BRAND NAME AND PRICE CUE EFFECTS WITHIN A BRAND EXTENSION CONTEXT

ABSTRACT This research considers brand name and price cue interaction effects on perceived quality judgments within a brand extension context. A lab experiment was conducted within the context of a new grocery product and brand name quality was manipulated at two levels, high and moderate. Price information was manipulated at two levels, high and low. Results suggest that high price information may enhance perceived quality evaluations of new offerings extended from moderate quality parent brands, and that there may be a limit to the enhancing effect of high price on perceived quality evaluations of a new offering extended from a high quality parent brand. Further, results showed that low price information was interpreted as an indicator of strong value as opposed to low quality for extensions introduced by both high and moderate quality brands. The findings have important implications for manufacturers of moderate quality brands in particular, and brands that are pursuing growth opportunities by a brand leveraging strategy. The findings, along with theoretical and managerial implications, are discussed. INTRODUCTION Consumers often base new product quality judgments on extrinsic quality cues such as brand name or price when intrinsic information about new product quality is not available (Kirmani & Rao, 2000). The present research examines the joint use of extrinsic quality cues and considers thensubsequent impact on perceived quality and value judgments (cf. Rao & Monroe, 1989; Dodds, Monroe & Grewal, 1 99 1 ; Purohit & Srivastava, 200 1 ; Miyazaki, Grewal & Goodstein, 2005). The research is conducted within a brand extension context because many consumer product firms leverage brand equity by extending brands into new product categories (Keller, 2008). Finally, the research focuses on high and moderate quality brand name cues. Extant research on quality cue effects generally considers low and high brand name quality cues, but not moderate quality brand cues. Similar to information economic models of search behavior (Stigler, 1 961 ; Salop & Stiglitz, 1 977), this research assumes that consumers approach new product judgments with beliefs regarding the distribution of brands on a quality continuum ranging from low to moderate to high quality (Urbany, 1 986; Moorthy, Ratchford & Talukdar, 1 997). Consumers conceptually place each brand along this continuum. In this conceptualization, a brand's quality, or strength, is derived from consumer familiarity with the brand as well as the specific associations consumers hold about each brand. The highest quality, or strongest, brands are those that are well-known to consumers and that possess favorable and unique associations that are strongly held by consumers (Keller, 1993). Consequently, high quality brand are familiar brands that enjoy strong, favorable, and unique brand associations. Moderate quality brands are also familiar brands, but these brands generate only moderately favorable brand associations and these associations may be held with less strength. Finally, low quality brands are less familiar to consumers and may even generate unfavorable brand associations. Results from this research suggest that new grocery products extended from moderate quality brands may receive a significant increase in perceived quality evaluations when paired with a high price, and that there may be a limit to the enhancing effect of high price on the product evaluations of a new grocery product extended from a high quality brand. The findings from this research have implications for manufacturers of moderate quality brands in particular, and brands that are pursuing growth opportunities by a brand extension strategy. Manufacturers following an exploit brand equity strategy by introducing extensions farther away from the parent brand often have concerns that less similar extensions may be received unfavorably, especially when introduced by parent brands perceived as moderate quality (Volckner & Sattler, 2006; Keller & Aaker, 1992). …