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MSc. in Business Administration – Marketing Track
MASTER THESIS
“Vertical Brand Extensions and the Moderating Role of
Consumers’ Product Involvement: A comparison between step-up
and step-down brand extensions”
Student: Kyriaki Gavriilidou
Student Number: 10603239
Date: August 31
st, 2015
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Statement of Originality
This document is written by Student Kyriaki Gavriilidou who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
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Acknowledgements
First of all I would like to sincerely thank my thesis supervisor Dr. Karin Venetis from the University of Amsterdam for her precious help, guidance, feedback and support. Her dedication and knowledge sharing were extremely valuable and determinant for the successful completion of my research study.
I would like to dedicate and share my thesis to my parents, Vasilis and Anastasia, as well as to my brother, Dimitris, expressing in this way my immense and deepest gratitude and appreciation to them. There are no words to demonstrate how thankful I feel about my family who were the invisible heroes behind me and my personal achievements so far. Their endless love, psychological support, motivation and confidence prompt me to surpass every difficulty and achieve my objectives.
I would also like to thank my relatives and close friends for their continuous interest and support. They never stopped to encourage me and be by side in any possible way. Their presence and love never let me feel alone. I feel blessed surrounding by such friends and relatives.
Last but not least, I owe a big thanks to all those who took part in this study and contributed to the completion of the experimental process. Without their participation this study would never have been finished.
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Abstract
This study is based on conflicting findings regarding the impact of vertical line extensions on the parent brand. A group of studies found evidence that the introduction of vertical brand extensions has negative spillover effects to parents’ brand image, whereas another group of studies supported that vertical extensions do not necessarily dilute the brand image of the parent brand, and particularly in case of step-up extensions, the parent brand is revitalized. Common facts on the experimental process between the two wider groups implied that consumers with different levels of involvement reacted diversely toward the extension and the parent brand subsequently. This research investigated the moderating effects of product involvement to the extension evaluation and parent brand post-evaluation. A number of 305 respondents took part in the experiment answering the questionnaires. The sample was constituted by high and low involved subjects. The results of the study supported the
premise that consumers’ involvement was the answer to the previous contradictory findings. More specifically, step-up brand extension did not dilute the parent brand image. On the contrary, high involved consumers post-evaluated the brand significantly better. Step up extensions proved to be more delicate since the parent’s brand image was diluted for the high involved subjects, while the low involved ones post-evaluated the parent brand better in terms of attitude, but not in terms of overall quality. Moreover, the study proved that step up line extensions get accepted easier by high involved consumers. Although, the study failed to find evidence for the hypothesis that step down extensions are evaluated better by low involved consumers.
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Table of Contents
ACKNOWLEDGEMENTS ... 2 ABSTRACT ... 4 1. INTRODUCTION ... 7 1.1 BACKGROUND ... 7 1.2 RESEARCH GOAL ... 91.3 RESEARCH QUESTION AND SUB-QUESTIONS ... 10
1.4 CONTRIBUTION ... 11
1.5 OVERVIEW OF THE REMAINDER THESIS ... 11
2. THEORETICAL FRAMEWORK ... 11
2.1 THE CONCEPT OF BRAND EXTENSIONS ... 11
2.1.1. Horizontal brand extensions ... 13
2.1.2. Vertical brand extensions ... 14
2.1.3. The evaluation of brand extensions ... 15
2.1.4. The risk of brand dilution ... 16
2.2.PRODUCT INVOLVEMENT ... 19
2.2.1 High- vs. Low – Involved Consumers ... 20
2.2.2 Consumers’ product involvement and the evaluation of brand extensions ... 21
2.2.3 Consumers’ product involvement and the post-evaluation of the parent brand ... 22
2.3.CONCEPTUAL FRAMEWORK AND HYPOTHESES DEVELOPMENT ... 27
3. METHODOLOGY ... 28
3.1.PRETESTING ... 29
3.1.1. Pretest 1: product category selection ... 29
3.1.2. Pretest 2: Brand selection ... 31
3.1.3. Pretest 3: brand name selection ... 34
3.2.MAIN RESEARCH ... 35 3.2.1. Research Design ... 35 3.2.2. Development of stimuli ... 38 3.2.3. Measures ... 40 4. RESULTS ... 41 4.1.SAMPLE SELECTION ... 41
4.2.SCALES VALIDATION:RELIABILITY AND CORRELATION ... 42
4.3.DESCRIPTION OF THE SAMPLE ... 43
4.3.1. Differences among experimental conditions ... 43
4.3.2. Total Sample ... 47
4.4.MANIPULATION CHECK ... 50
4.5.HYPOTHESES TESTING ... 52
4.5.1. Extension evaluation ... 52
4.5.2. Parent brand evaluation ... 59
5. DISCUSSION ... 66
5.1.GENERAL DISCUSSION ... 66
5.1.1. Evaluation of step-up and step-down line extensions... 67
5.2.1.PARENT BRAND POST- EVALUATION ... 69
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6. CONCLUSIONS ... 73
6.1.SUMMARY ... 73
6.2.LIMITATIONS AND FUTURE RESEARCH ... 75
7.0 REFERENCES ... 77
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1.
Introduction
1.1
Background
The recent twenty years, brand extensions have become increasingly popular in the marketplace as a way for introducing new products (Loken, 1993). Intense market
competition, high financial costs of introducing a completely new brand in the market and the risk of potential failure, have led managers to shift to brand extensions. By leveraging the brand equity of successful brands, managers reduce the risk and expenses for launching new products (Pitta & Katsanis, 1995; Musante, 2007).
There are two types of extensions; horizontal and vertical. Horizontal extensions apply the name of an existing brand to a new product either in the same product category (horizontal line extensions) or in a different product category (horizontal brand extension) from that the company already competes in (Aaker & Keller, 1990; Pitta & Katsanis, 1995). On the other hand, vertical (line) extensions involve the launch of a similar brand in the same product category, but often at a different price or quality level in comparison to the parent brand (Kim et al., 2001). A step-down brand extension is introduced at a lower quality level and price point, while a step-up brand extension is introduced at higher quality level and price point compared to the parent brand (Pitta and Katsanis, 1995; Kim and Lavack, 1996).
Interestingly, the recent years it has been noticed an increasing interest about step-up brand extensions. The reason behind that new trend is companies’ efforts to attract current and potential customers who are seeking products with more features and higher level of prestige and quality and target new market segments (Kim & Lavack, 1996 and Kirmani et al., 1999). Despite the increasing interest, little research has been conducted in the field of step-up vertical extensions. The main concern of companies though is the reaction of
current customers toward the extension and their post evaluation of the parent brand, while companies are trying to capture new market segments by introducing vertical brand
8 extensions (Kirmani et al., 1999). Generally, brand extensions entail the risk of causing negative feedback effect on the parent brand, known as “dilution effect”.
From the studies investigated the negative feedback effects of brand extensions on the parent brand image, the majority of them have been focused on the horizontal brand extensions, while only few have examined vertical extensions. There is a significant number of researchers who believe that vertical extensions dilute parent brand beliefs. Large part of the marketing society, which has investigated brand extensions, supports that vertical brand extensions, either step-up or step-down, have negative feedback effects to the parent brand (Aaker & Keller; 1992, Loken & Roedder John; 1993, Kim et al.; 2001, Kim & Lavack; 1996). On the other hand, there are studies which not only did not they find negative spillover effects, but also they argued that vertical extensions had a positive effect on the parent brand by reinforcing its brand image (Lei et al.; 2008, Munthree et al.; 2006, Zimmer and Bhat; 2004, Rantal et al.; 1998, Dall’ Olmo Riley et al.; 2013).
There is strong evidence that the inconsistencies around the negative feedback effect on parent’s brand beliefs can be attributed to the lack of involvement. In the studies where the parent brand image was tarnished, the respondents lacked either the motivation or the ability to process the information. Most of the studies provided participants with very limited information depriving them the ability to process them in depth and comprehend them (Aaker & Keller; 1992, Loken & Roedder John; 1993, Kim et al., 2001). Whereas, the opposite findings came from studies that examined product categories which were considered generally as highly- involved to the participants. Involvement refers to “a person’s perceived relevance of the focal objects based on inherent needs, values, and interest” and particularly product involvement refers to “general level of interest in or concern about a product class” (Sun, 2010). According to the Elaboration Likelihood Model (ELM), high-involved consumers are characterized by the “motivation” and “ability” to process product related information and
9 they exert more cognitive effort to scrutinize them, while, low-involved consumers lack either the motivation or the ability to process product-related information and their decision making process is based mainly on more salient information cues, such as price and brand name (Petty & Cacioppo, 1983). So, the kind of salient information -positive or no, consistent or no with what they had already know- will determine their reactions towards the new brand. Besides, Aaker and Keller (1992) explicitly mentioned that they did not control participants’ level of involvement.
Apart from few studies which have highlighted the determinant role of involvement in consumers’ evaluations of brand extensions (Hansen & Hem, 2004; Maoz & Tybout, 2002 and Nkwocha et al., 2005), no effort has been directed toward testing the moderating role of involvement on vertical extensions and on the evaluation of the core brand.
To sum up, we are expecting to find evidence that involvement level will influence
consumers’ evaluation for the extensions and their beliefs for the parent brand image after the introduction of the extension. More specifically it was expected to resolve the conflicting findings by proving that vertical extensions do not always tarnish parent’s brand image.
1.2
Research Goal
Companies introducing step-up brand extensions intend to capture a greater market share by attracting current and new customers and revitalize their parent brand by providing higher quality products. So, managers are concerned about the success of the new marketed product as well as the protection of the parent brand. Unfortunately, companies have a blurred knowledge about the consequences of the brand extensions on brand image. Among all researches investigated brand extensions and the dilution effect, a common reference point is that sub-branding strategy is the most appropriate strategy among the others for introducing brand extensions (Smith and Park, 1992; Ries and Trout, 1986; Loken and Roedder John, 1993).
10 Taking into consideration all the previous studies about step-up vertical brand extensions, a fundamental question comes up; how would consumers evaluate step up and step down brand extensions when they have different levels of involvement? How would they evaluate the parent brand under different levels of involvement after the launch of the extension?
To sum up, the starting point of this study is the extreme conflict among the studies that have investigated the dilution effect in vertical brand extensions. Previous studies have largely ignored to investigate the moderating role of involvement in step-up and step-down brand extensions and particularly to unravel the blurred scene of the dilution effect. In other words, the purpose of this study is to investigate how involvement influences consumers’ evaluation of step-up brand extensions and their post-evaluation of the core brand under the sub-branding strategy.
1.3
Research Question and Sub-questions
This research study will attempt to answer the following research question:
“How does product involvement influence the relationship between vertical brand extensions and extension evaluation under the sub-branding strategy? And how
involvement moderates the impact of brand extensions on the post-evaluation of the parent brand?”
In order to answer the research question we have to answer previously a number of questions:
- What are the brand extensions and what types of brand extensions are there?
- How do brand extensions influence the parent brand?
11 - How is involvement defined and how does it influence consumers’ evaluations of brand extensions and their post- evaluations of the parent brand?
1.4
Contribution
This research study will provide a substantial contribution to the current and limited knowledge about vertical line extensions. Based on the literature reviewed, this will be the first time that product involvement will be tested as a moderator of consumers’ post- evaluations of the parent brand, shedding light on the existing conflicting findings. Last but not least, this research study will be a useful reference point for managers for developing their branding strategies.
1.5
Overview of the remainder thesis
The remainder of the paper proceeds as follow: the first part of the study is constituted by describing the literature review in the field of brand extensions, the studies which
investigated the dilution effect and their findings underlining the extreme and interesting inconsistencies, and final the existing studies about involvement and how it is correlated with the conflicting findings. Then the conceptual framework and hypotheses development follows. In the third part of the study is described the research methodology. The chapter four includes the data analyses results’ presentation. Chapter five includes the discussion of the outcomes found in the experiment followed by managerial implications. The last part presents a general conclusion, limitations and suggestions for future research.
2. Theoretical Framework
2.1
The concept of brand extensions
The last thirty years the capitalization of established brand names is the most common strategy for launching new products (Maoz & Tybout, 2002). A successful brand is the
12 company’s most valuable asset as consumers are already familiar with it and they have formed strong, unique and favorable associations with the brand (Pitta & Katsanis, 1995). Introducing a new brand in the market place requires a huge financial budget for advertising campaigns, promotion, and any action for making the new brand known to consumers and creating a strong brand image. However, though being challenging the introduction of a new brand in the market, it is at the same time very costly and risky. The reason why companies are increasingly introduce brand extensions is based on the notion that the strong brand equity of successful brands will lead to the creation of strong, unique and favorable associations for the new brand. Successful and well-known brand names serve as signals for quality, trust and satisfaction. Therefore, in a competitive market where the introduction of new products is innumerable, consumers use brand names to process product-related attributes and benefits. In that case, brand names facilitate consumers’ decision making and reduce perceived risk (Nkwocha et al., 2005). Thus, using an existing strong brand name for launching a new product is a wise strategy for minimizing the risks of potential failure, costs and augmenting the possibilities of a successful product introduction. In other words, firms tend to leverage the equity of established brands to create easily new profitable brands (Balachander & Ghose, 2003). According to Aaker and Keller (1990), between 1977 and 1984 40% of the 120 to 175 new brands introduced each year in supermarkets were extensions. Additionally, in 1986 more than $15 billion in retail sales and more than 34% of apparel and accessory sales were brand extensions. The number of brand extensions of consumer products which are introduced in 1990, as they constitute over 81% of the total introductions (Nkwocha et al., 2005).
Brand extensions can be introduced either in the same product category where the parent brand already exists or in different product categories (Pitta & Katsanis, 1995). Usually, when brand extensions are introduced in the same product category are mentioned as line
13 extensions, while when they introduced in different categories, are known as category extensions. Further, brand extensions can be classified to horizontal and vertical.
2.1.1. Horizontal brand extensions
Horizontal extensions apply the name of an existing brand to a new product either in the same product category or in a different product category from that the company already competes in (Aaker & Keller, 1990; Pitta & Katsanis, 1995). The price level of the new product is at the same price range of the parent brand. An example of horizontal line extension is the introduction of Diet Coke and Diet Pepsi (Pitta and Katsanis, 1995).
The extension that is introduced in a related or same product category to the parent’s brand, is known as ‘’horizontal line extension’’. A line extension refers to the launch of new flavors or refined packages, providing to consumers a wider variety of products. With line extensions companies aiming mainly to respond to the market trends and be competitive. It is also a way to keep retain current customers and boost their interested for the brand by enriching the product line (Kapferer, 1994). An example of horizontal line extension is the introduction of Diet Coke and Diet Pepsi (Pitta and Katsanis, 1995). On the other hand, the products that are introduced in a completely new category form which the current brand operates in, are called in the literature ‘’horizontal brand extensions’’ (Aaker & Keller, 1990; Pitta & Katsanis, 1995) or ‘’category extensions’’ (Kapferer, 1994). In this study the first term will be used. An example of horizontal brand extension is the Virgin apparel or discs, when the brand is known as an Airline company. Both horizontal extensions aim to increase sales and grow market share. So, in both cases the success point is to leverage the existing brand equity, reinforce the brand and boost revenues by expanding the current customer base (Dawar and Anderson, 1994; Milewicz and Herbig, 1994).
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2.1.2. Vertical brand extensions
Vertical (line) extensions involve the launch of a similar brand in the same product category, but often at a different price or quality level in comparison to the parent brand (Kim et al., 2001). A vertical brand extension is a very common strategy in many industries. By
introducing a vertical line extension, managers capitalize the equity of a well-known brand and they mainly focus on capturing a greater market share. Vertical line extensions have two dimensions associated with the different quality and price level.
A vertical extension can be stretched either downward (step-down line extensions) or upward (step-up line extensions). A step-down brand extension is introduced at a lower quality level and price point. Such an example is the introduction of Candillac’s Cimarron (Pitta and Katsanis, 1995) and the Courtyard Inn by Marriott Hotel (Kim and Lavack, 1996). In contrast, a step-up brand extension is introduced at higher quality level and price point compared to the parent brand. Maxwell’s standard videotape with the EHG brand, the American Express Platinum card, the Jaguar XJ220, and Gallo wines are examples of step-up extension (Pitta & Katsanis, 1995; Kim & Lavack, 1996; Musante, 2007; Kirmani et al., 1999). Vertical brand extensions are so common in the market because, by extending upwards or downwards the brands, companies can target new customers, be competitive, and take advantage of potentials to grow in other segments, and increase their customer base. More specifically, in step-down extensions companies can increase their revenues and customer base by delivering more affordable products to consumers, under a well-known and
prestigious brand name. Consumers who have brand awareness but cannot afford it, will be eager to embrace the new extension. Whereas, step-up extensions are mainly focused on the current customer base, by providing them with an even more prestigious product which will compete the competitive brand in the high-end product category (Aaker, 1997).
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2.1.3. The evaluation of brand extensions
According to Park, Milberg and Lawson (1991) the evaluation of brand extensions depends on the perceived similarity, “fit”, between the parent brand and the extension. When a brand is stretched, consumers try to find similarities between the new product and the brand’s existing products, which can be concrete- feature correlations and attribute matching- or abstract, such as similarity in usage imagery. Concept consistency is also a determinant factor for the extension evaluation and refers to the perceived congruity between the existing image of the core brand and that of the brand extension. Namely, when evaluating brand extensions, consumers try to find a logical connection between the core brand and the extension brand. This coherence refers to either how consistent the image of the initial brand is with that of the extension, or how similar the attributes of the new marketed product are with those of the parent’s brand.
It is commonly accepted that if the new product’s attributes are consistent with the existing strong and favorable beliefs of the parent brand, then consumers will accept easier the extension (Park et al., 1991; Musante 2007). ’’Affect transfer’’ explains that when there is high perceived “fit” between the core brand and the extension brand, consumers are more likely to transfer all positive associations and attitudes they have for the parent brand to the extension (Aaker & Keller, 1990; Park et al., 1991; Kim et al.,, 2001; Barone, 2005). Hence, it is likely consumers to evaluate more favorably the brand extension.
Considering now vertical line extensions, where the brand is extended in the same product category with the core brand, the perceived fit will be determined by the difference of quality level and price point between the core brand and the extension brand. As both step-up and step-down extensions are dissimilar from the original brand in terms of quality and price, consumers’ familiarity or likeability of the core brand will not affect their evaluations in both cases. Consumers will focus on the new brand image and benefits resulting from the usage of
16 the new product. More specifically, when a brand is stretched up, the quality of the new product is higher and the brand reflects higher status, prestige, or functionalities. On the contrary, when a brand is stretched down the quality of the new product is lower and it becomes accessible to a wider range of people, so automatically it loses its exclusivity and sophistication (Kirmani et al., 1999). According to Kirmani et al. (1999), when a prestige-oriented brand is stretched upwards the higher quality level and status reflected by the new product lead consumers to form a positive evaluation for the extension. That happens because consumers tend to be positively predisposed for gaining prestige and status and being one of the “elite” in any possible way. On the other hand, when the newly launched product has a lower quality level, the image of the new brand will not reflect any “superiority” or differentiation compared to competitive brands. And usually the fact that the new extension comes from a higher quality brand has the tendency to create beliefs of the “cheaper version” of a reputable brand. However, horizontal brand extensions (mentioned in the following parts of the study as neutral extension) which are introduced at the same price range as the current brand, the fit is high and consumers are expected to use the associations they have from the parent brand to the extension evaluation (Bridges et al., 1997; Kim and Lavack, 2001). Thus, we expect the following:
H1a: Consumers will evaluate significantly more favorably a step-up than a neutral
extension.
H1b: Consumers will evaluate significantly less favorably a step-down than a neutral
extension.
2.1.4. The risk of brand dilution
Great concerns have been raised recently from researchers and practitioners about how consumers change their beliefs about the parent brand after the introduction of an extension.
17 A fundamental concern of managers, in the case of vertical brand extensions, is whether the new product designed to attract a new market segment will be also received favorably by the current customers (Kirmani et al., 1999). The notion of this fear stems from the fact that in vertical brand extensions the difference between the core brand and the extension lies in the different quality and price balance.
Categorization theory is extensively used by researchers for conceptualizing consumers’ evaluation of brand extensions. According to the categorization theory, people use cognitive schemas for organizing information about objects. “A schema is a cognitive structure that represents knowledge about a concept or an object”. People tend to develop schemas about entities- products and product categories - about salient information of those entities (Musante, 2007). In other words, people form in their minds a set of accepted and relevant information about a product category. So, any new information that consumers receive regarding that fix schema, they compare it with existing information, in terms of similarity and congruity. For example, if Starbucks, the well-known chain of coffee stores, launched a coffee with ice cream flavor, it would be considered as consistent with the existing brand schema (coffee brand). In contrast, if Starbucks marketed a line of personal computers, that product would be considered as incongruent with the core brand. That’s because the salient information about a coffee brand are completely different for those consumers probably have formed about the category of personal computers (Musante, 2007).
The “bookkeeping model”, a model of categorization theory, argues that when consumers receive new information regarding the brand extension, they reassess their beliefs about the core brand. According to the bookkeeping model, any incongruent attribute information about the brand extension induces an incremental change in parent brand’s beliefs (Loken and Roedder John, 1993). As far as the vertical extensions concerned, it is the different balance of price point and quality level between the parent brand and the extension which
18 signals the inconsistency of product-related information. Therefore, usually consumers after the introduction of a new product update their existing beliefs about the parent brand.
However, there are many researchers (Pitta and Katsanis 1995, Kim and Lavack; 1996, Kirmani et al.; 1999) who support that despite the inconsistent information consumers receive in vertical line extensions, they do not evaluate the parent brand in the same way after the introduction of step-up and step-down extensions. After a step-down extension is introduced, there is always the fear that consumers may feel betrayed by the parent brand, as the prestige gets lost (Pitta and Katsanis, 1995). The lack of prestige and status in the extension brand usually fade parent’s brand image. In contrast, in upscale extensions, despite the existence of incongruent information related to the quality level, the newly introduced product may be perceived as an accomplishment of the company (Lei et al., 2008) and it may reinforce parent brand recall due to the extension’s higher status and prestige (Boisvert, 2012).
Based on the previous analysis, we expect that consumers will evaluate more favorably the parent brand after the introduction of the step-up brand extension than of the step-down brand extension.
H1c: When a step-up line extension is introduced, the post-evaluation of the parent brand will
be significantly more favorable than its initial evaluation.
H1d: When a step-down line extension is introduced, the post-evaluation of the parent brand
will be significantly less favorable than its initial evaluation.
However, it is already mentioned at the beginning of the study, there are contradictory findings regarding the post-evaluation of the parent brand. As it is inferred from the
condition of those researches, consumer’s product involvement could justify and explain the inconsistent outcomes. Besides, involvement was missed to be taken into consideration in any of those studies, even if previous analyses pointed out the influence of involvement of
19 brand extensions (Nkwocha et al.; 2005, Maoz & Tybout; 2002, Hansen & Hem; 2004,
Laurent & Kapferer; 1985). Despite the important role of product involvement in consumers’ information process and purchase decisions, researchers have largely ignored to investigate the moderating role of involvement in vertical brand extensions. The line of reasoning behind the involvement as key reason for those conflicting findings as well as the studies that revealed supported different outcomes will be explained in greater detail below.
2.2. Product Involvement
Involvement refers to “a person’s perceived relevance of the focal objects based on inherent needs, values, and interests” and particularly product involvement refers to “general level of interest in or concern about a product class” (Sun, 2010).Generally, many studies have proved that product involvement is a determinant factor for consumer evaluations of brand extensions. The role of involvement is explained by the “Elaboration Likelihood Model” (ELM). According to the ELM model, people differ in their way of evaluating information about a product, due to their different level of involvement with the product category (Petty & Cacioppo, 1983). Consumers with different levels of involvement process differently product-related information and differ in their way of searching information. The degree of involvement determines the extent of cognitive effort that consumers exert before their purchase decision process (Laurent & Kapferer, 1985). Moreover, the level of product involvement is also associated with the consumers’ purchase perceived risk, their willingness to try new products, and their attitude toward dissimilarities between the parent brand the extension brand (Nkwocha et al., 2005; Hansen & Hem, 2004). However, in our study we will focus on perceived quality of the product regarding to different levels of involvement.
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2.2.1 High- vs. Low – Involved Consumers
High-involved consumers are characterized by the “motivation” and “ability” to scrutinize the information provided about a product. The motivation exists when a consumer finds the product important and interesting for his life. On the other hand, ability refers to the knowledge or capability of a consumer to evaluate and process the information. Some researchers have proved that involvement is closely related to consumer product knowledge (Baker et al., 2002). More specifically, consumers who are highly involved with a product category they also tend to be more knowledgeable about the specific category. When consumers have the ability and motivation to process product-related information, they are highly involved with a product category and they engender a “central route” to persuasion, in which they exert more cognitive effort to elaborate product-relevant information and evaluate them relying on elaborative inferences about quality, value and performance. Besides, high-involved consumers, before making a purchase decision, seek actively more product information, and use more criteria and highly diagnostic cues to compare the products of the same category to insure quality and value. So, the level of quality is important for highly involved consumers and focal to their decision making, as it considered as a highly diagnostic cue (Lei et al., 2008).
On the other hand, when consumers lack either the ability or motivation to process product information, they characterized as low-involved and engender a “peripheral route” of persuasion, in which they based on instantly salient cues to evaluate products. Low-involved consumers do not tend to seek additional information about the product, and do not compare product attributes in the given product category (Zaichkowsky, 1985). Thus, before making their purchase decision, low-involved consumers rely on extrinsic salient cues such as price and brand name. This kind of information is readily recognized and there is no need for further elaboration in order to infer more profound meanings (Petty and Cacioppo; 1983, Lei et al.;
21 2008). Consequently, consumers do not exert cognitive effort to elaborate that information and form their evaluations considering those salient cues.
2.2.2 Consumers’ product involvement and the evaluation of brand extensions
The level of consumers’ product involvement can explain how they react to vertical brand extensions. Product involvement is closely associated to consumers’ knowledge and experience about a product or a product class. According to Chen and Liu (2004), experienced consumers are able to conceive product innovation and are able to draw attribute correlations between the parent and the extension brand. This facilitates them to use the product knowledge they have to the extension evaluation. This implies that high-involved consumers who are knowledgeable enough about the specific product category will be able to evaluate and appreciate step-up the premium quality level of step up extensions, while the lower price of the step down extensions will not be a motivating factor for them to evaluate positively the extension. Additionally, according to the ELM, when a step-up brand extension is introduced, high involved consumers will be able to perceive, process with scrutiny, and comprehend the higher quality of the new product, due to their central route they follow when they evaluate new information. So, by embracing the new extension, consumers will have the chance to gain the prestige and status reflected by the new product and benefit from the advanced quality attributes of the new product. Conversely, step-down extension is equal to lack of exclusivity and prestige and to inferior quality attributes (Kirmani et al., 1999; Chen and Liu, 2004). Conversely, a ‘’novice’’ is able to find similarities between the parent brand and the extension, when there is not fit, since they don’t have attribute-related associations stored in their memory.
In contrast, low- involved consumers, due to limited product knowledge they possess, take the peripheral route and they rely on readily available and salient cues to evaluate the new information incorporated in the extension (Petty and Cacioppo, 1983). This is implied also by
22 Chen and Liu (2004), whose study suggested that a ‘’novice’’ is able to find similarities between the parent brand and the extension, when there is not fit, since they don’t have attribute-related associations stored in their memory. In the case of vertical brand extensions, consumers with lower level of product involvement will focus on the price point while evaluating the brand extension because it is more salient than quality and it is readily perceived. While a step-down brand extension is introduced, low-involved consumers will focus on the lower price, which is attractive. Moreover, the brand name of the new extension which incorporates the name of the parent brand (as we said, the brand extensions in this study will be introduced under the sub branding strategy) will be another salient cue, signaling some of the parent’s brand status. As a consequence, low-involved consumers are more likely to evaluate more favorably step-down than step-up brand extensions.
Considering, all the previous the following is hypothesized:
H2a: High-involved consumers will evaluate significantly more favorably a step-up brand
extension than a neutral, compared to low-involved consumers.
H2b: Low-involved consumers will evaluate significantly more favorably a step-down brand
extension than a neutral, compared to high-involved consumers.
2.2.3 Consumers’ product involvement and the post-evaluation of the parent brand
The Bookkeeping model and Fishbein’s attitude theory suggest that any inconsistent information about the product attributes results in diluting the parent’s brand beliefs. Hence, the dilution of the parent brand is caused due to the perceived incongruent attribute information of the new product. In the case of vertical brand extensions, consumers will perceive as inconsistent attributes the higher quality level and price point of the extension, and they will be confused comparing the quality and price of the new product with those of the parent brand. As a consequence, confusion will be caused regarding the initial positioning
23 of the brand and consumers will evaluate the core brand less favorably than previous, when the extension will be introduced (Kim & Lavack, 1996). Based on these theories, the majority of the studies that investigated brand extensions argue that any perceived inconsistent information provided in the extension will result in tarnishing parent’s brand image (Kim et al., 2001, Kirmani et al., 1999, Loken and Roedder John; 1993). Even in the case of vertical brand extensions where the brand is extended in the same product category, the different price and quality balance will cause negative feedback effects. This notion is relied on the fact that the different level of quality and price will create confusion to the consumers’ mind and the parent brand’s image will be blurred (Kim & Lavack; 1996, Kim et al., 20012). On the other hand, other studies that investigated vertical extensions argued that there is no dilution effect when a brand is vertically extended (Lei et al.; 2008, Munthree; 2006, Zimmer and Bhat; 2004, Rantal et al.; 1998, Dall’ Olmo Riley et al.; 2013).
Since this is this study focuses on those conflicting findings, they will be analyzed in depth. More specifically, Aaker and Keller (1992) examined consumers’ post evaluations of the core brand and found that regardless the quality level of the parent brand, the introduction of the brands into different product categories (horizontal brand extensions) did not harm the parent’s brand image. The authors interpret those findings as a result of the strong brand image and assume that parent brands are kind of “immune” when they are stretched in different product categories, implying at the same time that this would not be the case if the brand was stretched in the same product category. However, these findings are completely conflicting with those of their study two years earlier (Aaker and Keller, 1990), where the introduction of a horizontal brand extension with lower quality, did not weak consumers beliefs for the parent brand. Loken and Roedder John (1993) provided evidence for negative spillover effects on the brand equity regardless the type of the extension (horizontal brand extensions and vertical brand extensions). The authors chose the shampoo product category as the original category and then they extended the brand both in the same and different
24 product categories where the attributes that were changed were the quality and gentleness level. The information given to the subjects was about lower quality level and less
gentleness of the newly launched product, which were supposed to be perceived as
negative. Unexpectedly, the dilution effect found only for “gentleness” but not for “quality”. The authors attributed the outcome to the fact that the quality attribute was not salient in that moment and as a result consumers did not perceive the lower quality level of the extension. Then, they generalized the findings anticipating negative feedback effect on the parent brand image also in vertical line extensions. Nevertheless, the fact that the quality attribute was not salient in that moment and that was the reason why participants did not negatively evaluate it, despite inferior quality, demonstrates the low-involvement condition of the subjects. Kim et al., (2001) supported that generally vertical brand extensions, either step-up or step-down, will dilute parent brand’s beliefs, as the different level of price and quality will be perceived by the consumers as inconsistent attributes. In that study, the information given to the participants was limited and distancing techniques for increasing or diminishing the perceived distance between the parent brand and the extension were used. The level of distance in each condition aided consumers to avoid confusion about the image clarity of the parent brand and it would mediate the negative evaluation of the parent brand after the introduction of the extension. By changing the distance, the authors intended to manipulate the perceived fit between the parent brand and the extension relying on the categorization theory that uses the “typicality-based model”. That is, when a product is considered as typical with a product category, it shares attributes with other members. So, when an extension is perceived as typical of a product category, the inconsistent
information would have a negative feedback effect on the parent brand, because the two brands are closely related and the focus will be shifted to the inconsistent information. In contrast, when an extension is considered as atypical, the parent brand and the extension will be more distanced from each other, and the inconsistent information of the extension
25 will not affect negatively the parent brand. In fact, the authors found negative feedback effects on parent brand beliefs and support for their notion that the distancing techniques moderate those effects. However, according to Nkwocha et al., (2005), “changing” the dimensions of fit in order to aid consumers maintaining the image clarity of the parent brand after an extension is introduced, is a mode to make the new information readily available and salient to the consumers. This in turn, diminishes the required cognitive effort
elaborative inferences and analytical processes, which facilitate consumers to evaluate the new information and the parent brand. Consequently, those techniques are particularly effective to low-involvement conditions.
Conversely,
Munthree et al. (2006) conducted a qualitative study in large firms in the beverage industry and found that not only did not step-up line extensions harm parent brand beliefs, but also they served as revitalization for the parent brand by contributing to the brand equity. Lei et al. (2008) investigated vertical service line extensions in the hotel industry and the impact of those extensions on the parent brand. The findings supported that step-up service line extensions enhanced the post evaluation of the parent brand more than step-down service line extensions. The difference in that study, in comparison with the others, is that the researchers choose the hotel industry because it is considered as important by consumers and they have many experiences. Accordingly, Dall’ Olmo Riley et al. (2013), Zimmer and Bhat (2004), Rantall et al. (1998) found that step-up extensions enhanced the parent’s brand image. Besides, the Rantall et al. (1998) conducted the experiment in the trade show for bikes, where people passionate for that product visited, while Zimmer and Bhat (2004) mentioned the respondents’ high familiarity and usage degree with the tested brands. All the above implied consumers under high involvement condition.The determinant role of product involvement on consumers’ evaluation process and specifically on brand extension is confirmed also by numerous studies. In particular, according
26 to Morin (1999) and Boisvert (2012), after experiencing a vertical brand extension, consumers rate their attitudes toward the core brand. The rating of their attitudes, and thus the formation of their evaluations toward the parent brand, depends in great extent to their level of involvement. It is also argued, that an extension can have an impact on the parent brand by enhancing parent brand recall.
As it was mentioned earlier, high-involved consumers tend to make comparisons between the brands in the same product category and they comprehend better new information. When prestige and exclusivity or quality attributed are further “reinforced” by a step-up brand extension, high-involved consumers have the knowledge, ability, and motivation to scrutinize and comprehend about the new information. Although perceiving the discrepancy of information between the parent brand and the extension, high-involved consumers tend to disregard dissimilarities and see beyond them, in depth, by making elaborative inferences about product’s performance and value, and the parent brand. So, the quality of the new product will be compared with competitive brands in the product class and its superiority will be proved, high-involved consumers will consider the new extension as an achievement for the company and parent’s brand beliefs will be reinforced (Boisvert, 2012).
Based on the previous analyses, we argue that after a vertical brand extension is introduced, high involved consumers will focus on the quality of the new product and they infer its subsequent performance and they will “transfer” their inferences on the parent brand. So, in the case of step-up brand extensions, high-involved consumers will have more positive evaluations for the parent brand the parent’s brand image will be reinforced, as the higher quality will be considered as an accomplishment for the firm.
On the contrary, low-involved consumers are based on readily accessible and salient cues – in our case, on price- and they are not characterized by elaborative thought. According to Maoz and Tybout (2002), low-involved consumers seem to follow a more heuristic process to
27 evaluate the parent brand after an extension is introduced. The fact that low-involved individuals have not either the ability or the motivation to exert a cognitive effort to evaluate the new information, implies that any inconsistent information creates confusion to them about what they already know. In their effort to resolve that discrepancy easily and without elaborative thinking, they use any salient cue which is available each time (e.g. price) as a pattern to solve these inconsistencies. This heuristic process usually leads consumers to a cognitive bias, as they are not able to make elaborative inferences about the parent brand. Thus, the inconsistent information regarding the difference price point of the extension will destroy the parent’s brand image clarity in their minds weakening consumers’ beliefs about the parent brand (dilution effect). Consequently, the following are hypothesized:
H3a: After the introduction of a step-up line extension high-involved consumers will
post-evaluate it significantly more favorable he parent brand than low-involved consumers, compared to its initial evaluation
H3b: After the introduction of the step-down line extension, low-involved consumers will
evaluate significantly more favorable the parent brand than high-involved consumers, compared to its initial evaluation
2.3. Conceptual framework and hypotheses development
The conceptual framework of this research study is presented in figure 1. To sum up, this paper is going to investigate how consumers will evaluate step up and step down line extensions (H1a & H1b) and how the introduction of such extensions will influence the post-evaluation of the parent brand (H1c & H1d). Then, the moderating role of consumers’ product involvement on the extension evaluation will be tested (H2a & H2b). Last but not least, the influence of involvement on the post-evaluation of the parent brand will be investigated (H3a & H3b).
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Figure 1: Conceptual framework
3. Methodology
In order to investigate the hypotheses presented above, an experiment which investigated vertical line extensions was conducted. For the purpose of this research, an existing parent brand was used. The use of an existing parent brand is used extensively in literature by practitioners studying vertical extensions, since the control over the manipulation is easier, and consumers have different associations and attitudes towards the brand. (Lei et al., 2008a; Kim et al., 2001; Kirmani et al., 2009). Besides, the entire rationale of brand extensions lays on leveraging the brand equity of an existing brands (Aaker and Keller, 1990; Pitta and Katsanis, 1995). On the other hand, for fictitious brands, respondents do not have any established brand knowledge and attitudes, something that is basically prerequisite for a brand to be extended (Dwivedi et al., 2010).
Brand extension (Step up/ step down/ neutral
extension) Level of involvement (High/Low involvement) Parent brand evaluation Brand extension evaluation H2 H1a & H1b H1c & H1d H3
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3.1. Pretesting
Three pretests were conducted prior to the main experiment in order to prepare the main research. Every pretest had its specific purpose which is described below. Each pretest was answered by the same sample of 26 respondents with ages between 18 and 30, mainly students and young professionals.
3.1.1. Pretest 1: Product category selection
The first pretest aims to reveal the product category that is characterized by a big spread regarding consumers’ product involvement. Namely, it was necessary a product category that would include both high and low involved consumers. The rationale behind the selection of only one brand instead of one high and low involved product categories, is laying on the fact that it would be very difficult to select, in the next step, two different brands which should be equivalent in terms of brand knowledge, likability, and favorability. Since the manipulation of these effects for both brands at the same time would be quite difficult, there was a risk of bias on the results.
Twenty six respondents answered a questionnaire regarding their level of involvement about five different product categories. The selection of product categories based on the fact that all of them should include known brand names and be commonly used by most of people. After careful consideration, watches, personal computers, smart phones, beers, and cameras, are selected for the test. Participants were asked to answer ten questions for each product category. In order to test the level of involvement, Zaichkowsky’s Revised Personal Inventory was used. The ten-item scale of product involvement includes being important, relevant, meaningful, valuable, interesting, exciting, appealing, fascinating, needed and concerned (Zaichkowsky, 1994).These questions measured subjects’ level of involvement in a 7-point Likert scale.
30 After summing the responses to Likert items, we obtained Likert scales, one per product. In order to understand every scale's distribution, box plots were constructed. Box plots revealed that cameras and watches' scales distributed uniformly around 5, which is considered the cut point between low and high involved consumers.
The above mentioned scales were categorized, using 5 as a cut point, producing frequency tables. Both cameras and watches seem appropriate for our research. However, cameras are preferred since the low and high involved consumers are almost equal.
In the analysis scales were treated as interval variables. This can be done as long as all questions use the same Likert scale and that the scale is a defensible approximation to an interval scale, which is the case in this study.
So, based on the results of the first pre-test, Digital Cameras seem to be the most appropriate product category for our research since it concentrates the highest spread among the respondents.
Table 3.1: Consumers’ total involvement for each product category
Total Involvement Assesment
Product Category Low involvement (mean score<5)
High Involvement (mean score ≥5) Watches 8 (30.8%) 18 (69.2%) PCs 1 (3.8%) 25 (96.2%) Smart Phones 4 (15.4%) 22 (84.6%) Beers 20 (76.9%) 6 (23.1%) Cameras 12 (46.8%) 14(53.8%)
31 Figure 3.1: Box plot for consumers’ involvement spread for every product category
3.1.2. Pretest 2: Brand selection
The purpose of the second pretest is to select a brand of cameras which would meet certain criteria regarding consumers’ likability, favorability and attitudinal predisposition toward the brand. The selection the parent brand is of fundamental importance for the success of the experiment since the both step-up and step-down line extensions will be based on the parent brand and will leverage its brand equity.
Six cameras’ brands were selected for the second pretest; Canon, Nikon, Sony, Olympus, and Fujifilm. Respondents called to answer to questions about their level of familiarity, likability and overall attitude towards the brand as well as to express their feelings/thoughts for each brand. The selected brand should score very high in terms of familiarity, neutral in terms of
32 favorability and overall attitude towards the brand, and should evoke similar associations among the participants. High familiarity ensures that participants have certain knowledge about the brand which will enable them to evaluate the brand and process any brand related information (Maoz & Tybout, 2002). On the other hand, neutral favorability and attitudinal predispositions will ensure the avoidance of ceiling or floor effects on consumers’ attitudes towards the newly launched step-up and step-down extensions accordingly. Besides, congruent associations among the participants ensure consistency about brand’s status and perceptions associated with price and quality which are of fundamental importance for the introduction of the vertical line extensions (Kim et al., 2001).
Familiarity and favorability were measured in 7-point Likert scale; (1=not familiar at all, 7=very familiar) and (1=not favorable at all, 7=very favorable) respectively. We calculated the sample mean of the Likert item ‘’Familiarity’’. In this case, mean is used as a score to show which brand is more familiar to consumers.
Table 3.2: Consumers’ familiarity, attitude and quality perception toward the brands (means)
Brand Level of familiarity Attitude toward the
brand Quality Canon 5.81 5.59 4.54 Sony 5.04 4.82 5.19 Nikon 5.23 5.45 5.65 Olympus 4.04 4.09 4.50 Fujifilm 3.27 3.06 3.65
Differences among brands were tested through a one-way ANOVA, given the fact that the assumption of normality is met (p=0.00). The test showed statistically significant differences in familiarity among brands (p=0.00). Although, no statistically significant differences existed between Canon, Sony and Nikon (p=0.141). To measure consumers' favorability for each brand, we calculated the sample mean of the Likert item favorability, constructing a
means-33 plot. Differences among brands were tested through a one-way ANOVA, given the fact the assumption of normality is met (p=0.00). The test showed statistically significant differences in familiarity among brands (p=0.00). No statistically significant differences existed between Canon, Sony and Nikon (p=0.089).
Brand attitude was measured in a three-item 7-point Likert scale, testing perceived quality (1=low quality, 7=high quality), perceived superiority (1=inferior, 7=superior) and likelihood of purchasing (1=not likely at all, 7=very likely) (Kim et al., 2001; Aaker & Keller, 1990). After summing the responses to Likert items Quality, Likelihood of Purchasing and Superiority we obtained Likert scales, one per brand. The scale was reliable since Cronbach's Alpha is greater than 0.81 and the three items were significantly correlated (p<0.01). Differences among brands were tested through a one-way ANOVA. In this case ANOVA is robust to possible violations of normality due to sample sizes (>25). The test showed statistically significant differences in Attitude among brands (p=0.00). No statistically significant differences existed between Canon, Sony and Nikon (p=0.052).
However, because brand’s perceived quality is a determinant factor for vertical extensions, the index of means of quality is presented separately before the computing to the overall attitude variable. More specifically, since the 'distance' between the upward and downward to be the same from the parent brand, the parent brand should be somewhere in the middle, so that consumers will see the upward extension as equally different and far away as the downward extension. Based on the results, the Olympus and Fujifilm brand are obviously not suitable for our experiment, so they are rejected. Although, there are not big differences in the variables among Canon, Nikon, and Sony brands, Sony brand is selected for the main research, because attitude and favorability doesn’t score so high as for other two. Besides, means above 5.5 for the others are very high and there is a risk to deal with ceiling effects.
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3.1.3. Pretest 3: brand name selection
As it was mentioned at the beginning of this study, the step-up and step-down line extensions will be introduced under the sub-brand strategy. According to Milberg et al., (1997), the name of the newly introduced extensions could influence the effectiveness of the sub-brand strategy. Thus, the third and last pretest was necessary to select a brand name for both the step-up and step-down extension that would be unfamiliar and neutrally likable to the participants. Using the same scales used in Milberg’s et al. (1997) study, familiarity was measured on a 7-point scale (1=not at all familiar; 7=extremely familiar), as well as likability (1=not at all likable; 7=extremely likable).
For the step-up line extension the selection was made among the following six brand names: Sony ProShotM1, Sony Evolution M1, Sony Focus, Sony INFusion M1, Sony Virtue M1, and Sony ProEx M1.The construction of a means-plots (Appendix II) did not show differences between the brand names' familiarity means, but showed some between the brand names' likability. Differences among names were tested through a one-way ANOVA, given the fact the assumption of normality is met. The test showed not statistically significant differences in familiarity among names (p=0.399). On the other hand statistically significant differences existed between in likability (p=0.10).
Table 3.3: Consumers’ familiarity and likability towards brand names for step-up brand extension
Measure ProShot M1 Evolution M1 FOCUS INFusion M1
Virtue M1 ProEx M1 Familiarity 2.77 (2.00) 2.81 (2.04) 2.81 (2.04) 2.38 (1.70) 1.92 (1.20) 2.27 (1.80) Likability 4.42 (1.75) 4.23 (1.88) 4.19 (1.60) 3.31 (1.59) 2.92 (1.60) 3.62 (1.79)
35 ‘’Sony ProShot M1’’ was chosen for the upscale extension because it had the most neutral likability among the others.
For the selection of the brand name for the step-down extension, participants asked to answer the same questions for the following brand names; Sony ColourShot, Sony PicYou, Sony LifeShot, Sony Luminance, Sony Blue, Sony Vibrant. The construction of a means-plots did not show any differences between the brand names' familiarity or likability means (Appendix II). Differences among names were tested through a one-way ANOVA, given the fact the assumption of normality is met. The test showed not statistically significant differences in familiarity or likability among names (p=0.229, p=0.380).
Table 3.4: Consumers’ familiarity and likability towards brand names for step-down brand extension
Measure ColourShot PicYou LifeShot Luminance Blue Vibrant
Familiarity 2.96 (1.89) 2.58 (1.86)* 3.00 (2.08) 2.62 (1.39) 2.12 (1.34) 2.12 (1.34) Likability 4.04 (2.07) 3.88 (1.75) 4.19 (1.60) 3.36 (1.55) 3.38 (1.60) 3.35 (1.65)
*Kurtosis: -.367
‘’Sony PicYou” was chosen for the step-down line extension since the combination of familiarity and likability scores met better the selection criteria than the rest of the brands.
3.2. Main Research
3.2.1. Research Design
This study is a between-subject 2 (type of extension: step-up/ step-down) × 2 (level of involvement: high/low) experimental design. Type of extension (step-up, step-down) is the independent variable, extension evaluation and brand-post evaluation are the dependent variables, and level of involvement is the moderator.
36 The purpose of the main research is to investigate 1) the effects of involvement on the newly introduced brand extension, 2) the moderating role of involvement on the parent brand after the introduction of a vertical line extension. Main focus of the research is to prove dilution effect is not always caused when an extension is introduced, and involvement can change the direction and size of main effect under different circumstances.
The manipulation of product involvement was succeeded by distributing the questionnaires via online photography forums and groups (for high-involved consumers) and via Facebook (for low involved consumers).
In this study there were 2 experimental conditions (step-up and step-down) and the control group (including the neutral extension), where respondents pre-evaluated the parent brand. Then they were asked to evaluate a neutral brand extension. The control group was used as a baseline to compare the post-evaluation of the parent brand to its initial evaluation as well as the evaluation of vertical line extensions to the neutral extension. Control groups are commonly used in similar studies (e.g. Milberg et al., 1997; Dall’Olmo Riley, 2013).
The step-up brand (step-down) extension had to be introduced at a higher (lower) price point and quality level than the current Sony cameras are operating in. The price range for Sony cameras is from 400€ to 2300€. The percentage of increase and decrease of prices for the step-up and step-down extensions respectively was based on the study of Kirmani et al. (1999) who implemented a decrease of 40% of the parent brand for the step-down extension. According to that study, this price change is significant enough target a completely different segment of consumers compared to the target group of the mother brand. Therefore, the step-up was introduced under the price of 3200€ and the step-down extension under the price of 240€. In order to emphasize the different effects that involvement has on step-up and step-down extension, a neutral extension was introduced in the control group. A neutral brand extension is a horizontal line extension at the same price point and quality level that
37 the current Sony cameras are operating in. Thus, the price of this extension was introduced at the price of 1300€. For all the extensions the price was mentioned and the quality difference was emphasized. Besides, since the accessories and lenses are determinant factors for the selection and evaluation of a camera, it was pointed out that a wide range of accessories and lenses would be available with the introduction of the new brand.
To sum up, there are three groups of respondents including the control group. Namely, 1) the control group where respondents pre-evaluated the parent brand before receiving any information for the neutral extension, and then evaluated the neutral extension. Neutral extension, was included in the questionnaire for the control group since it was used as a baseline to compare the evaluations of step-up and step-down extensions, 2) the step-up brand extension, and 3)the step-down brand extension. For both step-up and step-down extensions, as it is already mentioned, involvement was manipulated. The different extensions were manipulated by stimuli development which will be explained in detail below.
Product Involvement Low High Type of extension Step-down CONDITION 1 (Step-down + Low) CONDITION 2 (Step-down + High) Step-up CONDITION 3 (Step-up + Low) CONDITION 4 (Step-up + High) Neutral 0 0
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3.2.2. Development of stimuli
In the two conditions (step-up and step-down) consumers were informed that Sony Cameras would introduce a new model of Mirrorless Digital Cameras and were asked to express their opinion for the new product.After a thorough research in the digital cameras market, it was found that there are different categories of cameras, such as compact digital cameras, bridge cameras, DSLR, and Mirrorless Interchangeable Cameras. The most diffuse ones that have a product ranges for beginners, amateurs, advanced users, and professionals are the last two. The Mirrorless cameras were chosen to be used in the experiment for the following reasons; 1) this category of cameras is relatively new and they attract much interest, 2) the market is not saturated compared to DSRL cameras and there are potentials for significant future growth 3) there are not many brand extensions in this category, something that would possibly bias consumers’ evaluation, 4) a fiction brand extension would be more realistic since this category of cameras is growing. (www.cameralabs.com,
www.tomsguide.com, www.digitalcameraworld.com)
The experiment included two scenarios- step-up and step-down line extensions- plus the control group (neutral brand extension). The introduction of the extension for each scenario was manipulated through the following introductory statements:
Scenario 1: Step-up brand extension
“Sony is considering the introduction of a new, higher quality model of Mirrorless Digital Camera at the price of 3.200€.
This new camera will be the first model of an entire new product line of Digital Mirrorless Cameras priced above Sony's Mirrorless Digital Cameras price range, which fluctuates from 400€ to 2300€.
39 The new model will be named ''ProShot'' and will include models for both amateur and professional photographers.
A wide range of lenses and accessories will be available as well.
Sony ProShot will emphasize on technology and innovation providing to users an outstanding quality of the current features of Sony's Mirrorless Digital Cameras.”
Scenario 2: Step-down brand extension
“Sony is considering the introduction of a new, more affordable model of Mirrorless Digital Camera at the price of 240€.
This new camera will be the first model of an entire new product line of Mirrorless Digital Cameras priced below Sony's Mirrorless Digital Cameras price range, which fluctuates from 400€ to 2300€.
The new model will be named ''PicYou'' and will include models for both amateur and
professional photographers. A wide range of lenses and accessories will be available as well. Sony PicYou will emphasize on providing to the users a new product line of cameras with the current features of Sony's Mirrorless Digital Cameras, but in a more affordable price. This will be a result of an offset between quality and price.”
Control Group: Neutral brand extension
“Sony is considering the introduction of a new model of Mirrorless Digital Cameras at the price of 1300€.
This new camera will be the first model of an entire new product line Mirrorless Digital Cameras priced at the same point of Sony's Mirrorless Digital Cameras price range, which fluctuates from 400€ to 2300€.
