedback effects of extensions on the parent brand mainly focuses on how extensions affect parent brand evaluations and beliefs ([85] Romeo, 1991; [51] Keller and Aaker, 1992; [58] Loken and John, 1993; [63] Milberg et al. , 1997; [40] Grhan-Canli and Maheswaran, 1998; [48] John et al. , 1998; [9] Ahluwalia and Grhan-Canli, 2000; [88] Sheinin, 2000; [20] Chang, 2002; [108] Zimmer and Bhat, 2004), memory structures and retrieval processes ([67] Morrin, 1999) and brand choice ([93] Swaminathan et al. , 2001; [11] Balachander and Ghose, 2003). These studies have not considered the feedback effects on parent brand equity. Second, empirical research on brand extensions is mainly based on data collected in one country. In an increasingly global economy where extensions are usually launched in several national markets, an understanding of the brand extension effects in these different markets is needed. While there has been strong call to address this issue ([32] Diamantopoulos et al. , 2005; [103] Vlckner and Sattler, 2007), few have examined consumer evaluations of brand extensions and the effects ofbrand extensions on the parent brand across countries ([15] Bottomley and Holden, 2001; [35] Echambadi et al. , 2006; [12] Basu and John, 2007). Therefore, this article seeks to address these issues by analysing the influence that two key determinants ofbrand extension success, perceived fit and the type of brand used to launch the extension, have not only on the consumer evaluations of brand extensions, but also on the parent brand equity after the extension. Furthermore, the study investigates whether consumer evaluations of brand extensions and the effect ofextensions on parent brand equity differ across cultures. More specifically, this study assesses whether the fit or similarity between the parent brand and theextension influences consumers' attitude towards brand extensions and parent brand equity. As regardsbrand type, this research studies the differences in consumers' attitude towards the new product and parentbrand equity when consumers evaluate extensions of high equity brands against medium equity brands. Finally, this paper examines whether consumers' attitude towards extensions and parent brand equity vary according by country. This work focuses on three

countries: Spain, the UK and Norway, since they have a different cultural profile ([44] Hofstede, 1984). The paper opens with a literature review on the three aspects that are the basis for the hypotheses. It then describes the methodology used in the analysis and presents the results. Finally, the paper draws conclusions and considers implications for managers. Conceptual background and hypotheses Effect of perceived fit Perceived fit between the parent brand and the extension is one of the major determinants of brand extension success ([102] Vlckner and Sattler, 2006). Despite the lack of consensus on the definition of this concept ([18] Bridges et al. , 2000), the idea of fit always refers to the degree of proximity between parentbrand and extension that consumers perceive. This dimension therefore reflects the degree of congruence between the parent brand and the new product launched by the firm. Perceived fit has a twofold importance: its weight in the evaluation of extensions ([6] Aaker and Keller, 1990; [16] Boush and Loken, 1991; [14] Bottomley and Doyle, 1996; [15] Bottomley and Holden, 2001) and its feedback effect on the parent brand ([89] Smith and Park, 1992; [67] Morrin, 1999). When the firm launches a new product consistent with the parent brand, consumers perceive higher fit between the products associated to the brand and the extension. In this context, consumers regard the new products as credible, which in turn make them more willingness to buy them. Thus, previous studies indicate that perceived fit has a positive effect on the evaluation of extensions ([6] Aaker and Keller, 1990; [16] Boush and Loken, 1991; [29] de Ruyter and Wetzels, 2000; [102] Vlckner and Sattler, 2006). Such positive relationships appear in studies that analyse both tangible products ([17] Boush et al. , 1987; [6] Aaker and Keller, 1990; [79] Park et al. , 1991) and services ([29] de Ruyter and Wetzels, 2000; [98] van Riel et al. , 2001; [43] Hem et al. , 2003; [55] Lei et al. , 2004). The positive influence of fit also occurs both in studies considering fit globally ([41] Gutirrez and Rodrguez, 1994; [61] Martnez and Pina, 2005) or focused on the dimensions of category and image fit ([17] Boush et al. , 1987; [16] Boush and Loken, 1991; [79] Park et al. , 1991; [26] de Magalhaes and Varela, 1997; [87] Seltene, 2004). As well as leading to positive consumers' attitude towards brand extensions, perceived fit can strengthen or dilute brand equity of the parent brand. Past research shows that an extension perceived as congruent may lead to more favourable and positive evaluations of the original brand ([51] Keller and Aaker, 1992; [38] Grimeet al. , 2002), which avoids dilution ([5] Aaker, 2002). If the extension presents a high fit, consumers transfer their quality perceptions and

other associations to the new product. This contributes to improving the level of perceived quality and image of the parent brand ([60] Martnez and de Chernatony, 2004) since the pre-existing associations will be reinforced ([1] Aaker, 1990). Likewise, high fit extensions may result in consumers buying more products of the brand ([93] Swaminathan et al. , 2001), facilitate parent brand categorisation ([67] Morrin, 1999), and strengthen the awareness of the original brand through the brand extensionsincreasing the brand's visibility ([2] Aaker, 1991). By contrast, an extension with poor fit may lead to the loss of differentiation and credibility of the firm, weakening associations with the parent brand ([3] Aaker, 1992; [51] Keller and Aaker, 1992). In addition, distant extensions are generally regarded as questionable by consumers ([25] Dawar, 1996), which increase the risk of failure. Therefore, consumers' attitude towards brand extensions and parent brand equity after the extensiondepends on the level of similarity or congruence between the original brand and the extension. Thus, we hypothesise that: H1a: Consumers' attitude towards brand extensions will be more favourable when the perceived fit between the parent brand and the extension is high than when the perceived fit is low. H1b: The effect of brand extension strategies on parent brand equity will be more favourable when the perceived fit between the parent brand and the extension is high than when the perceived fit is low. Effect of parent brand type The evaluation of extensions and the effect of brand extension strategies on parent brand equity are likely to depend on the type of parent brand used (i.e. whether high or medium brand equity). Previous research has verified that extensions of high equity brands enjoy a more positive attitude. The main reason lies in the fact that these extensions have highly perceived quality, positive associations derived from the original brand and more brand awareness and familiarity. Research findings suggest that the perceived quality of the parent brand has a positive effect on extensionevaluation ([64] Milewicz and Herbig, 1994; [15] Bottomley and Holden, 2001; [77] Park and Kim, 2001; [98] van Riel et al. , 2001; [60] Martnez and de Chernatony, 2004; [102] Vlckner and Sattler, 2006). Thus, if consumers perceive that a brand has a high quality level, the extension should benefit. As regards brandassociations or brand image, [30] del Ro et al. (2001) found that three of the four dimensions that formed their brand associations construct had a positive effect on the acceptance of brand extensions. Likewise, studies focusing on corporate brands and services provide evidence that a positive image contributes to the success of the extension ([29] de Ruyter and Wetzels, 2000; [98] van Riel et al. , 2001; [43] Hem et al. , 2003). Consequently, if a brand presents a set of positive associations, consumer evaluations of brand extensionswill be more

favourable. Finally, brand awareness can also positively affect consumers' attitude towardsbrands ([4] Aaker, 1996). Consumers' reaction towards extensions can be affected by the individual's knowledge of the brand ([53] Klink and Smith, 2001). This variable also acts as a predominant choice tactic amongst inexperienced consumers facing a new decision task ([46] Hoyer and Brown, 1990), and its importance remains even when consumers face more familiar and repetitive choices ([59] Macdonald and Sharp, 2000). As a strong brand enhances the likelihood of a positive consumer attitude towards brand extensions, highbrand equity increases the probability of brand extension success ([84] Rangaswamy et al. , 1993). Generally, strong brands have a level of awareness and clearly defined associations, which are transferred to theextension. In addition, under particular circumstances, extensions can strengthen the parent brand's positioning, as well as associations like perceived quality ([82] Pitta and Katsanis, 1995; [10] Ambler and Styles, 1997). Furthermore, consumers have stronger beliefs and associations regarding dominant rather than weakerbrands. This makes dominant brands less vulnerable to extensions ([67] Morrin, 1999). Therefore, the initial parent brand equity may help to provide a defence against failed brand extensions, thus avoiding brandequity dilution or, at least, diminishing potential negative effects ([52] Keller and Sood, 2003). In this context, brands with higher equity are expected to generate a more positive consumer response. Similarly, we also expect to observe more favourable feedback effects of brand extension strategies on the parent brand equity when the original brand has a higher equity. Consequently, the following hypotheses are postulated: H2a: Consumers' attitude towards brand extensions will be more favourable when the parent brand has highbrand equity than when brand equity is medium. H2b: The effect of brand extension strategies on parent brand equity will be more favourable when the parentbrand has high brand equity than when brand equity is medium. Effect of the country's culture Over the past few decades, globalisation of markets has become one of the most important trends. Some researchers, following the [57] Levitt's (1983) proposition, have posited that globalisation would lead to converging consumer needs and tastes. However, other scholars suggest that although globalisation has lead to the convergence of income, media and technology, consumer behaviour is diverging. For example, in a European context, [27] de Mooij (2000) and [28] de Mooij and Hofstede (2002) state that large differences between value systems and consumer behaviour still remain.

Cultural differences affect consumer response to advertising ([105] Waller et al. , 2005; [74] Orth et al. , 2007),brand positioning ([86] Roth, 1995), consumer decision-making processes ([56] Leo et al. , 2005), consumption and usage of a large number of products and services ([27] de Mooij, 2000; [28] de Mooij and Hofstede, 2002) and diffusion of innovations ([34] Dwyer et al. , 2005; [92] Sundqvist et al. , 2005). Therefore, ignoring culture's influences may reduce company profitability. As such, given the diverse contexts in which culture has been found to have an influence, one would expect consumers to respond differentially to brand extension strategies across different countries. Similarly, feedback effects on parent brand equity could be different according to the country where the brand extension is commercialised. The literature shows different theoretical frameworks to explain cross-cultural differences in consumer behaviour. Hofstede's framework ([44] Hofstede, 1984) is one of the most commonly used. He proposes five dimensions - masculinity/femininity, individualism/collectivism, power distance, uncertainty avoidance and long-term orientation. These are widely accepted both by scholars in marketing and other disciplines ([69] Nakata and Sivakumar, 2001). Such dimensions explain behavioural differences between customers from different countries ([44] Hofstede, 1984). Another justification for studying cross-cultural differences is due to the way people think. [71] Nisbett et al. (2001) suggest that due to social differences between cultures, certain cognitive processes are more developed than others. Therefore, culture leads to different styles of thinking. Few studies in the brand extension literature have adopted a cross-cultural approach to analyse the influence that cultural differences can have on the consumer evaluations of extensions and on the feedback effects ofbrand extensions on parent brand equity. Only the replications of the work of [6] Aaker and Keller (1990), from the USA to New Zealand ([91] Sunde and Brodie, 1993), as well as Europe ([45] Holden and Barwise, 1995) and China ([39] Guoqun and Saunders, 2002), or the joint analysis of these studies made by [15] Bottomley and Holden (2001) and more recently by [35] Echambadi et al. (2006), reveal that brand extensionevaluation seems to differ across countries. More specifically, [7] Aaker and Keller (1993) suggest that the differences found by [91] Sunde and Brodie (1993) in their replication might be due to the cultural differences between the countries used in their study. [15] Bottomley and Holden (2001) suggest that the relative importance of factors like fit or perceived quality forextension evaluation varies according to the origin of consumers. Similar conclusions are reached by [12] Basu and John (2007) in two studies conducted with consumers from an Eastern culture (India) and a Western one (USA). They find that cultural differences affect perceived fit between the extension and the original brand, and thus brand extension evaluation. More specifically, and following the different styles of thinking proposed by [71] Nisbett et al. (2001), these authors verified that individuals in Eastern societies (holistic thinkers) perceive higher fit than those in more Western societies (characterised as analytic thinkers), which results in a more favourable evaluation of extensions.

Considering previous evidence pointing towards the effect of cross-cultural differences, it is hypothesised that culture will impact brand extension evaluation, as well as the effect of brand extension strategies on parentbrand equity. Given the lack of studies reporting empirical evidence about how different cultural dimensions affect consumers' attitude towards brand extensions and feedback effects on parent brand equity, we propose a global effect of the country's culture. Thus, we propose: H3a: Consumers' attitude towards brand extensions will depend on the culture of the country where theextension is launched. H3b: The effect of brand extension strategies on parent brand equity will depend on the culture of the country where the extension is launched. Methodology A factorial design consisting of three factors was used to test the hypotheses. The experiment used a 2 (perceived fit: high fit vs low fit)2 (brand type: high equity vs medium equity)3 (country's culture: Spain vs UK vs Norway) design. Given the international character of the study, high familiarity of consumers in the three countries with the product category was considered an essential requirement. Thus, we focused on the sportswear market for the following reasons. This market has global brands, available in the three countries and with wide recognition and awareness amongst consumers. Furthermore, the sample, composed of students, characterises the segment of young people, who are the main consumers for sportswear brands. Selection of countries One of the aims of the study is to analyse whether consumer evaluations of extensions and the effect ofbrand extension strategies on parent brand equity are influenced by culture. In this study, nationality was used as a proxy for culture, since there is empirical support for between-country differences ([90] Steenkamp, 2001) where individual nations share a similar language, history and religion ([44] Hofstede, 1984). Therefore, three European countries were selected based on having differentiated cultural profiles derived from their different heritage: Spain; the UK; and Norway. Table I [Figure omitted. See Article Image.] displays the cultural differences between these countries based on scores of Hofstede's dimensions ([44] Hofstede, 1984). Regarding the first dimension, power

distance, Spain is at the top, followed by the UK and then Norway. The UK is more individualist than Norway, while Spain is the most collectivist country. Norwegian society is more feminine than both Spain and the UK. Spain has the highest uncertainty avoidance culture, whereas the UK has the least risk aversion. Finally, the differences in long-term vs. short-term orientation are insignificant. Stimuli Two pre-tests were required to identify appropriate brands and hypothetical extensions. The purpose of the first pre-test, carried out with 84 students from the University of Zaragoza (Spain), 58 students from the University of Birmingham (UK), and 60 students from the Norwegian School of Economics and Business Administration (Norway), was to choose two well-known brands in the three countries, which had different degrees of awareness. We asked respondents to indicate, from a list of brands selected after visiting several sports retailers in the three countries, their level of familiarity (F) on a seven-point Likert scale. Two brands were chosen: Nike (N ) as a high familiarity brand in the three countries (Spain: FN =6.6; UK: FN =6.81; Norway: FN =5.92), and Puma (P ), also with a high, but significantly lower, level of familiarity (Spain: FP =4.74, Z=-6.63, p < 0.001; UK: FP =5.55, Z=-5.71, p < 0.001; Norway: FP =5.38, Z=-3.87, p < 0.001). A second pre-test was used to select two hypothetical extensions with different perceived fit. Respondents indicated the degree of similarity (S), on a seven-point Likert scale, of some products different from those normally offered by both brands. This pre-test was carried out with 86 students from the University of Zaragoza (Spain), 45 students from the University of Birmingham (UK), and 60 students from the Norwegian School of Economics and Business Administration (Norway). The objective was to choose two extensions with different degree of similarity but with the same level of fit for both brands. The brand extensions finally selected were jeans (J ), with high perceived fit (Spain: SNJ =3.13, SPJ =2.99, p > 0.28; UK: SNJ =3.07, SPJ =3.04, p > 0.36; and Norway: SNJ =2.08, SPJ =2.15, p > 0.55); and cameras (C ) as a low fit extension (Spain: SNC =2.14, SPC =1.98, p > 0.20; UK: SNC =1.71, SPC =1.78, p > 0.79; and Norway: SNC =1.30, SPC =1.30, p =1). Significant differences in the degree of similarity between these two extensions were found for the three countries (Spain: SNJ =3.13, SNC =2.14, Z=-4.90, p < 0.001; SPJ=2.99, SPC =1.98, Z=-4.79, p < 0.001; UK: SNJ =3.07, SNC =1.71, Z=-4.16, p < 0.001; SPJ =3.04, SPC =1.78, Z=-4.34, p < 0.001; and Norway: SNJ =2.08, SNC =1.30, Z=-4.02, p < 0.001; SPJ =2.15, SPC =1.30, Z=-4.36, p < 0.001). The general category product, brands and extensions selected for the analysis are equally available and have the same function for consumers in the three countries. These guidelines ensure functional equivalence ([97] Usunier, 2000). Experimental design and subjects

The design consisted of a 2 (perceived fit: high fit vs. low fit)2 (brand type: high equity vs medium equity)3 (country's culture: Spain vs UK vs Norway) between-subjects design. A total of 672 students from the three countries: Spain (227), the United Kingdom (203) and Norway (242), participated in the study. A representative city was chosen in each country. In the Spanish market the study was undertaken in Zaragoza; Birmingham was selected in the British market; and Bergen was the choice for the Norwegian market. Table II [Figure omitted. See Article Image.] shows the number of subjects assigned to each experimental condition. Although some authors have suggested that the use of student samples creates problems regarding generalisability of findings ([80] Peterson, 2001), their use is very common in brand extension research ([9] Ahluwalia and Grhan-Canli, 2000; [54] Lane, 2000; [22] Chen and Liu, 2004; [62] Meyvis and Janiszewski, 2004; [99] van Riel and Ouwersloot, 2005). The use of matched and homogeneous samples, such as students, facilitates the control of extraneous variables that could potentially confound the results ([19] Callow and Lerman, 2003; [74] Orth et al. , 2007) and are considered appropriate when comparing different countries since they give this homogeneity ([33] Durvasula et al. , 1993; [8] Agarwal and Teas, 2002). Finally, students are particularly relevant for this study because they are the target market for sportswear clothes. According to the Mintel report "Sportswear Retailing, 2002", the segments aged 15-19 and 20-24 are the main consumers of sports clothing and footwear. The study controlled for the sample equivalence by using business studies students with similar years of education and age in the three countries. Procedure Data were collected using four different questionnaires with analogous questions, such that each subject considered only one brand and only one extension. In each country, the questionnaire was administered during class time with the same instructions. It guaranteed data collection equivalence. The questionnaires had two parts that differed for each treatment. In the first part, similar for all the scenarios, subjects answered questions that assessed the brand equity of a particular brand (Nike or Puma). In the second part, participants were told that the brand (Nike or Puma) had decided to launch a new product (jeans or cameras) with the same brand name. They were then asked to assess perceived fit, attitude towards the extensionand the brand equity of the original brand in the new context (final parent brand equity). The original questionnaire was written in English and then translated into Spanish and Norwegian. To assure translation equivalence the Spanish and Norwegian versions were drafted with the assistance of several experts who speak both languages, English and Spanish, and English and Norwegian. Furthermore, some students responded to the questionnaires in their own language to correct potential problems ([97] Usunier, 2000). Finally, conceptual equivalence is assumed since the concepts used in the questionnaires have similar meaning across the three countries.

Measures The dependent variables, parent brand equity and consumers' attitude towards brand extensions, were measured using scales developed by other researchers. To conceptualise brand equity this study builds on [49] Keller's (1993) and [2] Aaker's (1991) definitions. The dimensions included in our measure of consumer brand equity are brand awareness, perceived quality andbrand associations. Therefore, only perceptual dimensions are considered to conceptualise brand equity.Brand loyalty was not included as we next explore. Brand loyalty differs from other dimensions as it is more related to use experience ([2] Aaker, 1991; [101] Villarejo, 2002). This is one of the reasons that could explain the lack of consensus on this factor. Researchers such as [2] Aaker (1991) advocate incorporating brand loyalty into measures of brand equity ([2] Aaker, 1991; [107] Yoo et al. , 2000; [75] Pappu et al. , 2005; [76] Pappu et al. , 2006). On the other hand, some authors such as [23] Cobb-Walgren et al. (1995) exclusively consider perceptual dimensions: brand awareness, perceived quality and brand associations, and do not include brand loyalty, following [49] Keller (1993). This perspective regards brand loyalty as a consequence of brand equity ([68] Na et al. , 1999; [95] Taylor et al. , 2004; [50] Keller, 2007) and not as one of its components. We adopt this perspective. Brand awareness, which refers to the brand's strength in the consumer's mind, was measured using the items prposed by [107] Yoo et al. (2000) and [70] Netemeyer et al. (2004). Perceived quality is defined as "the customer's perception of the overall quality or superiority of a product or service" ([109] Zeithaml, 1988) and was assessed following [107] Yoo et al. (2000) and [101] Villarejo (2002). Finally, six items proposed by [4] Aaker (1996) and [75] Pappu et al. (2005, [76] 2006) were used to measure the dimension of brandassociations, which refers to "anything linked in memory to a brand" ([2] Aaker, 1991). These measures were applied both before the extension and after the extension to assess changes in parent brand equity. Consumers' attitude towards brand extensions was measured by adapting items suggested by [6] Aaker and Keller (1990) and [83] Pryor and Brodie (1998). Finally, to verify the different levels of perceived fit associated with the extensions, five items adapted from previous studies were included in the questionnaire ([6] Aaker and Keller, 1990; [96] Taylor and Bearden, 2002). These items measure both category fit, i.e. the similarity between the new category and other products from the original brand, and the helpfulness of the firm's resources to make the extension, and image fit, i.e. the match between the image of the brand and the extension, and the opinion about whether the launching of the extension is logical and suitable for the company. All items were measured on seven-point Likert scales. Table III [Figure omitted. See Article Image.] shows the scales used in the experiment to measure the dependent variables.

Results A series of analyses of variance (ANOVA) were conducted to test the hypotheses. First, the psychometric properties of the scales used in the study were examined and the effectiveness of the experimental manipulations was verified. Scale validation The scales were evaluated with exploratory techniques for assessing reliability and dimensionality. First, we calculated Cronbach's alpha and the item-to-total correlation. Item AWA1 before and after the extension was deleted from the brand awareness' sub-scales since its Cronbach's alpha was below 0.7 ([72] Nunnally, 1978) and its item-to-total correlation was below 0.3 ([73] Norusis, 1993). We then performed a series of exploratory factor analyses using principal components analysis and varimax as the rotation method. Results suggested that the corresponding items of each scale were grouped into a single factor with significant factor loadings and the explained variance exceeding 60 per cent in each case. Only the items of brand association dimensions (before and after the extension) loaded on two different factors. In this process the items ASS3 and ASS4 before and after the extension were eliminated due to significant loadings on both factors. After this procedure a series of confirmatory factor analyses were estimated using EQS 6.1 and the robust maximum-likelihood estimation ([13] Bentler, 1995). Standardised factor loadings of individual items were significant with values above 0.5, which suggests convergent validity of each scale. Likewise, the coefficients have a clear relation with the underlying factor ( R2 >0.3). Composite reliability (CR) and average variance extracted (AVE) indices were 0.781 and 0.545 respectively for the three-item consumers' attitude towards brand extensionsscale, while Cronbach's alpha was 0.778. All brand equity dimensions also exceeded the recommended values of 0.7 and 0.5 for composite reliability and average variance extracted ([42] Hair et al. , 1998). Discriminant validity between the underlying dimensions in the brand equity constructs (initial and final) was also achieved. Goodness-of-fit indicators of dimensions of initial brand equity (SB 2=97.71, 38, p <0.001; RMSEA=0.048; CFI=0.981; IFI=0.981; NFI=0.970; NNFI=0.973) and final brand equity (SB 2=73.59, 38, p <0.001; RMSEA=0.037; CFI=0.991; IFI=0.991; NFI=0.981; NNFI=0.986) indicated an acceptable level ([42] Hair et al. , 1998). Finally, it was verified that the dimensions brand awareness, perceived quality and brand associations that constitute initial brand equity (CFI=0.948; IFI=0.948; NFI=0.937; NNFI=0.928; RMSEA=0.08) and final brandequity (CFI=0.955; IFI=0.955; NFI=0.946; NNFI=0.937; RMSEA=0.08) are integrated into second-order factor models. Manipulation checks Manipulation checks were carried out to determine whether treatments related to extension fit and brandtype were effective. Results showed significant differences in perceived fit (F) associated to each extension. In this respect, similar extensions (jeans) presented a higher fit than distant ones

(cameras) (F J =3.36, FC=2.58, Z=4.02, p < 0.001). In addition, according to the initial approach, significant differences were found in the parent brand equity (BE) of the two selected brands (Nike and Puma). Nike's brand equity was significantly higher than Puma's (BEN =5.09, BEP =4.71, Z=2.55, p < 0.001). These results indicated that both manipulations were successful. Test of hypotheses To test the hypotheses, data were analysed using a series of analyses of variance (ANOVA). The dependent variables were consumers' attitude towards brand extensions (ATT) and parent brand equity variation (BEV ), that is, the difference between final and initial parent brand equity. Accordingly, the items that constitute the validated scales of consumers' attitude towards extensions, final and initial parent brand equity were averaged to form two single dependent measures. Means and standard deviations of consumers' attitude towards extensions and parent brand equity (initial, final and the variation) for the different experimental conditions are presented in Tables IV and V [Figure omitted. See Article Image.]. Even though we finally used the parent brand equity variation as a dependent measure, we also present the means for the initial and final parent brand equity. The variation illustrates the size and direction of the effect of brand extension strategy on parent brand equity. A positive score indicates that valuations after the extension exceed the initial scores, whereas a negative score indicates a loss of equity. Table VI [Figure omitted. See Article Image.] shows marginal means and standard deviations. The first hypothesis (H1a ) proposed that perceived fit, that is, the degree of proximity or congruence between the extension and the original brand, has a positive effect on consumers' attitude towards brand extensions. Results obtained reveal that this factor has a significant positive influence on consumers' attitude ( F =54.33, p=0.000). Thus, the evaluation of brand extensions is more favourable in conditions of high fit extensions (ATTJ=3.84) than for low fit extensions (ATTC =3.16). The second hypothesis (H1b ) is also supported. Therefore, perceived fit between the parent brand and theextension has a significant positive influence on the variation of parent brand equity (F =9.48, p =0.002). Figure 1 [Figure omitted. See Article Image.] shows that, although brand extension strategies have a dilution effect on parent brand equity, when the extension is more similar and coherent with the original brand the negative effect on the parent brand equity is lower. The two following hypotheses (H2a and H2b ) predicted that the type of brand used to launch the extension(high brand equity vs. medium brand equity) would condition brand extension evaluation, as well as the effect of brand extension strategy on parent brand equity. More specifically, we posited that thoseextensions that have their origin in a strong brand, with high equity, will receive a more favourable evaluation and will have a more positive effect on parent brand equity than those that come from weaker brands. As regards the first hypothesis ( H2a ), results show that

the initial equity of the original brand has no significant effect on consumers' attitude towards the new products (F =1.93, p =0.165) Consumers' attitude towardsbrand extensions is similar for brands with high brand equity (ATTN =3.44) and for brands with mediumbrand equity (ATTP =3.57). By contrast, the type of parent brand has a weak significant effect on parentbrand equity (F=2.83, p =0.093). However, as can be seen in Figure 2 [Figure omitted. See Article Image.], the result is contrary to our prediction. Thus, the effect of brand extension strategies on parent brand equity is less negative when the parent brand has medium brand equity (BE
V

=-0.32) than when brand equity is high (BEV =-

0.40). Consequently, hypotheses H2a and H2b were not supported. Finally, the two last hypotheses analysed the moderating role that culture can play in the brand extensionevaluation process and in the feedback effect of brand extension strategies on parent brand equity. Regarding H3a , results show that consumers' attitude towards brand extensions vary from one to another country (F =5.88, p =0.003), which shows that a country's culture has an influence on the evaluation of new products. Norway presents the most favourable attitude (ATT=3.64), followed by UK (ATT=3.58) and Spain (ATT=3.29). Post-hoc comparisons revealed significant differences between Spain and the other countries. Results also confirm that parent brand equity variation as a result of brand extension strategies depends on the culture of the country where the extension is launched (F =15.17, p =0.000). Therefore, as established inH3b , a country's culture also influences the feedback effects of extensions on parent brand equity. In this case, post-hoc comparisons found significant differences between Norway and the other countries of the study. Figure 3 [Figure omitted. See Article Image.] shows that the UK has the highest brand equity dilution (BEV=-0.50), followed by Spain (BEV =-0.42) then Norway (BEV =-0.19). In summary, the results indicate that when brand extensions present a high level of fit with the parent brand, the consumers' attitude towards brand extensions is more favourable, whereas the feedback effects of brand extension strategies on parent brand equity are less negative. In addition, consumers' attitude towardsextensions is not influenced by the type of parent brand (high or medium equity brand), and contrary to our expectations, parent brand equity dilution is higher when the brand used to launch the extension has high equity. Finally, it has been verified that brand extension evaluations and the feedback effects of brand extension strategies on parent brand equity are influenced by the culture of the country where the extensionis launched. Consumers' responses to brand extensions analysed are significantly more positive in Norway and UK than in Spain. Likewise, parent brand equity dilution as a consequence of the brand extension strategies is significantly smaller in Norway compared to the UK and Spain. Discussion and managerial implications Brand extensions are a popular brand strategy to launch new products. This strategy enables companies to leverage the equity associated with the parent brand, reducing the costs of new product introduction and potentially reducing the risk of new product failure.

The literature proposes numerous determining factors of brand extension success. By understanding the influence of these factors on consumer evaluation process, managers should be able to develop effective strategies ([43] Hem et al. , 2003). Nevertheless, brand managers also need to consider potential reciprocal effects on parent brand equity when assessing the benefits of brand extensions ([38] Grime et al. , 2002). In an increasingly global economy where companies expand their activities to international markets, an understanding of the cultures in which they are competing is also essential ([100] Veloutsou et al. , 2005). This paper has analysed the influence of three key factors on brand extension evaluation and on the feedback effects of brand extension strategies on parent brand equity: perceived fit between parent brand and extension; type of brand used to launch the extension; and the culture of the country where the extension is launched. As regards the first factor, perceived fit, results show that consumer evaluations of extensions and the effect of these strategies on parent brand equity differ according to the fit perceived by consumers. Thus,extensions close to the original brand that have a high degree of similarity with the existing product categories of the parent brand and maintain a coherent image will benefit from a more favourable attitude. Likewise, the negative effect of the extension on the parent brand equity is lower when consumers perceive high fit. Consequently, firms can use perceived fit to reinforce consumers' attitude towards brand extensionsand protect the equity of the parent brand. Brand type has been shown to have no significant effect on consumer evaluations of brand extensions. It means that consumers' attitude towards brand extensions will be similar regardless of whether the parentbrand has high or medium brand equity. Contrary to our expectations, the brand with the highest equity (Nike) has been the most damaged by brand extension strategy. This result is consistent with previous studies ([21] Chen and Chen, 2000; [81] Pina et al. , 2004; [104] Vlckner et al. , 2007) where, after an extension, the brand with the most awareness or the mostbrand equity was more damaged than other weaker brands. This can be explained by the difficulty strengthening strong brands because of the favourable evaluations they already have ([104] Vlckner et al. , 2007). Although it has been argued in the literature that brand equity may provide a defence against failedbrand extensions ([52] Keller and Sood, 2003), strong brands can be more vulnerable to negative feedback effects. Thus, when the equity level of the parent brand is high and the extension fails, the dilution effect is more likely to be higher ([21] Chen and Chen, 2000). In our study, Nike has a higher level of brand awareness amongst consumers who in turn will have developed specific brand associations. These strong bonds may produce a more powerful dilution effect than for brands like Puma, with weaker cognitive structures amongst consumers. Nevertheless, the brand with the highest equity, despite having suffered more damage, is

still well ahead of the weakest brand. Thus, although high equity brands may experience a higher negative effect, they have more leeway and can afford a greater fall. Finally, this study reveals that the country where an extension takes place may condition its results, mainly due to cultural differences. On the one hand, the results show that Spanish consumers have a significant less favourable attitude towards extensions than British or Norwegian consumers; on the other hand, extensionstrategies proved to have a higher negative effect on parent brand equity in Spain and the UK, whereas Norway significantly differs from these countries with a much more reduced dilution effect. Consequently, the culture of the country has a significant influence on extension evaluation and on the feedback effects of brand extensions on parent brand equity. These findings can be explained according to the characteristics of these countries. Spain shows a higher tendency to uncertainty avoidance ([44] Hofstede, 1984). By contrast Norway and the UK are societies with low or average risk aversion. In these cultures, new or different things arouse curiosity, thus consumers in these countries are likely to have more positive evaluations of the new products launched by firms than consumers with less tolerance of uncertainty, as in the case of Spain. Furthermore, individualist societies, such as the UK or Norway, tend to search for a wider variety than collectivist ones like Spain ([44] Hofstede, 1984; [37] Erdemet al. , 2006), which would also result in a more favourable evaluation of new products. The same reasoning can be used to explain the brand equity dilution, although in this case in the UK, where consumers have a positive attitude towards extensions, the dilution effect is the highest. It implies that while Hofstede's framework ([44] Hofstede, 1984) can be useful to analyse the different behaviour, other factors should be considered in future research. There are several implications from this study. Brand extensions are seen by many companies as one of the easiest and least costly strategies to launch new products. However, our study has demonstrated that brand extension's results differ according to several factors. First, managers should focus on maintaining a coherent image and ensuring a high degree of similarity with other products of the firm when launching an extension. If consumers perceive a high fit, beliefs and affect associated with the parent brand will be transferred to the extension, thus reducing the potential negative effects on the parent brand and favouring a positive attitude towards the extension. This result is consistent with extant research indicating that perceived fit is one of the most important determinants of brand extensionsuccess ([6] Aaker and Keller, 1990; [102] Vlckner and Sattler, 2006). Therefore, if companies cannot guarantee a high level of perceived fit, managers should consider other options such as using two brandnames ([78] Park et al. , 1993; [63] Milberg et al. , 1997; [38] Grime et al. , 2002) or creating a new brand. Second, our study found a weak but significant effect of the brand type used to launch the extension on parent brand equity. It implies that the potential negative influence of brand extension strategies on parentbrand equity for high equity brands are greater compared to those of

medium equity brands. Therefore, the challenge for managers of high equity brands is to exploit the brand equity of the parent brand but avoid damaging it. If the extension produces a dilution effect, it is probable that strong brands are more likely to be adversely affected. More care is therefore needed with these strong brands. Finally, although convergence between consumers and markets is increasingly leading to global brands under the same marketing strategies ([110] Zou and Cavusgil, 1996), managers should recognise that cultural differences between countries may influence brand extension success. Brand extension strategies require adequate planning due to their potential negative effects on parent brand equity. However, this process will be of vital importance if the same brand extensions are launched in several countries, due to the impact of their country cultures. Our findings suggest that consumers' reactions to brand extensions and the feedback effects of extensions on the brand equity of the parent brand vary significantly across the three European countries. This result raises the important question of the effectiveness of standardised brand extensionstrategies. It will be necessary in certain cases to modify or adapt the extensions to increase the probability of success and reduce the possible damage to the parent brand. Ignoring this may be fatal. As with all research there are several limitations associated with our study that suggest directions for further research. First, the experimental nature of the study constrained the number of products, brands andextension categories included. Thus, in order to generalise the results, further research should consider the extent to which the relations analysed may occur in other products and services, brands - with higher differences in their brand equity- or extension categories. Similarly, our study focused on three countries. Further research could be undertaken in other geographical areas, with more in-depth analysis to understand the effect of culture. Finally, although the use of students was appropriate for the characteristics of the brands and product category of the study, further research should use a representative sample. Nevertheless, there is general agreement in cross-national research that matched samples - such as the one employed in this study -s- are appropriate and advantageous ([33] Durvasula et al. , 1993; [8] Agarwal and Teas, 2002). Furthermore, [103] Vlckner and Sattler (2007) have recently demonstrated that findings derived from students samples are largely generalised to non-students samples. Proceedings of the 24th EMAC Conference, Paris Proceedings of the 38th Academy of Marketing Conference, University of Gloucestershire, Cheltenham, 6-9 July Sportswear Retailing The authors gratefully acknowledge the financial support of the projects CICYT (Ref: SEJ2005-02315), GENERES (Ref. S-09) and "PM026/2006" from the Government of Aragon, and The Research Council

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Appendix About the authors Isabel Buil is a PhD candidate in Marketing and an Assistant Professor in the Department of Economy and Business Studies at University of Zaragoza, Spain. She has been Visiting Scholar at the Centre for Research inBrand Marketing at the Birmingham Business School, UK. She is a member of the research group Generes recognised by the Government of Aragon. She has published research papers in both local and international journals, such as the Business Strategy and Environment . She has attended and presented research papers at several national and international conferences. Isabel Buil is the corresponding author and can be contacted at: ibuil@unizar.es Leslie de Chernatony is Professor of Brand Marketing at Universit della Svizzera Italiana, Lugano and Aston Business School. With a doctorate in brand marketing, he has a substantial number of publications in American and European journals, in addition to numerous presentations at international conferences. He has several books on brand marketing, the two most recent being Creating Powerful Brands and From Brand Vision toBrand Evaluation . A winner of several research grants, his two most recent grants have supported research into factors associated with high performance brands and research into services branding. He was Visiting Professor at Madrid Business School and is currently Visiting Professor at Thammasat University, Bangkok. Leslie is a Fellow of the Chartered Institute of Marketing and Fellow of the Market Research Society. He acts as an international consultant to organisations seeking more effective brand strategies and runs acclaimed branding seminars throughout Europe, Asia, America and the Far East. He is an experienced expert witness in legal cases involving branding issues in commercial and competition cases. Leif E. Hem is an Associate Professor at the Norwegian School of Economics and Business Administration (NHH) in Bergen, Norway. He gained his PhD in February 2001. His research interests focus on branding in general, with a specific focus on brand extension. He has published several papers focusing on brand extensions in leading European and American journals. He is also the director of an executive Master's degree in branding and runs several corporate branding schools for the business. AuthorAffiliation

Isabel Buil, Faculty of Economics and Business, University of Zaragoza, Zaragoza, Spain Leslie de Chernatony, Universit della Svizzera Italiana, Lugano, Switzerland and Aston Business School, Birmingham, UK Leif E. Hem, NHH, Norwegian School of Economics and Business Administration, Bergen, Norway Illustration Figure 1: Effect of perceived fit on parent brand equity Figure 2: Effect of brand type on parent brand equity Figure 3: Effect of the country's culture on parent brand equity Table I: Hofstede's cultural dimensions scores Table II: Number of subjects in each experimental condition Table III: Dependent measures Table IV: Consumers' attitude towards brand extensions: means and standard deviations Table V: Parent brand equity (initial, final and variation): means and standard deviations Table VI: Marginal means and standard deviations : 11133 Copyright Emerald Group Publishing Limited 2009

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Studies; Statistical analysis; Strategic planning; Brand image; Market research; Variance analysis; Culture; Brand equity Spain, United Kingdom--UK, Norway

9130: Experimental/theoretical 9175: Western Europe 7100: Market research Brand extension strategies: perceived fit, brand type, and culture influences Buil, Isabel; de Chernatony, Leslie; Hem, Leif E European Journal of Marketing 43 11/12 1300-1324 2009 2009 2009 Emerald Group Publishing, Limited Bradford United Kingdom Business And Economics--Marketing And Purchasing ISSN 03090566 Scholarly Journals English

Feature References;Graphs;Tables DOI http://dx.doi.org/10.1108/03090560910989902 ProQuest 237033253 URL http://search.proquest.com/docview/237033253?accountid=132872 Copyright Emerald Group Publishing Limited 2009 2010-06-11 ProQuest Business Collection

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