Brand Extension and Cognitive Style and their Impact on the Consumers' Evaluations

Table of Contents

Table of Contents

List of Tables

1 Introduction

2 Conceptual Framework
2.1 Analytic versus Holistic Thinking
2.2 Brand Extension
2.2.1 Characteristics of Brand Extension
2.2.2 Prestige Versus Functional Brand Concepts
2.3 Cultural Differences and Style of Thinking

3 The Role of Thinking Style in Consumers Evaluation of Brand Extension Fit
3.1 Differences in Style of Thinking and Consumer's Evaluations of Brand Extension
3.1.1 Joint Influences on Brand Elasticity
3.1.2 Further Strategies for Increasing Acceptance for Distant Brand Extensions
3.2 Cultural Differences in Brand Extension Evaluation

4 Conclusion

References

List of Tables

Table 1: Examples for (distant) Brand Extension (Aaker/Keller, 1990, p. 31)

1 Introduction

Brand extension constitutes a common marketing strategy for entering into new segments and leveraging brand equity by expanding a brand, both, within and beyond the parent brand's product category (Volckner/Sattler, 2006, p. 18; Monga/John, 2010, p. 80; Collins-Dodd/Louviere, 1999, p. 1). This strategy is often employed by management for leveraging existing brand beliefs and the overall image of the parent brand to the newly launched product and thereby saving expenses with respect to measures for market launch (e.g. advertising or price promotions) (Collins-Dodd/Louviere, 1999, p. 1; DeGraba/Sullivan, 1995 p. 230). Considerable effort in research has been conducted in exploring and understanding the success factors of brand extensions, with brand extension fit being identified as one of the main drivers for an extension to succeed (see Volckner/Sattler, 2006, p. 18, 29; Aaker/Keller, 1990, p. 29). In this context, a high brand elasticity is likely to result in more favorable evaluations for brand extensions in distant product categories (Monga/John, 2010, p. 80; Park et al, 1991, p. 188). However, these findings cannot be generalized. Instead, it was found that the brand concept of the parent brand can significantly influence the elasticity and thus also the evaluation of the brand extension . In this respect, a distinction is generally made between two different brand concepts, namely prestige (e.g., Rolex) and functional (e.g. Casio). While a functional brand concept can be characterized in terms of brand-unique aspects that are related to the performance of a product, a prestige-oriented brand concept can be characterized in terms of consumers' expression of self-concepts or images (Park et al, 1991, p. 186; Kirmani et al, 1999, p. 88; Bridges et al, 2000 p. 1). What further complicates this recognition is that evaluations of brand extension are not consistent for every consumer, since individuals show differences in processing information provided in evaluation instances. In other words, whether an individual is more inclined toward analytic versus holistic thinking style significantly influences whether the evaluation for a (distant) brand extension turns in an favorable manner (Ahluwalia, 2008, p. 337-340; Monga/John, 2007, p. 530). This is due to numerous differences between the two ways of thinking, as for instance their categorization tendencies, their connected versus discrete way of thinking and their object- versus context-related focus (see Chiu, 1972, p. 235-236; Ji et al, 2000, p. 943-944). Differences in cognition have been found to be embedded in an individual's cultural origin (see Hossain, 2008, p. 619; Chiu, 1972, p. 235-236).. Existing research in this field is primarily concerned with differences between Eastern (i.e., East Asia) and Western (i.e., European/ American) cultures. While Eastern cultures are more inclined toward thinking hohstically, Western cultures rather demonstrate an analytical thinking style (see Nisbett et al, 2001, p. 296-297, 300; Ji et al, 2000, p.4-6, 21-22, Norenzayan et al, 2002, p. 654).. Consequently, these differences are also reflected in the perception of brand extensions. The purpose of this seminar work is to give an overview of existent research findings on brand extension and cognitive style to examine what impact style of thinking has on consumers evaluations of brand extensions.

2 Conceptual Framework

2.1 Analytic versus Holistic Thinking

Individuals can in general, be characterized by one of the two divergent styles of thinking -the analytic thinkers and the holistic thinkers. Holistic thinking is defined as "involving an orientation to the context or field as a whole, including attention to relationships between a focal object and the field, and a preference for explaining and predicting events on the basis of such relationships," and analytic thinking "involves a detachment of the object from its context, a tendency to focus on attributes of the object to assign it to categories, and a preference for using rules about the categories to explain and predict the object's behavior" (Nisbett et al, 2001, p. 293). This distinction finds support in numerous findings of prior research, including a study by Ji et al. (2000, p. 4-6,21) in which they find that people showing indications for holistic thinking, put more emphasize on relationships between an object and its environment compared to analytic thinkers.

Following existing literature, a main difference between the two divergent cognitive styles is due to categorization tendencies (see Choi et al, 1999, p. 48; Markus/Kitayama, 1991, p. 231; Hossain, 2018, p. 616). Depending on the cognitive style, individuals differ in their disposition regarding this aspect (Hossain, 2018, p. 616). When evaluating objects, analytic thinkers characteristically assign them into categories and rate them by reference in terms of category-specific attributes. Holistic thinkers by contrast point to relationships between different categories and are thus characterized by their flexibility in categorization (see Jain et al, 2007, p. 66-68; Masuda/Nisbett, 2001, p. 933; Monga/John, 2010, p. 80-81; Nisbett et al, 2001, p. 293, 296, 300). These findings coincide with numerous studies ascertained that holistic thinkers possess a greater disposition of connected-thinking - saying that they characteristically view the world as a composed of connected constituents - whereas analytic thinkers are rather characterized by viewing the world as composed of isolated constituents (Monga/John, 2007, p. 530; Monga/John, 2010, p. 80; Nisbett et al, 2001, p. 297). Along the same lines, in their study Masuda and Nisbett (2001, p. 933) figured out that when asked to describe objects, holistic thinkers are more inclined toward drawing connections to their context whereas analytic thinkers are able to elute them from their context. Norenzayan et al. (2002, p. 654) find that analytic thinkers have a greater tendency to engage in rule-based categorization relative to holistic thinkers. In sum, analytic and holistic thinkers differ in their perceptions of connections between objects (Monga/John, 2010, p. 81). Prior research has shown that this divergent nature of cognition - connected versus discrete - which is constituted in the holistic and analytic thinking style respectively, can have a major impact on market decisions. (Hossain, 2018, p. 617). The most prevalent studies in this research area refer to effects on decisions concerning brand extension fit (Monga/John, 2007, p. 530), consumers' reactions to negative brand publicity (Monga/John, 2008, p. 5) as well as price-quality judgments.

2.2 Brand Extension

2.2.1 Characteristics of Brand Extension

Brand extension involves the use of an established brand name for launching new products and constitutes a common strategy for leveraging brand equity (Volckner/Sattler, 2006, p. 18; Monga/John, 2010, p. 80; Collins-Dodd/Louviere, 1999, p. 1). The trend of employing brand extensions has proved successful for decades. In his early study on brand extension, Aaker/Keller (1990, p. 47) found that already between 1977 to 1984 40% of the new launched brands (175 brands in total) represented brand extensions. Up to the present time, this trend is still on the rise. Numerous successful introductions of new products these years are brand extensions, for instance Apple's iPhone, Starbucks Frappuccino or Porsche's kitchen appliances (Monga/John, 2010, p. 80). Extending brands, both within as well as beyond the parent brand's product category appears to be profitable, since the prestige of the parent brand is assumed to be transferrable to the extension and thus lower investment in new product introduction expenses are required (e.g. advertising or price promotions) (Collins-Dodd/Louviere, 1999, p. 1; DeGraba/Sullivan, 1995 p. 230). However, what actually determines the success probability of a brand extension, represents an important research inquiry, with a view of providing insights for management to lower failure rates of brand extensions (see Aaker/Keller, 1990, p. 27). With this regard, prior research has identified the perceived fit between the parent brand and the extension to be one of the main drivers for an extension to succeed (see Volckner/Sattler, 2006, p. 18, 29; Aaker/Keller, 1990, p. 29). Perceived fit can result from numerous factors, including whether the extension and the parent brand are within the same product category and/or associated with the similar product benefits (Chang et al, 2011, p. 400), and the transferability of the image or prestige of the parent brand (Boush & Loken, 1991 p. 16; Monga/John, 2007, p. 529). Prior research provides substantial support for this assumption. For instance, following Park et al. (1991, p. 185), perceived "fit" describes consumer's evaluation of the extension in terms of its suitability with the product category of the parent brand (Park et al, 1991, p. 185). Broniarcyzk/Alba (1994, p. 215), have further elaborated the concept of perceived "fit". They claim that "fit" dependents on numerous brand-related associations, anchored in consumer's minds. Hence, if the product category of the extension exhibits these associations, the brand is presumed to be evaluated positively. This is in line with more recent findings, namely that consumers possess a tendency to respond more favorably to brand extensions that fit with perceptions about the parent brand (Monga/John, 2010, p. 80; Aaker/Keller, 1990, p. 28). Moreover, perceived brand extension fit is observed to be higher for extensions in product categories similar to the parent brand and extensions that can be used together with other products sold by the parent brand (Boush/Loken, 1991, p. 18; Aaker/Keller, 1990, p. 29). However, a large number of brands also launch successful extensions not complying these rules. Such brands are described as being "elastic" since they are capable of launching extensions into distant product categories notwithstanding that they correspond to merely few or no attributes or features with existing products and touch upon different consumers (Monga/John, 2010, p .80). As a present example Monga/John (2010, p. 80) mention Ralph Lauren. The luxury brand offers a wide variety of products under its brand ranging from sunglasses, dog leashes and paint up to restaurants. Moreover, Monga/John (2010, p. 80) posit that decisive for whether a brand is more elastic than another is based on the characteristics of the parent brand, as they determine a brand's elasticity. A crucial role in this context plays the type of brand concept that is associated with the parent brand which can be characterized as either being functional or prestige (Park et al, 1991, p. 186). Following Park et al. (1991, p. 186). Brands that are assigned to prestige stand out by their abstract brand concept and possess a high elasticity, whereas functional brands are commonly less elastic (Monga/John, 2010, p. 80). What determines the elasticity for prestige versus functional brands, will be further elaborated in the following section. The previously elaborated framework for perceived brand extension fit, can be concluded as follows, namely, that the effect of perceived fit on consumers evaluations of brand extensions appears to be moderated by an individuals' goal orientation. In particular, the relative effects of category-similar versus bene- fit-similar extensions on consumers attitudes have been found to correspond with an individuals motivational orientation: promotion-focus versus prevention-focus (Chang, 2014, p. 166). Since individuals that possess a promotion-focus are more inclined toward maximizing benefits, they will evaluate an extension that serves similar benefits (benefit-similar extension) more favorably. This is due to the fact, that this extension seems to guarantee the anticipated benefits. Prevention-focused individuals, on the contrary, place their focus on the minimization of risks and thus evaluate extensions that show similar category attributes (category-similar extension) more favorably, as they are associated to be less risky (see Chang et al, 2011, p. 393; Chang, 2014, p. 166). However, following recent research a further aspect has to be taken in to account when making assessments on a brand's elasticity. Namely, it has been found, that the style of thinking (i.e. holistic versus analytic) employed in evaluation instances of brand extensions, besides brand concept (i.e., prestige versus functional), substantially influences perceived elasticity (Ahluwalia, 2008 p. 337-340; Monga/John, 2007, p. 530; Monga/John, 2010, p. 81).

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Table 1: Examples for (distant) Brand Extension (Aaker/Keller, 1990, p. 31)

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