Exploring the importance of product category similarity and selected personal correlates in brand extensions

Abstract

Firms often try to benefit from their well-established brands by extending them (the brands) into new product categories. Real life observations show that this strategy can be beneficial, but also result in market failures difficult to overcome. This paper reports an effort to enhance present insights regarding factors that attribute to success in extending established brands into new product categories. A set of interrelated hypotheses was examined in a quasi-experimental study. The findings show — as reported in earlier research — that extensions into product categories perceived similar to that of the parent brand tend to be more easily accepted then less similar extensions. It was observed, however, that the phenomenon of product category 'similarity' may be more complex and multifaceted than usually believed. The reported findings indicate that strong brands are advantageous when extending into product categories perceived high in risk. It was also found that knowledge of and belief in strong brands may compensate for consumers' lack of product knowledge in their purchase behaviours. Managerial and theoretical implications are emphasised.