RAJEEV BATRA, PETER LENK, and MICHEL WEDEL*
The majority of brand extensions reportedly fail, suggesting the need for methodologies that allow for better strategic prediction of categories into which a brand should extend or license. Prior literature suggests that brand extensions are likely to be more successful if a brand extends into another category into which its existing brand associations and imagery “fit” better and if the extending brand is “atypical” (if it possesses associations and imagery that are broad and abstract rather than tied too closely to the brand’s original product category). The authors develop a methodology in this study to estimate brand and category personality structures, using a Bayesian factor model that separates the two by means of brand-level and category-level random effects. This methodology leads to measures of a brand’s fit and atypicality. The authors illustrate and validate the model on two nationally representative data sets on brand personalities in three categories (jeans, magazines, and cars) and investigate the brand extension and licensing implications of the results obtained with the model.
Keywords: brand extensions, marketing strategy, brand personality, category personality, marketing research, brand management
Brand Extension Strategy Planning: Empirical
Estimation of Brand–Category Personality
Fit and Atypicality
Brand extensions—the use of an existing brand name on
a new product in a new category to benefit from the existing brand name’s awareness and associations—leverage the
investments a company makes in its existing brand names
and hedge against the risk of new product failures. The
popularity of this strategy is due to the belief that it leads to higher consumer trial than the use of a new brand name
because of the awareness levels and association (imagery)
equities of the brand name being leveraged (Keller 2003, p.
582). Many companies today also seek to leverage their
existing brand assets through licensing deals to other manufacturers in other categories (e.g., the Caterpillar brand on
boots, made by Wolverine footwear) or through cobranding
arrangements (e.g., Harley-Davidson with Ford trucks).
These “extendibility” advantages significantly contribute to a brand’s financial value because they raise the estimate of its future revenues (Keller 2003, p. 499).
However, not all brand extensions succeed, and there is a
risk that failure will backfire on the image of the parent
brand (Martinez and Pina 2003). In the United States, new
products experience failure rates between 80% and 90%,
and brand extensions fail at a somewhat lower rate (Keller
2003, pp. 581–82). Thus, there has been a burgeoning academic research stream on the factors that promote or reduce the success of brand extensions. This academic research has
highlighted the contributing role of the breadth and abstractness of the extending brand’s associations and imagery and the fit of these with the target category. This article fills a void in the literature by proposing a methodology to estimate these constructs by separately measuring the association imagery of the extending brand, its “parent category,” and that of the product category into which it is being
extended. Using a Bayesian factor-analytic model (Ansari
and Jedidi 2000; Ansari, Jedidi, and Dube 2002) for brand
and category personality, we derive measures of a brand’s
*Rajeev Batra is S.S. Kresge Professor of Marketing (e-mail: rajeevba@ umich.edu), and Peter Lenk is Professor of Operations Management Science and Marketing (e-mail: firstname.lastname@example.org), Ross School of Business, University of Michigan. Michel Wedel is PepsiCo Professor of Consumer Science, Smith School of Business, University of Maryland (e-mail: email@example.com). The authors gratefully acknowledge the data collection support of GfK and the Marketing Science Institute. They give special thanks to Raimund Wildner of GfK for his interest in...
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