An Empirical Analysis of Umbrella Branding

Abstract

In this article, the author studies the processes by which consumers’ quality perceptions of a brand in a product category are affected by their experience with the same brand in a different category. The model proposed and estimated explicitly incorporates some of the basic consumer behavior premises of signaling theory of umbrella branding (Montgomery and Wernerfelt 1992; Wernerfelt 1988). The author provides a framework to analyze the impact of marketing mix strategies in one product category on quality perceptions, consumer perceived risk, and consumer choice behavior in a different category. The model is estimated on panel data for two oral hygiene products, toothpaste and toothbrushes, in which a subset of brands share the same brand name across the two product categories. The results show strong support for the consumer premises of the signaling theory of umbrella branding.