Research on brand extension feedback effects based on customer equity

J Zhang,K Chen,J Shao

doi:10.4102/sajbm.v46i1.86

Abstract

As a strategy for enterprises to expand the scale of their operations, brand extension could also generate feedback effect diluting parent brand's customer equity. This study proposes and estimates a theoretical model examining the influence of brand extension on the drivers of parent brand's customer equity, namely value equity, brand equity, and retention equity using data of 850 questionnaires from ordinary consumers in China. The model indicates whether the drivers of a parent brand's customer equity change after brand extension, and how fit and consumer evaluations of brand extension influence the drivers of the parent brand's customer equity. The results show that firstly brand extension influences the drivers of parent brand's customer equity, secondly fit and consumer evaluations of brand extension directly affect the drivers of parent brand's customer equity, consumer evaluations also perform an intermediary function between fit and the drivers of parent brand's customer equity. Finally, this paper talks about managerial implications of the finding.Limitations and suggestions for future research are also discussed.

Highlights

With the intensification of competition in the market, the success rate of new products is generally low
Scholars have made an intensive study of brand extension feedback effects, which means the effects of brand extension on the parent brand's image (Pina et al, 2010), attitude (Dwivedi et al, 2010), characteristic (Diamantopoulos et al, 2005) and so on, but research on the effects of brand extension on the parent brand's customer equity has received little attention
Value equity is based on consumers' objective assessment, but previous brand feedback effects research mainly study the effects on parent brand's attitude, image, characteristic, which belong to consumer's subjective perception, so brand extension won't affect objective value equity

Summary

Introduction

With the intensification of competition in the market, the success rate of new products is generally low. Based on the customer equity model and introducing factors that influence brand extension as exogenous variables, this paper considers the effects of brand extension on the drivers of a parent brand's customer equity, makes theoretical hypotheses, and constructs a model of the relationship between brand extension and customer equity to identify marketing activities that will dilute customer equity. It makes theoretical suggestions for companies that wish to introduce brand extension. We conclude with an overview of our findings, the managerial implications, and suggestions for future research

Literature review

Method

Discussion and limits