A Modular Approach to Study the Impact S of Brand.

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A Modular Approach to Study the Impact S of BrandExtension in Pakistan

Tariq Jalees* & Tahir Ali

The objectives of the study were to (1) Identify the factors that affect theconsumer evaluation of brand extensions. (2) Develop and empirical modelson of the variable associated with consumer evaluation brand extension. (3)Tests the validity of the empirical model. While reviewing the literatureseveral variables were found to have to have relationships on howconsumers evaluate the brand extensions. The variables used in theempirical models are : (1) Similarity (2) Reputation (3) Innovativeness (4)Perceived risk (5) Multiple extensions (6) Parent brand characteristics (7)Concept and consistency (8) Brand extension fit. The conceptual definitionsof different authors were used for identifying the determinants of the abovevariables. Based on these variables a questionnaire was developed thatcontained 24 questions. Nine questions were related to the personal dataand the rest were related to the subject study. A sample size of 700 was

selected for the survey. As per 1989 census the population of Karachi is 9.43millions. Karachi is divided into 18 towns with different level of populationsand UGC. Stratified proportionate random sampling (in proportion to thepopulation of each UGC) was used for drawing 700 samples. Based onfocus groups discussion the following four different brand extensions werefinalized each representing different level of closeness among them: (1)Tapal Tea Viz. Tapal Tea Bag. (b) Life Buoy Soap Viz. Lifebuoy Shampoo.(c) Sufi Vegetable Oil and Sufi Washing Soap.(d) Woodward GripeViz.Woods Ward Toothpaste.

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Researchers have made significant contributions in the last fewdecades for explaining how consumers evaluate brand extension(Nkwocha, 2000). However, the scopes of the previous researcheshave certain degree of limitation. Most of the previous have used upto four factors for ascertaining how consumers evaluate brandextension. The stimuli in most of the previous studies have been thehypothetical brand extension, and the subjects in most of thestudies were college students. The contribution of this study is thatit has attempted to ascertain the relationship of eight differentvariables that are related to consumer evaluation of brandextension. More over, four different real life brands have been used

in this study and the subject have been drawn in such a mannerthat it is a representative sample. To the best of authors knowledgeno such comprehensive study on brand extension in Pakistansscenario has ever been carried out.

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*Tariq Jalees, PAF-Karachi Institute of Economics & Technology, Pakistan


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11..11..00 PPUURRPPOOSSEEOOFFTTHHEESSTTUUDDYY

The objectives of the study were to (1) Identify the factors that affectthe consumer evaluation of brand extensions. (2) Develop anempirical model on of the variables associated with the consumerevaluation of brand extension. (3) Tests the validity of the empirical

model.

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The dependent variable for this study is consumer consumerevaluation of the brand extension. The eight different variablesalong with their relationships with dependent variable are expressedthrough eight different eight variables different hypothesis which aredemonstrated below:

Figure -1

Empirical Model

H1SIMILARITY

H2REPUTATION

H3INNOVATION

CONSUMER

H4 EVALUATIONPERCEIVED RISK

OF

H5MULTIPLE EXTENSION

BRAND

H6 EXTENSIONPARENT BR. CHARACTERISTIC

H7CONCEPT AND CONSISTENCY

H8BRAND EXTENSION FIT


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11..44..44LL IITTEERRAATTUURREESSUURRVVEEYY

Brand extension is using an established name of one product classfor entering another product class (Aaker, 1991). Kotler &Armstrong, 1996 defines brand extension as a strategy wherein firmuses a successful brand name for launching a new or modified

product or line. Ambler and Styles (1997), observed that althoughbrand extension and line extensions are used interchangeably bysome of the authors but there is a conceptual difference in thedefinitions of the two. The definition proposed by Ambler andStyles(1997) are: When a company launch an existing product andbrand name in the same product category with the same name byadding new flavor, changing form or color of the product, orchanging ingredients or package sizes, it comes in the category ofline extension. These line extensions are commonly used in Dairyproducts, and shampoo. Danones launched of different yogurtflavors in different sizes and packaging , a fat free yogurt, all are theprime examples of line extension (Kotler & Armstrong, 1996)

1.4.0 Variable and Measures

(1) SSIIMMIILLAARRIITTYY

The similarity refers to degree of resemblance of consumerperception on the extensions and the core brand (Smith andPark 1992). Most of the researches have deliberated on thelevel of perceived similarity between the original andextended brand and found that if the level similarity ishigher between the core and extended brand category thenthe extended brands would have more chances of inheritingthe positives and negative aspects of the core brand (Aakerand Keller 1990; Park, et al. 1991; Boush and Loken 1991;Dacin and Smith 1994; Keller and Sood 2001/2).

(2) RREEPPUUTTAATTIIOONN

The leverage providing capabilities of parents brands toextensions varies from brands to brands. It is higher forstronger brand and lower for weaker brand (Keller andAaker 1992; Smith and Park 1992). Brand reputation refersto consumers perceptions on the quality associated with a

brand (Aaker and Keller 1990; Barone, et al. 2000). Theconsumers tend to evaluate those brands more favorablythat have higher perceived quality as compared to lowperceived quality brands (Keller and Aaker 1992;

(3) PPEERRCCEEIIVVEEDDRRIISSKK

Consumers before purchasing the goods feel uncertainty inreference to expected loss that may incur from purchasing


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and using of the product. This uncertainty is referred asperceived risk (Bauer 1960; Cox 1967). Derbaix 1983;Gronhaug and Stone 1995; Mitchell 1999 advocatesuncertainty in reference to (1) consequences of making amistake; and (2) uncertainty about the outcome.

Most of the research on perceived risk suggests that theconsumers when dealing with recognized brand feel that ithas lesser degree of perceived risk (Cox 1967; Rao andMonroe 1989). Thus a well known brand not only inducestrial but also helps in relieving the risk (Nkocha, 2000) .Berlyne (1970) observed that novel stimuli give adversereactions. However repeated exposure helps in developingfamiliarity with a brand which not only helps in decreasingperceived risk and increasing positive affect. (Baker, et al.1986; Obermiller 1985).

(4) IINNNNOOVVAATTIIVVEENNEESSSS

An individual who is receptive to new ideas and is willing totry new practices and brand is considered to possess apersonality trait of innovativeness (Heim, 2005). Theinnovators are venturesome; they try new ideas as someriskwhere as late adopters (laggard) are traditionalbound, they are suspicious of changes, and adoptinnovation when it has become some thing of tradition itself.

(Kotler and Armtrong, 2006). The innovative consumertends to get comfort when they take risk.

(5) MMUULLTTIIPPLLEEBBRRAANNDDEEXXTTEENNSSIIOONNSSAANNDDEEVVAALLUUAATTIIOONNThe consumer perception of brand image and associationmodified with the introduction of brand extension. Thus thisprocess has an impact on the perception of fit between abrand and its future extension. On the introduction of newbrand extension the consumer recalls the previousperception of the brands and modifies it that affects the fitbetween a brand and its future extension. (Lynch and Sru11

1982).

(6) BBRRAANNDDEEXXTTEENNSSIIOONNAANNDDPPEERRCCEEIIVVEEDDFFIITT

Different researchers have perceived fit, differently. Theterm fit in brand extension research are focused towardsthree concepts, (1) Complementary, (2) Suitability, and (3)Transferability, indicating the degree of synergy between thetwo products (Aaker & Keller, 1992). Rousch and Loken


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1991, believe that typicality is an important concept ofperceived fit. Where as (Park, Mlberg and Lawsan 1991) areof the opinions that product similarity and brand conceptconsistency, are the determinants of brand extension andperceived fit. Klink & Smith, (1997) are of the opinions thatdeterminants such as component parts, product feature,

product function, needs they satisfy, usage situations,manufacturing processes and manufacturing process arerelated to perceived fit.. The research relating to perceivedfit has been criticized by several researchers Klink andSmith (1997) while criticizing such studies observed thatmost of such studies had focused on product related orattributes information while comparing two product classes.Additionally, these researched have restricted attributeinformation to one cue i.e. brand name (Klink & Smith,1997). These authors were of the opinions that these brandextension studies have emphasis on (1) attribute information,and (2) single cue, therefore, it may give an inflated effect of

perceived

(7) PPAARREENNTTBBRRAANNDDCCHHAARRAACCTTEERRIISSTTIICC&& EEVVAALLUUAATTIIOONN

The terms such as product attributes, product benefits andcostumers characteristics are generally used forconceptualization of brand Association (Keller, 1993). Brandnames such as Sony have broad association and are usedfor diversified range of products. Brands such as close uphas narrow association and is used for one or few products(Bousch and Loken, 1999). Dacin and Smith (1994),

observed that the consumers confidence on evaluation ofwould be positive for those brands that are associated withseveral product, provided there is no significant paritybetween the qualities of product, in fact addition of productwould have positive evaluation, provided the quality level ofadditional product is same.

(8) BBRRAANNDDCCOONNCCEEPPTTCCOONNSSIISSTTEENNCCYY&& EEXXTTEENNSSIIOONN

The market is dynamic, and is always changing. In responseto these dynamic markets, firms modify there offering, enterdifferent market segments, reposition their offering. In view of

such complexities, the measure of fit while introducing brandextension may be relevant in one situation and not in anothersituation (Kapoor, 2005). Park et.al. (1991) were of theopinion that the validity of fit measure between core brandand brand extension are based only on one similarity couldbe a debatable issue. They were of the opinion thatconsumer evaluation would only be positive for those brandextensions that have consistency in the brand concept.Brand concept is Brand unique abstract meaning (e.g. high


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status that typically originate from a particular configurationof product features.(e.g. High price, expensive lookingdesign, etc.) and a firms efforts to create meanings for thesearrangement. (Park .et, al. 1991, p.186)

2.0.0 Methodology

2.1.0 Measurements

The dependent variables and independent variables of this studyhave been discussed in the literature survey, The empirical modelsexplaining the relationships of the variables have also beendiscussed earlier, the list of those variables are presented below::

a) Dependent variable

Consumer evaluation of brand extension.

b) Independent Variable

Similarity

Reputation of parent brands

Perceived risk

Innovativeness

Multiple brand extensions

Parent Brand consistency

Brand extensionfit

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The sample size for this study was 700. As per 1989 census thepopulation of Karachi is 9.43 millions, and has 18 towns withdifferent level of populations. Stratified proportionate randomsampling (in proportion to the population of each UGC) was usedfor drawing 700

2.3.1 Stimuli Selection

Based on focus groups discussions the following four differentbrand extensions were finalized each representing different levelof closeness among them:

a) Tapal Tea Viz. Tapal Tea Bag.b) Life Buoy Soap Viz. Lifebuoy Shampoo.c) Sufi Vegetable Oil and Sufi Washing Soap.d) Woodward Gripe Water and Woods Ward Toothpaste.


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4.0.0. Discussion and Conclusion

The major findings finds are disused below:

a) The hypothesis one was that brands extension to similar

category would have positive consumer evaluation ascompared to those brands that have been extended to non-similar category. The respondents found high levels ofsimilarities between brand extensions of Tapal Tea viz. TeaBag and Lifebuoy Soap viz. Shampoo. The relationships ofvariables Similarities, and consumer overall evaluation forthe brands extensions Tapal Tea Viz. Soap and LifebuoySoap Viz. Shampoo shows very strong relationships withcoefficient of determinations being 0.89 and 0.82respectively. The Betas were 0.95 and 0.89 for brandsLifebuoy and Tapal respectively.

The respondents found low level of similarities betweenbrand extensions Sufi Vegetable Oil viz. Washing soap,and Woodward Gripe Water Viz. Tooth paste. Weakerrelationships were also found between variables Similaritiesand consumer overall evaluation for the brand extensionsSufi Vegetable Oil viz. Washing Soap and WoodwardGripe Water viz. Tooth Paste with coefficient ofdetermination being 0.22 and 0.03 respectively. Thus thehypothesis was substantiated for the entire four stimuli,therefore it could be inferred that the hypothesis is true.

b) The hypothesis two was that the consumer evaluation ofbrand extension would be positive for those brands whoseparents brands have stronger reputation as compared tothose whose parents brands who have weaker reputation.The results indicates that strong relationships exist on brandreputation and consumer evaluation for the brandextensions Tapal Tea viz. Tea Bag and Life Buoy viz.Shampoo, with R2 being 0.64 and 0.68. Incidentally, thereputations of these two brands were high with Means of4.35 for Tapal and 4.80 for Lifebuoy.

The brands Sufi Vegetable Oil and Woodward GripeWater were found to have weaker reputations with means of2.44 and 2.55 respectively. The relationships of Reputationof brand and Overall consumer evaluation for brandextensions Sufi Vegetable Oil viz. Washing Soap andWoodward Gripe Water viz. Tooth Paste were weak withR2 being 0.35 and Woodward with R2 of 0.33. Thus theabove analysis confirms that the variable reputation of the


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parent brands and overall consumer evaluation hadstronger relationship for the brand that has strong reputationand weaker relationships for the brand that had weakerreputation.

c) The hypothesis three was that that there is a positive

relationship on how consumer perceived risk and over allevaluation of brand extension.

The average level of perceived risk of the individuals washigh with a mean of 3.95. The relationships of variableperceived risk and overall evaluation for the brandextensions Sufi-Vegetable Oil Viz. Washing Power,Woodward Gripe Water viz. Toothpaste were comparativelystronger with coefficient of determination being 0.61 and0.0.33 respectively.

The relationships on perceived risk and overall evaluationfor brand extensions Tapal Tea and Lifebuoy Tooth paste

were weaker with coefficient of determinations being 0.26and 0.03 respectively.It may be pointed out that the relationship between thevariables Similarity and Overall Evaluation for brandextension of Tapal Tea and Lifebuoy was found to behigher with coefficients of determination being 0.89 and 0.82.Thus it could be concluded that the consumers having highlevel of perceived risk tends to have stronger relationshipwith the products that are dissimilar as compared to thosethat are of similar in nature.

d) The hypothesis postulates that there is a positive relationshipbetween the consumer level of innovativeness andoverall evaluation of brand extension. The level of theinnovativeness in the respondents was found to be high withmean of 4.02. The relationships of innovativeness andOverall Evaluation for Brand extension Sufi-Vegetable OilViz. Washing Soap was high with R2 being 0.72. For otherbrands the relationships were weaker 0.29 for Tapal tea viz.Tea bag, 0.12 for Lifebuoy Soap Viz. Shampoo 0.12, and0.04 Woodward Gripe Water viz. tooth paste.

The above analysis shows that there is no consistent trend in

the relationships of Innovativeness and consumerevaluation of brand extension For one dissimilar brandextension that is Sufi Vegetable Oil Viz. Washing power therelationship was stronger [r2= 0.72], and for other dissimilarextension the relationship was weak [r2= 0.04]

e) The hypothesis five was that the consumer evaluation ofthose brand extension would be positive that have reputationof introducing multiple brands. Respondent were of the


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opinions that Brands Tapal tea and Lifebuoy have astronger reputation of introducing multiple brand extensionswith mean of 4.19 and 4.23. And the brands Sufi-VegetableOil and Woodward Gripe water have weaker reputation ofintroducing multiple brands with mean of 2.85 and 2.96.

The relationships between Perception of Multiple Brandingand Overall evaluation was found to be weak withcoefficient of determinants being 0.30 for brand extensionsTapal Tea viz. Tea Bag, and 0.18 for Lifebuoy Soap viz.Lifebuoy Shampoo. For the other two brands that have lowreputation of introducing multiple brands had weakerrelationships with coefficient of determinations being 0.11 forSufi Vegetable Oil Viz. Washing Soap, and 0.06 forWoodward Grip Water Viz. Tooth Paste.

f) The hypothesis six was that the consumer evaluation ofthose brand extension would be positive whose parent brand

have strong association Association means how the parentbrand could be used in variety of product categories. Forexample Sony has broad Association as its extensions couldbe found numerous product categories. The respondentswere of the opinion that the brand Tapal had the strongestAssociation with a mean of 4.34. For other brands therespondents opinions was that the Associations were weakwith mean being as high as 3.59 for Woodward and as lowas 3.02 for Sufi. However, the relationships between theassociation and overall evaluation were found to bestronger for the Tapal with R2of 0.56 and Woodward with R2of 0.69. Incidentally, the consumers have rated the variable

association highly for these two brands. Thus thehypothesis that there is a stronger relationship betweenbrand Association and consumer evaluation have beensubstantiated.

g) The hypothesis seven was that the consumer evaluationwould be positive for those brands whose parent brands thathave more concept consistency. Concept consistencyrelates to Price and Design. In this case 4 sets of multipleregression analyses were carried out between price anddesign with overall evaluation four the four brandsseparately. The relationship between overall consistency

and consumer evaluation was strongest for brand Tapalwith coefficient of determination being 0.73. For the otherbrands coefficient of determination ranged between 0.36 forSufi and 0.18 for Woodward Gripe Water For brandTapal, the coefficient of design was significantly strongerthan coefficient f price betas being 0.74 and 0.01respectively. This indicates that in the relationship ofconsistency and overall evolution of Brand Tapal, the


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contribution of design is comparatively stronger, than thecontribution of price In case of brand Sufi, thecontribution of design was stronger with betas being 0.38for design and 0.29 for price. For the brands Lifebuoy andWoodward, the contributions of price were found to bestronger with coefficient of prices being 0.40 and 0.28

respectively

h) The hypothesis eight was that the consumer evaluationwould be positive for those brands whose parent brandand Extended brand, have more Fitness. The Aaker haveused four variables for measuring the consumer perceptionof fitness between the parent brand and extended brand.The four variables are complimentary, Substitutable andDifficulty, and Transferability. Four different set of multipleregressions were carried based for these four variables andoverall consumer evaluation for the four brands, separately.

The regression of consumer perception of fitness andoverall evaluation indicates that brand Tapal had thestrongest relationship with R2 being 0.97. The other brandslifebuoy and Sufi both moderate relationships with coefficientof determination being 0.42 for both the brands. The brandWoodward had the weakest relationship between thefitness and consumer overall evaluation of brands withcoefficient of determination being 0.14. In case Tapal thecoefficient of substitute and transferability were found to becomparatively stronger with Betas being 0.48 for substituteand 0.34 for transferability. In case of Lifebuoy soap theBeta value of 0.37 was stronger for variable transferability

and they were insignificant for other variables. In case ofSufi comparatively stronger relationship was found forTransferability with Beta being 0.31 and comparativelyinsignificant for other variables. In case of Woodward, veryweak betas were found for all the variables. The beta valuewas as strong as (0.13) for complimentary and as weak aslow as 0.02for variable difficulty.

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A Modular Approach to Study the Impact S of Brand.

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