Consumer evaluation of vertical brand extensions and core brands

Abstract

This research uses categorization theory to understand the dynamics of vertical brand extensions. Two experiments measure consumer evaluations of both core brands and vertical brand extensions, including the effects of direction of brand extension (step-up vs. step-down) and distancing techniques (close, medium, far). The impact of product concept (function-oriented vs. prestige-oriented brands) is examined, with Study 1 using cars (Lexus, Toyota), and Study 2 using wristwatches (Rolex, Timex). Findings from these two studies indicate that the introduction of any vertical brand extension (either step-up or step-down) has a negative impact on consumer evaluation of the core brand. However, increasing the perceived distance between the core brand and the brand extension, via the use of graphical and linguistic distancing techniques, reduces this negative impact on the core brand. Increased distancing also benefits step-up brand extension evaluations, but step-down brand extensions are evaluated less favorably when distancing techniques are used.