Consumer Brand Evaluations of Step-down Brand
Extensions of Varying Price Levels Manipulated by
Quality and Sub Branding
Master Thesis
University of Amsterdam, Faculty of Economics and Business – Marketing Track June 30, 2014
Author: Irma Maria Bakker Student Number: 10668861
Acknowledgements
This master thesis is written for the University of Amsterdam, Faculty Economics of Business for the Marketing Track. The master thesis examines the consumer evaluation of step-down brand extensions of different price levels manipulated by quality and sub branding.
From high school I have always wanted to get my masters degree in Marketing. It took me a lot of effort and work but it was always with great pleasure and every step was very satisfying. Getting to this point makes me feel very proud but also gives me mixed feelings because it will probably be the end of my study life.
Finishing my master thesis would not have been possible without any help from different people. First of all, I would like to thank my supervisor Karin Venetis for her time and effort, advice and inspiring talks during the meetings. Karin Venetis knew how to guide me in the right direction. Secondly, thanks to all the respondents who have filled out my survey. Finally a special thanks to my friends and family, but particularly to my parents Peter and Lida Bakker. My parents have always supported me in every step I took in my (study) life, and for their moral support and trust.
Kind Regards, Irma Maria Bakker
Abstract
During the past decade, the economy is changing and organizations need to compete in highly competitive markets. Brand extensions have been the drivers of strategic growth for many organizations. A step-down brand extension is an extension that is introduced at a lower price and a lower quality than the core brand. Some researchers emphasize that step-down brand extensions overall have a negative impact on the consumer brand evaluation of the core brand. Another research (the research of Riley et al. (2013) concluded that consumers evaluate the core brand image more positive after a step-down brand extension of -50% than a step-down brand extension of -25%. These findings are contradicting with earlier research about step-down brand extensions. The study of Riley et al. (2013) is replicated in this study. This study analyzes the consumer brand evaluation of magnitude price (-25% and -50%) step-down brand extensions through an experiment manipulated by quality and sub branding for a prestige car brand, Audi. The experiment was conducted among 242 respondents in the Netherlands. Results show that after introducing each step-down brand extension the consumer brand evaluation of the core brand image when varying price levels is overall evaluated very positive, also despite adding the manipulations of quality and sub branding. These results are contradicting with earlier research and give many possibilities for future research.
Table of Contents Acknowledgements ... 2 Abstract ... 3 1. Introduction ... 7 1.1 Background ... 7 1.2 Research Goal ... 11 1.3 Research Question ... 12
1.4 Structure of the Thesis ... 12
2. Theoretical Framework ... 13
2.1 Brand Extensions ... 13
2.2 Horizontal Brand Extensions ... 13
2.3 Vertical Brand Extension ... 14
2.4 Consumer Evaluations 2.4.1 Categorization Theory ... 15 2.4.2 Distancing Techniques ... 16 2.5 Price ... 17 2.6 Quality ... 20 2.7 Sub Branding ... 23 2.8 Conceptual Framework ... 26 3. Methodology ... 27 3.1 Pre-Test ... 27 3.2 Experimental Design ... 29
3.3 Manipulation and Measures ... 29
4.1 Sample ... 33
4.2 Descriptives of the Sample ... 33
4.2 Response per Condition ... 33
4.3 Pre-Analysis Results ... 36
4.3.1 Scale Reliability ... 36
4.4 Analysis Results ... 36
5. Discussion ... 48
5.1 Discussion of the Findings ... 48
5.1.1 Research Question ... 48
5.1.2 Step-Down Brand Extensions with a Magnitude Price Discount ... 48
5.1.3 Step-Down Brand Extensions with a Magnitude Price and Quality Decrease ... 50
5.1.4 Step-Down Brand Extensions with a Magnitude Price Discount and A Sub Branding Strategy ... 51
5.1.5 Additional findings ... 52
5.2 Limitations and Suggestions for Future Research ... 53
6. Conclusion ... 56
References ... 58
Appendix ... 63
Appendix 1 – Questionnaire Pre-Test ... 63
Appendix 2 – Questionnaires Experiment ... 66
Appendix 3 – Survey Flow Experiment ... 70
List of Tables
Table 1: Means Familiarity and Means Prestige ... 28
Table 2: Gender per Condition ... 34
Table 3: Audi per Condition ... 34
Table 4: Age per Condition ... 34
Table 5: Familiarity Car Driving ... 35
Table 6: Familiarity Car Brands in General ... 35
Table 7: Familiarity with the Brand Audi ... 35
Table 8: Reliability ... 36
Table 9: Condition Means - Core Brand Image Evaluation (CBIE) ... 37
Table 10: Condition Means - Parent Brand Attitude Evaluation (PBAE) ... 37
Table 11: Condition Means - Extension Evaluation (EA) ... 37
List of Figures Figure 1: Conceptual Framework ... 26
Figure 2: Core Brand Image Evaluation ... 38
Figure 3: Parent Brand Attitude Evaluation ... 38
Figure 4: Extension Evaluation ... 38
1. Introduction 1.1 Background
Brands are everywhere; they are all over the world. When we as consumers go out for our grocery shopping, shopping for clothes or shopping for fun, we are always aware of brands. A brand can be defined as ‘a name, term, sign, symbol, or combination of them which is intended to identify the goods and services of one seller or a group of sellers and to differentiate them from those of competitors’ (Keller, 1993). ‘A brand can be considered as an integrated marketing idea, a concept that drives the business’ (Mosmans and van der Vorst, 1998). Understanding the content and structure of brand knowledge is important because they influence what comes to mind when a consumer thinks about a brand (Keller, 1993). Having a strong brand is important; when companies have a strong brand this results in higher revenue streams, for the long term and the short term (Esch et al., 2006). For consumers, brands have both a functional and a symbolic meaning (Jamal and Goode 2001). Marketing managers expand their brand portfolios, to stay attractive for the consumer; firms are stretching down an already existing brand (Pitta and Katsanis, 1995).
Besides the awareness of brands, consumers are price sensitive. Especially now, during the recession, we are even more aware of brands, prices and quality of certain products. Consumers buy cheaper products, the behavior of consumers is changed during the recession, consumers buy lower priced brands (Bohlen, Carlotti and Mihas, 2010). Companies need to compete to stay attractive for different consumers who all have a different wallet and all have different brand preferences.
The market is changing, competition defines the market place. Organizations need to expand their portfolios and create brand extensions to fulfill the preferences of consumers. During the past decade, brand extensions have been the drivers of strategic growth for many
organizations. ‘Brand extensions represent an opportunity for firms to use the equity built up in the names of existing brands in order to enhance marketing productivity’ (Rangaswamy, Bruke and Oliva, 1992). The use of well known brand names to enter new product categories can considerably reduce introductory marketing expenses and enhance the prospects of success by helping gain retailer and consumers acceptance (Keller and Aaker, 1992). As mentioned earlier, competition defines the marketplace, for firms vertical extensions are a very important strategy for growth in booming premium markets or value markets (Lei, Ruyter and Wetzels, 2008). Brand extensions involve the application of an established brand name to new products in order to capitalize on the equity of the original brand name and to capture new market segments (Kerin et al., 1996) and brand extensions exist in two primary forms; horizontal brand extensions and vertical brand extensions. ‘Horizontal brand extensions’ is the application of an existing brand name to a new product introduction, either in the same product class or in a total new product category of a firm (Kim, Lavack and Smith, 2001), also called ‘category extensions’ (Riley, Pina and Bravo 2013). ’Vertical brand extensions’ imply introducing a similar brand in the same product category of a firm but the price and also the quality points are different (Sullivan, 1990; Keller and Aaker, 1992).
Vertical brand extensions exist in two ways; upscale and downscale. A vertical step-up brand extension means a higher quality level and price point than the core brand. Vertically stepping up a brand may access potential or current customers who are looking for more features/services or prestige. As an example American Express introduced an ‘American Express Platinum’ to offer specialties for frequent users (Kirmani, Sood and Bridges, 1999). By stretching a brand vertically down, an organization offers a cheaper option under the mother brand. A ‘vertical step-down brand extension’ is a brand extension that is introduced at a lower price and a lower quality than the core brand (Kim and Lavack, 1996). Companies
are looking for cheaper brand options in their brand portfolios, to fulfill the needs of the consumers with a different wallet because consumers buy lower priced brands (Bohlen, Carlotti and Mihas, 2010). At the moment, the famous brand Apple is known for its high prices but they also introduced the new iPhone 5S and the cheaper iPhone 5C, the price of the new iPhone is lower. Another example is the hotel industry, Hilton introduced a ‘Hilton garden inn’ to serve consumers with a lower budget (Lei, Ruyter and Wetzels, 2008). The well-known supermarket in the Netherlands, Albert Heijn, also uses a step-down brand extension. There is also the home brand Albert Heijn (‘AH huismerk’) with its step-down brand extension Albert Heijn Basics (AH Basics). The rational part of stepping down is to attract customers who cannot afford the brand’s current offerings because these are too expensive, with the new extensions companies hope that those customers will eventually trade up to the brand’s more expensive offerings (Kim and Lavack, 1996). The main premise of an extension strategy is the attempt to leverage the investment on the brand’s equity by launching new products that share the same brand name.
Fit between the core brand and the extensions plays an important role in the consumer evaluation of line extensions. Line extensions are not without risks. The risk of brands image dilution is especially strong for vertical extensions. The brand extension literature shows that the higher the fit between the core brand and the extensions, the higher the transference of beliefs and attitudes from the brand to the extension will be, which improves both the extension attitude and the parent brand’s image. Consumers will evaluate extensions more positively when there is concept consistency and product feature similarity with the parent brand (Park et al., 1991). Introducing a vertical brand extension at a price point or quality level that differs significantly from the core brand, gives the consumer inconsistent information that would weaken favorable core brand beliefs, and ultimately could result in a
less favorable core brand evaluation. This inconsistent information would cloud or dilute the core brand beliefs (Kim, Lavack and Smith, 2001). Also, Mustante (2007) argues that ‘the greater the difference between the brand’s traditional price range and the price positioning of the new product the less the perceived fit is’.
The research of Riley et al. (2013) is the most recent research about consumer evaluations of brand extensions. The study analyzes the evaluation and feedback effects of vertical downscale line extensions through an experiment with price (-25% v. -50%), brand concept (luxury vs. prestige and product category (cars vs. fashion). Few researchers have explicitly studied the effect of price on consumers’ attitudes towards brand extensions. The relatively scant research on vertical line extensions does not consider how consumers evaluate downscale extensions of different magnitude (levels) for brand on the luxury/prestige/price continuum and the resulting effect on the corresponding parent brands’ images. This research finds that a smaller price differential (-25%) appears to have a more negative impact on the brand image than the larger discount (-50%). For the prestige brands Audi and Diesel, the brand image in terms of status, conspicuousness and overall image is better after a 50% downscale extension than after 25% one. Results indicate that the image of prestige brands is more sensitive to dilution than luxury brands, which lie higher up in the status/ conspicuousness continuum. As a consequence, downscale extensions of prestige brands need a higher degree of differentiation, not to dilute the core brand image. However this magnitude effect of price discount does not appear to affect the extension evaluation, the findings apply to luxury as well as to prestige brands in both product categories (cars vs. fashion). It seems that in the downscale extensions of luxury and prestige brands, the magnitude of the discount does not affect the evaluation of the core brand. Thus, price has a role as a distancing technique, creating a sub-category in consumers’ mind, which helps to reduce the dilution of the post-extension brand image, particularly in the case of prestige
brands in conspicuous product categories like cars.
These results of this study (Riley, Pina and Bravo 2013) are contradicting by what is mentioned earlier (Mustante, 2007; Kim et al., 2001; Park et al., 1991). How is it possible that more incongruence leads to a more positive brand image? The brand image in terms of status, conspicuousness and overall image is better after a 50% downscale extension than after 25% one. How can this be explained? Price is a distance technique, what happens when we use another distance technique? Possibly the respondents assume the same level of quality but what happens when quality will be also manipulated and what happens when we use sub branding as a distance technique? Besides this the research of Riley et al. (2013) did not evaluate the parent brand attitude after the manipulation of price, what happens with the parent brand attitude after the manipulation?
1.2 Research Goal
This research will present new perspective on existing research fields and a new situation. Besides this, the other studies about consumers’ evaluations towards step-down brand extensions will be tested again in another way and there is not a lot of research done on the consumer evaluation of vertical step-down brand extensions. Still, a step-down brand extension is a very attractive strategy for companies to increase its’ profits, because it enables companies to reach new markets and so also new targets groups (Kim, Lavack and Smith 2001). So, if companies want to expand their brands by introducing a vertical extension, the desire is to have the brand extension evaluated favorably by a new market segment. A company does not want to hurt the company name or alienating the original consumer franchise of the core brand.
This study wants to address these contradicting findings mentioned above and by extending the research of Riley et al. (2013) this study wants to investigate what happens when using
price as a distance technique when at the same time other techniques are being used. This study will examine the consumer evaluation of the core brand and the step-down brand extensions of varying price levels of prestige brands, with some new insights to address the contradicting findings mentioned above.
1.3 Research Question
This research will be focused on prestige brands, because the research of Riley et al. (2013) uses a prestige brand. Price has a role as a distance technique particularly in the case of prestige brands in conspicuous product categories like cars, this is why this study will be focused on prestige brands (Riley, Pina and Bravo 2013).
What is the effect of a step-down brand extension of varying price levels (-25% and -50%) towards the core brand image, parent brand attitude and extension evaluation in consumer brand evaluations when introducing varying quality levels (-25% and -50%) and a sub branding strategy?
1.4 Structure of the Thesis
The structure of this thesis will be constructed in the following way: the second chapter is a literature overview with, at the end of the existing literature a conceptual framework is addressed. The next chapter (Chapter three) includes the methodology of this study. this is followed by the results of the analysis in Chapter four. At the end the findings will be discussed and the limitations and suggestions for future research will be presented in Chapter five. Lastly, the conclusion is presented in Chapter six.
2. Theoretical Framework 2.1 Brand Extensions
During the past decade, brand extensions are popular and have been the origin of strategic growth for many firms in the world. ‘Brand extensions involve the application of an established brand name to new products in order to capitalize on the equity of the original brand name and to capture new market segments’ (Kerin et al., 1996). Brand extensions are a popular strategy for firms, for leveraging brand equity. By introducing a brand extension, new products under famous brand names, firms hope that consumers react positively to the new offering because of the familiarity and associations with the parent brand, hopefully this helps the new brand extension to capture new market segments fast (Kim and John, 2008). A brand extension is a strategy that many companies follow with the aim of benefiting from the brand knowledge achieved in current markets. When a new product is marketed under a well-known brand name, a brand extension, the costs are reduced and also the failure rates are reduced. More than 80 percent of firms resort to brand extensions as a way of marketing goods and services (Martinez and Pina 2010). Consumer familiarity with the existing core brand names aids new product entry into the marketplace and helps the brand extension to capture new market segments quickly (Kim and Lavack 1996). Brand extensions exist in two primary forms; horizontal brand extensions and vertical brand extensions, this will be explained in the next paragraph (2.2 horizontal brand extensions and 2.3 vertical brand extensions).
2.2 Horizontal Brand Extensions
‘Horizontal brand extensions means the application of an existing brand name to a new product introduction, either in the same product class or in a total new product category of a firm’ (Kim, Lavack and Smith, 2001). An example of a horizontal brand extension is the example of Ivory Soap. Ivory Soap introduced brand extensions such as Ivory detergent of Ivory dishwashing liquid. Horizontal extensions are necessary for firms, to keep responding
towards different trends in the market. Horizontal brand extensions exist in two ways and those are different in their focus (Aaker and Keller, 1990). They are named; line extensions and franchise extensions. First line extensions involve a current brand name, which is used to enter a new market segment in its product class. Diet Coke and Diet Pepsi are examples of line extensions since they focus on the diet conscious segment for colas not served by their parent products. In contrast, second the franchise extensions use a current brand name to enter a product category new to the firm (Tauber, 1981). Jell-O Frozen Pudding Pops exemplifies a franchise extension from Jell-O gelatin dessert (Pitta and Katsanis, 1995). So, horizontal extensions usually involve products in product categories different from core brands. The products are relatively new and distinct products for the consumers. When compared to horizontal extensions, vertical extensions often involve products with similar, modified features, although at a different price or quality level. It is more likely for brand association to carry over to vertical extensions than to horizontal extensions (Xie, 2008).
2.3 Vertical Brand Extension
‘A vertical brand extension stands for introducing a similar brand in the same product category of a firm but the price and also the quality points are different’ (Sullivan, 1990; Keller and Aaker, 1992). Vertical brand extensions often use a second brand name or descriptor linked to the core brand name, to create the link between the brand extensions and the core brand name (Kim and Lavack, 1996). Nowadays competition intensifies the marketplace, vertical line extensions have become a highly important strategy for firms to create growth in booming premium or value markets (Lei, Ruyter and Wetzels, 2008). Line extensions, such as new flavors, or varieties of existing brands in their current product classes, are a strategy used by companies to minimize costs while leveraging brand equity. Line extensions may account for more 75% of new product introductions (Kirmani, Sood and Bridges, 1999). One primary advantage of vertical line extensions is to leverage the brand
equity built up among its current customers to enter different market segments. Vertical extensions offer the management of a firm the quickest way to leverage a core product’s equity. However, since the new product is in the same category, distancing is difficult and the risk of negative information is higher than with a horizontal extension (Pitta and Katsanis, 1995). Vertical brand/line extensions exist in two ways; upscale and downscale. A step-up brand extension is introduced at a higher quality level and price point than the core brand, while a step-down brand extension is introduced at a lower quality level and price point. An example of a step-up extension; American Express introduced an ‘American Express Platinum’ to offer specialties for frequent users (Kirmani, Sood and Bridges, 1999). A step-down example is ‘Hilton’ introduced ‘Hilton Garden Inn’ to serve low-end customers. The rational part of stepping down is to create offerings for consumers who cannot afford the brand hoping that these customers eventually trade up do the brand’s more expensive offerings (Kirmani, Sood and Bridges, 1999). However a critical question to ask is whether these vertical brand/line extensions, offered under the same brand name but at a different price/quality point, will be received by consumers, and what effects they might have on the parent brand.
2.4 Consumer Evaluations 2.4.1 Categorization Theory
Fit between the core brand and the extensions plays an important role also in the consumer evaluation of line extensions (Kim, Lavack and Smith 2001. Actually, perceived fit is a key factor in the evaluation of the brand extensions (Lei, Ruyter and Wetzels, 2008). A core brand has its own set of attributes and associations. When a new brand extension is introduced, a brand familiarity category is created in the mind of the consumer. The new brand extensions will have its own attributes and associations which will be consistent or inconsistent with the core brand. When a step down brand extension is introduced the price and quality point
differs from the core brand, this is an example of inconsistent information and this can weaken the positive beliefs about the core brand and will result in less favorable core brand evaluation. Brand extensions differ in quality and price from the core brand and this results in a reduced consumer evaluation of the core brand (Kim, Lavack and Smith, 2001). Line extensions are not without risks. Consumers react more favorably to brand extensions that fit with their perception about the core brand. The risk of brand dilution is especially strong for vertical extensions. In the case of a downscale vertical extension, consumers may associate a lower price with a lower quality, with the ensuing risk of brand dilution. The assumption of the crucial role of fit for either type of brand extension finds overall support in the literature (Riley, Pina and Bravo, 2013). The higher the fit, the higher will be the transference of beliefs and attitudes from the brand to the extensions, which improves both the extension attitude and parent brand’s image. Brands that stretch too widely can lead to the loss of brand meaning and may cannibalize the sales of other products in the brand portfolio (Kim and Lavack 1996). So, line extensions require developing a new identity that reduces the risk of cannibalization and, in the case of vertical stretching, positions the new product in the desirable price-quality level, while maintaining some degree of coherence with the lower or higher price-quality image of the parent brand (Riley, Pina and Bravo, 2013). Kim et al. (2001) show that, regardless of the brand concept (functional or luxury) and regardless of the direction of the extensions (upscale of downscale), the introduction of vertical line extensions has a negative impact on the parent brand.
2.4.2 Distancing Techniques
Distancing the core brand name from the brand extensions is useful for protecting the core brand in vertical extension situations. Distancing techniques are the means through which the brand extension is positioned closer to, or further away from the core brand (Kim and Lavack, 1996). In horizontal brand extensions, there is no need for distancing the brand extensions
from the parent brand. Actually, the whole idea of introducing a horizontal brand extension is to position it close to the mother brand, in order to profit from the equity that has built up within the mother brand (Smith and Park, 1992). For vertical brand extensions, however, a problem occurs because they differ in price and quality from the core brand. In general, attaching a brand that differs in quality and price point form the mother brand, enhances the risk that the quality image of the core brand will be negatively affected (Kim, Lavack and Smith, 2001).
2.5 Price
The role of price in step-down brand extensions is not investigated very often. When new products are introduced which are a bit different from the core brand, price is an important factor in the evaluation of the new brand extensions of the consumer (Riley, Pina and Bravo, 2013). As mentioned earlier, vertical brand extensions are conceptually similar to the core brand because they involve the extension to products within the same product category, at a different price-quality point. According to the research of Michel and Salha (2005), the main aspects determining vertical extensions evaluation will be the brand concept and the congruency between the price of the extension product and the price-quality image of the parent brand, relative to the competition, so consumers will accept a vertical brand extension which is consistent with the core associations of the parent brand, in terms of price and quality positioning. A lot of studies suggest there exists a direct positive effect upon the attitude towards an extension when consumers believe that the new product somehow “fits” with the brand image. Attaching a vertical brand extension to a different price point increases the risk that the quality image of the core brand will be adversely affected. The net result will be a less positive consumer evaluation of the core brand (Chen and Liu, 2004). The greater the difference between the brand’s traditional price range and the price positioning of the new product the less the perceived fit is. This finding also parallels previous horizontal extension
findings that indicated the greater the consistency, typically, or similarity between the parent brand and the extension, the greater the potential for a favorable evaluation (Mustante, 2007). These findings are contradicting with the research of Riley et al. (Riley, Pina and Bravo 2013), because they mentioned that the brand image in terms of status, conspicuousness and overall image is better after a 50% downscale extension than after a 25% one. The price positioning of a 50% downscale extension has a lower perceived fit than the price positioning of the 25% downscale extension but still the brand image evaluation is better evaluated. Overall step-down brand extensions have a negative influence on the consumer core brand evaluation (Kim, Lavack and Smith 2001).
Hypothesis 1A1: Consumers will evaluate the core brand image after introducing a step-down brand extension less positive when the price is decreased by 25% than when it is not.
Hypothesis 1A2: Consumers will evaluate the parent brand attitude after introducing a step-down brand extension less positive when the price is decreased by 25% than when it is not.
Hypothesis 1B1: Consumers will evaluate the core brand image after introducing a step-down brand extension less positive when the price is decreased by 50% than when it is not.
Hypothesis 1B2: Consumers will evaluate the parent brand attitude after introducing a step-down brand extension less positive when the price is decreased by 50% than when it is not.
The effect of the magnitude of the price differential between a brand and its extensions as a distance technique on its own is less clear. Riley et al. (2013) suggest that increasing the discount increases the distance between the prestige brand and the extensions, reducing the negative impact on the core brand image. This research finds that a smaller price differential
25%) appears to have a more negative impact on the brand image than the larger discount (-50%). For the prestige brands Audi and Diesel, the brand image in terms of status, conspicuousness and overall image is better after a 50% downscale extension than after 25% one. Results here also indicate that the image of a prestige brand is more sensitive to dilution than luxury brands, which lie higher up in the status/conspicuousness continuum. Price can be seen as a distance technique; it creates a sub category in the mind of the consumer, it reduces the core brand image evaluation.
Hypothesis 1C1: After introducing a step-down brand extension with a price decrease of 25%, the evaluation of the core brand image will be less positive than after introducing a step-down brand extension with a price decrease of 50%.
Hypothesis 1C2: After introducing a step-down brand extension with a price decrease of 25%, the evaluation of parent brand attitude will be less positive than after introducing a step-down brand extension with a price decrease of 50%.
The most favorable evaluation of brand extensions appears when the brand extensions are created with high brand concept consistency and high product feature similarity (Park et al., 1991). Regarding to the study of Riley et al. (2013) on the magnitude of the downscale extension, results do not show any significant effect of price differentials (-25% vs. -50%) on the extensions value, attitude or purchase intention. Nevertheless, it would seem that in the downscale extensions of prestige brands the magnitude of the discount does not affect the evaluation of the extension. What possibly is the case for these brands; respondents assume the same level of quality of the parent brand, whatever the price of the vertical extensions is.
Hypothesis 1D: After introducing a step-down brand extension with a price decrease of 25% or after introducing a step-down brand extension with a price decrease of 50% the magnitude effect of the discount will not affect the evaluation of the extensions.
2.6 Quality
The greater the difference between the brand’s traditional price range and the price positioning of the new product the less the perceived fit is, this is contradicting with the research of Riley et al. (2013). Consumers will accept a vertical line extension, which is consistent with the core associations of the parent brand in terms of its price and quality positioning. However, the quality positioning was never investigated. For the prestige brands Audi and Diesel, the brand image in terms of status, conspicuousness and overall image is better after a 50% downscale extension than after a 25% one (Riley, Pina and Bravo 2013). Will the effect change, when the quality is shown? It seems clear that introducing a brand extension that differs significantly in quality from the core brand potentially has negative implications on how consumers will subsequently perceive the core brand, regardless of whether the brand extensions is step-up or a step-down extension (Kim, Lavack and Smith, 2001).
Hypothesis 2A1: Consumers will evaluate the core brand image after introducing a step-down brand extension less positive when the price and quality are decreased by 25% than when it is not.
Hypothesis 2A2: Consumers will evaluate the parent brand attitude after introducing a step-down brand extension less positive when the price and quality are decreased by 25% than when it is not.
Hypothesis 2B1: Consumers will evaluate the core brand image after introducing a step-down brand extension less positive when the price and quality are decreased by 50% than when it is not.
Hypothesis 2B2: Consumers will evaluate the parent brand attitude after introducing a step-down brand extension less positive when the price and quality are decreased by 50% than when it is not.
Riley et al. (2013) suggest that by evaluation the step-down brand extension with a price decrease of 50% and 25% consumers were probably not aware of the quality and are assuming the same level of quality. However, by introducing a step-down brand extension that differs in quality from the core brand, arise negative implications by the consumers about the evaluation of the core brand. The larger the difference in quality levels between a core brand and its step-down brand extension, the greater is the potential for dilution of the core brand image (Kim and Lavack, 1996). By definition vertical line extensions are in concept similar towards the core brand, since they involve the extension to products in the same product category but at different price and quality points. Riley et al. (2013) did express the lower price points in their experiment but did not express the lower quality of the new step-down brand extensions. What happens when quality will be also manipulated in the mind of the consumer evaluating the core brand image and parent brand attitude? According to the literature a bigger difference in quality (-50%) will negatively influence the evaluation.
Hypothesis 2C1: After introducing a step-down brand extension, when the quality of the product changes equally with the price (-25%), the evaluation of the core brand image will be more positive when the quality of the product changes equally with the price (-50%).
Hypothesis 2C2: After introducing a step-down brand extension, when the quality of the product changes equally with the price (-25%), the evaluation of parent brand attitude will be more positive when the quality of the product changes equally with the price (-50%).
A step-down brand extension reduces the prestige of the core brand, perhaps because the core brand becomes mentally associated with a lesser quality brand extension. Regarding to the research of Riley et al. (2013) the magnitude effect of price of the downscale extension, results do not show any significant effect of price differential (-25% vs. -50%) on the extensions evaluation. What happens when quality will be also manipulated in the mind of the consumer evaluating the extension? According to the literature a bigger difference in quality (-50%) will negatively influence the evaluation.
There is not much research about quality in combination with price in step-down brand extensions. The research of Kim and Lavack (1996) investigated the use of information cues for vertical brand extensions. If the information cue for a step-down brand extension emphasizes the similarities between the core brand and the step-down brand extensions (for example telling that the step-down extension adheres the same quality standards as the core brand). This results in a reduced distance between the core brand and the brand extension. However, when the information focuses on the differences between the brand extension and the core brand, this increases the distance between the core brand en the brand extension. (Kim and Lavack, 1996).
Hypothesis 2D: After introducing a step-down brand extension, when the quality of the product changes equally with the price (-25%), the evaluation of the brand extension will be less negative when the quality of the product changes equally with the price (-50%).
2.7 Sub Branding
Sub branding is a distance technique; such a technique is used to increase or decrease the distance between a step-down brand extension and the core brand. Researchers agree that differentiating or distancing the extension from the parent brand often helps to resolve consumer perceptions of inconsistencies between the vertical extensions and the core brand and reduces or eliminates the risks of brand image dilution (Riley, Pina and Bravo 2013). Sub branding is the use of graphic or linguistic distancing techniques. For example the Marriott Hotel used distancing techniques for the introduction of a step-down extension called the ‘Courtyard Inn’ by Marriot, which was intended to appeal to a less upscale public. The word ‘Courtyard’ provides a distinct identity by introducing a new brand identifier for the extensions. The word ‘Inn’ implies a less expensive, less luxurious type of overnight accommodation as compared to ‘Hotel’. This is an example of a linguistic distancing. An example of graphical distancing is for example the Marriot name is shown small in size in the logo (Kim, Lavack and Smith, 2001). Increasing perceived distance between the core brand and the brand extension, via the use of graphical and linguistic distancing techniques, reduces the negative impact on the core brand. In sum the results show that putting greater distance between the core brand and the brand extension results in less dilution of the core brand. Distancing worked most strongly to reduce damage to the core brand image for the prestige-oriented brand (Kim and Lavack, 1996). When there is a significant difference in the price and quality between the brand extension and the core brand, it is eligible for the core brand to create more distance between itself and the brand extension via a graphical of linguistic technique (the use of sub branding) (Kim, Lavack and Smith, 2001). However, still, step-down brand extensions will be evaluated negative, they have a negative influence on the consumer evaluation on the core brand.
Hypothesis 3A1: Consumers will evaluate the core brand image after introducing a step-down brand extension less positive when the price is decreased by 25% and a sub branding strategy is applied than when it is not.
Hypothesis 3A2: Consumers will evaluate the parent brand attitude after introducing a step-down brand extension less positive when the price is decreased by 25% and a sub branding strategy is applied than when it is not.
Hypothesis 3B1: Consumers will evaluate the core brand image after introducing a step-down brand extension less positive when the price is decreased by 50% and a sub branding strategy is applied than when it is not.
Hypothesis 3B2: Consumers will evaluate the parent brand attitude after introducing a step-down brand extension less positive when the price is decreased by 50% and a sub branding strategy is applied than when it is not.
Consumers will accept a brand extension with a price that is higher or lower than other products which are less typical than the core brand and will be less probable to make any inference from the extension to the brand (Loken and Roedder, 1993). Greater distancing of the step-down brand extensions has the effect of reducing the perceived linkages between the core brand and the brand extension, this will result in reducing the dilution of the core brand. By using the ‘far distance technique’ the negative impact on the core brand will be reduced. A far distance technique removes the primary brand name and simply addresses the new secondary brand name (Kim, Lavack and Smith, 2001). Using a sub branding strategy will influence the magnitude price effect. When the core brand is distanced further (-50%) and a sub branding strategy is applied, this will probably be evaluated even more favorable.
Hypothesis 3C1: After introducing a step-down brand extension with a price decrease of 25%, the evaluation of the core brand image will be less positive than after introducing a step-down brand extension with a price decrease of 50% and a sub branding strategy is applied.
Hypothesis 3C2: After introducing a step-down brand extension with a price decrease of 25%, the evaluation of the parent brand attitude will be less positive than after introducing a step-down brand extension with a price decrease of 50% and a sub branding strategy is applied.
Step-down brand extensions are evaluated less favorable when distancing techniques are used. Distancing the step-down brand extension name further from the core brand name resulted in a less favorable evaluation of the brand extension, compared with having the extension name closely linked with the core brand name. To improve consumer evaluation of the step-down brand extension, it is better to position it close to the core brand so the extension can benefit from being associated with the superior quality of the core brand. In sum, greater distancing will lead to less favorable evaluation of the brand extension of prestige brands (Kim, Lavack and Smith, 2001).
Hypothesis 3D: After introducing a step-down brand extension with a price decrease of 25%, the evaluation of the brand extension will be less negative than after introducing a step-down brand extension with a price decrease of 50% and a sub branding strategy is applied.
2.8 Conceptual Framework
The conceptual framework is a summary of this study, see also figure 1 below; the conceptual framework. This study will investigate how step-down brand extensions of different price levels (-25% and -50%) will influence the core brand image evaluation, brand attitude evaluation and extension evaluation (H1A1, H1A2, H1B1, H1B2, H1C1, H1C2, H1D). Also, there will be investigated how a step-down brand extension of different price levels and quality levels (-25% and -50%) will influence the core brand image evaluation, brand attitude evaluation and extension evaluation (H2A1, H2A2, H2B1, H2B2, H2C1, H2C2, H2D). Finally, there will be investigated how a step-down brand extension of different price levels (-25% and 50%) and sub branding will influence the brand image evaluation, brand attitude and extension evaluation (H3A1, H3A2, H3B1, H3B2, H3C1, H3C2, H3D). Core brand image evaluation, parent brand attitude evaluation and extension evaluation are all aspects of consumer brand evaluation.
Step-Down Quality Sub Branding
H1
H2 H3
Step-Down Price (-25% & -50%)
Core Brand Image Evaluation
Parent Brand Attitude Evaluation
3. Methodology
In order to test the hypotheses, which have been outlined in the theoretical framework, a pre-test and experiment are conducted. See appendix I and II for the questionnaires.
3.1 Pre-Test
The pre-test of this study was conducted to choose the right brand for the experiment. The pre-test looks like the pre-test of Riley et al. (2013), because this study tries to understand/investigate the results of the study of Riley et al. (2013). To use Audi as a prestige brand for the experiment, the results of the pre-test of this study should contain almost the same results as from the pre-test of the study from Riley et al. (2013).
Firstly the study required the selection of two car brands at the upper end of the market, but differing in prestige level and price ranges. The sample exists of 31 Dutch participants (22 woman and 9 men) who where all between 19 and 69 years old (mean age = 34). Respondents assessed familiarity (FAM) and rated the luxury/prestige (PRES) of ten car brands (Alfa Romeo, Aston Martin, Audi, BMW, Ferrari, Maserati, Range Rover, Saab, Porsche and Volvo) through 7-point scales (1 = totally unfamiliar/7 = totally familiar; 1 = not very prestigious/7 = very prestigious). The list of car brands originated from car magazines’ classification of cars at the upper end of the market, mainly price ranges above the median (Riley, Pina and Bravo 2013). From the pre-test, the car brands Porsche and Audi met the criteria for the study, since they met the requirement of achieving scores above the median (4) in the familiarity and prestige question. In terms of familiarity (FAM) a one-sample t-test is conducted, the overall mean of the ten car brands is 5.8871 (table 1) bot Porsche and Audi scored higher (FAM Porsche = 6.03; p = .291; FAM Audi = 6.32; p = .000); this is the same as the study of Riley et al. (2013). In terms of prestige (PRES) a one-sample t-test is conducted, the overall mean of the ten car brands is 5.6989 but Porsche and Audi scored higher. Porsche scored higher on the level of prestige than Audi (PRES Porsche = 6.42; p =
.000 PRES Audi = 6.13; p = .001) and both are significant. Some other car brands scored higher on the level of prestige than Porsche (Maserati and Ferrari) but both brands did not scored higher on the familiarity level. This is also the case for the FAM level; some brands scored higher on familiarity, but not high enough for the prestige level.
On the basis of the differences in the PRES images and in the price ranges between Porsche/Audi, Porsche can be seen as the luxury brand and Audi as the prestige brand (Riley, Pina and Bravo 2013). For this study Audi will be the prestige brand, which will be used for the experiment. There will only be used a prestige brand (and not a luxury brand) because the results of Riley et al. (2013) indicate that the image of prestige brands is more sensitive to dilution than luxury brands, which lie higher up in the status/ conspicuousness continuum.
3.2 Experimental Design
The research design for this study employs a 2 (price downscale extension magnitude: -25% vs. -50%) × (quality: 0 vs. 1) × (sub branding: 0 vs. 1). The research will be conducted via surveys, using the online program Qualtrics. The independent variable is manipulated by testing step-down brand extensions of one quality level and a step-down brand extension of two quality levels and sub branding. The respondents will be males and females, in the age category from 16 years till 65 years old.
The car market is an appropriate setting for the study, because of the range of brands at different price and prestige level and also for comparability with previous studies (especially the study of Riley et al. (2013). The discount level of 50% reflects previous studies. For instance, Kirmani et al. (1999) use a 40% downward stretch and Lei et al. (2008) consider a step down extension 50% lower in price than the parent brand. Kirmani et al. (1999) remark that a stretch level of this magnitude signals that the downscale extension does compete in a significantly different price tier than the existing range of products under the brand name. The discount level of 25% offers a good comparison, signaling a closer downscale extension in terms of quality and other characteristics (Taylor & Bearden, 2002).
3.3 Manipulation and Measures
After the pre-test, the main study included seven different questionnaire versions (see appendix II for the questions). For all questionnaires, the opening questions regarded consumer expertise with the product category (Mishra, Umesh, & Stem, 1993) and brand familiarity (Milberg, Park, & McCarthy, 1997).
After the opening questions, different text per treatment will be used (price, quality and sub branding). The conducted questionnaires were in Dutch, hereby an example of the seven different manipulations:
Condition 1. Step-down with a price decrease of 25%
Audi overweegt een nieuw automodel te introduceren, voor een prijs van €15.000. Dit nieuwe automodel is het eerste model in een nieuwe lijn dat 25% lager geprijsd zal zijn dan de huidige prijsschaal tussen €20.000 tot €190.000.
Condition 2. Step-down with a price decrease of 50%.
Audi overweegt een nieuw automodel te introduceren, voor een prijs van €10.000. Dit nieuwe automodel is het eerste model in een nieuwe lijn dat 50% lager geprijsd zal zijn dan de huidige prijsschaal tussen €20.000 tot €190.000.
Condition 3. Step-down with a price decrease of 25% and a quality decrease of 25%.
Audi overweegt een nieuw automodel te introduceren, voor een prijs van €15.000. Dit nieuwe automodel is het eerste model in een nieuwe lijn dat 25% lager geprijsd zal zijn dan de huidige prijsschaal tussen €20.000 tot €190.000. Daarnaast zal de kwaliteit van dit nieuwe automodel ook met 25% omlaag gaan, door bijvoorbeeld het weglaten van onder andere het navigatiesysteem.
Condition 4. Step-down with a price decrease of 50% and a quality decrease of 50%.
Audi overweegt een nieuw automodel te introduceren, voor een prijs van €10.000. Dit nieuwe automodel is het eerste model in een nieuwe lijn dat 50% lager geprijsd zal zijn dan de huidige prijsschaal tussen €20.000 tot €190.000. Daarnaast zal de kwaliteit van dit nieuwe model ook met 50% omlaag gaan, door bijvoorbeeld het weglaten van onder andere het navigatiesysteem.
Condition 5: Step-down with a price decrease of 25% and sub branding.
Audi overweegt een nieuw automodel genaamd 'Monaco' te introduceren, voor een prijs van €15.000. Dit nieuwe automodel is het eerste model in een nieuwe lijn dat 25% lager geprijsd zal zijn dan de huidige prijsschaal tussen €20.000 tot €190.000.
Condition 6: Step-down with a price decrease of 50% and sub branding.
Audi overweegt een nieuw automodel genaamd 'Monaco' te introduceren, voor een prijs van €10.000. Dit nieuwe automodel is het eerste model in een nieuwe lijn dat 50% lager geprijsd zal zijn dan de huidige prijsschaal tussen €20.000 tot €190.000.
Condition 7: No manipulation text.
U bent nu op de helft ban de vragenlijst, klik op de pijl rechtsonder in dit tekst vak om te vragenlijst af te maken.
Respondents with a manipulation text thus noticed both the information on the price of the extension product (€X), the size of the discount and the brand's current price range (€Y and €Z). Besides this both the quality and the sub branding is manipulated. For the sub branding manipulation, a ‘far’ distance technique is used. By using a ‘far’ distance technique, the negative impact on the core brand will be reduced. The same name for the sub branding technique will be used as in the study of Kim, Lavack and Smith (2001), this study used the name ‘Monaco’ for a Rolex extension name.
After the text, respondents indicate the fit (Keller & Aaker, 1992), the attitude towards the extension (Kirmani et al., 1999; Musante, 2007), the value perceptions (Lei et al., 2008; Taylor & Bearden, 2002) and the likelihood of purchasing the vertical extension (Lafferty, 2007; O'Cass & Grace, 2004). After that, individuals assess the image of the brands in terms
of status and conspicuousness (Truong et al., 2008) and also parent brand attitude (Mustante, 2007). At the end some demographic questions will be asked; gender, nationality, age and education. Except for the demographic information questions, the questionnaires employed 7-point scales throughout.
The dependent variables are operationalized in the following way: The variable core brand image evaluation (CBIA) was operationalized by six questions, the questions employed a 7-point scale throughout. The variable consisted of brand image status (BIS1 – can indicate a person’s social status, BIS2 – symbol of achievement, BIS3 – symbol of wealth) and brand image conspicuousness (BIC1 – symbol of prestige, BIC2 – attracts attention, BIC3 – can be used to impress other people). The variable parent brand attitude evaluation (PBAE) was operationalized by three questions; the questions employed a 7-point scale throughout. The variable consisted of parent brand attitude (BAT1 – unfavorable/favorable, BAT2 – dislike/like, BAT3 – unappealing/appealing). The variable extension evaluation (EA) was operationalized by eleven questions, the questions employed a 7-point scale throughout. The variable consist of fit of extension (FIT1 – bad fit/good fit, FIT2 – not logical/very logical, FIT3 not appropriate/very appropriate) and general extension attitude (EAT1 – unfavorable/favorable, EAT2 – dislike/like, EAT3 – unappealing/appealing) and value perception of extension (VAL1 good value for money, VAL2 – good buy, VAL3 – comparative value) and purchase intention (INT1 – would not consider it/would consider it, INIT2 not probably/very probably).
4. Results 4.1 Sample
On May fifth, 2014, the online survey is send to people in my personal network, besides this a message was placed at the Audi Facebook (the Netherlands) page and a message was placed at an Audi Forum Facebook page however those messages are later on removed. All the respondents are randomly assigned to one of the seven questionnaires. After five days, around 150 respondents filled out the questionnaire, after two weeks 265 respondents filled out the questionnaire. However, only 242 respondents did really complete the full questionnaire. The distribution of the respondents over these seven conditions: 37 respondents for the step-down price decrease of 25%, 34 respondents for the step-down price decrease of 50%, 33 respondents for the down price and quality decrease of 25%, 33 respondents for the step-down price and quality decrease of 50%, 35 respondents for the step-step-down of 25% and sub branding, 35 respondents for step-down of 50% and sub branding and 35 respondents in the control group.
4.2 Descriptives of the Sample
The final data set consisted in total of 242 respondents, 104 men (43%) and 138 women (57%) in the age category from 18 years till 64 years old. The nationalities of the respondents: 234 are Dutch respondents and eight respondents belong to another nationality, living in the Netherlands. Of the total group 26 respondents of the survey ever had an Audi (10,7%) and 216 (89,3%) respondents never had an Audi.
4.2 Response per Condition
To check if all the conditions have the same circumstances, in total there are seven treatments/conditions, a variety of tests were conducted. First, a chi square test was conducted for the variable gender. The test is not significant (p = .581) this means that for every condition there are almost the same amounts of males and females, X2 (6, N = 242) = 4.715, p
= .581). There are some more woman in the experiment, however this is a normal result because the respondents are conducted via a female Facebook Page (Irma Bakker). The results are shown in table two, gender per condition.
Another chi square test was conducted for the variable own(ed) an Audi yes or no. The test was not significant (p = .558), X2 (12, N = 242) = 10.611, p = .558; table three contains the results. This outcome is not surprising because most respondents never had an Audi; the questionnaire is sent to people who were mostly students.
A One Way ANOVA test was conducted for the variables age, familiarity with car driving, familiarity with car brand and familiarity with the brand Audi. All the four conducted ANOVA’s were not significant. The differences between the conditions were not (significantly) high. The variable age was not significant either (F(6, 235) = 0.906, p = .491). The age of the respondents between the different conditions was quite the same, which has a logical reason: the respondents were mostly students, conducted from the Facebook Page (of Irma Bakker).
The variable familiarity with car driving is not significant (F(6, 235) = 0.571, p = .753). The variable familiarity with car brands in general is also not significant (F(6, 235) = 0.461, p = .837). The variable familiarity with Audi is not significant either (F(6, 235) = 1.114, p = .355). See below tables five, six and seven. This means that within the conditions the familiarity with car driving, car brands in general and Audi specific don’t differ much.
Overall can be concluded that there were no major (significant) discrepancies between the different conditions, so the conditions can be compared in a correct way.
4.3 Manipulation check
First of all, to check if al the respondents were familiar with the brand Audi, the overall mean is calculated. The overall mean was 5.75 (table 7: familiarity with the brand Audi): overall the respondents are familiar with the brand Audi. This information was important because the whole manipulation of this study is focused on the brand Audi. Secondly, the comparison between the extension evaluations conditions is analyzed by using the One Way Anova for the variable extension evaluation. The One Way ANOVA was significant, (F(5, 203) = 4.330, p = .001); there were some differences. Condition five (-25% price and sub branding)
compared with condition four (-50% price and -50% quality) is significant (mean difference = 0.837, p = .023) and condition six (-50% price and sub branding) compared with condition four (-50% price and -50% quality) is significant (mean difference = 1.162, p = .000). This means that the respondents do see a difference between the manipulations.
4.3 Pre-Analysis Results 4.3.1 Scale Reliability
To measure the internal consistency of the dependent variables; core brand image, parent brand attitude and extension evaluation, a scale reliability test was performed. A scale reliability test was necessary to see if each item was internally consistent. Table 2 shows the Cronbach Alpha for each variable; all Cronbach Alpha’s of the variables scored above the margin of α = 0,70. This indicates an acceptable reliability and some of the variables scored α
= 0,80 or higher; this indicates a good reliability.
4.4 Analysis Results
This paragraph will consist of the results of the analyses. This study is a replicate of the study of Riley et al. (2013), therefore the same three analyses are conducted. First, a One Way ANOVA was conducted for the variable Parent Brand Image. The One Way ANOVA was not significant, (F(6, 236) = 1.026, p = .409). Second, a One Way ANOVA was conducted for the variable Parent brand attitude evaluation. The One Way ANOVA was not significant, F(6, 236) = 0.512, p = .799). Third, a One Way ANOVA is conducted for the variable extension evaluation. The One Way ANOVA was significant, (F(5, 203) = 4.330, p = .001), there were some (significant) differences (see also table 9, 10 and 11 below).
The following graphs (figure two, three and four) represent the means of the three variables (core brand image evaluation, parent brand attitude evaluation and extension evaluation). The y-axis represent the variable and the x-axis the different conditions. The means of the variables are closely linked, except for some means of the extensions evaluation. Unfortunately these means are not covering this research, however in the discussion (chapter five, paragraph 5.1.5 Additional Findings) of this study these results are discussed.
Hypothesis 1A1: Consumers will evaluate the core brand image after introducing a step-down brand extension less positive when the price is decreased by 25% than when it is not. The expectation was that the condition price decrease of 25% would score lower at the core brand image evaluation. However, this difference was not found in the data. Post Hoc test (Tukey HSD) showed the difference is not significant (mean difference = -0.151, p = .993). Therefore, this research shows no support for hypothesis 1A1. From this can’t be concluded that the core brand image of a step-down brand extension with a price decrease of 25% is evaluated less positive.
Hypothesis 1A2: Consumers will evaluate the parent brand attitude after introducing a step-down brand extension less positive when the price is decreased by 25% than when it is not. The expectation was that the condition price decrease of 25% would score lower at the core parent brand attitude evaluation. However, this difference was not found in the data. Post Hoc test (Tukey HSD) showed the difference is not significant (mean difference = -0.171 p = .983). Therefore, this research shows no support for hypothesis 1A2. From this can’t be concluded that the parent brand attitude of a step-down brand extension with a price decrease of 25% is evaluated less positive.
Hypothesis 1B1: Consumers will evaluate the core brand image after introducing a step-down brand extension less positive when the price is decreased by 50% than when it is not. The expectation was that the condition price decrease of 50% would score lower at the core brand image evaluation. However, this difference was not found in the data. Post Hoc test (Tukey HSD) showed the difference is not significant (mean difference = -0.129, p = .997). Therefore, this research shows no support for hypothesis 1B1. From this can’t be
concluded that the core brand image of a step-down brand extension with a price decrease of 50% is evaluated less positive.
Hypothesis 1B2: Consumers will evaluate the parent brand attitude after introducing a step-down brand extension less positive when the price is decreased by 50% than when it is not. The expectation was that the condition price decrease of 50% would score lower at the parent brand attitude evaluation. However, this difference was not found in the data. Post Hoc test (Tukey HSD) showed the difference is not significant (mean difference = -0.373, p = .587). Therefore, this research shows no support for hypothesis 1B2. From this can’t be concluded that the parent brand attitude of a step-down brand extension with a price decrease of 50% is evaluated less positive.
Hypothesis 1C1: After introducing a step-down brand extension with a price decrease of 25%, the evaluation of the core brand image will be less positive than after introducing a step-down brand extension with a price decrease of 50%.
The expectation was that the condition price decrease of 25% would score lower at the core brand image evaluation than the condition price decrease of 50%. However, this difference was not found in the data. Post Hoc test (Tukey HSD) showed the difference is not significant (mean difference = -0.022, p = 1.000). Therefore, this research shows no support for hypothesis 1C1. From this can’t be concluded that the core brand image of a step-down brand extension with a price decrease of 25% is evaluated less positive than a step-down brand extension with a price decrease of 50%.
Hypothesis 1C2: After introducing a step-down brand extension with a price decrease of 25%, the evaluation of parent brand attitude will be less positive than after introducing a step-down brand extension with a price decrease of 50%.
The expectation was that the condition price decrease of 25% would score lower at the parent brand attitude evaluation than the condition price decrease of 50%, however this difference was not found in the data. Post Hoc test (Tukey HSD) showed the difference is not significant (mean difference = 0.202, p = .962). Therefore, this research shows no support for hypothesis 1C2. From this can’t be concluded that the parent brand attitude of a step-down brand extension with a price decrease of 25% is evaluated less positive than a step-down brand extension with a price decrease of 50%.
Hypothesis 1D: After introducing a step-down brand extension with a price decrease of 25% or after introducing a step-down brand extension with a price decrease of 50% the magnitude effect of the discount will not affect the evaluation of the extension.
The expectation was that the condition price decrease of 25% or 50% would not affect the extension evaluation and this was supported by the data. Post Hoc test (Tukey HSD) showed the difference is not significant (mean difference = -0.269 p = .904). Therefore, this research shows support for hypothesis 1D. From this can be concluded that a step-down brand extension with a price decrease of 25% or a step-down brand extension with a price decrease of 50% will not affect the evaluation of the extension.
Hypothesis 2A1: Consumers will evaluate the core brand image after introducing a step-down brand extension less positive when the price and quality are decreased by 25% than when it is not. The expectation was that the condition price decrease of 25% and quality decrease of 25% would score lower at the core brand image evaluation. However, this
difference was not found in the data. Post Hoc test (Tukey HSD) showed the difference is not significant (mean difference = 0.129, p = .977). Therefore, this research shows no support for hypothesis 2A1. From this can’t be concluded that the core brand image of a step-down brand extension with a price decrease of 25% and a quality decrease of 25% is evaluated less positive.
Hypothesis 2A2: Consumers will evaluate the parent brand attitude after introducing a step-down brand extension less positive when the price and quality are decreased by 25% than when it is not. The expectation was that the condition price decrease of 25% and quality decrease of 25% would score lower at the parent brand attitude evaluation. However, this difference was not found in the data. Post Hoc test (Tukey HSD) showed the difference is not significant (mean difference = -0.182, p = .980). Therefore, this research shows no support for hypothesis 2A2. From this can’t be concluded that the parent brand attitude of a step-down brand extension with a price decrease of 25% and a quality decrease of 25% is evaluated less positive.
Hypothesis 2B1: Consumers will evaluate the core brand image after introducing a step-down brand extension less positive when the price and quality are decreased by 50% than when it is not. The expectation was that the condition price decrease of 50% and quality decrease of 50% would score lower at the core brand image evaluation. However, this difference was not found in the data. Post Hoc test (Tukey HSD) showed the difference is not significant (mean difference = 0.098 p = 0.999). Therefore, this research shows no support for hypothesis 2B1. From this can’t be concluded that the core brand image of a step-down brand extension with a price decrease of 50% and a quality decrease of 50% is evaluated less positive.
Hypothesis 2B2: Consumers will evaluate the parent brand attitude after introducing a step-down brand extension less positive when the price and quality are decreased by 50% than when it is not. The expectation was that the condition price decrease of 50% and quality decrease of 50% would score lower at the parent brand attitude evaluation. However, this difference was not found in the data. Post Hoc test (Tukey HSD) showed the difference is not significant (mean difference = -0.182, p = 0.980). Therefore, this research shows no support for hypothesis 2B2. From this can’t be concluded that the parent brand attitude of a step-down brand extension with a price decrease of 50% and a quality decrease of 50% is evaluated less positive.
Hypothesis 2C1: After introducing a step-down brand extension, when the quality of the product changes equally with the price (-25%), the evaluation of the core brand image will be more positive when the quality of the product changes equally with the price (-50%).
The expectation was that the condition price decrease of 25% and equal quality decrease would score higher at the core brand image evaluation than the condition price decrease of 50% and quality decrease of 50%. However, this difference was not found in the data. Post Hoc test (Tukey HSD) showed the difference is not significant (mean difference = 0.030, p = 1.000). Therefore, this research shows no support for hypothesis 2C1. From this can’t be concluded that the core brand image of a step-down brand extension with a price decrease of 25% is evaluated more positive than a step-down brand extension with a price decrease of 50%.
Hypothesis 2C2: After introducing a step-down brand extension, when the quality of the product changes equally with the price (-25%), the evaluation of parent brand attitude
