The impact of brand extension success drivers on brand extension price premiums

Abstract

Research into brand extensions has mainly focused on consumers’ extension evaluations without considering an important financial implication: the ability of the extension product to charge a price premium. This study analyzes (1) the extent to which consumers are willing to pay a price premium for the extension product and (2) the impact of potential success drivers on consumers’ attitudes toward the extension and the extension price premium. The results show, for example, that perceived advertising support positively influences consumers’ attitudes toward the extension, but it does not directly affect the magnitude of the brand extension price premium. Furthermore, this study reveals monetary effects associated with these success drivers (i.e., parent brand quality, perceived fit, marketing support for the brand extension, and consumer experience with the extension category), which offer important information regarding how to allocate resources to various success drivers. For example, brand investments that increase perceptions of parent brand quality by one unit (seven-point scale) tend to enhance the brand extension price premium of typical fast moving consumer goods (average price of €2.04 in the study sample) by €.208, all else being equal.