Brand Extension: The Assessment of Perceived Brand Extension Fit in the Education
Context
Damrong Sattayawaksakul, Sokcheng Ung, Kraiwin Jongsuksathaporn, Tran Tien Dat
About the author
Damrong Sattayawaksakul is the Dean of the Faculty of Business Administration at AsiaPacific International University.
Sokcheng Ung is a student in the Faculty of Business Administration at Asia-Pacific
International University.
Kraiwin Jongsuksathaporn is a student in the Faculty of Business Administration at AsiaPacific International University.
Tran Tien Dat is a student in the Faculty of Business Administration at Asia-Pacific
International University.
Abstract
The authors develop a conceptual model of factors that determine perceived brand fit in the
brand extension context. The study examines the relationship of brand image consistency,
product feature similarity, and brand extension authenticity to perceived brand extension fit.
The study conducted among 100 students, which examine an extension of education brand
into a water bottle product. Structural equation modeling serves to test the hypotheses. The
study reveals that perceived brand extension fit can be leveraged from the brand image
consistency, product feature similarity, and brand extension authenticity.
Keywords: Brand extension, Brand image consistency, product feature similarity, brand
extension authenticity, perceived brand extension fit
Introduction
A brand is a set of perceptions and images that represent a company, product or service
(Persuade brands, 2013). While many people refer to a brand as a logo, name, or symbol, a
brand is actually much broader. A brand is the essence or promise of what will be delivered
or experienced. Importantly, brands enable a buyer to easily identify identifies one seller's
product distinct from those of other sellers. Brands are generally developed over time through
marketing strategies. Once developed, brands provide an umbrella under which many
different products can be offered. Recognition of the value of brands has lead marketers to
seek ways to leverage brands to increase their value through brand extension. Marketers use
this brand strategy in attempting to transfer the positive associations of the parent brand to the
extended product. Brand extension strategy consists of placing a well-known brand name on
a new product line or new market segment. According to D. A. Aaker and Keller (1990),
brand extension provides a way to take advantage of brand awareness and brand image to
enter new markets. The well developed strong brand can greatly reduce the risk of
introducing new products on the market by providing consumers with the knowledge and
awareness. In addition, the brand can reduce the cost of distribution to increase the
effectiveness of promotional spending. While there may be benefits in extending the brand,
there can also be a significant risk to brand image dilution. Poor choice for a brand extension
may dilute and weaken the core brand and brand equity. Even though many of the business
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operations have been practicing brand extension strategy to extend their brands and products
for many years, there is limited academic investigation on the nature of the strategy. Most of
the previous researches in brand extension based their investigation on customer attitude.
They addressed two broad areas: how customers’ perceptions of a extended product are
influenced by their perceptions on the parent brand; the performance comparison between
brand extension and other new product development strategies (Leuthesser, Kohli, & Suri,
2003). The prior research has found that perceived fit between original category and the
brand extension serves as an important antecedent of consumer brand extension evaluations
(Batra, Lenk, & Wedel, 2010; Lau & Phau, 2007; Phau & Lau, 2001; Yorkston, Nunes, &
Matta, 2010). However, few examine any details concerning the nature of brand fit. This
study aims to explore components and factors of brand fit. The results of this study would
expand the limited knowledge of the nature of brand fit in brand extension, especially in the
context of education brand in Thailand. The results of this study would also offers guidance
for the practitioners to understand the nature of fit in applying various brand extension
strategies.
Objectives of Research
There are three main objectives of this study. First, this study aims to examine the specific
components and factors of brand fit under the brand extension strategy. Second, the study aim
to examine how the fundamental components and factors of brand fit under the brand
extension strategy interact/relate to each other. Finally, the study also investigate the
phenomenal of brand fit under the brand extension strategy in the context of education brand
in Thailand
Theoretical Background
Brand Extension
Brand extension is defined as placing a well-known brand name on a new product line or new
market segment (e.g., kitchen appliance maker extending to home laundry appliances). J. L.
Aaker (1997) points out that brand extension can be distinguished by direction as vertical or
horizontal. Vertical extensions involve introducing a related brand in the same product
category but with a different price and quality balance. In contrast, horizontal brand
extensions either apply or extend an existing product’s name to a new product in the same
product class or to a product category new to the company. One of the most obvious
differences is whether the extension is in the same or different product category. On the other
hand, Farquhar (1989) and Keller (2003) present two approaches for brand extension:
category extension and line extension. Category extension involves the use of an established
brand name to enter a completely different product category. While, line extension involves
the use of an established brand name to enter a new market segment in the same product
category. Combining both J. L. Aaker (1997) and Keller (2003) of brand extensions results in a
matrix with four different forms of brand extensions, as presented in Table 1: vertical line
extension; vertical category extension; horizontal line extension; and horizontal category
extension.
Table 1 Forms of Brand Extension: Combination of Aaker and Keller approaches
Type/Direction
Line extension
Category extension
Vertical
Vertical line extension
Horizontal
Horizontal line extension Horizontal category extension
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Vertical category extension
A number of factors have been proposed to influence consumers' acceptance of extensions.
Much focus has been on how extension judgments might be shaped by the perceived quality
of the original brand. There is ample empirical evidence that strong quality brands benefit
extensions more than weak brands (e.g.(D. A. Aaker & Keller, 1990; C. W. Park, Milberg, &
Lawson, 1991; J.-W. Park, Kim, & Kim, 2002; Smith & Park, 1992). Another important
factor considered in the literature is the category similarity between an extension and the
original brand. It has been shown that an extension of a strong brand tends to be evaluated
more favorably when the extended category is similar to the original brand category. When
consumers perceive a lack of category fit, the extension is doomed to fail (D. A. Aaker, and
Keller, K., L., 1992).
Cognitive categorization theory
Cognitive categorization theory suggests that humans have a tendency to label object
(product or brand) with descriptive words and phrases (first impression). Label objects as
soon as you aware of them (high quality, bad, good, etc). People can't remember much about
object (product or brand) besides how they were labeled (categorized). These labels are
extremely resistant to change. Grouping items into categories is important because it can
influence individuals’ judgments and decisions (Brough & Chernev, 2012). For example,
categorization has been shown to affect consumers’ choices, perceptions of assortment
variety, and satisfaction.
Perceived Brand Extension Fit
Several brand extension researchers have tried to identify the factors that define successful
brand extensions. They have viewed the fit between a parent brand and the extension
category as a determinant of the success of the extension (D. A. Aaker & Keller, 1990).
Perceived brand fit is the similarity or feature overlap between the parent brand and extension
category (D. A. Aaker & Keller, 1990). Two perspectives on fit: similarity; and relevance,
coexists in brand extension literature. Both perspectives rely on cognitive categorization
theory, which assumes that brands are cognitive categories formed by a network of
associations organized in people’s memory. The associations may be based on shared product
features, attributes, benefits, or other common linkages, such as user imagery, and perceived
brand extension authenticity (D. A. Aaker & Keller, 1990; Spiggle, Nguyen, & Caravella,
2012).
Hypotheses and Conceptual Model
Brand Image Consistency and Brand Extension Authenticity
C. W. Park et al. (1991) examined the role of product feature similarity and brand concept
consistency that differentiate between successful and unsuccessful brand extensions. The
results reveal that brand extension will be successful when having a parent brand with an
image that is compatible with the extension. Furthermore, they found that consumers are
aware of the differences between function-oriented and prestige-oriented concepts. For both
function-oriented and prestige-oriented brand names, the most favorable reactions take place
when brand extensions are made with high brand concept consistency and high product
feature similarity (C. W. Park et al., 1991). In addition, these two factors cause different
impact to brand extension depending on the type of parent brand. For prestige-brands,
extensions must be clearly related to the values and concept of the company. Concept
consistency seems to be the major key to brand extensions for prestige brands. For functional
brands, because of the difficulty of identifying the brand concept, product feature similarity is
relatively more important since common features of a functional brand’s products are easier
to be recognized by consumers. Simonin and Ruth (1998) adopted Aaker and Keller
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dimensions of perceived fit to evaluate brand alliance (one of the forms of brand extension).
They found a collaborative relationship also involves the brand images of each parent brands.
If the two brand images are perceived fit, the co-branded product will be evaluated more
favorably compared to the inconsistent or incompatible brand image. Brand image
consistency could be defined as perceptions about a brand as reflected by the brand
associations held in consumer memory (Keller, 1993). Spiggle et al. (2012) developed the
construct and scale items based on the authenticity and the brand extension literatures. They
conducted four empirical studies where two of them are particularly examine the distinction
and the relationship between brand extension authenticity and brand fit. Based on the second
study which examined the prediction power of brand extension authenticity relative to brand
fit through 236, the results showed that brand image relates to brand fit through some
component of brand extension authenticity. Thus, we hypothesised that:
H1: Brand image consistency relates positively to brand extension authenticity.
Product Feature Similarity and Brand Extension Authenticity
Product feature similarity is defined as the similarity of extension product/service feature or
outlook (e.g. color, building style, service style). Several researchers investigate the product
purchasing intension. Helmig, Huber, and Leeflang (2007) studied the phenomenal and
found product fit and brand fit influence the consumer evaluation of co-branded products.
The arguments are in line with Dickinson and Heath (2006). They adopted both D. A. Aaker
and Keller (1990) and C. W. Park et al. (1991) dimensions of perceived fit to investigate
brand extension strategy. They collected both qualitative and quantitative data regarding 12
experimental extension products from 194 university students in Australia. The results show
that perceived fit between parent brands, based on product category or brand concept
consistency, is positive related to brand extension evaluation. Thus, we hypothesised that:
H2: Product feature similarity relates positively to brand extension authenticity.
Brand Extension Authenticity and Perceived Brand Extension Fit
Consumer evaluation on the relationship of brand extensions and perceived fit with the parent
brand is one of the most enduring findings from branding research (Kim & John, 2008). Prior
researchers identified perceived fit is the most important factor determined brand extension
success. Among others, D. A. Aaker and Keller (1990) suggested perceived fit consists of
three dimensions: complementarity; transferability; and substitutability. They conducted two
studies to investigate on how consumers form attitudes toward brand extensions. In the first
study, they evaluated consumer perceptions on brand fit and brand extension through a set of
six actual brands and 20 hypothetical brand extensions from 107 undergraduate students. The
results show that attitude toward the extension was higher when there was a perception of fit,
and specifically, the relationship of an image for the parent brand with the evaluation of a
brand extension was strong only when there was a basis of fit between the parent brands. On
the other hand, authenticity is becoming an important business concept today. Authenticity is
accepted by both academia and marketers as a core component of successful brands because
it forms part of a unique brand identity that constitutes in brand equity (Beverland, 2005;
Keller, 1993). Brand Extension Authenticity could be define as a consumer’s sense that a
brand extension is a legitimate, culturally consistent extension of the parent brand. Spiggle et
al. (2012) argue that the authenticity of a brand extension relative to the parent brand also
affects its acceptance in the marketplace. It provides an important, complementary construct
for predicting brand extension success and enhancing brand value. Brand Extension
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Authenticity could be one main component to determine the fit in brand extension. Thus, we
hypothesised that:
H3: Brand extension authenticity relates positively to perceived brand extension fit.
Conceptual Model
From the initial review of related research works, Figure 1 represents the conceptual model to
be the study framework and guideline of the investigation of this study.
Figure 1 Conceptual Model
Brand Image
Consistency
H1
Brand Extension
Authenticity
Product Feature
Similarity
H3
Perceived Brand
Extension Fit
H2
Research Methodology
Participants and stimuli brand
The participants for the experiment consisted of 100 undergraduate students at Asia-Pacific
International University. The hypothetical brand extension was AIU brand, with an extension
to water bottle. Table 2 describes the demographic information of the participants in this
study.
Table 2: Demographic Information
Age
Less than 19 years old
19 years old
20 years old
21 years old
More than 21 years old
Gender
Male
Female
No.
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Sophomore
N0.
24
17
Asian (Exclude Thai)
63
19
African
1
14
White/Caucasian
2
41
53
Other
Faculty of study
Business Administration
10
24
Science
16
Arts and Humanities
32
37
Nursing
2
13
13
47
Student Status
Freshman
Race/Ethnicity
Thai
29
Religious Studies
Junior
18
Education and Psychology
Senior
16
Measures
Brand image consistency
The operationalization of this variable uses four items, each measured with seven-point
scales. The items are adapted from Vázquez, Del Río, and Iglesias (2002), C. W. Park,
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Jaworski, and Maclnnis (1986), and Keller (1993). In support of the reliability of the inter
item test, the Cronbach's alpha (.96) exceeds .70, the standard cut-off point.
Product feature similarity
Four items, each measured on a seven-point scale, assess product feature similarity. Vázquez
et al. (2002) and Helmig et al. (2007) provide the items, which produce a Cronbach's alpha of
.91, exceeds the .70 standard.
Brand extension authenticity
To measure this variable, the study uses eight items, each measured on a seven-point scale,
derived from existing literature on brand extension (Spiggle et al., 2012). The Cronbach's
alpha (.815) indicates the items provide good indicators of purchase intentions.
Perceived brand extension fit
Four items, each measured on a seven-point scale, assess perceived brand extension. Spiggle
et al. (2012) provide the items, which produce a Cronbach's alpha of .72, exceeds the .70
standard.
Experiments
The participants were given a questionnaire contains Asia-Pacific International University
brand and its extension - new water bottle products using AIU brand. They were asked to
complete the identified brand image consistence scales, product feature similarity scales,
brand extension authenticity scales, and perceived brand extension fit scales. Toward the end
part of the questionnaire, the subjects were asked to complete the demographic information.
Analysis
SEM and AMOS 20.0 were used to test the conceptual model. Measurements of the overall
fit evaluate how well the model can reproduce the observed variables’ covariance matrix. The
goodness-of-fit index (GFI), a descriptive overall measurement, requires a minimum value of
.9, and the same threshold applies to the comparative fit index (CFI) and the incremental fit
index (IFI). The quotient of χ2 (chi-square test) and degrees of freedom (df), as well as the
root mean square error of approximation (RMSEA), were also employed as important
measurements of fit. For the χ2/df measure, a value up to 3.0, and for the RMSEA, a value up
to .5 indicate good model fit. The structural equation model meets all these criteria (GFI =
.986, CFI = .996, IFI = .996, χ2/df = 2.886, RMSEA = 0.067). Figure 2 shows the
measurement models for each construct and the overall structural model, including the
standardised coefficients of the different paths.
Figure 2: Results of structural equation analysis (N = 100)
H1 (.39)
Brand Image
Consistency
H3 (.69)
Brand Extension
Authenticity (r2=.60)
Product Feature
Similarity
Perceived Brand
Extension Fit (r2=.48)
H2 (.43)
Global Fit Measures:
χ2/df = 2.886; RMSEA = 0.067; GFI = .986; CFI = .996; IFI = .996
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Results
The conceptual model captures the important antecedents of perceived brand extension fit.
An adequate share (r2=.48) of variance in perceived brand extension fit can be explained. A
large share (r2=.60) of variance in brand extension authenticity can be explained. The results
indicate support for all hypothesised paths. The relationship between brand image
consistency and brand extension authenticity is significantly positive, in support of H1. H2,
which posits a positive relationship between product feature similarity and brand extension
authenticity, also is supported. In line with H3, the relationship between brand extension
authenticity and perceived brand extension fit is significantly positive.
Discussion and Implications
The researchers determine the total effect (i.e., sum of direct and indirect effects) on
perceived brand extension fit. The antecedents that positively affect perceived brand
extension fit, separate from brand extension authenticity, are brand image consistency and
product feature similarity. Brand extension authenticity explains 69 percent of the total
effects on perceived brand extension fit. Furthermore, product feature similarity is stronger
influence on perceived brand extension fit than brand image consistency. The result is in
contrast with other findings which indicate that brand image consistency has the stronger
impact on perceived brand extension fit (Helmig et al., 2007; C. W. Park et al., 1991;
Simonin & Ruth, 1998).
In the model, there is strong evidence that brand extension authenticity has a strong positive
influence on perceived brand extension fit. The result is similar with research finding by
Spiggle et al. (2012), who indicate that brand extension authenticity is difference from but
complements perceived brand extension fit.
The results of this study confirm the power of the use of an established brand name in new
product categories. This new category to which the brand is extended can be related or
unrelated to the existing product categories. A renowned brand helps an organization to
launch products in new categories more easily. In this study, AIU brand core product is
education with a likely successful extending to water bottle. Education institution, with
tuition fees as its main revenue, could extend its brand outside its core product category to
capture the opportunity for the new source of revenue. However, education institution must
aware of risks in brand extension. Before extending its brand to other category, the institution
must evaluate its product feature similarity, brand image consistency, brand extension
authenticity, and perceived brand extension fit.
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