Journal of Consumer Marketing

Understanding brand equity for successful brand extension

Dennis A. Pitta, Lea Prevel Katsanis,
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Dennis A. Pitta, Lea Prevel Katsanis, (1995) "Understanding brand equity for successful brand extension", Journal of
Consumer Marketing, Vol. 12 Issue: 4, pp.51-64, https://doi.org/10.1108/07363769510095306
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Brand extension could
create synergy
Potential problems
JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995 pp. 51-64 © MCB UNIVERSITY PRESS. 0736-3761
Understanding brand equity for
successful brand extension
Dennis A. Pitta and Lea Prevel Katsanis
Introduction
The costs of introducing a brand into a consumer market can be
considerable, ranging above $50 million. It is a considerable investment and
like most investments carries no guarantee of success. The recession of the
early 1990s focussed marketing managers on cost-saving tactics to increase
competitiveness. One of the most important effects was to make brand
extensions more compelling. Leveraging the brand equity of a successful
brand promises to make introduction of a new entry less costly by trading on
an established name. In essence, companies can be tantalized by the prospect
of reaping a second dividend from their initial investment in advertising,
research, and product development costs. As support for this alternative,
studies of consumer brands in different markets found that successful brand
extensions spent less on advertising than comparable new name products.
Against the costs and considering the savings, brand extension may seem
like the only alternative for some companies.
Successful examples such as Diet Pepsi and Diet Coke benefited from the
brand franchise of their parent products. Arguably, further advertising the
extension might even create synergy between it and its parent brand. In fact,
after initially resisting brand extension, Coca-Cola introduced six extensions
and captured a larger market share than the original brand. As an extreme
example, one of the extensions, Cherry Coke, was successful despite a near
absence of advertising support. Recent history shows that more than half of
the new brands marketed during the 1980s were extensions of existing
products, marketed under existing brand names. As a result, there is even
more pressure toward brand extension. While successful product extension
can reap benefits, management should not forget the risk of extension
failure.
History shows the potential of brand extension problems which range from
outright failure to partial failures such as brand cannibalism. Instead of
success, the failed extension might tarnish the image and reduce the market
share of the parent product. Extensions such as the Cadillac Cimarron serve
as examples of the price of a mistake. While the Cimarron was not actually a
failure it did cast a shadow on the core product. The model was popular in a
market segment which could not afford luxury sized Cadillacs. Owners of
luxury sized models lost their sense of the car’s exclusivity. Consumers
seemed to think that if anyone who could afford a Chevrolet could afford a
Cadillac, a full sized Cadillac seemed to be worth less. The lesson taught by
the Cimarron example is that it is important to know what consumers think
of the core product and what they will think of the extension. Other failed
extensions warn of potential problems and dissipation of corporate family
fortunes. Still, the lure of brand extension benefits continues to attract
attention.
51
 Managers seem to be aware of the dangers and benefits of extending their
brand franchise. Yet the number of failed extensions in the past few years
indicates that some refinement in our knowledge of the brand extension
process is needed. This article attempts to synthesize concepts from both the
brand extension and brand equity literature to yield managerial insights into
the process underlying brand extension.

Brand equity
Brand-focussed The concept of brand equity has been the subject of a number of studies
marketing and has been viewed from a number of perspectives. It has been described
frequently as the value a brand name adds to a product. That value can be a
halo extending beyond the current product category to other product classes.
Generally, brand equity results from all the activities needed to market the
brand. Therefore, it can be viewed in terms of the brand-focussed marketing
effects of those activities. It has received a great deal of attention recently for
several reasons, the foremost of which is the increasing strategic pressure to
maximize marketing productivity. That pressure yields managerial attempts
to gain advantage by increasing efficiency. In addition, references to
marketing success based on synergy, consistency, and complementarity
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(Park and Zaltman, 1987) have tended to support a deeper understanding

of the underlying components of products, and have awakened marketing
managers to survival opportunities in an era of flat markets, increasing
costs, and greater international competition.

The literature on brand equity shows two major focuses. Some authors
have focussed on the financial aspects of brand equity, more pertinent
to determining a brand’s valuation for accounting, merger, or acquisition
purposes. Others have focussed on the consumer behavior effects specific
to a particular brand. For marketers, the consumer effects are the appropriate
focus and include a number of cognitive effects.

Consumer memory The underlying basis of brand equity is consumer memory. Much of the
cognitive psychology literature has been devoted to the study of memory
structure and the process of memory. Most of the widely accepted work
involves a conceptualization of memory structure involving associative
models. An associative model views memory as consisting of a set of
nodes and links (Wyer and Srull, 1989, but see Keller, 1993). Nodes are
stored information connected by links of varying strengths. When the
consumer thinks about a product, or recognizes a problem, a “spreading
activation” process connects node to node and determines the extent of
retrieval. For example, if a consumer’s automobile is damaged in an
accident, he or she will encode the information in a node in memory,
which may activate other nodes including those devoted to insurance agency
information, the dealership which sold the last car, advertising information
about a new model, and others. The factor which mediates which and how
many nodes are activated is the strength of association between the nodes.
Once the consumer thinks of the need for a new car, specific information
most strongly linked to the new car model will come to mind. The
information will include features like price, styling, the consumer’s
past experience with it, word of mouth, and other information.

Components of brand equity

Various authors have described brand equity in terms of components of
brand knowledge. Of all the definitions, the most relevant treats it as the

52 JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995


Create brand awareness
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Brand recall is critical
for success
JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995
differential effect of brand knowledge on consumer response to the
marketing of the brand (Keller, 1993). Brand equity represents a condition
in which the consumer is familiar with the brand and recalls some favorable,
strong, and unique brand associations. This definition focusses on the
individual consumer and the consumer’s reaction to the marketing of a
particular product. In addition, Keller describes what consumers know
about brands and what such knowledge implies for marketing strategy.
Before completing a definition of brand equity, it is important to explore
its foundation.
Keller (1993) conceptualized brand equity using an associative memory
model focussed on brand knowledge and involving two components, brand
awareness and brand image, described as a set of brand associations. Using
this conceptualization of brand equity, the manager’s first job is to create and
enhance brand awareness, then build on this foundation and craft a salient
image composed of a group of positive associations about the brand. The
typical marketing tools used to create brand image include the choice of
advertising budgets, messages and media, as well as packaging, pricing and
distribution channels. Proper management of these elements helps to create
a level of awareness in the target audience, and careful creative activities can
form a brand’s identity in the consumer’s mind – its brand image.
Brand awareness
There are several levels of brand awareness depending on the ease with
which a consumer can recall the brand. Consumers exposed to advertising,
word of mouth, and other promotions, who are able to recall the brand only
with some kind of cue achieve a low level of brand awareness, recognition,
also called aided recall. Aided recall is insufficient to generate a consumer
choice by itself, since the consumer is unable to generate a picture of the
brand. A consumer would have to encounter the brand and recognize it as a
potential purchase choice. The associative memory model would describe
the strength of association between the brand and the situation as relatively
weak. However, since the consumer can recognize the brand when
confronted by it, the marketing efforts may still have a positive effect.
If consumers make decisions in the store for a group of products,
recognition will be very important in shaping the purchase of
those products.
Consumers who are able to recall a brand name without aid achieve a high
level of brand awareness, often termed unaided recall. In this situation, the
associative model of memory would describe the strength of association of
a brand name with a situation as strong. In the classic consumer behavior
model, consumers who recognize a problem and engage in internal search
can use unaided recall to generate alternative product choices, or even to
engage in routine product choice. Because recall determines which
alternatives are generated, those not recalled cannot be part of the
consideration set of products, the subset of products that receive serious
consideration for purchase. Thus, for many products, brand recall is critical
for success.
Brand awareness is important for other reasons besides its role in generating
a consideration set. For some low involvement products, brand awareness is
sufficient to create sales. Since consumers spend little time or effort on the
consumption decision of low involvement products, familiarity with the
53
 brand name may be enough to determine purchase. The most important
aspect of brand awareness is the formation of information in the memory
in the first place. A brand awareness memory node is necessary before any
brand associations can be formed. Without an established brand node in the
memory, it is impossible to build a brand image.

Brand image
A strong brand image After creating brand awareness, a manager must create a set of positive
is essential associations of the brand in the consumer’s mind. This task is the essence
of creating a positive brand image. Brand image can be defined as the
perceptions about a brand as reflected by the brand associations held in
consumer memory (Keller, 1993). Moreover, there are three important
aspects to brand image which determine the different consumer responses
to different products. The dimensions are the favorability, strength, and
uniqueness of brand associations. A positive brand image is vital for
defining a target market, determining a product’s position, and measuring
market response. For example, years of advertising have established
NyQuil’s position as the night-time cough medicine. Successful positioning
has created a unique, favorable, and strong brand image. NyQuil is the single
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brand to be used at night, which makes it unique. It quiets a cough and

“helps you get to sleep and stay asleep”, which puts it in a favorable light.
Finally, since most consumers will answer the question, “What is the night-
time cough medicine?” with the brand, NyQuil, its image is strong.

Aspects of brand associations

Brand associations can span a variety of classifications. As noted above,
positive brand associations should be unique, strong, and most important,
favorable. Unique brand associations have been classified into three major
categories: attributes, benefits, and attitudes.

Attributes. In general, attributes relate to product performance. They can

be further divided into product related and nonproduct related attributes.
Product related attributes are connected to the product’s physical
characteristics and vary by product category. They are familiarly called
features. As an example, components, materials, on-screen programming
and stereo sound are all product related attributes of a video cassette
recorder. Non-product related attributes are defined as external aspects
which relate to a product’s purchase or consumption. They include four
types of information: price, packaging, the identity of the typical consumer,
and where and in what situations the product is used.

Brands often have a Consumers recognize attributes in products and with many product
personality categories, especially shopping goods, actively compare alternatives. The
nonproduct attributes have little to do with product function, but may serve
as important cues to help create further associations. For example,
consumers often associate price with quality. It is likely that, in their minds,
they may group products in a category by price. Packaging usually does not
affect product function, but serves as a cue to product quality. Quality
products are usually sold in quality packages. Associations with the other
two nonproduct attributes can be formed by consumer observation, and often
can reflect some consumer inferences. Often brands have a personality, like
“rugged”, “dependable”, or “youthful”. The brand personality can result
from creative advertising, and/or consumer inferences about the user or
usage situation.

54 JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995

 Benefits. Benefits represent the want satisfaction that product features
convey. They are often specific and represent what specific consumers
value. Benefits like high gasoline efficiency may be highly attractive to
some automobile buyers, but less important to others who value low
purchase price. Benefits are often further classified as functional,
experiential or symbolic (Park et al., 1986). Functional benefits pertain to
the intrinsic features possessed by the product and are often linked to
relatively low level needs. Experiential benefits are also linked to features
and pertain to how it feels to use the product. They represent experiential
needs like stimulation, sensory pleasure, or novelty. Amusement parks,
water beds, ice cream, and other products convey experiential benefits.
The last type, symbolic benefits, relate to consumers’ self-concept and can
be linked to higher order needs like social or self-esteem needs (Maslow,
1970). Thus, consumers may value durability and simplicity or, in contrast,
exclusivity and prestige, if these pertain to their self image.

Brand attitudes. The last and most important association is a consumer’s

attitude toward a brand. Brand attitudes have been conceptualized as a
multiattribute expectancy value model (Fishbein and Ajzen, 1975). The
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model views attitudes as the sum of all the salient beliefs a consumer holds
about a product or service, multiplied by the strength of evaluation of each
of those beliefs as good or bad. An important implication of the model is
that many positively evaluated beliefs can be overcome by a few strong
negatively evaluated beliefs. For example, if consumers view a diet soft
drink as tasting good, and having no calories, they may evaluate each of
these beliefs as good. However, if they also believe that the sweetener
causes cancer, they may evaluate that as very bad, so bad that their overall
evaluation is negative and they avoid the product. The literature on brand
attitudes has been related to both product related and nonproduct related
attributes.

Brand association As noted above, these brand associations can vary according to their
can vary favorability, strength, and uniqueness. It is the purpose of the marketing
program to create associations with those characteristics with mechanisms
like product positioning, advertising, and others. However, not all
associations will be relevant in a purchase situation. For example,
the Sprint long distance phone company has engendered many brand
associations like high satisfaction, inexpensive rates, and fiber optic
quality. It has also created another less relevant association, namely that
Candice Bergen is the celebrity spokesperson. Most consumers will not
consider this in the purchase process.

In addition, the purchase situation may affect how consumers evaluate

the favorability of brand associations to the other factors. When under time
pressure, consumers may evaluate speed more importantly than when time
pressure is low. Under normal conditions, a consumer may value low price
more favorably except when time pressure intervenes and speed becomes
more important.

One other observation about the strength of brand association is noteworthy.

Brand association strength is thought to be correlated with the quantity and
quality of cognitive processing a consumer devotes to the information.
The more elaborate the processing, the more likely a consumer is to recall it.
As an example, successful advertisers have tried to increase the amount of

JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995 55

 consumer involvement by asking questions, and using teaser quizzes, just to
get them thinking. These commercials and the product copy points are
remembered much more than ordinary ads.

Even the best marketing programs will not be able to achieve a clear set of
brand associations with all consumers in a segment. In fact, as the number of
competitors in a segment increases, it becomes very difficult to distinguish a
unique set of associations. Like clutter in advertising, too many competitors
can cause blurring of the brand image among brands.

Assess consumers’ In summary, associations that are unique to the brand, strongly held, and
brand association favorably held, are vital for success. However, since the specific associations
a consumer holds are dependent on personal values and individual purchase
situations, managers must learn what they are and when they operate.
In addition, competitive offerings blur the uniqueness of the brand’s
associations. Therefore, it is important, on a product by product and
situation by situation basis, to assess consumers’ relevant brand
associations (Sharp, 1993).
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Brand equity implications

As mentioned above, consumer based brand equity is the differential effect
of brand knowledge on consumer response to the marketing of the brand.
Thus, a brand will have positive brand equity if consumers react more
favorably to its marketing mix elements than they do to the identical
elements attributed to an unnamed brand (Keller, 1993). Thus, brand equity
signifies something extra, namely the favorable status of the brand in the
consumer’s mind.

The importance of brand equity is that it increases the probability of brand

choice, leads to brand loyalty, and insulates the brand from a measure of
competitive threats. There are several implications of this. First, a positive
image should help solidify its position, differentiate it versus competition,
and move it more toward the specialty product category. Thus, it should be
able to command higher prices, and encourage consumers to search for it.
Second, brand equity implies high levels of awareness which should
increase the effectiveness of marketing communications.

Brands and brand extensions

Brands are important Successful brands are the most important assets of a company. Specifically,
assets of a company those assets represent the knowledge created in the minds of consumers as
a result of all of the marketing programs executed for those brands. In one
sense it can be viewed as the result of the total resource investment in
marketing the brand. All the marketing activities including product
development, market research, advertising, promotion, distribution,
sampling, and others act to create a brand image in its target audience.
Firms may choose from among three main branding strategies which link
products to the company (Kotler, 1991). One strategy employs individual
brand names for different products without an explicit connection to the
company or to each other. Procter & Gamble has employed this branding
strategy with brands such as Tide, Bold, Cheer and many others. Each brand
has its own brand identity and can develop its own brand equity. In the
unlikely event of a Procter & Gamble product catastrophe, each brand would
be rather insulated from adverse publicity. Indeed when toxic shock
syndrome claimed users of one of Procter & Gamble’s brands, there was

56 JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995

 virtually no link to the company’s unrelated brands. One difficulty is
that the company’s identity is so removed from individual brands that a
consumer looking for Procter & Gamble quality might wonder whether Fab
(Colgate-Palmolive) or Dash (Procter & Gamble) is a Procter & Gamble
brand.

Umbrella names A second strategy involves umbrella or family brand names in which the
company name is on every product. Black & Decker have chosen this
strategy, which has benefits and risks. When the company name connotes
quality, dependability and value, each new product gains immediate positive
brand associations. However, an unfavorable product issue, accident or
recall might taint the entire line (Sullivan, 1990). Black & Decker
experienced a special problem with family branding. The firm, noted for its
quality power tools, developed many brand associations with quality,
masculinity, dependability, ruggedness, and use in construction. Black &
Decker used its family brand strategy for its newly acquired General Electric
small appliance line which included hand mixers, toaster ovens, and other
kitchen appliances. Kitchen appliances like hand mixers convey a less
rugged image, which clashed with power tools. Black & Decker’s
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experience serves as another example of the need to assess brand

associations carefully.

The third strategy, a combination of the first two, is a sub-brand strategy

in which a company name is combined with an individual brand name.
Thus Kellogg’s Raisin Bran is distinct from Post Raisin Bran or a local food
retailer’s Giant Raisin Bran. Family and combination branding can leverage
positive associations consumers feel for the company. The sub-brand
strategy allows differentiation and the opportunity to create specific
brand beliefs.

Brand equity has Viewed as an investment, it is tempting for management to consider reaping
a finite life the rewards of that investment by extending it to another product. As an
investment, brand equity has a finite life. It is subject to growth and
reinforcement, or decay, and assault by competitors. It can even be harmed
by the well intentioned actions of management. Recently, concerns about the
negative effects of brand extensions on brand equity have been raised. It is
generally agreed that there may be negative effects on the core product if a
brand extension is unsuccessful. The negative effect of unsuccessful
extensions is termed brand equity “dilution” (Loken and Roedder John,
1993). However, even successful repeated extensions might diminish or
exhaust a core product’s brand equity. This process of repeated extensions
yields equity “wear-out”. In most cases, dilution, the negative effects of an
unsuccessful extension, are stronger. Nevertheless, some experts have
warned that repeated successful and unsuccessful extensions may result in
the total extinction of a brand’s equity (Gibson, 1990). It seems reasonable
that overdoing anything, including brand extension, can have adverse
consequences. Thankfully, managers are not often faced with such extreme
conditions. The typical situation a product manager must consider is an
individual introduction of a brand, given one or more existing brands.

Brand identity and extension

In competitive environments, pioneering products and product lines
often represent the most successful new product introductions. They take
advantage of the military axiom to hit the enemy where it is weakest.

JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995 57

 The ultimate weakness is a category without entries. Initially, they can
exploit an unfilled consumer need without the interference of rivals. Since
they can establish a distinct brand image they can each be the first brand to
occupy a position in the consumer’s mind, creating awareness and a brand
image. In addition, pioneering products have an advantage over follower
products because, without interference from competitors, they can dominate
the consumer’s association of the brand with benefits. If successful, those
products can thereby dominate the category. Because of the potential
category dominance, pioneering products also promise eventual rewards in
the form of greater consumer acceptance and higher prices. Even though
pioneering products offer great potential, they account for a fraction of all
new product launchings. Most “new” brands are simply modifications or
improvements on existing products. A likely reason for this is that risk, the
potential for failure, is inherent in any new product development. Since there
is no guarantee that consumers will respond to the underlying benefits of a
pioneering product, a measure of risk exists. Thus, the apparent emphasis
on improvements of successful products is an expression of managerial risk
avoidance. The literature on brand extensions echoes the managerial
fascination with capitalizing on a brand’s equity to attract new market
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segments. After all, marketers are in the business to maximize returns and
reduce risk.

Brand extension benefits

Core brand associations Consumer evaluation of a brand extension is frequently described by a
are conveyed to transfer process in which core brand associations are conveyed to the
extensions extension. As we have seen, brand associations can vary among
consumers, across usage situations, and in different competitive
environments. Potentially, the core brand may provide a group of salient,
positively evaluated, relevant associations which are valid within or across
product categories. Ideally, a core brand’s associations can contribute a
complex, yet well-defined image to an extension. A well-established brand
usually has a well-defined brand image. A great benefit of brand extension
is the instant communication of a salient image. For example, H.J. Heinz
acquired Weight Watchers and introduced the Weight Watchers line of low
calorie foods. The Weight Watchers name contributes recognition and many
positive brand associations to the food line.

In addition to brand associations, extension can convey quality associations.

To avoid advertising battles based on product specifications, one can
compete on the basis of perceived high quality. Hewlett-Packard has used
this strategy by extending its name to numerous products and thereby has
extended its umbrella of quality to them. When quality is perceived to be
high it is valuable to share the benefits of a core product with an extension.
Without perceived high quality, however, the task is impossible.

Another benefit of extension is the cross fertilization which advertising the

core brand can bring. Undoubtedly, Diet Cherry Coke benefited from the
advertising and familiar packaging of Diet Coke. Without ever seeing a
television ad for Diet Cherry Coke, consumers could easily recognize the
package and realize that it was a distinct product, yet was familiar.

That familiarity also provides consumers with another benefit in the form of
reduced risk with a new product. Consumers confronting Diet Cherry Coke
for the first time would know that it was a Coca-Cola product of assumed

58 JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995


Enhancing the core
product
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Concept testing
Reduce negative
associations
JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995
high quality. In reported tests of new products, most support the fact that an
established brand name enhances initial consumer reaction, interest, and trial.
The final benefit of extension is enhancing the core product. Like a
successful offspring, an extension may reinforce the core product’s brand
image instead of weakening it. Diet Cherry Coke is clearly positioned as a
tasty, low-calorie soda and reinforces Diet Coke’s association with low-
calorie content and good taste.
Brand extension problems
The potential for a core product contributing a clearly defined image is
really only an assumption. In fact, it has been shown that some positively
evaluated core product associations are liabilities for extensions. These
negative associations can spell trouble for an extension and need to be
assessed clearly beforehand. For example, Crest toothpaste’s flavor was
positively evaluated in Crest mouthwash. However, for a Dentyne-like
product, Crest chewing gum, the “Crest” flavor was a liability. Crest
reduced that liability by highlighting the flavor “containing Spearmint and
Peppermint”. In other cases, like the failed extension, Bill Blass designer
chocolates, the Bill Blass name was supposed to add distinction to the
chocolates, but was not a salient association to consumers.
A worthwhile lesson is that testing may reduce the number of inappropriate,
ineffective, or negative brand associations passed on to extensions.
Prospective customers could give their impressions of an extension in the
context of the extension category. If, in a concept test, consumers had
evaluated the potential for a Bill Blass designer chocolate line, information
about their perceptions and preferences might have been valuable, and
helpful to management. Such findings might allow modifications to reduce
the problem.
Aaker and Keller (1990) found several instances in which negative
associations might be reduced by adding a second brand name or elaborating
on the concept. A second name might provide distancing, as well as the right
connotations. They report that Campbell’s Soup called its line of spaghetti
sauces Prego after they found that consumers associated the name
Campbell’s with being watery and orange. They suggested that another
extension might be able to use the Campbell’s name if coupled with a
second name like Special Torino. Thus the name, Campbell’s Special Torino
Spaghetti Sauce, might combine the quality associations from Campbell’s
with associations appropriate for spaghetti sauce. The second name would
convey a feeling of rich, thick, and “Italian” – better associations than
orange and watery.
Negative associations can also be reduced by providing a brief
elaboration of an extension attribute about which subjects may be
uncertain and which has the potential to damage the extension (Aaker
and Keller, 1990). For example, antibiotics have a number of side-effects.
When the Upjohn Company introduced an antibiotic, thought to have an
adverse side-effect, for use in debilitated penicillin-allergic patients,
doctors were given elaboration information. The information that the
side-effect occurred less frequently than with penicillin avoided undue
negative associations.
59
 Brand extension dimensions
Brand extensions can be accomplished in a variety of ways. One of the
most obvious differences is whether the extension is in the same or different
product category. Thus they can be classified as either vertical or horizontal
extensions.

Horizontal extensions
Extend a current brand Typically, horizontal brand extensions either apply or extend an existing
name to a new product product’s name to a new product in the same product class or to a product
category new to the company. There are two varieties of horizontal brand
extensions which differ in terms of their focus (Aaker and Keller, 1990).
They are termed line extensions and franchise extensions. 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, franchise extensions use a
current brand name to enter a product category new to the company (Tauber,
1981). Jell-O Frozen Pudding Pops exemplifies a franchise extension from
Jell-O gelatin dessert. Most of the recent research in brand extension has
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focused on horizontal extensions.

Extension distance
One brand extension variable studied recently is the distance of the
extension from the core product. Close extensions may be in the same
product category and share the same feature set as the parent product.
Distant extensions may be in unrelated product categories and rely on
overall quality associations from the parent for success.

Horizontal extensions lend themselves to natural distancing. Distancing is

the purposive increase in the perceptual distance of the extension from the
core product. Unsuccessful horizontal extensions are less likely to damage
the core brand than vertical extensions since horizontal extensions are often
in different – and more distant – product categories. Typically consumers
will recognize that such horizontal extensions are not closely related. The
downside to distancing is that distancing reduces the amount or strength of
the brand associations and reduces the halo effect of the extension.

Importance of Horizontal extensions may suffer if the core and extension are perceived to
associations be too distant from each other. Brand associations cannot stretch over too
large a gulf. Research indicates that if the core product is perceived to be of
high quality, and the “fit” between the core and extension is high, then brand
attitudes toward the extension will be more favorable (Aaker and Keller,
1990). Without the perceived similarity between the parent and extension,
consumers find it more difficult to attribute original brand associations to
the extension.

Vertical extensions
In contrast, vertical extensions involve introducing a related brand in the
same product category but with a different price and quality balance.
They offer very little distancing. Vertical extensions offer management 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. As a
strategy, vertical brand extension is widely practiced in many industries.

60 JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995


Brand images
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Upscale or downscale
Potential benefits of
downscaling
JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995
For example, within automobile brands, the various models attempt to offer
distinct price-quality bundles to attract a variety of market segments. Often
a product will be extended in an attempt to garner more of the market.
Type of product extended
Two main types of products undergo brand extension: products with
function-oriented brand images and products with prestige-oriented brand
images. Function-oriented products are visualized in terms of brand unique
aspects that are related to product performance. In contrast, a prestige-
oriented brand is visualized primarily in terms of a consumer’s expression
of self-image. Thus, a Gillette Trac II or Sensor razor is a function-oriented
product because consumers are most concerned with performance, that is,
whether it shaves well or not. Conversely, consumers would be more
concerned with the prestige aspects of a Mercedes Benz 560 SL. Each type
of product has unique brand associations and lends itself to different forms
of extension.
Some of the studies have examined the consumer evaluation of the extension
and the core brand name. For both function-oriented and prestige-oriented
brand names, the most favorable consumer reactions can be expected when
brand extensions and core brands have high concept consistency and high
product feature similarity (Park et al., 1991). This reinforces the need for
fit between the core product and its extension.
Vertical extension direction
Vertical new product introductions can extend in two directions, upscale,
involving a new product with higher price and quality characteristics than
the original; or downscale, involving a new product with lower quality and
price points. Maxell’s standard videotape was the object of an upscale
extension with the EHG brand, Cadillac’s Cimarron was a downscale
introduction from the luxury-sized models. The vertical extension is the type
of new product introduction which seems to carry less risk and seems more
appealing to management. The new product is in the same category as the
parent, aims at a similar market segment as the parent, and may enjoy the
same acceptance as the parent.
Downscale vertical extensions. Downscale vertical extensions may offer
the equivalent of sampling to a new market segment, and bring some market
share enhancement. Functional products, like computer software, offer some
unique opportunities. Delrina software’s WinFax Pro is a first class fax
modem program with a significant market following. It was extended
downscale, with the introduction of WinFax Lite. WinFax Lite has fewer
features than its parent product and has a much lower cost. In fact, it is often
bundled free with fax modem hardware. The Lite product is clearly inferior
to WinFax Pro, but the price-quality balance is appropriate – one gets fewer
features at a lower cost.
The potential benefit of a “Lite” functional product with a subset of
features is that the new segment will learn about and gain experience with
the product. When companies promote clearly the “Lite” product’s lack of
some features, coupled with an appropriate low price, they effect both
users of the extension and of the core product. New consumers may react
favorably to the free or inexpensive product. Core consumers who use the
full-featured product will understand that their price-quality balance is
61
 higher, and should not resent the low-cost, low-quality extension. When
users of the downscale extension need more power, it is less costly in terms
of retraining and search costs to trade up to the full-featured product. Thus,
if the downscale extension is successful, the company will have foreclosed
competitors from the new user market segment. If, on the other hand, the
extension is not successful, new users will probably avoid the core product
entirely. This is another situation in which managers should craft extensions
carefully, and foreknowledge of consumer reactions is vital.

Prestige may be With prestige-oriented products, the reverse is true. Downscale extensions
tarnished usually bother the core audience. If consumers view the downscale extension
as a cheaper version of “their” prestige product, the prestige is tarnished and
core consumers may feel cheated.

A significant amount of recent literature examined aspects of vertical

extensions. In general, downscale vertical extensions of function-oriented
products may be accepted, while downscale extensions of prestige-oriented
products will probably damage the core product’s image.
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Upscale vertical extensions. Functional products seem to allow downscale

but not upscale extension. Conversely, prestige products allow upscale but
not downscale extensions. An example of a functional product, the Gillette
Trac II razor, offered a successful downscale extension, the Good News
disposable razor. The product and its advertising reflected a cheap,
disposable concept which offered much of the functional benefits of the Trac
II, with less cost. In contrast, Gillette attempted an upscale extension, a gold-
tone plated luxury Trac II razor in a hinged prestige gift box, with little
success. Consumers valued the cheap disposable for situations like traveling,
but would not pay a premium price for the functions of a “decorated” but
otherwise ordinary razor.

Upscale extensions Upscale extensions of prestige products seem more acceptable. The limited
enhance prestige or luxury editions of various automobile models seem to be popular, even
at a higher price. Consumers seem to recognize and accept the enhanced
prestige brand image of such upscale extensions. Numerous prestige brands
like Lexus, Accura, and Infinity are direct upscale extensions from other
models and have been well accepted.

Managerial implications and recommendations

Basic implications
First, the foremost implication for managers is to continue to concentrate
on consumer perceptions, beliefs and associations. The nature of a target
market’s perceptions determines the managerial actions which can influence
them. It is no surprise that managers influence the brand perceptions of
consumers by a number of methods, including pricing, packaging,
promotion, and distribution. What is noteworthy is that managers must
know a segment’s existing brand knowledge and beliefs, as a baseline,
as well as the effects of their marketing actions on that baseline.

Second, the price of tarnishing brand image and reducing core brand equity
may actually be worth it. If, for example, a downscale extension is evaluated
unfavorably by the core segment, and the core image is diminished, the new
downscale segment may embrace the extended product and the net effect on
company sales may be positive. In this case, managers must be managers

62 JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995

 and judge whether equity erosion is acceptable or not. If it is, then
the decision comes within the purview of management. If it is not, then
management might avoid squandering company resources and refrain from
or modify the extension.

Avoid poor Third, poor implementation must be avoided. This statement sounds overly
implementation simplistic and needs clarification. Knowledge of consumer-based brand
equity will increase managerial understanding of the value and potential of
specific products. In addition, companies which assess the brand equity of
each of their products can evaluate the past effectiveness of their marketing
activities and improve if necessary. Thus, a thorough understanding of
consumer evaluations and associations for core products and new
extensions can avoid mistakes and reduce risk.

Fourth, assessing consumer-based brand equity can allow cost-benefit

analysis of the value of extension. Managers can assess the equity of the
core product, and assess the specific brand associations for the extension
in the context of the extension, and determine the possibility of success.
Overall, if the core product’s brand associations are relevant and positive
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for the extension, brand extension may be appropriate. However, if there are
few positive or weakly held positive associations extension would not be as
favorable. Similarly, if the core product’s image is overall negative for the
extension, resources should be devoted to building or buying an individual
brand identity. Alternatively, for the case in which resources are insufficient
to build a new brand image, licensing or acquiring a brand might achieve
the desired effect. If creation of an appropriate image is unlikely using these
methods, it would be prudent to forgo an extension and devote the resources
to building equity for a new brand.

Specific implications
When considering vertical extensions, certain principles serve as basic
guidelines about what to do and what to avoid. For example, if a prestige
image among the core target audience is important, prestige products should
avoid downscale brand extensions. One of our examples, the Cadillac
Cimarron, was actually a popular extension. However, it damaged the core
product image and sales in the core audience. In fairness, a dispassionate
marketing manager may recognize that, overall, core markets may not matter
if a brand extension attracts a lucrative new segment. In Cadillac’s case, the
downscale extension probably caused more harm to profits by tarnishing the
luxury sized model’s image than it brought in.

Protect the care brand
by distancing
Another basic principle is to protect the core brand by distancing the
extension. Distancing is achieved by extending into a different product
category or by emphasizing a difference between the core and extension.
Within the same product category, emphasis on a difference in name or
product benefits may provide the distance. The Audi 5000, 4000, and
Quattro illustrate the benefits of distancing. When the Audi 5000 suffered
a series of unexplained accelerations, one of which was fatal, the attendant
publicity damaged its sales. The sales of the Audi 4000, a model without the
problem, were also damaged. However, the related Audi Quattro survived
with reduced sales losses. Apparently, consumers perceived the Quattro as
somehow different from the 5000 and 4000 models. The Quattro achieved
some brand distancing by emphasis on the Quattro rather than the Audi.
While distancing may be a safety measure in brand extension, it seems to

JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995 63

 contradict the reason for extending in the first place, namely reusing the
carefully crafted brand equity of the core product.

Another specific implication is that function-oriented products seem to allow

downscale but not upscale extension, while prestige-oriented products allow
upscale but not downscale extensions. While every rule or implication has
exceptions, this guideline seems to operate in more cases than not. The real
implication is that consumer testing and more consumer testing of the core
and extension may show underlying conditions which cause exceptions.
Otherwise, it is probably best to avoid the wrong extension direction
entirely.

Is this trip worth it? The final implication takes the form of the question, “Is this trip worth it?”
The apparent ease of brand extension should be tempered by the attendant
risk of wear-out or dilution of equity. Managers can use focus groups and
other research techniques to investigate the consumer perceptions and
specific brand associations of a core product. They should also estimate
the specific brand associations of potential extensions. Armed with that
information, it is possible to perform a cost-benefit analysis to support
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either a brand extension, or its converse, establishing a unique new brand.

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Dennis A. Pitta is an Associate Professor in the Marketing Department of the University

of Baltimore, Maryland, USA, and Lea Prevel Katsanis is an Assistant Professor at
Concordia University, Montreal, Quebec, Canada.

64 JOURNAL OF CONSUMER MARKETING VOL. 12 NO. 4 1995

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