Consumers’ Evaluation of Brand Extensions: An Application of Multiple-Group Causal Models in Assessing Cross Product Category Measurement Equivalence

Brand extensions are among the most important and popular strategies followed by the companies in recent days. A major part of brand value stems from its contribution to launching a new product in the market. Brand extension is the "use of established brand name to enter into new product categories" (Aaker & Keller, 1990). Brand extension strategies are most extensively used in marketing because, by launching a new product under the established brand name, firms hope consumers will respond favorably to the new offering through developing and communicating strong brand positioning, augmenting brand awareness and quality associations, and increasing the probability of trial by shrinking new product risk for consumers (Reddy, Holak & Bhat, 1994; Chowdhury, 2001; Taylor & Beardon, 2002). Brand extension strategy has been considered to be more profitable than introducing a new brand in the market. The reasons for extending brand across sectors includei. The escalating cost of establishing brands in a competitive market, as consumers become immune to promotional activities, creates greater pressure to leverage existing brands into new product categories (Aaker & Keller, 1990);ii. In an increasingly busy market place, brand extensions allow manufacturers' brands to hold more shelf space and retain higher profiles in customers' minds (Farquhar, 1990);iii. Brand extensions can control the costs of distribution expenditures (Morein, 1975); andiv. Brand extensions help in increasing the chance of a new product's success and reducing launch costs (Kapferer, 1997; Chowdhary, 2002). The basic premise behind brand extension is the manufacturer can develop a new product or service that can piggyback on the perceptions and feeling associated with a parent brand. The best example for this is Caterpillar, whose strengths lie in the manufacturing of construction and mining equipment. When the company extended into the footwear market, that extension was considered a success story in Caterpillar's history. The reason for success is the company's ability to elicit the same association for the extended product as the parent brand.Virgin Group, a successful global company, extended its products to airline, cruises, bridal services, telecommunications, etc. Virgin's consumers with positive associations and attitude are more likely to try the brand extension than choose a completely unfamiliar brand in that product category.Yahoo began as a search engine in 1994 but has now expanded into different fields such as auctions, chat rooms, games, stock quotes, financial information, shopping portals, and many other services. Again, an example of brand extension.The article is organized as follows. First, the study reviews relevant literature on brand extension evaluation and identifies the gaps from extant literature. Second, based upon the extant literature, the study forms hypotheses. The study discusses the methodology for data collection and analysis in the fourth phase. Finally, it discusses theoretical and managerial implications, and provides some directions for future research.Review of LiteratureAaker and Keller (1990) studied the effects of certain brand and product categoryrelated aspects on the attitude consumers develop toward hypothetical extensions of reputable brands. They proposed a relationship between perceived quality of the original brand and consumers' attitude toward extensions in unrelated product categories (Aaker & Keller, 1990). The authors suggested this perceived quality transferred to the extension category to the extent that there has been sufficient congruence between the original product category and the extension category (Aaker & Keller, 1990). The transfer of positive associations is related to the extent of similarity the consumer perceived between original product category and the extension.Van Riel, Lemmink, and Ouwersloot (2001), replicated Aaker and Keller's (1990), study and extended it to the service domain. …