Positioning Category Extensions
The Effects of Points of Parity and Points of Difference on
Category Extension Evaluation
Master Thesis
Student: Camille Lancée Studentnumber: 10872035Program: MSc. in Business Administration: Track: Marketing
Institution: Amsterdam Business School, University of Amsterdam First Supervisor: Drs. J. Labadie MBM
Second reader: Drs, R.E.W. Pruppers
Date of Submission: January 28, 2016 (final version)
This document is written by Student Camille Lancée 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.
1.1 CATEGORY EXTENSIONS: A DONE DEAL? ... 1
Did we Forget Points of Parity and Points of Difference? ... 2
Research Gap ... 3 1.2 PROBLEM STATEMENT ... 4 Delimitations ... 5 1.3 CONTRIBUTIONS ... 5 1.4 OUTLINE ... 6 2. CATEGORY EXTENSIONS AND THEIR EVALUATIONS ... 7
2.1CATEGORY EXTENSIONS ... 7
Customer-‐Based Brand Equity ... 7
The Associative Network ... 8
The Role of Associations in Category Extensions ... 10
Leveraging Customer-‐Based Brand Equity ... 10
2.2 CATEGORY EXTENSIONS EVALUATION ... 11
Fit ... 12
Fit: The Major Determinant of Category Extension Success ... 14
Beyond Fit ... 14
Attitude Versus Purchase Intention ... 15
3. BRAND POSITIONING AND CATEGORY EXTENSION POSITIONING ... 16
3.1 BRAND POSITIONING ... 16
Points of Parity ... 16
Points of Difference ... 17
3.2 POSITIONING CATEGORY EXTENSIONS ... 18
4. HYPOTHESES DEVELOPMENT AND CONCEPTUAL FRAMEWORK ... 20
4.1 CATEGORY EXTENSION EVALUATION ON THE COGNITIVE LEVEL ... 20
4.2 CATEGORY EXTENSION EVALUATION ON THE BEHAVIOURAL LEVEL ... 22
5. RESEARCH METHOD ... 25
5.1 STIMULI DEVELOPMENT AND MANIPULATIONS ... 25
Qualitative Pre-‐test ... 25
Quantitative Pre-‐test ... 28
Pre-‐test Results ... 30
Pre-‐test Conclusions and Considerations for the Main Research ... 40
5.2 MAIN STUDY ... 41
Design ... 41
Measurement of Dependent Variables ... 41
Control Variables ... 43
Sample and Procedure ... 45
6. RESULTS ... 47
6.1 QUANTITATIVE ANALYSIS ... 47
Data Preparation ... 48
Manipulation Check ... 49
6.2 QUALITATIVE ANALYSIS ... 61
Word Clouds ... 62
Categorisation of Associations ... 66
Categorised Brand Associations: First-‐named Associations ... 67
Categorised Brand Associations: PoPs and PoDs ... 68
7. DISCUSSION ... 74
7.1 MEASUREMENT AND MANIPULATION OF POPS AND PODS ... 74
7.2 COVARIATES ... 75
7.3 THE EFFECTS OF POINTS OF PARITY ... 76
7.4 THE EFFECTS OF POINTS OF DIFFERENCE ... 77
7.5 THE INTERACTION EFFECT BETWEEN POPS AND PODS ... 78
7.6 ATTITUDE VERSUS PURCHASE INTENTION ... 79
7.7 THEORETICAL IMPLICATIONS ... 79
7.8 MANAGERIAL IMPLICATIONS ... 80
7.9 LIMITATIONS AND SUGGESTIONS FOR FUTURE RESEARCH ... 82
7.10 CONCLUSION ... 83
REFERENCES ... 85
APPENDIX ... 89
APPENDIX A: PRE-‐TEST QUESTIONNAIRE ... 89
APPENDIX B1: OVERVIEW OF MEASURES ... 98
APPENDIX B2: OVERVIEW OF MEASURES IN DUTCH ... 99
APPENDIX C: MAIN QUESTIONNAIRE ... 100
APPENDIX D: SPSS OUTPUT MANCOVA ... 110
APPENDIX E: CATEGORISATION TABLE FREE ASSOCIATION RESEARCH ... 114
success. However, many introduced category extensions still fail. The aim of this research was to gain a deeper insight in the success of category extensions by looking at the effects of Points of Parity and Points of Difference on category extension
evaluation, both on the cognitive and behavioural level. Preceded by a pre-‐test, an online survey was spread among 254 Dutch consumers. Respondents received one of the four experimental conditions followed by multiple measures and free association research. A MANCOVA and different qualitative methods were used to analyze the data. This research found that Points of Parity and Points of Difference have a positive effect on the success of category extensions. The importance of Points of Difference is emphasized as they can make up for the absence of Points of Parity. However, the results also confirms that fit and parent brand attitude are still the major
determinants of category extension success. In addition, the attitude toward the extension was in general higher than the intention to purchase the extension. Taking into account a purchase intention measure, including a comparison to the market leader, is therefore recommended. Furthermore, The research emphasized the
complexity of the Points of Parity and Points of Difference constructs. Measurement of these constructs remains a topic of interest.
Keywords: Category extensions, category extension evaluation, Points of Parity, Points of Difference, brand associations, fit.
1. Introduction
1.1 Category Extensions: A Done Deal?
Chocomel has been ruling the Dutch chocolate milk market since the mid nineties. In 1988, Dutch dairy brand Friesche Vlag entered this market with ‘Choq’ but this chocolate milk was not able to compete with Chocomel and has thus been taken from production. Chocomel’s slogan ‘the one and only’ seemed to be true. However, in 2012, chocolate brand Tony’s Chocolonely successfully entered the chocolate milk market and Chocomel is now facing some real competition. How come Tony’s
Chocolonely managed to enter the chocolate milk market successfully while Choq did not?
Choq and Tony’s Chocolonely chocolate milk are both examples of category extensions, which are brand extensions that use existing brand names in categories new to the firm (Farquhar, 1989). Category extensions are one of the most popular ways for companies to leverage their brand equity (Kim & John, 2008). Just as Tony’s Chocolonely extended its brand with chocolate milk, margarine brand ‘Blue Band’ extended its brand with bread and pancake premix and detergent brand ‘Robijn’ started selling fabric softeners. This popularity is due to the benefit of being able to leverage one of the most valuable assets a firm owns; its brand equity
(Tauber, 1988).
The question of which factors will determine the success of a category
extension has been answered unanimously ever since the first article written on the topic. Tauber (1988) already discussed the importance of perceived fit between the parent brand and the category extension and stated that ‘there should be a benefit of the parent brand that is the same benefit offered and desired in the new
extension’ (p.38). Roughly all the literature written after this first article accepts perceived fit between parent brand and the extension to be the major determinant of success of the category extension (Aaker & Keller, 1990; Park, Milberg & Lawson, 1991; Sunde & Brodie, 1993; Bottomley & Holden, 2001; Hem, Chernatony &
Iversen, 2003; Volckner & Sattler, 2006; Grime, Diamantopoulus & Smith, 2002; Dwivedi, Merrilees & Sweeney, 2010). However, scholars have not come to one
conceptualisation of fit, which means that there are still different perceptions of what fit really means. Moreover, the assumption that perceived fit is the major determinant has been so widely accepted that other variables might have been neglected. Are category extensions that show high fit with the parent brand always successful? Category extensions have shown to be successful in perceptually distant categories while other extensions introduced in perceptually close categories have failed. For example, Apple successfully moved from computers to phones and music. Also, Davidoff moved from cigars to perfumes with great success. On the other hand, Mars failed in the chocolate milk market. The category extension of the Mars
chocolate bar into the chocolate milk category appears to score high on fit as Mars Incorporated has proven to produce good chocolate. However, Mars chocolate milk was still not able to compete with the Dutch market leader Chocomel. Moreover, why did the mobile phones and laptops by Philips fail even tough Philips is regarded as an expert in electronics? Also, the McPizza was reckoned to become a success by the manufacturers, as McDonalds is a fast food giant. Apparently, this move was not seen as logical at all by consumers and the McPizza soon disappeared. Other failed attempts are EasyJet moving from a low-‐cost airline to low-‐cost cinemas, café’s and car rentals or Xerox moving from photocopiers to computers (Turpin, 2014). The question of how to create a successful category extension thus still remains. Did We Forget Points of Parity and Points of Difference?
In the article ‘Three questions you need to ask about your brand’ Keller et al. (2002) state that you need to leverage your points of parity (hereafter PoPs). These PoPs are the minimum requirements if you want products to be seen as credible and legitimate within the new category. In this way, the perceived fit between the parent brand and the category extension could be seen as functioning like the PoP that you need to leverage, as the prerequisite to be able to compete as a legitimate candidate within a new category. However, the PoPs are not enough to be able to beat the competition. A product also needs compelling points of difference (hereafter PoDs) (Keller et al., 2002). This raises the question of what factors are needed on top of perceived fit for a category extension to be successful. Both Friesche Vlag’s ‘Choq’
and Tony’s Chocolonely chocolate milk showed fit with their new category as Friesche Vlag already produced dairy and Tony’s Chocolonely already produced chocolate. Does this also mean that both brands were leveraging their PoPs? And why did Friesche Vlag still fail? Perhaps consumers have a different perception of the required PoPs than the manufacturers have. Or perhaps Choq does not show the compelling PoDs that Tony’s Chocolonely does show. It might even be the case that Choq did have PoDs but those that were not seen as relevant, credible or distinctive to the consumer. This research will shed more light on the possible explanations of failure and the success factors of category extensions.
Research Gap
Within the existing literature on category extension evaluation, there is a rough consensus in the literature on the major role of fit in the success of category extensions. Practitioners might thus assume that their new product will be successful when the product shows high fit with the new category. As mentioned however, many extensions that show high fit within the new category like the McPizza and mobile phones by Philips, still fail (Turpin, 2014). It is therefore not surprising that scholars still subject substantial interest to the topic of fit and the success of category extensions (Yeo & Park, 2006; Völckner & Sattler, 2006;
Dwivedi, Merrilees & Sweeney, 2010; Turpin, 2014). A possible explanation for the lack of understanding regarding the success of category extensions might be that the category extension evaluation literature has never taken into account another
important stream of branding literature, namely the brand positioning literature concerning PoDs and PoPs (Keller, 2003). Surprisingly, these two major streams of branding literature have never been integrated in earlier research on category extensions. Furthermore, quantitative measurement of the PoP and PoD concepts is still lacking in the scientifical literature.
Furthermore, the existing literature mainly examined category extensions in isolation, only measuring the attitude toward the extension. However, when
companies enter new categories, their products are competing with products from other brands in that category and rarely sold in isolation. Also, attitude toward the
category extension might differ greatly from more behavioural variables like purchase intention and choice when the extension is compared to competing
products, especially when compared to the market leader within that category. Choq might have seemed like a successful product when evaluated in isolation and when only considering the attitude toward the product. However, when the actual choice between Choq and Chocomel was available, Choq appeared not to be successful after all.
1.2. Problem Statement
This research will try to gather more insight into this gap by integrating two streams of branding literature. The category extension and fit literature will be integrated with the brand positioning literature regarding PoPs and PoDs. More specifically, the effects of PoPs and PoDs on category extension evaluations and different combinations of them will be examined. This study will further strive to develop quantitative measures of PoPs and PoDs.
Another important aspect of this study is that the category extension will be compared to the dominant product in the extended category. The category
extension will thus not be measured in isolation. Category extension attitude will therefore not be the only category extension evaluation outcome. Purchase intention between the category extension and the dominant product will also be taken into account. This research will be therefore be guided by the following research question:
What is the role of PoPs and PoDs on category extension evaluation on both the cognitive and behavioural level?
In order for this research question to be answered, several sub questions need to be addressed. First of all, it is important to define category extensions. Secondly, the way in which consumers evaluate category extension has to be explored. Perceived fit plays an important role in category extensions evaluations and will therefore be addressed as well. Thirdly, the brand positioning literature regarding PoPs and PoDs will be discussed. Finally, the positioning of category extensions, by
integrating the two streams in the branding literature, has to be covered. This leads to following sub questions:
• What are category extensions and what are the benefits?
• How are category extensions evaluated and what is the role of fit in this evaluation?
• What is brand positioning?
• What are PoPs and PoDs and what is their role in category extension evaluation?
• How can category extensions be positioned? Delimitations
This study will focus on the determinants of the success of category extensions, with PoPs and PoDs in particular. Category extensions are only one of the many brand equity-‐leveraging strategies. However, other brand equity-‐leveraging strategies like alliances or ingredients and brand building strategies will not be discussed in this study as these are beyond the scope of the study. Furthermore, other possible determinants than PoPs and PoDs are not examined. However, determinants that have been showed to have a large impact on category extension success, like fit and parent brand attitude, are taken into account as control variables (Aaker & Keller, 1990; Park, Milberg & Lawson, 1991; Sunde & Brodie, 1993; Bottomley & Holden, 2001). Also, a distinction between line and category extensions is made in the brand extension literature (Farquhar, 1989). This research will be limited to category extensions. Lastly, this study is limited to the FMCG industry due to time limitations. 1.3 Contributions
Although the field of category extensions has been researched extensively in the literature already, this study aims to contribute to the literature in multiple ways. This study thus strives to contribute to the existing literature by integrating two major streams in the branding literature. Also, this research has strived to measure PoPs and PoDs quantitatively, something that is still lacking in the existing
intention to purchase the extension has not been done yet. Comparing the effects of PoPs and PoDs on attitude versus purchase intention could give new insights on the success of category extensions.
In addition, this study is also highly relevant for marketers. As many category extensions fail, a deeper understanding of the effects of PoPs and PoDs on the
acceptance of category extensions by consumers could result in better-‐informed decision-‐making by practitioners. Knowledge on how to position category
extensions and on how and when to leverage PoPs and PoDs under what conditions could result in higher success of category extensions.
1.4 Outline
The structure of this study is as follows. Firstly, a theoretical background will be given concerning the concepts of category extensions and perceived fit (Chapter 2). Secondly, an overview of the brand positioning literature will be discussed
containing the concepts of PoPs and PoPs (Chapter 3). Thirdly, the conceptual model and the hypotheses that guide this research will be formulated (Chapter 4).
Hereafter, the method of this study (Chapter 5) and the results of the study (Chapter 6) will be reported. Finally, the results will be interpreted and integrated within the existing literature, ended by concluding remarks (Chapter 7).
Chapter 2: Category Extensions and their Evaluation
This section will review the literature on category extensions and the way in which they are evaluated. The first part addresses the definition of category extensions and discusses customer-‐based brand equity and the associative network. The following subsection will address the evaluation of category extensions. Within this subsection, the role of fit and the distinction between attitude and purchase
intention are discussed. 2.1. Category Extensions
Before going deeper into the category extension literature, the concept of a category extension has to be defined. Category extensions fall within the broader category of brand extensions. In the first article on brand extensions, Tauber (1981) describes brand extensions -‐which he then called franchise extensions-‐ as “taking a brand name familiar to the consumer and apply it to products that are in a category new to the firm’’ (p. 37). As mentioned before, Farquhar (1989) makes a distinction
between line extensions and category extensions. Line extensions are those that use existing brand names for products in existing categories of the company. Category extensions are those that use existing brand names in new categories to the firm. In this study, this definition of category extensions will be followed.
Category extensions have a financial advantage due to efficient promotion and packaging as this can be done in cooperation with the parent brand. Maybe even more important though is that category extensions take advantage of the
recognition and the image of their parent brands to enter new markets. In this way, the risk of failure is reduced when introducing products in new categories (Aaker & Keller, 1990). Category extensions thus take advantage of the existing familiarity and knowledge about an existing brand (Aaker & Keller, 1990). In other words, category extensions capitalize on the brand equity of their parent brand. Customer-‐Based Brand Equity
As mentioned, one of the most valuable assets of a company is its brand equity and the knowledge about the brand that has been created in the mind of consumers
(Tauber, 1989). Brand equity can be defined as ‘’the marketing effects uniquely attributable to the brand’’ (Keller, 1993, p.1). Brand equity is an important concept as it offers many benefits to a firm. Greater customer loyalty and more favourable responses to new products like category extensions are among those benefits (Keller, 2001). Keller (1993) narrowed this concept down by introducing customer-‐ based brand equity (hereafter CBBE) to look at brand equity from the perspective of a customer. As consumers are overwhelmed with choice in the world we live today, understanding consumers’ behavior has become a necessity for companies to be able to compete. Moreover, consumers are the ones that will respond to the marketing of the firm, among which their category extensions. Considering their perspective is thus essential to the process of creating an extension. Keller (1993) defines CBBE as ‘’the differential effect that brand knowledge has on consumer response to the marketing of that brand’’. For this study, brand knowledge is especially relevant as brand knowledge of the parent brand is used to evaluate category extensions. Brand knowledge consists of two dimensions: brand
awareness and brand image. Brand awareness refers to the ‘’likelihood that a brand name will come to mind and the ease with which it does so’’ (Keller, 1993, p. 3). Brand image consists out of the perceptions the consumer holds about the brand that are formed out of all the associations a consumer holds. By creating the right brand knowledge in the mind of their consumers, and thus creating brand
awareness, the right associations and the right brand image, companies can build CBBE. In addition, when companies have managed to build CBBE, they can start exploiting this valuable asset. The next two paragraphs will first discuss and explain associations and the associative network before turning to the leveraging of CBBE. The Associative Network
From the perspective of the ‘associative network memory model’, brand knowledge can be seen as a node in memory to which certain associations are linked. For example, when a consumer would think of the fast food giant McDonalds,
associations the consumer has with McDonalds, will also be activated. This process is what Collins and Loftus (1975) call ‘spreading activation’. The associations that
are activated can be anything, for instance: ‘Big Mac, ‘tasty’, ‘family’ or maybe ‘unhealthy’ (Henderson, Iaobucci & Calder, 1998). Associations are thus the other informational nodes in memory that are linked to the brand node (Keller, 1993). More specifically, Aaker (1991) defines brand associations as: ‘’those perceptions, preferences, and choices in memory linked to a brand’’ (p.254).
There are multiple types of brand associations, which can be placed in three major categories, namely attributes, benefits and attitudes (Keller, 1993). Attributes are related to the characteristics the consumer thinks the product or service has or what is involved when buying or using the product. These could be pure product-‐ related attributes like the ingredients of a beverage but it could also be a more symbolic association like the kind of people who use the product or in what kind of situations you would use the product. Benefit associations relate to what consumers think they will get from buying and using the product or service. Again, these benefit associations can vary from more functional to more experiential and symbolic benefits (Park, Jaworski & MacInnis, 1986). For example, a bottle of water can solve the functional need of thirst. However, if that same bottle of water is of the Evian brand, it might also fulfill a more symbolic need of self-‐enhancement as Evian is seen as a luxurious water brand. Lastly, attitude associations are defined as the ‘’overall evaluations of a brand’’ (Keller, 1993, p.4). The overall brand attitudes determine the eventual choice of brand by consumers.
Furthermore, these associations can vary in terms of their favorability, strength and uniqueness (Keller, 1993). The first one refers to associations being either positive or negative but also to the relevance of the association. A strong brand should thus focus on creating positive and relevant associations (Krishnan, 1996). The second is determined by the accessibility of the association and the ease to which it comes to mind. When an association is salient and easily recalled, it is thus strong. Lastly, uniqueness determines whether the association is different from its competitors and thus not part of the competitors’ associative network. However, ‘distinctiveness’ might be a better conceptualisation than uniqueness (Romaniuk, Sharp & Ehrenberg, 2007). Brands can have distinctive associations compared to competitors but those associations do not necessarily have to be unique. For
instance, when consumers order mineral water in the Netherlands, they do not order ‘a mineral water’ but they ask for a ‘Spa’. However, different mineral water brands have few unique associations, as the differences between the products are negligible. Spa water has thus managed to generate distinctive associations that are not necessarily unique. In conclusion, companies should strive for strong,
favourable and unique or distinctive associations as those produce a high CBBE (Keller, 1993).
The Role of Associations in Category Extensions
The CBBE and the associative network of the parent brand are highly relevant to a category extension. Consumers will evaluate and form expectations about
extensions by relying on the associations they already have of the parent brand (Keller, 1993). Category extension evaluations are thus dependent on what associations of the parent brand come to mind and whether these are strong, favourable and unique (Keller & Aaker, 1992). These associations hopefully cause positive affect and considerations of benefits by the consumer as a reason to buy the extension (Henderson et al., 1998). The next paragraph will discuss the processes that are included in the leveraging of associations between the extension and the parent brand.
Leveraging Customer-‐Based Brand Equity
As mentioned, once CBBE has been build and the right associations have been created, companies can start exploiting this asset. One manner to use the CBBE of a brand is by introducing category extensions. Important to know is that this equity-‐ leveraging strategy includes two different processes, which could offer both
advantages and disadvantages (Dwivedi et al., 2010). The first process concerns the evaluation of the category extension. This process includes the strong influence of the parent brand on the evaluation of the category extensions. Associations from the parent brand are thus leveraged to the extension. This first process can cause both the discussed financial and perceptual advantages of extensions. The second process however, the effects of extensions on the parent brand, are often overlooked. This
second process concerns the evaluation of the parent brand evaluation and can also be called feedback effects (Dwivedi et al, 2010). This process causes the associative network of the parent brand to be updated by the associations formed about the category extension. Dwivedi et al. (2010) state that when the attitude toward the extension is positive, the evaluation of the parent brand might get more positive as well. The advantages might be a revitalized parent brand image or better market coverage. However, Dwivedi et al. (2010) also discuss ‘negative feedback effects’, or also called the ‘dilution effect’. This effect occurs when a negative attitude toward the extension is leveraged to the parent brand, which causes the positive
associations of the parent brand to dilute. This implicates that category extensions also have their risks and should be implemented with care.
2.2.Category Extension Evaluation
The evaluation of a category extension by consumers determines the success of the extension. For an extension to be successful, consumers need to associate the extension with its category while also recognizing the unique attributes of the extension to differentiate the product from competitors (Krishnan, 1996). This leads to the question: How do consumers evaluate category extensions? According to the existing literature, category extensions can be evaluated in two different ways (Aaker & Keller, 1990; Boush & Loken, 1991). Consumers can form an attitude about a category extension based on the specific product attributes of the extension. This technique is called ‘piecemeal processing’. The other processing technique is ‘category-‐based processing’. When this processing technique is used, consumers form an attitude about the category extension based on a previously defined category that the product is classified in (Aaker & Keller, 1990; Boush & Loken, 1991). This means that when consumers can classify the category extension within a category, the affect associated with this category will transfer to the extension (Nan, 2006). The categorization of products makes it easier for consumers to retrieve information from memory (Sheng & Pan, 2009). Category extensions as a brand equity leveraging strategy thus makes it easier for consumers to categorize and process new products as consumers have the parent brand as an existing category.
These categorization judgments are formed by consumers’ perception of fit (Diamantopoulos & Smith, 2002).
Fit
As cited before, roughly all the literature written on category extension evaluations accept perceived fit between parent brand and the extension to be the major
determinant of success of the category extension (Aaker & Keller, 1990; Park, Milberg & Lawson, 1991; Sunde & Brodie, 1993; Bottomley & Holden, 2001; Hem, Chernatony & Iversen, 2003; Volckner & Sattler, 2006; Grime, Diamantopoulus & Smith, 2002; Dwivedi et al., 2010). We then wonder: How can ‘perceived fit’ (also called ‘similarity ‘or ‘relatedness’) be defined and measured? As discussed above, fit involves the categorization process in which consumers make an evaluation of the new product by determining the extent to which the product is a member of a category (Park et al., 1991). The higher the fit with this category, the more associations of the category will be transferred to the category extension. This conceptualisation of fit by Park et al. (1991) is only one of the many
conceptualisations of fit. Scholars have defined and measured fit in different ways. Tauber (1988) was the first one to mention fit in the literature and defines
perceptual fit ‘’whether the consumers perceives the new item to be consistent with the parent brand’’ (p.38). Hereafter, Aaker and Keller (1990) were the firsts to really examine and measure the role of fit in extension evaluations. They made a
distinction between three types of fit: complementarity, substitutability and transferability. The complementarity type of fit occurs when two products can be used together to satisfy a need. The second type of fit –substitutability-‐ is the extent to which two products substitute each other and can thus replace each other. The transfer type of fit refers to the perceived ability of the firm to make a product in the new product category. This type is thus most relevant in the case of category
extensions. Furthermore, Park et al. (1991) measure fit by distinguishing between two other bases of fit, namely product feature similarity and brand concept
consistency. Product feature similarity refers to a fit between specific attributes of the product. For example, there is high product feature similarity between chocolate
bars and chocolate milk as both products have the attribute of containing chocolate. Brand concept consistency refers more to the abstract meaning of products. For example, fashion brand Roberto Cavalli introduced a category extension of Vodka. At first sight, the perceived fit between these two product categories might be low. However, both high-‐end fashion and Vodka are associated with luxury and high status. In addition, Park et al. (1991) make a further distinction in the brand concept by stating that it can be either symbolic or functional. Bhat and Reddy’s (1998) study even shows that the brand concept is not one-‐dimensional and can therefore have both a symbolic and a functional brand concept. A symbolic brand concept satisfies symbolic needs such as those of status and self-‐expression while a functional brand concept satisfies more immediate and practical needs.
Furthermore, scholars have measured fit on different levels. Some authors measure fit on two levels, namely low and high fit (Sunde & Brodie, 1991; Hem et al., 2003; Lei, Pruppers, Ouwersloot & Lemmink, 2004; Völckner & Sattler, 2006), while others also include a third moderate level of fit (Nan, 2006; Fedorikhin et al., 2008). Other studies even included a bad fit or a ‘misfit’ condition (Keller & Aaker, 1992). Noticeably, fit has been conceptualised and measured differently by scholars.
However, manufacturers and consumers also perceive fit differently. This makes the conceptualisation of fit even more complex. Fit between the category extension and the parent brand or product is all about perception as the example of the McPizza illustrates. The manufacturers perceived the fit between the McPizza and the McDonalds parent brand as high as both belong to the fast-‐food category. The
consumers might have perceived the fit differently as the McPizza ended up as a fail. Although the conceptualisation of fit is complex, the conceptualisation and measurement as defined by Lei et al. (2004) will be used for the purpose of this study as it is parsimonious while also considering different distinctions within the fit concept. Lei et al. (2004) conceptualise fit as ‘’the attribute or association overlap between an extension and the parent product’’ (p. 245). In addition, the authors include Park et al.’s (1991) distinction as they state that the associations that overlap can be either product-‐or concept related.
Fit: the Major Determinant of Category Extension Success
Aaker and Keller (1990) were the first to show the high importance of fit in category extension evaluation. Other studies have replicated and generalized the effects of fit found by Aaker and Keller (1990) in different settings, category extensions and cultures (Sunde & Brodie; 1993; Bottomley & Holden, 2001; Hem et al., 2003). Furthermore, in a study by Dwivedi et al. (2010), the strength of the effect of perceived fit has been compared to other determinants of fit like ‘parent brand image’ and ‘attitude toward the extension’. Perceived fit appeared to be the most dominant force in determining extension success. In addition, Völckner and Sattler (2006) compared the effect of fit with even more determinants (Parent brand experience, marketing support, retailer acceptance, perceived risk and more). Once again, the authors accepted the major importance of the fit variable. Nevertheless, there is reason to doubt the strength of this relationship.
Beyond Fit
Despite the congruence on the importance of perceived fit in determining the success of extensions in the literature, other research has found conditions under which fit is not as important as previously presumed. For instance, Klink and Smith (2001) found that when information about the extension increases and when the innovativeness of the consumer increases, the positive effect of fit on category extension decreases. In addition, Fedorikhin et al. (2008) show that brand attachment goes beyond and above the effects of fit on category extension evaluation. More specifically, the authors found direct positive effects of brand attachment on purchase intentions and willingness to pay, and they found that attachment could compensate for moderate levels of fit. Also, Hem and Iversen (2003) found direct positive effects of brand loyalty on the success of category extensions.
In addition, other studies have examined variables that influence the relationship between fit and category extension evaluation. The level of
involvement, differentiation and self-‐regulatory focus were found to moderate the relationship between fit and extension evaluation (Maoz & Tybout, 2002; Nkwocha,
Bao, Brotspies & Johnson, 2005; Yeo & Park, 2006). These studies show that the influence of fit might have been overrated in previous research and that there are many other variables that directly and indirectly influence category extensions success.
Attitude Versus Purchase Intention
Apart from the role of fit, the literature has thus far mainly used attitude toward the category extensions as a measure of category extensions evaluation. As mentioned however, attitude might differ greatly from more behavioural measures. Notable is that Fedorikhin et al. (2008) did measure a more behavioural measure, namely willingness to pay, when they showed that brand attachment went beyond the effect of fit. Furthermore, the assumption that attitudes perfectly predict behaviour is proven to be wrong as other variables moderate and mediate this relationship (Armitage & Christian, 2003). Only measuring the attitude toward the category extension could thus give an incomplete image of the success of the extension. In addition, as discussed earlier in this study, extensions are rarely sold in isolation. This might further dilute the predicting effect of attitudes on behaviour. In real life, consumers have the choice between multiple brands when buying a product. Attitude towards a product only matters when it is actually compared to those of competitors. If the Spa Company was the only one available in the mineral water market, attitude would be irrelevant since consumers have no other choice than to buy Spa water. Only when the consumer has a choice between Spa water and a competitor, like Evian, attitude becomes important. Would consumers still choose Spa now that they can also pick Evian water? Choice between products is thus a relevant variable that the existing research has neglected as an outcome variable. Next to the attitude toward the extension, the intention to purchase the extension when compared to competitors should therefore also be measured. An incomplete image of category extension evaluation, one that does not resemble real life
situations, has been given.
Chapter 3: Brand Positioning and Category Extension Positioning
The previous chapter has reviewed the literature on category extensions, customer-‐ based-‐brand equity, associations, evaluations and fit. This chapter will move on to the brand positioning literature. In the first section, the conceptualisation of brand positioning, Points of Parity (PoPs), Points of Difference (PoDs) will be addressed. The second subsection will discuss the positioning of category extensions.
3.1 Brand Positioning
Effective positioning of brands is an essential part of the brand’s success (Marsden, 2002). Brand positioning can be defined as ‘’how a brand is positioned in the mind of consumers with respect to the values with which it is differentially associated or which it owns’’(Marsden, 2002, p. 307; Ries & Trout, 1982). Brand positioning is thus about creating the right brand image together with the right associations, in the mind of the consumers. In addition, Keller et al. (2002) state that there are three important questions that you need to ask about your brand, to be able to engage in successful brand positioning. The first question relates to establishing a frame of reference that dictates in which market the brand will compete. This frame further stipulates what associations will function as PoPs and PoDs (Keller et al., 2002). The next two questions that Keller et al., (2002) emphasize are: “Are we leveraging our points of parity?’’ (p. 4) and ‘’Are the points of difference compelling?’’ (p.5). The next two paragraphs will discuss these two questions in more detail.
Points of Parity
PoPs are strong and favourable associations that are shared with competitors and thus not unique. PoPs are the minimum requirements if you want a product to be seen as credible and legitimate within a category. When a specific frame is chosen, the brand has to meet the minimum requirements of that frame (Keller, 2002). Keller (2002) states that managers focus too much on points of differentiation while forgetting about the features that the brand has in common with competitors.
Neglecting the PoPs is unwise. Consumers first need to associate the brand with a category before they can recognize the unique attributes of the brand compared to
competitors (Krishnan, 1986).
There are three types of PoPs (Keller, 2013). The first type is the category PoP that is needed for a brand to establish membership of a category. For example, the Nivea brand is known for producing gentle and protective skin cream. However, when they entered the deodorant market, they first had to establish category
membership. This means that before leveraging their gentle and protective associations, the ability of the deodorant to stop odours had to be pushed first (Keller, 2002). The second type is the competitive PoP. This type is PoP is used to negate the PoDs of competitors. The third type is the correlational PoP. These PoPs are important when dealing with two attributes that correlate negatively with each either, taste and low calories for instance (Keller, 2013). For example, brownies by Weightwatchers need to be communicated as tasty first to be regarded as a member of the brownie category before the low-‐calorie attribute can be pushed. In
conclusion, only when a brand is successfully leveraging the essential PoPs of the new category, the PoDs become relevant. For this study, the first type is especially relevant as category membership is crucial for category extensions. The category PoP will thus be measured in this study.
Points of Difference
Although PoPs are a necessity, category extensions also need PoDs to be successful. PoDs are those associations that are strong, favourable and unique. PoDs are thus associations that come to mind easily, are regarded as positive and are not linked to the associative network of competitors. PoDs help a brand to stand out from its competitors and are therefore essential to successful brand positioning (Keller, 2002). Kay (2006, p.744) even states that ‘’branding is about being different’’. When brands are perceived as different, companies will be able to avoid intense
competition (Kay, 2006). However, distinctiveness might be more suitable than uniqueness. Associations might be part of the competitor’s associative network but still be distinctive (Romaniuk et al., 2007). Romaniuk et al. (2007) even argue that differentiation plays a more limited role than is assumed within existing literature. These authors show that consumers perceive only a low level of differentiation
between competing brands and building strong and distinctive brand elements should therefore be at the core of brand strategy. These elements include logos, colors and symbols for instance. In this study, it is argued that these stand do not necessarily have to contradict each other. Distinctive brand elements can be a point of differentiation, while not necessarily being unique.
Brands can differ from each other in multiple ways. PoDs might be brand performance associations; those that satisfy more functional needs of consumers. For instance, a large assortment might be a PoD for a shampoo brand as it satisfies the needs for different consumers groups; some need shampoo for dry hair while others want shampoo that creates more volume. However, PoDs can also be more symbolic or abstract, related to the people who use it and in what situations (Keller, 2002). For example, fashion brand Chanel satisfies a more symbolic need as
consumers of the brand might feel it reflects their status.
Furthermore, there are three criteria for PoDs to deliver real benefits (Keller, 2002). The first two relate to the desirability of the PoDs. Firstly, the PoD has to be relevant to the consumer. Secondly, the PoD has to be credible or believable. The third criterion concerns the distinctiveness of the PoDs. This means that the PoD must be feasible to create, profitable and not easily imitated by competitors. Taken all together, firms must first determine their frame of reference and make sure they push their PoPs. After this, they are able to compete with
competitors on PoDs. Although category extension literature and the above mentioned have not yet been integrated in existing literature, there are various points of similarity, which will be discussed in the following section.
3.2 Positioning Category Extensions
Although both the category extension (containing the literature about fit) literature and the brand positioning literature have gathered a great deal of attention, these two streams have surprisingly not been integrated before. Integrating these two streams might give more insight on why fit might not always guarantees a
successful category extension and will further enhance the understanding on other factors that influence that success.
