BRAND EXTENSIONS OF FMCG IN PAKISTAN A MODULAR APPROACH TO STUDY THE IMPACT OF BRAND EXTENSIONS

BRAND EXTENSIONS OF FMCG IN PAKISTAN

A MODULAR APPROACH TO STUDY THE IMPACT OF BRAND EXTENSIONS

BY TARIQ JALEES

THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF M-PHIL MAY 2008

ACKNOWLEDGMENTS

It took me more time than anticipated, more than a year to finalize my thesis. I am obliged to and thank acknowledge all those people who have been a source of encouragement, inspiration and motivation. Since I have not maintained a proper record of all these helping hands, I would like to apologize to those whose names I am not able to mention, here. Nonetheless, I shall ever remain grateful and indebted to them all. I am thankful to the management PAF-Karachi Institute of Economics and Technology, for having provided an opportunity to upgrade my qualifications, and a stepping stone for a Doctorate. In this context, I would like specially to mention the names of Air Commodore (Retired) Mohammad Khalid Hussain, the President of the Institution, Ex- Dean of the institute, Dr. Javaid A. Ansari, Ex-Director of College of Management Science Mr. Raza Kamal, and the present Dean of the institute Dr. Manzoor A. Khalidi. It would not be fair, if I do not mention the name of Associate Professor Mr. A.A.Kanwar, of PAF-KiET, who not only encouraged me all the time, in fact he has always been breathing on my neck not only to complete the M-Phil, but also go for a PhD. I would also like to thank my Dr. Javed R. Laghari, Ms. Azra Maqsood, Dr. Amanat Ali Jalbani,

Dr. Mustaghis-ur-Rahman and Mr. Zia Memon of

SZABIST and Dr Wasim Qazi, Mr. Imtiaz Arif of IQRA with whom I had been associated for a while before joining the PAF-KIET. Last but not least, I would like to thank my supervisor Dr. Tahir Ali for providing all the necessary guidance and supervision due to which I was not only able to complete the thesis but was also able to present the summarized versions of the thesis at an international conference at Dubai, UAE and various other international journals.

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CERTIFICATE OF STATEMENT

I hereby certify that this paper constitutes my own product, that where the language of others is set forth, quotation mark so indicate, and that appropriate credit is given where I have used the language, idea, expression or writing of the others

SIGNED ______________________ TARIQ JALEES

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APPROVAL PAGE

BRAND EXTENSIONS OF FMCG IN PAKISTAN

A MODULAR APPROACH TO STUDY THE IMPACT S OF BRAND EXTENSION

BY TARIQ JALEES

APPROVED____________ SUPERVISOR: Dr. Tahir Ali

APPROVED

______________ Dr. Manzoor A. Khalidi Dean of College of Management Sciences

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TABLE OF CONTENTS ACKNOWLEDGMENTS ..........................................................................................................................I CERTIFICATE OF STATEMENT ......................................................................................................... II APPROVAL PAGE ............................................................................................................................... III TABLE OF CONTENTS........................................................................................................................IV ABSTRACT ........................................................................................................................................... VII CHAPTER-1 .............................................................................................................................................. 1 INTRODUCTION ..................................................................................................................................... 1 1.1 1.3 1.3

PURPOSE OF THE STUDY ..........................................................................................................2 CONTRIBUTION OF THIS STUDY ............................................................................................2 PROBLEM STATEMENT.............................................................................................................3

CHAPTER - 2 ............................................................................................................................................ 4 LITERATURE SURVEY ......................................................................................................................... 4 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8

BRAND...........................................................................................................................................4 BRAND EQUITY...........................................................................................................................6 BRAND MANAGEMENT STRATEGY.......................................................................................8 BRAND EXTENSION ...................................................................................................................9 RISK IN BRAND EXTENSIONS................................................................................................13 RATIONAL AND BENEFIT OF BRAND EXTENSION...........................................................14 CATEGORIZATION THEORY ..................................................................................................18 CONGRUITY THEORY..............................................................................................................19

CHAPTER-3 ............................................................................................................................................ 20 EMPIRICAL MODEL VIZ. HYPOTHESES .............................................................................................20 3.1 EMPIRICAL MODEL ..................................................................................................................20 3.2 HYPOTHESES .............................................................................................................................21 CHAPTER -4 ........................................................................................................................................... 22 METHODOLOGY .................................................................................................................................. 22 4.1 STIMULI SELECTION................................................................................................................22 4.2 MEASUREMENTS......................................................................................................................22 4.2.1 DEPENDENT VARIABLE ................................................................................................ 23 4.2.1.1

4.2.2

4.2.2.1 4.2.2.2 4.2.2.3 4.2.2.4 4.2.2.5 4.2.2.6 4.2.2.7 4.2.2.8

4.3

CONSUMER EVALUATION OF BRAND......................................................................... 23

INDEPENDENT VARIABLES .......................................................................................... 23 SIMILARITY......................................................................................................................... 23 REPUTATION OF PARENT BRAND ................................................................................ 23 PERCEIVED RISK ............................................................................................................... 24 INNOVATIVENESS............................................................................................................. 24 MULTIPLE BRAND EXTENSIONS................................................................................... 24 PARENTS BRAND CHARACTERISTICS......................................................................... 24 PARENT BRAND CONSISTENCY .................................................................................... 25 BRAND EXTENSIONS FIT................................................................................................. 25

SAMPLE SIZE..............................................................................................................................25

CHAPTER-5 ............................................................................................................................................ 27 RESULTS AND DISCUSSIONS ........................................................................................................... 27 5.1 DISCUSSIONS RESULTS OF REPUTATION, SIMILARITY & ASSOCIATION .................27 5.1.1 SIMILARITY ...................................................................................................................... 27 5.1.2 PARENT BRAND CHARACTERISTIC & EVALUATION............................................... 28 5.1.3 REPUTATION................................................................................................................... 29 5.1.4 STIMULI ........................................................................................................................... 29 5.1.5 HYPOTHESIS ONE: ...................................................................................................................30 5.1.5.1 CLOSE EXTENSION................................................................................................................... 30

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5.1.5.2 DISTANCE EXTENSION............................................................................................................. 32

5.2 DISCUSSIONS & RESULTS OF INNOVATIONS & PERCEIVED RISK ..............................35 5.2.1 PERCEIVED RISK.......................................................................................................................35 5.2.2 INNOVATIVENESS........................................................................................................... 36 5.2.3 STIMULI ........................................................................................................................... 36 5.2.4 HYPOTHESIS TWO: ...................................................................................................................36 5.2.4.1 CLOSE EXTENSION..................................................................................................................... 37 5.2.4.2 DISTANCE EXTENSION............................................................................................................. 38

5.3 DISCUSSIONS & RESULTS OF CONCEPT CONSISTENCY ................................................41 5.3.1 BRAND CONCEPT CONSISTENCY & EXTENSION ..................................................... 41 5.3.2 HYPOTHESIS.................................................................................................................... 42 5.3.2.1 CLOSE EXTENSION.................................................................................................................... 42 5.3.2.2 DISTANCE EXTENSIONS .......................................................................................................... 44

5.4 RESULTS AND DISCUSSIONS ON BRAND EXTENSION FIT.............................................47 5.4.1 BRAND EXTENSION AND PERCEIVED FIT ................................................................ 47 5.4.1 HYPOTHESIS-4 ................................................................................................................ 48 5.4.2.1 5.4.2.2

CLOSE EXTENSION ........................................................................................................... 49 DISTANCE EXTENSION .................................................................................................... 51

5.5 DISCUSSIONS AND RESULTS ON MULTIPLE BRAND EXTENSIONS ............................54 5.5.1 MULTIPLE BRAND EXTENSIONS AND EVALUATION............................................... 54 5.5.1 HYPOTHESIS 5 ................................................................................................................ 55 5.5.1.1 5.5.5.2

CLOSE EXTENSION ........................................................................................................... 55 DISTANCE EXTENSION .................................................................................................... 57

CHAPTER 6............................................................................................................................................. 59 CONCLUSIONS...................................................................................................................................... 59 CHAPTER 7 ................................................................................................................................................64 RECOMMENDATIONS ............................................................................................................................64 REFERENCES........................................................................................................................................ 66 APPNEDIX-1 QUESTIONNAIRE ........................................................................................................ 74 LIST OF TABLES Table 1: Town wise Population and size................................................................................ 26 Table 2: Multiple regression of Close distance extension ...................................................... 31 Table 3: ANOVA (Close Extension) ....................................................................................... 31 Table 4: Coefficient (Close Extension)................................................................................... 31 Table 5: Multiple Regression of Distance Extension .............................................................. 33 Table 6: ANOVA-Distance Extension .................................................................................... 33 Table 7: Coefficients- Distance Extension ............................................................................. 33 Table 8: Multiple Regression of Close Extension................................................................... 37 Table 9: ANOVA of Close Extension ..................................................................................... 37 Table 10: Coefficients of Close Extension ............................................................................. 38 Table 11: Multiple Regression of Distance Extension ............................................................ 39 Table 12: ANOVA, Distance Extension.................................................................................. 39 Table 13: Coefficients, Distance Extension............................................................................ 39 Table 14: Multiple Regression of Close Extension................................................................. 43 Table 15: ANOVA, Close Extension ...................................................................................... 43 Table 16: Coefficients, Close Extension ................................................................................ 43 Table 17: Multiple Regression of Distance Extension ............................................................ 44 Table 18: ANOVA, Distance Extension.................................................................................. 44 Table 19: Coefficients Distance Extension............................................................................. 45 Table 20: Multiple Regression, Close Extension.................................................................... 49 Table 21: ANOVA, Close Extension ...................................................................................... 49 Table 22: Coefficients, Close Extension ................................................................................ 50 Table 23: Multiple Regression Distance Extension ................................................................ 51 Table 24: ANOVA, Distance Extension.................................................................................. 51 Table 25: Coefficients, Distance Extension............................................................................ 52 Table 26: Multiple Regression, Close Extension.................................................................... 56 Table 27: ANOVA, Close Extension ...................................................................................... 56

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Table 28: Coefficient, Close Extension .................................................................................. 56 Table 29: ANOVA, Distance Extension.................................................................................. 57 Table 30: ANOVA, Distance Extension.................................................................................. 57 Table 31: Coefficients, Distance Extension............................................................................ 57

LIST OF GRAPHS Graph 1: Scattered Chart-Close Extension............................................................................ 31 Graph 2: Scattered Chart-Distance extension ....................................................................... 33 Graph 3: Scattered Chart, Close Extension ........................................................................... 38 Graph 4: Distance Extension ................................................................................................. 39 Graph 5: Scattered Chart Close Extension ............................................................................ 43 Graph 6: Scattered Chart, Distance Extension ..................................................................... 45 Graph 7: Scattered Chart, Close Extension .......................................................................... 50 Graph 8: Scattered Chart Distance Extension ....................................................................... 52 Graph 9: Scattered Diagram, Close Extension ...................................................................... 56 Graph 10: Scattered Chart, Distance Extension .................................................................... 58

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ABSTRACT Most of the previous researches have used up to four factors for ascertaining how consumers evaluate brand extension by using hypothetical brand extension and college students as a subject. This study has identified several variables that could influence the consumer evaluation of the brand extension and then have used eight of them to ascertain the relationship of these variables with the dependent variable “consumer evaluation” of brand extension.

The variables used in the empirical models are listed as (1)

similarity (2) reputation (3) innovativeness (4) perceived risk (5) multiple extensions (6) parent brand characteristics (7) concept and consistency (8) brand extension fit. Moreover, four different real life brands have been used as stimulus in this study which are: (1) Tapal Tea Viz. Tapal Tea Bag., (2) Life Buoy Soap Viz. Lifebuoy Shampoo. (3) Sufi Vegetable Oil and Sufi Washing Soap. (4) Woodward Gripe Water and Woodward Toothpaste. Two of the stimuli were close brand extensions and the other two were distance brand extensions. Based on these variables, a questionnaire was developed that was administered to a sample size of 700. Quota sampling was used for drawing samples from 18 Union District Council (UDC) of Karachi. The subject has been drawn in such a manner that it would be a representative sample. The research has established that the relationships of independent and dependent variables is highly on related to “close brand extension” and “distance brand extension”

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CHAPTER-1 INTRODUCTION The present chapter introduces the theme of this master thesis, and the motives, problems and findings that lie behind this choice. It includes a short background, of the area of investigated and continues with objective and ends up with the problem statement. Growth is necessary for companies to stay competitive, and for achieving growth, firms must launch new products, consistently. However, a failure rate for a new launch is very high. Researchers found that failure rate of new product in early eighties and nineties were between 30 to 35% (MontoyaWeiss & Calanone 1994). Crawford (1997) findings on new products’ failure were more alarming as he found that the failure rates in nineties were as high as 80%. New product failure could hurt the firm quite substantially and the loss could run in millions. “RCA lost $850 million on its Selecta Vision. Texas instrument lost a staggering $660 million on disc computer before withdrawing from the home computer business; web TV lost $725 million before it was shut down.” (Kotler & Armstrong 2006). It has become very difficult for a new product to succeed because of ever increasing advertisement cost and sever competition for limited shelf space. (Aaker 1991; 1996) In view of the built-in risk associated with new products, brand extensions are commonly used by companies for pursuing growth strategies. In 1980s, the brand extension strategy for expansion became so popular that of the entire new products launched in this era, about 80% of them were brand extensions (Ries & Trout 1986). However, by 1990s the share of brand extensions increased to 90%. Firms have adapted to this growth strategy because financial and marketing benefits of this strategy are enormous (Aaker 1991). The researchers have found that the growth rate of introducing new products by using brand extension strategy has an increasing trend. The reasons for such a trend were: (1) substantial benefit and (2) reduced risks associated with the brand extensions. Market intelligence service (2001) in 1

this context reports that about 31,432 new consumer related products were launched in the year 2000; this was 21% higher than the preceding year. And again, the market share of the brand extension remained 90%. Brand extension may also adversely affect the brand name that happens to be the most important asset of any company. Wrong extension, not only results in substantial loss of time and other market opportunities, but it may also lead to the “damaging association that may be expensive or even impossible to change” (Ries & Trout 1986). Consistent and repeated brand extensions may dilute the brand equity and lead to the death of the brand name associated with the brand equity (Gibson 1990). Other researchers found no evidence that suggests a positive relationship between unsuccessful brand extension and dilution of brand equity (Keller & Aaker 1992). Aaker (1992) and Romeo (1991) found that brand extension failures in terms of sales and product performance had no adverse impact on the prominent and established brands (Aaker 1992; Romeo 1991). Popularity of brand extensions as a growth strategy has opened various avenues of brand extension related research, including, how consumer evaluate brand extensions, and what are the factors that contribute towards the success of brand extensions.

1.1 PURPOSE OF THE STUDY The objectives of the study were to (1) identify the variables that affect the consumer evaluation of brand extensions, (2) develop an empirical model showing relationships of the variables and, (3) test the validity of the empirical model, separately for close and distance brand extensions.

1.3 CONTRIBUTION OF THIS STUDY Researchers have made significant contributions in the last few decades towards explaining how consumers evaluate brand extension (Nkwocha 2

2000). However, the scope of the previous researches has had a certain degree of limitation. Most of the previous researches have used up to four factors for ascertaining how consumers evaluate brand extension. The stimuli in most of the previous studies were found to be hypothetical brand extension, and the subjects, in most of the studies, were college students. The contribution of this study is that it has attempted to ascertain the relationship of eight variables that are related to consumer evaluation of brand extension. Moreover, four different real life brands have been used as stimulus in this study. Two of the stimuli were close brand extensions and the other two were distance brand extensions. The subject has been drawn in such a manner that it would be a representative sample. To the best of author’s knowledge, no such comprehensive study on brand extension in Pakistan’s scenario has ever been carried out

1.3 PROBLEM STATEMENT The failure rates of new product over the last few decades have increased tremendously; therefore, firms have resorted to brand extensions, because of inherent advantages including its acceptability, low promotion cost and comparatively lesser degree of failures. Despite these advantages, the failure rate of brand extension has remained significant in the last one decade. Therefore, the researchers have been focusing in identifying the factors that consumers use for “evaluating the brand extension”, or the factors that are contributes towards the success or failure of brand extensions. The focus of this study is to identify the variables that consumers uses for evaluating brand extension. The variables used in this study are inclusive of (1) similarity, (2) reputation of parent brand, (3) perceived risk, (4) Innovativeness, (5) multiple brand extensions (6) parent brand characteristics (7) parent brand characteristics (8) brand extension fit. The behavior and relationships of these independent variables, with the dependent variable “consumer evaluation” of brand extension will help marketers to use brand extension strategy more effectively and successfully.

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CHAPTER - 2 LITERATURE SURVEY This chapter intends to set a theoretical framework of the thesis by introducing the main areas needed to create basis of our analysis, shaping the way toward our main purpose. Thus, it begins with a short description of the brand, brand equity, brand management strategy, brand extension, risk in brand extension, and rationale behind brand extension, categorization theory and ends on congruity theory.

2.1 BRAND Branding has an ancient history. It could be traced back to times when the ancient Egypt brick makers used to stamp symbols on bricks for identification and distinction purposes (Farghuhar 1990). Nilson (1998) on the other hand found that ancient farmers used to put symbols on cattle with the help of hot iron, which meant burning. The word “brand” has been derived from the Scandinavian word "branna" that means to burn. In Swedish language the word "brand", means fire. Thus, when a producer puts some marks or symbols on their product, it will come in the category of branding (Nilson 1998). One of the advantages of strong brand name is that it helps in penetrating in a new market or a new market category. Globalization has created tremendous brand awareness and this awareness is not dependent on the availability of the products. (Czinkota & Ronkainen 2001).

For

example, brands such as McDonald, Pizza Hut and KFC had very strong awareness in Pakistan even before they opened their franchises in the country. The evolution of brands continued in early twentieth century. There were several commonly recognizable brands in this era. By the mid of twentieth century (1950) this branding concept gained substantial momentum, so much so that it became strategic marketing activities for market oriented companies (Blois 2000). Since the nineties, companies started treating brands as an important asset (Nijssen 1999). The success stories of leading and powerful corporation will tell that all of them owned “strong brand”. Realizing the importance of brand, the companies 4

are now giving more attention to brands, which was previously reserved for employees or tangible assets such as capital and equipment (Daivs 2002). Kotler and Armstrong (2007) has defined brand as a name, term, sign, symbol, design or a combination of these attributes used by the firms for identifying their products and to differentiate the competitor’s brands. Another important aspect of brand is that it helps consumers in identifying the manufacturers (Kotler & Armstrong 2007). According to American Marketing Association a brand is: "A name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition," (American Marketing Association 2007). The scope of branding is beyond product identification. Brands not only reflect quality but it helps in creating competitive advantage and helps customers in making purchase decisions (Kapoor 2005).

Keller (1996) also adds that

branding should be used for creating brand awareness and developing associations in accordance with the firm's strategic goals. Branding has two perspectives. One is product plus view and the other is holistic view. In product plus view, brand is perceived as an addition to the product; therefore, it is also termed as an identifier. In holistic view, the scope of brand is not restricted to product. In fact, in holistic view, it is a reflection of all the 4p’s of the marketing mix. Brand, besides offering product, contains certain attributes that may provide satisfaction to the purchaser. These attributes are not restricted to tangibility or rationality but are inclusive of intangible or invisible features (Ambler & Styles 1996). Researchers are of the opinion that branding is beyond creating unique identity, it helps in establishing preferences, creating habits, loyalties and building relationship between a brand and customers. Thus, the customers are not only able to distinguish one brand from another but are also able to develop their relative positioning. Brand also helps in adding more value to the product. (Wells & Burnett & Moriarty 2000).

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Branding is an important managerial activity for creating awareness about the brand and its benefits and helping competitors to differentiate their products. Brands thus are important assets of organizations and in some cases the book value of a company may show that brands have a significant share as compared to other tangibles (Kamakura & Russell 1991). Business week (2004) reported that the market capitalization of the Coca Cola Company as of early 2004 was approximately $120 billion, out of which more than 50% ($70 billion) was it’s brand value. Similarly, Procter & Gamble sold to Cadbury-Schweppes its “Hires” and “Crush” product-line at $220 million. Of this aggregate, about 90% of the total price was associated with brand assets. (Kamakura & Russell 1991).

2.2 BRAND EQUITY Brand equity is a relationship between customers and brands, resulting in a profit to be realized at a future date (Wood 2000). Kotler and Armstrong (1996) were of the opinion that measuring brand equity is a tedious job. Nevertheless, a powerful brand means high brand equity that helps in achieving ‘higher brand loyalty, name awareness, perceived quality, and strong brand associations’. Some of the major benefits of brand equity are brand awareness and consumer loyalty which helps in reducing marketing costs. Brand is an important equity; therefore, it should be carefully preserved by adopting strategies that would help in maintaining or improving brand awareness, perceived brand quality and positive associations. (Kotler & Armstrong 1996) Ambler and Styles (1997) are of the opinion that brand equity could be measured from two perspectives. One is “financial evaluation approach” and the other is “consumer-based approach”. The financial evaluation approach is related to the monetary value of the brand, and the consumer-based approach focuses on the brand itself that is how much value the consumers give to the brand. Brand equity is also considered as an accumulated profit that could be realized at a future date. The brand equity concept can also

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cause confusion, because of the difficulty in measuring it (Amler & Styles 1997). Importance of brand equity, demands a need for a more practical experience and comparative research to judge and validate the usefulness of brand evaluation methods (Farquhar 1990). The recent merger and acquisition trend has also increased the importance of measuring brand equity (Tauber 1988). The role of brands is now far beyond product differentiation or competing for market share. They are accumulated annuities which the firm can acquire from its balance sheet (Tauber 1998). Firms could have a strong competitive edge over competitors, if they could create brand equity ‘through building awareness, image, and linking associations’ (Keller 1998). A stronger brand would always have a better understanding of needs, wants, and preferences of consumers than the brands that are not competitive. Thus stronger brands would help in creating effective marketing programs that could go beyond consumer expectations. (Keller 1998). Brand equity, since last one decade, has remained popular for attracting new market segments (Pitta & Katsanis, 1995). This phenomenon of brand equity has coincided with the newly emerged but equally popular phenomenon of brand extension (Ambler & Styles 1997). Research shows a two way relationship between brand equity and extension.

A brand's equity could

influence the success of extensions, and extensions could positively influence brand's equity. The result is that highly valued brand extensions are more successful. Consumers tend to choose those brands that have strong brand equity. Brand position of a firm is strongly dependent on the positive image of brands. Strong brands are a major source of differentiation and extending the same towards a specific product category is easier. Successful brand allows firms to demand high prices and are a source of barrier which makes it difficult for consumers to switch to other brands (Pitta & Katsanis 1995.) Investment and brand equity both have a limited life. Brand equity cycle is comprised of growth, reinforcement or decay, and is vulnerable to 7

competitors. Organizational actions have a direct bearing on the brand equity. Strong brand equity also helps in reducing the introduction cost of new brands. (Pitta & Katsanis 1995), Some of the brand equity definitions are based on strategic marketing perspective and others on financial theory perspective (Kapoor 2005). Aaker's definition is: "Brand equity is a set of assets / liabilities associated with a brand such as name awareness, loyal customers, perceived quality, and associations that are linked to the brand that add/subtract value to the product or service being offered" (Aaker 1996, p.7). Keller (1993) definition of brand equity is based on customers' perceptions of the brand, therefore, could be attributed as customer-based brand equity: "The differential effect of brand knowledge on consumer response to the marketing of the brand”. (Keller 1993, p. 2). The firm could use above definitions of brand equity for developing long term growth-strategy. For example, predictors’ variables such as “familiarity with the brand name”, and “level of promotion” may influence “trial purchase” more strongly as compared to determinants such as distribution, packaging, and brand awareness achieved by advertising (Aaker 1990). It has been found that one of the strongest motivating factors for inducing trial purchase is established brand name (Aaker 1990). The marketing cost at introduction stage is generally higher as the awareness is low. Firms with strong “brand equity” have two advantages at the introduction stage of new brand. Marketing costs at this stage will decline considerably, and it would also support a higher price, resulting in increased profitability (Aaker 1990). Retaining customers is more cost efficient than attracting new customers. The studies have suggested that the customers are more loyal to stronger brands than weaker brands. Thus, retention of loyal customer is easier than non-loyal customer (Aaker 1992).

2.3 BRAND MANAGEMENT STRATEGY The concept of brand management is not entirely new in the marketing of consumer products. Proctor & Gamble (P&G) when launched “Camy” brand in 8

1930, they were afraid that this brand would fail, as it would have to compete directly with the company’s established brands (e.g., Ivory). In order to give protection to the newly launched “Camy” the company for the first time in history, introduced the “brand manager system.” Under this system, a brand manager was appointed for “Camy”, and he was given all the authority, including competing directly against the established brands (Zenor 1994). The strategy of brand management was so successful that the firm formally adopted this philosophy. Subsequently, other industries, including food, soap, toiletries, and chemical industries, adopted the brand management strategy initiated by Procter & Gamble for Camy Soap (Low & Fullerton 1994). Four brand strategies are available for a company: multi-brands, to introduce a new brand, line extensions, or brand extensions (Kotler & Armstrong 2007). Multi-branding is introducing additional brands in the same product category in which the company is presently active. The purpose of multi-branding is to establish different features so that they are appealing to several different buying segments at the same time. Procter & Gamble following this strategy has thus included nine different kinds of laundry detergents. The second strategy is a creation of a new brand when launching into a new product category. Generally, a new brand is developed when firms believe that the current brand is loosing its charm and a new brand name is needed or when the firm feels that the current brand name is not appropriate for a new product (Kotler & Armstrong 2007). The other two concepts of brand extension and line extensions are discussed in subsequent sections.

2.4 BRAND EXTENSION Some of the commonly used definitions of brand extensions are as follows: Using an established name of one product class for entering another product class (Aaker 1991). Using a successful brand name for launching a new or modified product or line is known as brand extension strategy (Kotler 1991). An expansion strategy in which firms use already established and successful brand name for introducing a new or modified product (Kotler & Armstrong 1990). Using an established brand name for introducing a new product into 9

product category which is new to the company is known as franchise strategy (Hartman & Price & Duncan 1990). There are several ways for “accomplishing” brand extensions, including horizontal extension, distance extension, and vertical extension (Pitta and Katsanis 1995). When a firm uses the existing brand name for extending into a new product in the “same product class or to a product category new to the company” it is considered as horizontal extension (Pitta and Katsanis 1995). Horizontal extension again could be extended into two categories. One is line extension and other is franchise extension. Aaker and Keller (1990) states that horizontal brand could be further divided into two categories which are line extension and franchise extensions, and according to them the focus of these brand categories is different (Aaker & Keller 1990). Using an existing brand name and same product class for entering a new market segment comes in the category of line extension. Examples of line extensions are Pepsi and Diet Pepsi

(Aaker and Keller 1990). Other examples of line extensions are

shampoos for different segments such as dry hair, oily hair, and dandruff hairs, etc. This strategy is generally more successful for extensions in the same category as the core product. Franchise extension on the other hand is a strategy of using current brand name for entering a product category that is new to the company (Tauber 1981). If the core brand is extended into related or similar category it is considered as “close extension”. Extending to unrelated product category is known as “Distance extension”. In this case overall quality association of core brand is necessary for success (Pita & Katsanism, 1995). Distancing is a deliberate effort to increase the perception distance of the core brand and extension product (Kamal 2003). While using umbrella branding that is using the same brand name for several products the firm must ensure that the quality perception of the core products has also been transferred to all the extensions (Erdem 1998).

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Firms when launches “related brands” in the same product category with significant difference in price and quality levels they are considered as vertical extension. (Pita & Katsanism, 1995) The vertical extension has two directions. If the new product is of higher quality level with higher pricing it will be called up-scaling. On the other hand if the extended brand quality is low and is also of lower pricing it will be known as down scaling (Kamal 2003) If a newly launched product has a strong association with a strong brand then customers would have the comfort of believing that the firm will support its offering. (Aaker 1990). Extensions are significant in creating awareness of the strong brands especially to the segment that are not purchasing the product. The cost of “new launch” is increasing, the market is becoming more competitive and therefore more firms are deriving benefits from strong brand equity by brand extension strategies. In view of the high costs associated at introduction stage, firms leverage the equity of established brand name to introduce products in a totally different product category (brand extension). The rationale for this strategy is that consumer perception of the positive image (equity) tends to carry over to the extension and hence would be beneficial to new launch (Nkocha 2000) Ambler and Styles (1997), observed that although brand extension and line extensions are used interchangeably by some of the authors, but there is a conceptual difference in the definitions of the two. The definition proposed by Ambler and Styles(1997) is: when a company launches an existing product and brand name in the same product category with the same name by adding new flavor, changing form or color of the product, or changing ingredients or package sizes,

it comes in the category of line extension. These line-

extensions are commonly used in dairy products, and shampoo (Kotler & Armstrong, 2007) However, launching a new or modified product in a new category but using successful brand name would be brand-extension (Kotler & Armstrong 1996). A brand that has strong awareness can easily be launched in new product category, as the level of recognition and acceptance for such product is higher 11

(Kotler & Armstron, 1996). Virgin, basically a tobacco company has successfully ventured into businesses such as record company, airline, financial services, vodka, jeans and cola by using brand extension strategy (Hart & Murphy 1998). If the brand is of high quality, and if there is resemblance (fit) between the new product category and brand, and if a company has relevant expertise then the chances of successful brand extension would be bright (Ambler & Styles 1997). One of the problems in brand extensions is that customers might think that the company already offers this product and is not new in the new product form (Nijssen 1999). Despite this problem, the acceptance of the new brand will be higher for those brands that have strong associations with the brand as compared to reasonably familiar or weak brand (Nijssen 1999). Consumers while evaluating the brand extensions tend to assess its suitability in the relevant product category and the brand’s original category. If the customers’ perception is positive toward the suitability, then the degree of acceptance would be higher (Nijssen 1999). If the customers do not find any suitability between original brand category and brand extension category then the brand extension would adversely affect the brand equity of the company (Kim & Lavack 1996). Since last one decade, brand extension is getting extensive coverage in the academic and trade journals and is extensively used as growth strategy; therefore, it could be attributed as a branding strategy (Sharp 1993). The firms do not deliberate on whether to adopt brand extension strategy or not. What they deliberate on is timing (when) and place of brand extension (where) (Keller, 1998). Early 1990’s recession forced the firms to follow cost saving strategies so that they could be more competitive. This resulted in extensive usage of this extension strategy (Pitta & Katsanis 1995).) Whether a brand could be extended or not is very difficult, therefore, such decisions must be made on “combination of market research, experience and common sense.” (Nilson 1998). The firm must understand the managerial process 12

involved in brand extensions and study the factors that contribute to the success of brand extensions (Ambler & Styles 1997).

2.5 RISK IN BRAND EXTENSIONS Using equity of a brand to leverage into different product category may be profitable but it has its share of risk as well. Some of the very common risks associated with brand extensions are (1) a high number of brand extensions tend to adversely affect value associated with the brand, and (2) brand extension that fails to make an impact may dilute the equity of a reputable brand name (Mcarthy 1996) Ries and Trout (1986) endorsing the preceding opinions, stated that even if the brand is used “congruously”, the success to extended brand would be at the expense of parent brand. Aaker and Keller (1990) in this context found that the brand extension may carry typical attributes of the parent that may be dangerous to the extended brand. Thus Aaker and Keller were surprised that the respondents’ thought that Crest Chewing Gum, a brand extension of Crest tooth paste would taste typically like toothpaste or may not be appealing. Loken and John (1993) in similar research found that the possibility of dilution in brand extension cases increases when there are higher degrees of inconsistency between parent brand and extension brand. Loken & John (1993) found that when consumers’ perception towards brand extension is weak, this perception will also be transformed to the parent brands and hence they would believe that the attributes of the parent’s brand are weak as well. (Shocker, Srivastava & Rueker 1994) Another risk associated with brand extension is the cannibalization effect. The gravity of cannibalization would be higher for (1) those brand extensions that are more successful in new brand category, and (2) for those extensions that have higher degree of “closes ness” between parent brands from the consumers’ perspective. (Sharp 1993; Farquhar 1990).

13

If brand extension is not executed properly, it would not only damage corporate associations but would have several other adverse impacts (Ries & Trout 1986; Loken & Roedder 1993). Reputed brand extensions at times fail. This failure could generate the following adverse feelings for the parent brands: (1) customers may feel that the brand extension is not adding value to the product, and (2) it is an exploitation strategy, in general and specially for increasing the prices (Aaker & Keller 1990). Failure of extended brand hurts the core brand, especially, if there is inconsistency between the parent and extended brand. In this context, the customer did not find any association between Levi tailored Classic, a line of men suiting that was sold separately, and the old and strong perception that Levi’s products are casual living and are of rugged material (Aaker 1990).

2.6 RATIONAL AND BENEFIT OF BRAND EXTENSION The cost of launching a new product has increased tremendously and the risk of failure is high. These constraints have made brand extension strategy very popular.

Brand extension is not only cost efficient but it is less risky as

compared to a new brand launch (Ambler & Styles 1997). The survival rate of brand extensions is generally higher than a new brand launch (Grime & Smith 2002). Of all the reasons for adopting brand extension strategy, the most vital is that it facilitates growth (Kapferer 2001). The biggest advantage of brand extension is that the growth could easily be achieved by keeping the cost within controllable limits (Sharp 1993). The penetration capability of a new product with the same name would be considerably higher than the product with a new brand name. The brand extension strategy has the potential to capture substantial market share of growing segment by drawing a parallel between the positive values associated with the core brand and extended brand (Kapferer 2001). Brand extension increases the market coverage, its strength, and creates a segment that was not in existence previously (Kim & Lavack 1996)

14

In this context, Virgin Company is one of the many companies that have successfully ventured into new market by using the reputation of the existing brand. The company initially was a publisher and a retailer of popular music, subsequently, it successfully ventured through brand extension strategy into diversified business such as airlines, cola production, and financial services (Randall 2000). Brand extension growth strategy has several economic advantages. Therefore its popularity has also increased because of this cost advantage. The cost in brand extension strategy reduces quite considerably as the firms may not have to incur expenses for searching a suitable name for the product, advertising expenses would be minimal as the customer may be aware of the extended brand because of the strong brand name of established parent brand (Aaker 1992). According to an estimate, launching a new brand is expensive as it cost about one billion dollars in USA, whereas the cost of launching an extended brand is a fraction of new brand (Randall 2000). The extended brands inherit a strong positioning from the established core brand, therefore, the risk of failure of extended brand is also low (Aaker 1992). Whether a new product is launched with a new brand or is extended with an established name in both the cases a certain portion of sales are allocated for advertising and other fixed expenses. In case of brand extension the possibility of a reasonable return on small volume is higher as the advertising and other fixed expenses in this case are reasonably low (Buday 1998). Ambler and Styles (1997) were of the opinion that the cost of building awareness is low in case of brand extension because the core brand has a certain reputation, thus parent and extension both will promote each other as both of them have the same strong brand name. Advertisement costs in brand extension are distributed to more than one product, thus this advantage of economies of scale makes the brand extension more attractive. Customers are more familiar with the strong brand therefore its extension generally receives positive and stronger response. In view of high revenue generating capability of well-managed brand extension this expansion strategy is becoming more attractive to the firms ( Buday 1989; Nilson 1998). 15

While deliberating on the economic rationales for brand extension Kapferer (2001) warned that the firms should not get mixed up between two different issues which are (1) increasing profitability and (2) reducing cost. The production cost, distribution cost and communication cost varies from one market to other, therefore, the profitability may also vary accordingly. Hence, the profitably ratios of all the companies may not be the same. Thus, the brand extension strategy should be used for those markets where the degree of profit is high and cost structure is low (Kapferer 2001). If the extension is of a strong brand then the company could take the liberty of charging a higher premium of about 17% on it extended product (Buday 1989). Brand extensions of strong and familiar core brands provide a certain degree of comfort and assurance to the customers, therefore, the customers would not hesitate in trying such extended brands. Thus, the trial cost for brand extension would be quite lower than the new brand (Smith & Park 1992). Other researchers also found that brand extension of established name have several advantages including low cost, high success rate and it helps “customer trial” ( Pitta & Katsanis 1995; Aaker & Keller 1990). One of the major advantages of brand extension is that the reputation and image may silently transmit from parent’s brand to the extended brand. One such example is that of Heinz. The firm after acquiring “Weight Watcher” launched low calories food and got instant recognition and positive brand association. The parent brand and the brand extension advertisements not only complement each others but the quality of the core brand leads to higher level of acceptance and increase the awareness of the brand extension (Pitta & Katsanis 1995). Brands with strong reputation can capitalize its name and success by extending it in other categories (Randall 2000). Pitta and Katsanis (1995) were of the opinion that a core brand's associations with the extended brands are complex and well defined, as most of the core brands also possess welldefined brand image. Ambler and Styles (1997) also observed that the degree of acceptance between core and extended brand would be higher if there is a strong association between the two in terms of quality. 16

Customer based equity helps in increasing the brand image while the parent brand and the extended brand makes the brand stronger and helps in creating a “mega brand” (Pitta & Katsanis 1995). A mega-brand helps in increasing distributors’

bargaining

power

creating

investment

opportunities,

and

enhancing value of brands that critically affects brand positioning (Ambler & Styles 1997). The firm, thus, in its media campaign could focus on perceived quality and value of brands that helps in avoiding product specification based advertising battle (Pitta & Katsanis, 1995). The environment is constantly changing, and according to Kapferer (2001), brand extensions help in increasing and maintaining its equity in this vulnerable environment within and outside the country. The old brand tends to have an aging affect. Brand extensions helps in “revitalizing” the old and aging brands of the company. Launching a new brand with the same name not only allows the company to recaptures its reputation, but also helps in enhancing the image, and widens its appeal (Kapferer 2001). The competitors are always targeting the niche gaps that the prevailing brands may not be protecting effectively and efficiently. Brand extensions help firms to fill those vulnerable gaps which the competitors may target. Filling shelf space is an important marketing strategy for preventing the competitors to sneak in. The brand extensions help in filling shelf space in the market and make it more difficult for the competitors to attack from this end (Randall 1997). Some product categories lack quality and may not fulfill the consumer needs in one part of the world. The brand extensions help to fulfill the demand of other parts of world where the brand has strong reputation and more need for it (Weilbacher 1995). The company, at times, possesses certain technologies and expertise. This indigenous technology and the expertise in Research and Development could be utilized to develop a new product with the objective of extending the strong core brand (Randall 2000; Ambler & Styles 1997). Consumer perceives the level of transferability of expertise from one product to other differently. If customer feels that the technological transferability to new product is difficult 17

the consumer acceptance would be positive, otherwise the level of acceptance would be low (Randall 2000).

2.7 CATEGORIZATION THEORY Categorization theories state that consumer attitude would be positive for those extensions that are closer to the parent brand category (Fiske & Pavelchak 1986; Sujan 1985). Consumer, while evaluating brand extension, either adopts category based process or a piece meal process. If there is a similarity between the extension and the schema (previous perception), then according to categorization theory the consumer judgment would be based on family resemblance. If there is a mismatch between the parent brand and extension in terms of category then according to piece meal process the consumer judgment is based on the specific attribute of the extension (Nkwockha 2000). Aaker and Keller (1990) extension study was based on the categorization theory. This study was carried out to study the consumer perception and reactions on brand extensions. For this purpose, Aaker and Kelly (1990) used six non-durable consumer goods and twenty hypothetical brand extensions for ascertaining how the consumers evaluate brand extension. The consumer evaluation for the product extension was positive for those extensions that have a certain level of fit between core brand and extended (Nkwocha 2000). The subject in the study had positive attitude towards the core brand (crest) and hypothetical extension (crest mouth wash). In view of the similarity between the core brand and extension, some of the respondents were of the opinion that the crest mouthwash not only tastes like tooth paste but would also fight cavities. Comparatively, the respondents’ opinion on the extension of Heineken beer to Heineken wine and popcorn was poor, despite the positive opinions on the two brands. Thus, this example supports the premise of categorization theory that positive attitude would only transfer to the extension, when there is a certain level of fitness between two product classes. Respondents felt that the beer and wine is a bad combination and also beer and popcorn does not mix (Nkwocha 2000).

18

2.8 CONGRUITY THEORY Schema congruity theories (Handler 1982) propose that cues (e.g., brand names) state that some degree of congruity has a relationship with the level of processing used by the consumers. If there is some degree of incongruity than the consumer will process brand extension more positively. However, the consumer evaluation will not be that positive if the (1) cues are congruent or extremely incongruent (Nkwocha 2000). How consumer makes judgment depends on structural congruity between event and schema. If new events are similar to the existing schema it would have a positive evaluation familiarity, acceptability, and liking. On the other hand if the new events are “incongruent”, then it would lead to evaluation process that may have positive or negative results (Mandler 1982). In this context, when one sees a Pierre Cardin clothing on display with no price tag he will assume that the displayed clothing is expensive. In this case, the consumer has drawn the conclusion from schema (past experience) that Pierre Cardin products are expensive and prestigious (Nkwocha 2000).

19

CHAPTER-3 EMPIRICAL MODEL VIZ. HYPOTHESES This chapter illustrates an empirical model showing relationships of variables used in the study and ends with the derived hypothesis which is the main theme of the study.

3.1

EMPIRICAL MODEL

The relationships of different variables with the dependent variables have been illustrated through an empirical model which is presented below: FIGURE-1 EMPIRICAL MODEL

SIMILARITY REPUTATION

H1

PARENT BRAN. CHARACTERISTIC

CONSUMER EVALUATION

PERCEIVED RISK H2 INNOVATION

OF BRAND

MULTIPLE EXTENSION

H3

CONCEPT AND CONSISTENCY

H4

BRAND EXTENSION FIT

H5

EXTENSION

In the above empirical model, the dependent variable is consumer evaluation of brand extension. The relationships of the independent variables with dependent variables have also been illustrated through five derived hypothesis which are discussed in the subsequent section.

20

3.2

HYPOTHESES

Based on the literature survey and variables discussed in the previous chapters, the hypotheses that have been derived for testing have been stated below: H1:

Those brands that have a stronger (a) reputation, (b) extended to similar brand category, (c) share strong association, would get a stronger consumer evaluation.

H2:

There is a positive relationship between (a) how consumer perceived risk (b) consumer level of innovativeness and how consumer evaluates brand extension.

H3:

Consumer evaluation would be positive for those brand extensions that have a strong reputation for introducing multiple brands.

H4.

The “consumer’s brand evaluation” would be positive for those brands that have more “concept consistency”

H5:

The

“consumer perception fit” between the core brand and

extended brand would have a positive impact on the “consumer evaluation of the brand”.

21

CHAPTER -4 METHODOLOGY The research methodology chapter explains the author’s research position, the approaches used in determining the structure, of the thesis, and the research strategy that was necessary for achieving the paper’s objective. Initially, the paper discusses the procedure adopted for stimuli selection, followed by discussions on the variables used in the questionnaire along with the required citations. The population and sampling procedures discuss its size and how it was drawn and administered. This section ends with the methods used for data analysis.

4.1

STIMULI SELECTION

There are more than 30 brand extensions associated to FMCGs, in Pakistan. In order to have a manageable stimulus, a focus group discussion was held in which the respondents were asked to select four sets of core brand and their extensions in such a manner that they have varied degree of similarity ranging from “very close” to “far”. Thus, the following four brand extensions were finalized each representing different level of synergy amongst them: a)

Tapal Tea and Tapal Tea Bag.

b)

Lifebuoy Soap and Lifebuoy Shampoo

c)

Sufi Vegetable Oil and Sufi Washing Soap.

d)

Woods wards Gripe Water and Woods ward Toothpaste.

The first two stimuli come in the category of close extension, and the later two in the category of distance extension.

4.2

MEASUREMENTS

The dependent variables and independent variables of this study are presented below along with discussions on how they were measured:

22

4.2.1 DEPENDENT VARIABLE 4.2.1.1

CONSUMER EVALUATION OF BRAND

The dependent variable for the study was “consumer evaluation” of brand extension. Keller and Aaker (1992) have used the following statement for measuring overall evaluation: “I am very positive to the extension of the “XYZ.” In this study, the same was used for measuring “Consumer Evaluation” of brand extension. Reference may be made to question No.8 of the questionnaire attached as Appendix -1.

4.2.2 INDEPENDENT VARIABLES 4.2.2.1 SIMILARITY Similarity between the parent brand and extended brand has been measured differently by different researchers (Aaker and Keller (1990) and Smith and Park (1992) have measured similarity by asking “think of a brand__ how similar is the competence for making the original and extension brand”. “Think of what you associate with brand____ how much overlap exists” (Bouschs et.al 1987). In this study, the (Boush et. Al 1987) statement was modified for measuring the similarity between for brands and their extensions. (Refer question no.1, appendix-1).

4.2.2.2 REPUTATION OF PARENT BRAND Aaker and Keller (1990); Loken and John (1993) have used similar measures for measuring reputation of parent brand. (1) “All- together, I am very positive with the brand XYZ” (2) “Altogether, I am very satisfied with the brand XYZ”. (3) “Altogether, I associate positive things with the brand XYZ”. In this study, the statement-1 above was modified for measuring reputation of parent brands. (Refer to Question -2 of the questionnaire, appendix-1).

23

4.2.2.3 PERCEIVED RISK Heim (2001) has used five factors for measuring perceived risk. Of those five factors, the following two factors have been used in this study for measuring perceived risk. (Refer question No.3 of Appendix one) a)

“When I am in front of the___ section, I always feel unsure about what to pick”.

b)

“When you buy an____, it is easy to make wrong choices”.

4.2.2.4 INNOVATIVENESS Heims

(2001)

has

used

five

different

sub-variables

for

measuring

innovativeness. In this study the following two statements have been used for measuring innovativeness: (1) “I am continuously seeking new ideas” (2) “When things get boring, I like to find some new and unfamiliar experience”. Based on these constructs two questions were developed. (Refer question number-4, of the questionnaire at appendix-1)

4.2.2.5 MULTIPLE BRAND EXTENSIONS Aaker (1992) has found a relationship between the brand extension history and the consumer evaluation of the brand. Respondents in this study were asked to rate the history of introducing multiple brand extensions. (Refer question number 5, questionnaire at appendix-1)

4.2.2.6 PARENTS BRAND CHARACTERISTICS Smith (1994) has defined parents’ characteristics in reference to “broad association”. For example, “Sony” has broad association as this brand name could be associated with several product categories.

Narrow associations

means that brand could be associated with limited number of products. Based on this construct, the respondents were asked to rate the selected brand in terms of broad and narrow association. (Refer question number 6 of the questionnaire at appendix-1). 24

4.2.2.7 PARENT BRAND CONSISTENCY The independent variable parent brand consistency has been defined by (Park.et.al 1991) in terms of “price” and “product expensive design”. The respondents in this study were asked to rate the four selected core brands in terms of “price perception” and “expensive design”. (Refer to question number 7.1 and 7.2 of Appendix 1).

4.2.2.8 BRAND EXTENSIONS FIT The independent variable has been defined by Aaker and Keller (1990) and Keller, (1992), in terms of (1) Complimentary, (2) Suitability (3) Transferability and (4) Difficulty. In this context, the respondents were asked to rate the four brands in terms of these four sub dimensions. (Refer question number 8a, 8b, 8c, 8d, of the questionnaire, appendix-1).

4.3 SAMPLE SIZE For multivariate sampling, at least 30 samples per variable are required to have an appropriate representation (Sekran 2005). This study has 12 variables; therefore sample size of 360 would have been appropriate. However, in order to have more appropriateness a sample size of 700 has been used in this study. Karachi is divided into 18 Union District Council (UDC) and each UDC different population. It is as high as 0.723 million for Orangi and as low as 0.289 million for Gadap. To ensure appropriate representation from each UDC, quota sampling technique was used for drawing 700 samples. The population of all the 18 UDC along with the samples drawn form each town is presented below:

25

Table 1: Town wise Population and size

Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Union District Council Baldia town Bin Qaisim town Gadap Gulberg Gulshan-e-Iqbal Jamshed_town Kemari Korangi town Landhi town Liquatabad Lyari Town Malir town New Karachi North Nazimabad Orangi town Saddar Town Shahra-eFaisal Site

Population as per 1998 census 406,165 315864 289,564 453490 646,662 733,821 383,778 564,504 666,784 649,091 607,922 389,289 684,183 496,194 723,694 616,151 335,823 476,560 9,439,539

Sample size 30 23 21 34 48 54 28 42 49 48 45 29 51 37 54 46 25 35 700

It may be pointed out that and Gulshan and Orangi Towns are the most populated towns with populations of and 646, 662 and 616,151, respectively. Comparatively, the

Bin Qasim and Gadap are the least populated with the

population of 315,864 and 289,564, respectively.

26

CHAPTER-5 RESULTS AND DISCUSSIONS Results and discussions have been presented into five sub-chapters with each chapter containing the derived hypothesis and its results, along with the variables used in the hypothesis.

5.1 DISCUSSIONS RESULTS OF REPUTATION, SIMILARITY & ASSOCIATION In this sub-chapter, the derived hypothesis was based on four variables. Dependent variable was “consumer evaluation” of brand extension, and independent variables were: (1) similarity between parent brand and extended brand, (2) stronger reputation, and (3) stronger association. These variables were measured through four stimuli: (1) Tapal Tea Viz. Teabag (2) Lifebuoy Soap viz. Shampoo (3) Sufi Vegetable oil viz. Soap (4) Woodward Gripe Water viz. Tooth paste. The first two stimuli come in the category of close extension, and the other two in distance extension. In this and subsequent sub-chapters, the close-extensions and distance extensions have been tested separately. The empirical model developed earlier shows that the independent variables reputation, similarity and brand association have strong relationship with the consumer evaluation of the brand. These variables have been briefly discussed below:

5.1.1 SIMILARITY The similarity refers to degree of resemblance of consumer perception on the extensions and the core brand (Smith & Park 1992). Most of the researches have deliberated on the level of perceived similarity between the original and extended brand and found that if the level of similarity is higher between the core and extended brand category then the extended brands would have more chances of inheriting the positives and negative aspects of the core brand (Aaker & Keller 1990; Park, et al. 1991; Boush & Loken 1991; Dacin & Smith 1994; Herr, et al. 1996; Keller and Sood 2001). This conjecture is 27

based on the premise that consumers’ attitude will be more favorable towards those extensions where they find higher level of congruence between the extended and the original brand (Boush, et al. 1987)

5.1.2 PARENT BRAND CHARACTERISTIC & EVALUATION The terms such as product attributes, product benefits and costumers characteristics are generally used for conceptualization of brand association (Keller 1993). Brand names such as “Sony” have broad association and are used for diversified range of products. There are some brand names like “close-up” that has narrow association and could be used for one or few products (Bousch & Loken, 1999). Product portfolio characteristics of parent brands generally have moderating effect on product category fit and the evaluation of parent brand (Dacin & Smith, 1994). Dacin and Smith (1994) studied the impact of: (1) number of products associated with brand (2) the quality of variance across these products and (3) the relatedness of product to each other and the parent brands. Dacin and Smith (1994), major findings were: The consumer’s evaluation would be positive for those brands that are associated with several products, provided there is no significant parity between the qualities of product. In fact, addition of product would enhance positive evaluation, provided the quality level of additional product is the same. Their research also found that it may not be advisable to extend the brands un-discriminately into unrelated product, even if the quality of the core brand is high. First, extension must be carried out into moderately related categories and then to unrelated category. This step wise extension from one category to moderately unrelated category would help consumer in maintaining the perception of relatedness (Kapoor 2005). A brand could have association with several products. However, the level of association of brand name with all products may vary. Products that have strong association with the core brand could be easily evaluated by 28

consumers. Contrarily, products that have weaker association with the core brand are dependent on a certain degree of “cues” for evaluation purpose (Kapoor 2005)

5.1.3 REPUTATION The basic assumption in brand extension strategy is that the leverage providing capabilities of parent brands to extensions varies from brand to brand. It is higher for stronger brands and lower for weaker brands (Aaker & Keller 1992; Smith & Park 1992). Brand reputation refers to consumer’s perceptions on the quality associated with a brand (Aaker & Keller 1990; Barone, et al. 2000). The consumers tend to evaluate those brands more favorably that have higher perceived quality as compared to low perceived quality brands (Aaker & Keller 1990; Keller & Aaker 1992; Sunde & Brodie 1993; Dacin & Smith 1994; Bottomley and Doyle 1996). Reputation in the above studies has been conceptualized as a combination of: (a) product quality, (b) firm’s marketing activities and (c) acceptance in the market place (Fombrun & Van Riel 1997). Consumer while evaluating brands that have higher perceived reputation would feel that purchasing the same would be comparatively less risky, thus their evaluations would be more positive towards these brands as compared to brands carrying lower brand reputation (Wernerfelt 1988; Zeitham & Berry & Parasuraman 1996).

5.1.4 STIMULI The stimuli used for this study can be categorized into two categorize. One is close and other is distance extension. Brand extensions such as Tapal Tea Viz. Teabags, comes in the category of close-extension. The brand extensions such as Sufi Soap viz. Vegetable Oil and Woodward Gripe Water viz. Tooth Paste comes in the category of distance extension. The hypothesis for close and distance extensions have been tested separately.

29

5.1.5 HYPOTHESIS ONE: Variables such as brand reputations, similarity, and associations have been used by various authors for measuring the relationship of these variables with consumers’ overall evaluation of brand extensions. The hypothesis developed in this context is presented below: H1O: Brands that have (a) stronger reputation (b) similarity between parent brands and extended brand, and (c) strong associations would have strong consumer evaluation. H1A.

At least one of the variables has linear relationship with the dependent

variable “consumer evaluation” Statistical representation of the above hypothesis is presented below: H1O: β1=β2=β3=0 H1A: β1≠β2≠β3≠ 0 The above hypothesis was tested separately for close and distance extensions:

5.1.5.1 CLOSE EXTENSION Brands such as Tapal viz. Teabags and Lifebuoy viz. Shampoo have lesser distance. The combined relationships of these stimuli in terms of similarity, reputation and association with overall evaluation were tested through multiple regressions. The multiple estimating regression equation for close extensions used as stimuli is presented below: Y= a + b1SimilarityTapal

tea

+ b2SimilarityLifebuoy + b3ReputationTapal

tea

+

b4ReputationLifebuoy + b5AssociationTapal tea + b6AssocaitonLifebuoy Summarized multiple regression results are presented below: 30

Table 2: Multiple regression of Close distance extension Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations

0.96 0.92 0.92 0.11 700.00

Table 3: ANOVA (Close Extension) Df 6.00 693.00 699.00

Regression Residual Total

SS 95.69 8.55 104.25

MS 15.95 0.01

F 1,292.32

Significance F -

Table 4: Coefficient (Close Extension)

Intercept Similarity –Lifebuoy Similarity –Tapal Tea Reputation –Tapal Tea Reputation -Lifebuoy Association – Tapal Tea Association. Lifebuoy

Standard Error 0.05 0.01 0.02 0.02 0.02 0.02 0.00

Coefficients 0.01 0.42 0.18 0.10 0.31 (0.03) 0.01

t Stat 0.19 31.31 9.86 5.72 16.14 (1.74) 1.92

P-value 0.85 0.00 0.00 0.00 0.00 0.08 0.06

Lower 95% (0.09) 0.40 0.15 0.06 0.28 (0.06) (0.00)

Brand Evaluation

Graph 1: Scattered Chart-Close Extension Similarity-tapal

6.00 5.00

Similaritylifbuoy

4.00 3.00 2.00

Reputationtapal

1.00 -

ReputationLifebuoy 0

5

10

Close Extension

15

AssosciationTapal Assosciation-

(Respondent’s opinions have been grouped) The hypothesis that at least one of the independent variables will have the relationship with the dependent variable “consumer evaluation” of the brand extension was accepted. The ANOVA Table shows that the F< 0, meaning it is significant. Moreover, all the P values are less than .05 except “association”. This indicates that all the coefficients are relevant to the model except “Association-Tapal” and “Association-Lifebuoy”. The R2 is 0.92, which 31

indicates that the combined effect of the independent variables that is similarity, reputation and parent brand characteristics (association) will cause the dependent variable, consumer evaluation of brand extension to move by 92%, which is an indication of a very strong relationship. The coefficient of determination for similarity

Lifebuoy,

and reputation

lifebuoy

are

0.42 and 0.31, respectively indicating that these two predictor variables/stimuli have comparatively stronger influence on the dependent variable as compared to other variables/stimuli. The above tables and graphs indicates that in case of “Lifebuoy Soap Viz. Shampoo” similarity and reputation were found to be stronger predictors for “consumer evaluation” of brand extensions as compared to “reputation” and “parent brand characteristics (association)”. The variable “similarity” was found to be, comparatively, stronger predictor in case of “Tapal Tea viz. Teabag”, as compared to other variables.

5.1.5.2 DISTANCE EXTENSION Brands such as “Sufi viz. Vegetable Oil” and “Lifebuoy viz. Shampoo” Woodward viz. Grip Water” have more distance. The combined relationships of these stimuli in terms of similarity, reputation and association with overall evaluation were tested through multiple regressions. The multiple estimating regression equation for distance extensions used as stimuli is presented below: Y= a + b1SimilaritySufi + b2SimilarityWoodward + b3ReputationSufI + b4Reputation Woodward + b5Assocation Sufi + b6AssciationWoodward. Summarized multiple regression results of distance extensions are presented below:

32

Table 5: Multiple Regression of Distance Extension Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations

0.76 0.58 0.58 0.47 700.00

Table 6: ANOVA-Distance Extension Df 6.00 693.00 699.00

Regression Residual Total

SS 216.43 153.82 370.25

MS 36.07 0.22

F 162.51

Significance F 0.00

Table 7: Coefficients- Distance Extension Coefficients Intercept Similarity-Sufi Similarity Woodward Reputation –Sufi Reputation –Woodward Association –Sufi Association –Wood

0.25 0.09 (0.04) 0.26 0.37 0.06 0.20

Standard Error 0.11 0.02 0.02 0.02 0.03 0.01 0.03

t Stat

P-value

2.24 4.47 (2.05) 11.09 11.72 4.26 6.17

0.03 0.00 0.04 0.00 0.00 0.00 0.00

Lower 95% 0.03 0.05 (0.08) 0.21 0.30 0.03 0.14

Upper 95% 0.47 0.13 (0.00) 0.30 0.43 0.09 0.26

Overall evaluatin

Graph 2: Scattered Chart-Distance extension Similarity-Sufi

5.00 4.00

SimilarityWoodw ar

3.00

Rep-Sufi

2.00 1.00

Rep-Wood

0.00

0

5

10

Distance Brand Extension

15

Assos-Sufi Assos-Wood

(Respondents’ opinions have been grouped) The hypothesis that at least one of the independent variables will have the relationship with the dependent variable “consumer evaluation” of the brand was also accepted for the distance extension. The ANOVA table shows that the F< 0, meaning it is significant. Moreover all the P values are less than .05, further confirming the relationship of the model. The R2 is 0.58, which 33

indicates that the combined effect of the independent variables will cause the dependent variable “consumer evaluation” of brand extension to move by 58%, which is an indication of a strong relationship. The coefficient of determinations for Reputation

Sufi,

and Reputation

Woodward

are 0.26 and 0.37, respectively indicating that these two predictor variables/stimuli have comparatively stronger influence on the dependent variable “consumer evaluation” of brand as compared to other variables. From the above, it could also, be inferred that in case the parent brand is extended to similar category, then the similarity between parent brand and brand extension would be vital for respondents’ evaluation of brand extension. In case extension is of distance nature (not in similar category) than reputation of parent brand would be used by respondents for evaluation of brand extension. It may also be observed from the above that the predicator variable “reputation” is comparatively stronger in case of close and distance extensions. Firms, whose brands have strong reputation, could afford the luxury of venturing into distance brand extension. Firms with weaker brand reputation should focus on enhancing the brand reputation, and if they have to extend their brand, it should be in the same category (Close distance).

34

5.2

DISCUSSIONS & RESULTS OF INNOVATIONS & PERCEIVED RISK

In this sub-chapter, the derived hypothesis was based on two variables. Dependent variable was “consumer evaluation” of brand extension, and independent variables were: (1) consumer’ innovativeness, and (2) how consumer perceives risks. Close and distance extensions were again tested separately, followed by recommendation. The major premise in this case is that consumer evaluation of brand extensions is not dependent on the characteristics of parent or extended brand but on consumers’ personally traits like how innovative consumers are, and how they perceive risks. These variables have been briefly discussed below:

5.2.1 PERCEIVED RISK Consumers before purchasing goods feel uncertainty in reference to expected loss that may incur from purchasing and using the product. This uncertainty is referred as perceived risk (Bauer 1960; Cox 1967). The term uncertainty has two perspectives: (1) consequences of making a mistake; and (2) uncertainty about the outcome (Derbaix 1983; Gronhaug & Stone 1995; Mitchell 1999) Most of the researches on perceived risk suggest that consumers while dealing with a recognized brand feel that it has lesser degree of perceived risk (Cox 1967; Roselius 1971; Rao & Monroe 1989). Brand extension to a new category affects consumers from two perspectives. One, it provides new alternative; second, it enhances the consumer perception of risk. Thus, a well known brand not only induces trial but also helps in relieving the risk (Heim 2000). Berlyne (1970) observed that novel stimuli give adverse reactions. However, repeated exposure helps in developing familiarity with a brand which not only helps in decreasing perceived risk but also helps in increasing positive affect (Baker, et al. 1986; Obermiller 1985).

35

5.2.2 INNOVATIVENESS An individual who is receptive to new ideas and is willing to try new practices and brand is considered to possess a personality trait of innovativeness (Rogers 1989). “The innovators are venturesome; they try new ideas and take some risk…where as late adopters (laggard) are tradition bound, they are suspicious of changes, and adopt innovation when it has become some thing of a tradition itself” (Kotler & Armtrong, 2007). The innovative consumers tend to get comfort when they take risk.

5.2.3 STIMULI Like preceding section, close brand extensions such as “Tapal Tea Viz. Tea Bags”, and “Lifebuoy Soap viz. Shampoo”, and distance brand extensions such as “Sufi Soap viz. Vegetable oil” and “Woodward Gripe Water viz. Tooth Paste” have been tested, separately.

5.2.4 HYPOTHESIS TWO: Variables such as respondent’s innovative nature, and the perceived risk according to several authors would effect how consumers evaluate brand extensions. The hypothesis developed in this context is presented below: H2O:

There is a positive relationship between (a) how consumer perceived

risk, and (b) consumer level of innovativeness with “consumer evaluation” of brand extension. H2A.

At least one of the variables has linear relationship with the dependent

variable “consumer evaluation” The statistical representation of the above hypothesis is presented below: H2O: β1=β2=0 H2A: β1≠β2≠ 0

36

The above hypothesis was tested by two different methods. In method one, the relationship of the close-extensions was tested and in method two the relationship of distance-extensions was tested:

5.2.4.1 CLOSE EXTENSION The relationship of independent variables “Perceived Risk” and consumer level of “Innovativeness” were, also, measured with the dependent variable consumer evaluation of close brand extensions that is “Tapal Tea viz. Teabag”, and “Lifebuoy Soap Viz. Shampoo The multiple estimating regression equation for the above variables is presented below: Y= a + b1Innovativeness + b2Percived Risk. Where “Y” in the above equation is an average of consumer evaluation of close extensions, (1) “ Tapal Tea viz. Teabag, and (2) Lifebuoy Soap viz. Shampoo. The summarized multiple regression results are presented below: Table 8: Multiple Regression of Close Extension Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations

0.37 0.14 0.14 0.36 700.00

Table 9: ANOVA of Close Extension Df Regression Residual Total

2.00 697.00 699.00

SS 14.46 89.79 104.25

MS 7.23 0.13

F 56.12

Significance F 0.00

37

Table 10: Coefficients of Close Extension Intercept Perceived Risk Innovativeness

Standard Error 0.07 0.02 0.02

Coefficients 3.78 0.05 0.15

t Stat 53.50 2.94 9.03

Lower 95% 3.64 0.02 0.12

P-value 0.00 0.00 0.00

Upper 95% 3.91 0.08 0.19

Brand Evaluation

Graph 3: Scattered Chart, Close Extension 6 4 2 0 1

2

3

4

5

6

7

6

9

10

Close Brand Extension Percieved Risk

Innovativeness

Close Extension

The hypothesis that at least one of the independent variables will have the relationship with the dependent variable “consumer evaluation” of the close brand extension was accepted.

The ANOVA Table shows that the F< 0,

meaning it is significant. Moreover, all the P values are less than .05, further confirming the relationship of the model. The R2 is 0.14, which indicates that the combined effect of the independent variable will cause the dependent variable to move by 14% which is a very weak relationship. Innovative consumers tend to evaluate close brand extension more positively (coefficient of determination being 0.15) as compared with consumer with a higher degree of “perceived risk” (coefficient of determination being 0.05).

5.2.4.2 DISTANCE EXTENSION The relationship of independent variables “perceived risk” and consumer level of “innovativeness” were also measured with the dependent variable “consumer evaluation” of distance brand extensions that is “Sufi Soap Viz. Vegetable Oil” and “Woodward Grip Water viz. Tooth paste”. Multiple estimating regression equation for the above variables is presented below:

38

Y= a + b1Innovativeness + b2Percived Risk Where Y is the average of consumers responses in relation to how they evaluate distance extensions that is: (1) Sufi viz. Vegetable oil, and Woodward viz. Gripe water. Summarized multiple regression results are presented below: Table 11: Multiple Regression of Distance Extension Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations

0.42 0.18 0.18 0.66 700.00

Table 12: ANOVA, Distance Extension df 2.00 697.00 699.00

Regression Residual Total

SS 66.06 304.19 370.25

MS 33.03 0.44

F 75.68

Significance F 0.00

Table 13: Coefficients, Distance Extension Coefficients Intercept Perceived Risk Innovativeness

2.53 0.36 (0.04)

Standard Error 0.13 0.03 0.03

t Stat

P-value

19.46 12.16 (1.41)

0.00 0.00 0.16

Lower 95% 2.27 0.30 (0.11)

Upper 95% 2.78 0.41 0.02

Lower 95.0% 2.27 0.30 (0.11)

Consumer Evaluation

Graph 4: Distance Extension 6.00 4.00 2.00 1

2

3

4

5

6

7

8

9

10

Distance Extension Perceived Risk

Innovativeness

Distance Extension

The hypothesis that at least one of the independent variables will have the relationship with the dependent variable “consumer evaluation” of brand was accepted.

The ANOVA Table shows that the F< 0, meaning it is significant.

Moreover, all the P values are less than .05 except “innovativeness” indicating that “innovativeness” has no relationship with the dependent variable that is 39

“consumer evaluation” of brand extension. The R2 is 0.18, which indicates that the combined effect of the independent variables will cause the dependent variable to move by 18% which is a very weak relationship. The overall level of “innovativeness” and “perceived risk” of respondents were high, but their relationships to distance brand extensions were weak. The coefficients for “perceived risk” and “innovativeness” are 0.36 and -0.04, respectively indicating that consumers with high level of innovativeness would tend to evaluate distance brand extensions lowly and negatively. Consumers with high level of “perceived risk” have evaluated distance extensions comparatively more positively with coefficient being 0.36 Firms that are extending their brands to similar category (close extension) should

target

consumers

that

have

high

level

of

“innovativeness”.

Comparatively, companies that are extending their brand into non-similar category (distance extension) must target those customers that have high level of “perceived risk”.

40

5.3

DISCUSSIONS CONSISTENCY

&

RESULTS

OF

CONCEPT

In this sub-chapter, the derived hypothesis was based on dependent variable “consumer evaluation” of brand extension, and independent variable was “Brand Concept Consistency”. Like preceding sections, first the related variable concept consistency is discussed and subsequently the derived hypothesis was tested separately for close extensions, and distance extension followed by recommendations

5.3.1 BRAND CONCEPT CONSISTENCY & EXTENSION Market is dynamic, therefore is always changing. To remain aligned with market, firms must modify their offering, enter different market segments, and re-position their offering. In view of such complexities, the measure of fit while introducing brand extension may be relevant in one situation and not in another situation (Kapoor 2005). Park et.al. (1991) were of the opinion that the measure of fitness between core brand and extended brand based on one factor “similarity” has certain limitation. They were of the opinion that consumer evaluation would only be positive for those brand extensions that have consistency in brand concept. Brand concept is “Brand unique abstract meaning (e.g high status that typically originate from a particular configuration of product features. (eg. High price, expensive looking design, etc.) and a firms efforts to create meanings for these arrangements (e.g. The relentless pursuit of perfection by Lexus)” (Park .et, al. 1991, p.186) Factor “similarity” is important but it fails to explain all the aspects related to fitness. Two objects could have several common physical attributes, but it does not mean that both the objects would have similar brand concepts. For example Sieko and Rolex watches share several common product level features. But as far as brand concepts of the two watches are concerned, Seiko has reputation of functional brand and Rolex as a prestige brand (Park et al 1991). Thus the perceived fit is “combination of (1) product feature similarity and (2) brand concept consistency. 41

5.3.2 HYPOTHESIS Variable such as parent “brand concept consistency” have been used by various

researchers for

ascertaining

how

consumer

evaluate brand

extensions. The product concept consistency is related to (1) design, and (2) price. The hypothesis developed in this context is presented below: H3O. The “consumer’s brand evaluation” would be positive for those brands that have more “concept consistency” H3A. The “consumer’s brand evaluation” would be positive for those brands that have more “concept consistency” Statistical representation of the above hypothesis is presented below: H3O: β1=β2=0 H3A: β1≠β2≠ 0 The above hypothesis was tested for close extensions and distance extension, separately.

5.3.2.1 CLOSE EXTENSION The brands “Tapal viz. Teabags” and “Lifebuoy viz. Shampoo” have lesser distance. The combined relationships of these stimuli in terms of: (1) design, and (2) price, with overall evaluation were tested through multiple regressions. Multiple estimating regression equation for close extensions used as stimuli is presented below: Y= a + b1PriceTapal + b2Price Lifebuoy + b3DesignTapal +b4DesignLifebuoy Summarized multiple regression results are presented below:

42

Table 14: Multiple Regression of Close Extension Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations

0.82 0.67 0.67 0.22 700.00

Table 15: ANOVA, Close Extension Df 4.00 695.00 699.00

Regression Residual Total

SS 70.19 34.06 104.25

MS 17.55 0.05

F 358.04

Significance F 0.00

Table 16: Coefficients, Close Extension Coefficients Intercept Price-Tapal Tea Price-Lifebuoy Design-Tapal Tea Design-Lifebuoy

1.25 (0.04) 0.20 0.55 0.01

Standard Error 0.10 0.01 0.02 0.02 0.01

t Stat

P-value

12.60 (2.54) 12.46 26.38 1.37

0.00 0.01 0.00 0.00 0.17

Lower 95% 1.05 (0.07) 0.17 0.51 (0.01)

Upper 95% 1.44 (0.01) 0.23 0.59 0.03

Brand evaluation

Graph 5: Scattered Chart Close Extension

6.00 5.00

Price-Tapal Tea

4.00 3.00 2.00

Price-Lifebuoy Design-Tapal Tea

1.00 1 2 3 4 5 6 7 8 9 1

Close Extension

DesignLifebuoy Evaluation of close brands

The hypothesis that at least one of the independent variables will have the relationship with the dependent variable “consumer evaluation” of brand was accepted.

The ANOVA Table shows that the F< 0, meaning it is significant.

Moreover, all the P values except design of lifebuoy are less than .05. This indicates that except the design of lifebuoy other variables validate the model. The R2 is 0.67, which indicates that the combined effect of the independent

43

variables

will

cause

the

dependent

variable

to move by 67% which is an indication of strong relationship. The coefficients for design and price of Tapal Tea is 0.55, and -0.04, respectively indicating that consumers while evaluating Tapal tea were more influenced with the “design” of tea as compared to the “price” of Tapal tea. In case of Lifebuoy, the coefficients for “design” and “prices” were 0.01, and 0.20, respectively, indicating that while evaluating Lifebuoy, consumer appears to be more influenced with price, as compared to design of Lifebuoy soap.

5.3.2.2 DISTANCE EXTENSIONS The brand concept consistency for distance extensions “Sufi Soap viz. Vegetable Oil”, and “Woodward Gripe Water viz. Tooth Paste” brands were measured in terms of: (1) design, and (2) price, which were then related with “consumer overall evaluation” of brand extension. Multiple estimating regression equation for distance extensions used as stimuli is presented below: Y= a + b1Price Sufi + b2PriceWoodward + b3DesignSufi +b4DesignWoodward The summarized multiple regression results are presented below: Table 17: Multiple Regression of Distance Extension Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations

0.56 0.32 0.31 0.60 700.00

Table 18: ANOVA, Distance Extension Regression Residual Total

Df 4.00 695.00 699.00

SS 117.68 252.57 370.25

MS 29.42 0.36

F 80.96

Significance F 0.00

44

Table 19: Coefficients Distance Extension Coefficients Intercept Price-Sufi Price Woodward Design-Sufi Design-Woodward

1.88 0.14 0.13 0.19 0.01

Standard Error 0.10 0.03 0.02 0.03 0.02

t Stat

P-value

19.69 5.05 5.79 6.76 0.71

0.00 0.00 0.00 0.00 0.48

Lower 95% 1.70 0.08 0.09 0.14 (0.02)

Upper 95% 2.07 0.19 0.18 0.25 0.05

Brand Evaluation

Graph 6: Scattered Chart, Distance Extension Price-Sufi

12.00 10.00 8.00 6.00 4.00

Price Woodward

2.00 -

Design-Sufi 0

5

10

Distance Extension

15

DesignWoodward

The hypothesis that at least one of the independent variables will have the relationship with the dependent variable “consumer evaluation” of the brand was accepted.

The ANOVA Table shows that the F< 0, meaning it is

significant. Moreover, all the P values except of the design of Woodward Gripe water are less than .05. This indicates that the design of Woodward has no relationship with the dependent variable “consumer evaluation” of brand extension. The R2 is 0.32, which indicates that the combined effect of the independent variables will cause the dependent variable to move by 32% which is a weak relationship. The coefficient of determinations for Sufi’ design and price are 0.19 and 0.14, respectively indicating that in case of Sufi design is comparatively a stronger predictor than price. Comparatively, price of Woodward is stronger predictor and design has no relationship with consumer evaluation of distance brand.

In case of close extensions such as Tapal Teabag the firm must concentrate on the design, which Tapal was found to be doing it. However, in case of 45

distance extension, no relationship was found with the design of Woodward Gripe Water. Woodward needs to improve the design of the gripe water packaging in order to remain competitive.

46

5.4

RESULTS AND DISCUSSIONS ON BRAND EXTENSION FIT

In this sub-chapter, first the related variable brand extension fit has been deliberated and subsequently the derived hypothesis was tested separately for close extensions, and distance extension, followed by recommendations.

5.4.1 BRAND EXTENSION AND PERCEIVED FIT Different researchers have defined “perceived fit”, differently. The commonly used determinants of the perceived fit are, (1) complementary, (2) suitability, and, (3) transferability. These determinants relate to consumer perception on the degree of similarity between the two products (Aaker & Keller 1990; Aaker & Keller, 1992). Rousch and Loken (1991) believe that “typicality” is an important concept of perceived fit. Where as (Park & Melberg & Lawsan 1991) are of the opinion that “product similarity” and “brand concept consistency”, are the determinants of “perceived fit”. Kling and Smith, (1997) are of the opinion that determinants such as component parts, product feature, product function, needs they satisfy, usage situations, manufacturing processes are related to perceived fit. Most of the researchers suggest that affect of brand name in one category will transfer to another product category, if consumer perceptions about the core, and extended product category is same in terms of similarly and fitness. Smith (1997) while criticizing the earlier studies observed that most of such studies had remained focused on product related or attributes information while comparing two product classes. Additionally, these researches have restricted factor “attribute information” to one cue i.e. brand name (Klink & Smith, 1997). Since most of the previous brand extension studies are based on (1) attribute information, and (2) single cue, therefore, it may give an inflated effect of “perceived fit” (Nkowocha 2000). Some of the researchers have used two components in their brand extension fit studies. For example Park and Srivnvason (1994) proposed two concepts which were (1) product related similarities (2) and product concept consistency. The relationship between function orientation and prestige 47

orientation were used for studying brand concept consistency (Nkwocha 20005). Similarly, Park et.al., (1991)

proposed a concept in which they

identified product related similarity through concrete measures i.e. attribute matching or abstract (e.g. shared usage situation) for studying the relationship between the parent brand and extended brand(Nkwocha 2000) In another brand extension related study, a comparison of relative influence of brand specific association against category similarity was proposed (Broniarcz & Alba’s 1994). The authors were of the opinion that those brands that are less effective in their category will be more successful in another category, provided consumer perceives that this brand contains some attributes that are more relevant to the extended category (Brioniarzh & Alba’s 1994). Broniarcz and Alba’s (1994) in the same study used two tooth pastes that are “close-up” and “crest” as stimuli for extending into product category “mouthwash”. The finding of this research was that crest tooth paste was more acceptable in mouth wash category. Reasons for these conclusions were that “crest” tooth paste is more associated with breath-freshening, which is relevant to mouth wash category. In the same context “crest” toothpaste was not evaluated favorably because, it is more associated with “dental care”, which has little or no relevance with mouth wash category (Nkwocha 2000). 5.4.1 HYPOTHESIS-4 Variable such as parent brand fitness have been used by various author in relation to how the consumer evaluates brand. Some of the commonly used sub-variables

for

brand

fitness

are

complimentary,

supplementary,

transferability, and difficulty, which have, also, been used in this study. The developed hypothesis in this context is presented below: H4O: The

“consumer perception fit” between the core brand and

extended brand would have a positive impact on the “consumer evaluation of the brand”.

48

H4A:

The

“consumer perception fit” between the core brand and

extended brand would not have a positive impact on the “consumer evaluation of the brand”. Statistical representation of the above hypothesis is presented below: H4O: β1=β2=β3=β4=0 H4A: β1≠β2≠ β1≠β2≠0 The above hypothesis was tested for close and distance extensions separately.

5.4.2.1 CLOSE EXTENSION The independent variable “perceived fit” comprised of four sub-variables which are, (1) complimentary (2) substitute, (3) transferability, and (4) difficulty. These sub-variables of perceived fitness were measured for close stimuli “Tapal Tea viz. Tea Bag”, and “Lifebuoy Soap Viz. Shampoo. The multiple estimating regression equation for the above variables is presented below: Y= a + b1ComplimentaryTapal-Tea + b2SuplimentaryTapal Tea + b3Tranferabiity Tea +b4DifficutlyTapal-Tea

Tapal

+ b5ComplimentaryLifebuoy + b6SuplimentaryLifebuoy+

b7Tranferabiity Lifebuoy +b8DifficutlyLifebuoy Summarized multiple regression results are presented below: Table 20: Multiple Regression, Close Extension Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations

0.84 0.71 0.71 0.21 700.00

Table 21: ANOVA, Close Extension Regression Residual Total

Df 8.00 691.00 699.00

SS 73.89 30.35 104.25

MS 9.24 0.04

F 210.29

Significance F 0.00

49

Table 22: Coefficients, Close Extension Coefficients Intercept Tapal compliment Tapal substitute Tapal transferability Tapal difficulty Lifebuoy-Compliment Lifebuoy-Substitute Lifebuoy-Transferability Lifebuoy-Difficulty

1.67 0.01 0.24 0.23 (0.01) 0.07 (0.09) 0.18 0.02

Standard Error 0.08 0.01 0.03 0.03 0.02 0.01 0.01 0.01 0.01

t Stat

P-value

20.83 0.85 8.58 8.02 (0.49) 5.40 (9.11) 12.21 2.54

0.00 0.40 0.00 0.00 0.62 0.00 0.00 0.00 0.01

Lower 95% 1.51 (0.01) 0.19 0.17 (0.05) 0.04 (0.11) 0.15 0.00

Upper 95% 1.83 0.02 0.30 0.29 0.03 0.09 (0.07) 0.21 0.04

Brand Evaluation

Graph 7: Scattered Chart, Close Extension Tapal- comp.

6.00 5.00

Tapal- sub.

4.00 3.00 2.00

Tapal-trans.

1.00 -

Tapal-diff. 1 2 3 4 5 6 7 8 9 1

Close Brand Extension

(Respondents have been grouped)

LifebuoyComp. Lifebuoy-Sub

The hypothesis that at least one of the independent variables will have the relationship with the dependent variable “consumer evaluation” of the close brand extension was accepted.

The ANOVA Table shows that the F< 0,

meaning it is significant. Moreover, all the P values except tapal- difficulty and Tapal tea-compliment are less than .05. This indicates tapal-tea difficulty, and tapal tea-compliment has no relationship with the dependent variable that is consumer evaluation of brand. The R2 is 0.71, which indicates that the combined effect of the independent variables will cause dependent variable to move by 71% which is an indication of very strong relationship.

Comparatively, stronger predictors in this relationship were Tapal(substitute), Tapal (Transferability), and Lifebuoy (Transferability) with coefficient of determinations being, 0.24, 0.23 an 0.18 respectively. This indicates that 50

these variables are stronger predictors for the dependent variable “perceived fitness”. The rest of the variables are weak predictors for the perceived fitness with all the coefficients of determination being less than 0.18.

5.4.2.2

DISTANCE EXTENSION

The independent variable “perceived fit” comprised of four sub-variables which are (1) complimentary (2) substitute, (3) transferability, and (4) difficulty. These sub-variables of perceived fitness were measured for distance stimuli “Sufi viz. Vegetable Oil”, and “Woodward Gripe Water viz. Tooth Paste”. The multiple estimating regression equation for the above variables is presented below: Y= a + b1ComplimentarySufi Soap + b2SuplimentarySufi Soap + b3RTranferabiitySufi Soap

+b4DifficutlySufi Soap

+ b5ComplimentaryWoodward + b6SuplimentaryWoodward +

b7Tranferabiity Woodward +b8DifficutlyWoodward Summarized multiple regression results are presented below: Table 23: Multiple Regression Distance Extension Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations

0.39 0.15 0.14 0.36 700.00

Table 24: ANOVA, Distance Extension Regression Residual Total

Df 8.00 691.00 699.00

SS 15.51 88.74 104.25

MS 1.94 0.13

F 15.09

Significance F 0.00

51

Table 25: Coefficients, Distance Extension Coefficients Intercept Sufi-Complimentary Sufi-Substitute Sufi-Transferability Sufi-Difficulty Woodward compliment Woodward substitute Woodward transferability Woodward difficulty

4.46 (0.02) 0.00 0.08 (0.09) 0.01 0.03 (0.06) 0.07

Standard Error 0.05 0.01 0.01 0.02 0.01 0.01 0.00 0.02 0.02

t Stat

P-value

88.52 (1.20) 0.35 4.30 (7.06) 0.78 6.19 (3.65) 4.40

0.23 0.73 0.00 0.00 0.44 0.00 0.00 0.00

Lower 95% 4.36 (0.04) (0.02) 0.05 (0.12) (0.02) 0.02 (0.09) 0.04

Upper 95% 4.55 0.01 0.03 0.12 (0.07) 0.04 0.04 (0.03) 0.10

Brand Evaluation

Graph 8: Scattered Chart Distance Extension Suf-Comp.

4.00 3.00

Sufi-subs.

2.00

Sufi-Trans

1.00

Sufi-diff.

0

5

10

Distance Extension

15

Woodward.Co m Woodward.Sub

The hypothesis that at least one of the independent variables will have the relationship with the dependent variable “consumer evaluation” of the close brand extension was accepted.

The ANOVA Table shows that the F< 0,

meaning it is significant. Moreover, all the P values are less than .05 except Sufi-complimentary, Sufi-substitute, and Woodward complimentary, indicating that these mentioned variables have no relationship with the dependent variable. The R2 is 0.15, which indicates that the combined effect of the independent variables will cause dependent variable to move by 15% which is a very weak relationship. The entire image of coefficients was weak. It was as high as 0.08 for Sufitransferability, and as low as 0.01 for Woodward complimentary. Almost no relationships were found in cases of Sufi-complimentary, Sufi-substitute, and Woodward-complimentary.

52

Sufi vegetable oil does not compliment soap, and Sufi vegetable oil does not substitute soap. Similarly, the Woodward toothpaste does not compliment gripe water. In case of distance extension, firms must not extend their brands to category that consumer would hate to assume it as substitute or complement. The owners of Sufi and Woodward despite knowing this has dared to extend in these categories assuming that while evaluating their extension, the customers will take cues from the reputation of the company.

53

5.5

DISCUSSIONS AND RESULTS ON MULTIPLE BRAND EXTENSIONS

In this sub-chapter, first the related variable “Multiple brand extension” has been deliberated and subsequently the derived hypotheses were tested separately for “close extensions”, and “distance extensions”, followed by recommendations

5.5.1 MULTIPLE BRAND EXTENSIONS AND EVALUATION Firms that pursue growth strategy through multiple brand extension are dynamic and their brand association modifies with introduction of brand extension. Thus, this process has an impact on the perception of fit between a brand and its future extension. On the introduction of new brand extension, consumer recalls the previous perception of brand and modifies it that affects the fit between a brand and its future extension (Lynch & Sru1 1982). Keller and Aaker (1992) have suggested that the relationship between core brand and its extension would be moderated on previous brand extension history and the quality levels of the parent brands. If a firm has previous history of brand extension then consumer while evaluating brand extension would see (1) if previous extensions were successful or not (2) If there is any similarity in the core brand and proposed extension (Keller & Aaker 1992). If brand extensions were "dissimilar" (lacked fit) consumer perception on the quality of brand will also be adversely affected. The proposed brand extension would be affected, if there was no parity between the quality of the core brand and intermediate extension. If the quality of the intermediate brand is lower than the core brand, the consumer evaluation would be low. Intermediate brand will improve perception of core brand, if the quality of intermediate brand is of average level. If there is parity between intermediate and core brand, then there will be no change of perception on proposed brand (Kapoor 2005).

54

5.5.1 HYPOTHESIS 5 The consumers tends to evaluate the “brand extension”, positively that have a strong reputation of introducing multiple brand extensions. The hypothesis developed in this context is presented below: H50.

:

Consumer evaluation would be positive for those brand extensions that have strong reputation for introducing multiple brands.

H5A. :

Consumer evaluation would not be positive for those brand extensions that have strong reputation for introducing multiple brands.

Statistical representation of the above hypothesis is presented below: H5O: β1=0 H5A: β1≠ 0 The above hypothesis was tested for close extensions and distance extension, separately.

5.5.1.1 CLOSE EXTENSION The independent variable “Multiple brand extension” was measured through close stimuli “Tapal Tea viz. Tea Bag”, and “Lifebuoy Soap Viz. Shampoo. The multiple estimating regression equation for the above variables is presented below: Y= a + b1Multiple-Brand-ExtensionTapal-Tea + b2Multiple-Brand-ExtensionLifebuoy The summarized multiple regression results are presented below:

55

Table 26: Multiple Regression, Close Extension Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations

0.35 0.12 0.12 0.36 700.00

Table 27: ANOVA, Close Extension df 2.00 697.00 699.00

Regression Residual Total

SS 12.65 91.60 104.25

MS 6.32 0.13

F 48.12

Significance F 0.00

Table 28: Coefficient, Close Extension Intercept Tapal Lifebuoy

Coefficients 3.49 0.14 0.10

Standard Error 0.11 0.02 0.02

t Stat 32.22 6.95 4.37

P-value 0.00 0.00 0.00

Lower 95% 3.28 0.10 0.06

Upper 95% 3.70 0.18 0.15

Lower 95.0% 3.28 0.10 0.06

Brand Evaluation

Graph 9: Scattered Diagram, Close Extension 5.00 4.00

Mult-tapal

3.00

Mult-Lifbuoy

2.00

Overall-Assoc.

1.00 0

5

10

15

Close Brand Extension

The hypothesis that at least one of the independent variables will have the relationship with the dependent variable “consumer evaluation” of the brand was accepted.

The ANOVA Table shows that the F< 0, meaning it is

significant. Moreover all the P values are less than .05 further confirming the relationship of the model. The R2 is 0.12, which indicates that the combined effect of the independent variables will cause dependent variable to move by 12% which is a very weak relationship.

56

The coefficients of Tapal tea and lifebuoy in reference to multiple extension are o.14 and 0.10, evaluating Tapal tea

respectively indicating that the consumers while and

Lifebuoy soap were not influenced with the

reputation of multiple extensions. In fact, it has diluted the brand reputation.

5.5.5.2 DISTANCE EXTENSION The relationship of “Multiple brand extension” and “consumer evaluation” of the brand extension were measured through distance stimuli “Sufi Vegetable Soap viz. Oil”, and “Woodward Gripe Water viz. Shampoo” The multiple estimating regression equation for the above variables is presented below: Y= a + b1Multiple-Brand-ExtensionSufi + b2Multiple-Brand-ExtensionWoodward . The summarized multiple regression results are presented below: Table 29: ANOVA, Distance Extension Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations

0.51 0.26 0.26 0.63 700.00

Table 30: ANOVA, Distance Extension Regression Residual Total

df 2.00 697.00 699.00

SS 97.95 272.30 370.25

MS 48.98 0.39

F 125.36

Significance F 0.00

Table 31: Coefficients, Distance Extension Coefficients Intercept Sufi Woodward

2.49 0.04 0.27

Standard Error 0.07 0.02 0.02

t Stat

P-value

36.70 1.81 13.95

0.00 0.07 0.00

Lower 95% 2.36 (0.00) 0.23

Upper 95% 2.63 0.07 0.31

57

Brand Evaluation

Graph 10: Scattered Chart, Distance Extension 6.00 5.00

Mult-suf

4.00 3.00 2.00

Mult-woodward Overall Evaluation

1.00 0

5

10

15

Distance Extension

The hypothesis that at least one of the independent variables will have the relationship with the dependent variable “consumer evaluation” of the brand was accepted.

The ANOVA Table shows that the F< 0, meaning it is

significant. Moreover the P value for Sufi is more than five and for Woodward it is less than .o5. This indicates that Woodward validates the model where as Suif does not. It also means that consumers’ evaluation for sufi extension would not increase with the multiple brand extension. The R2 is 0.26, which indicates that the combined effect of the independent variables will cause dependent variable to move by 26% which is a very weak relationship. Firms must not go for all kind of extensions as it would have adverse affect on parent brand and would also adversely affect reputation of the parent brand.

58

CHAPTER 6 CONCLUSIONS This chapter of thesis aims to conclude the paper with a conclusion, suggestion and further research aspects. The conclusions are drawn from the literature survey and analyzing of the data. It ends with directions for future research.

The objectives of the study were to, (1) identify the factors that affect the consumer evaluation of brand extensions, (2) develop empirical model on of the variable associated with how consumer evaluates brand extension, (3) test the validity of the empirical model. While reviewing the literature, several variables were found to have relationships on how consumers evaluate the brand extensions. The variables used in the empirical models are, (1) similarity (2) reputation (3) innovativeness (4) perceived risk (5) multiple extensions (6) parent brand characteristics (7) concept and consistency (8) brand extension fit The conceptual definitions of different authors were used for identifying the determinants of the above variables. Based on these variables, a questionnaire was developed that contained seventeen questions. Nine questions were related to the personal data and the rest were related to the subject study. The sample size for the study was 700. Stratified proportionate non-random sampling was used for drawing samples from the 18 UDC of Karachi. Based on the focus group discussions, the following four different brand extensions were finalized each representing different level of closeness among: (1) Tapal Tea Viz. Tapal Tea Bag., (2)Life Buoy Soap Viz. Lifebuoy Shampoo. (3) Sufi Vegetable Oil and Sufi Washing Soap. (4) Woodward Gripe Water and Wood ward Toothpaste. 59

The major findings fare disused below: a)

The hypothesis that at least one of the variables amongst these, (1) stronger reputation (b) similarity (c) strong association has relationship with “consumer evaluation” brand was accepted. •

In case of close extensions, the R2 was 0.92 indicating a very strong relationship. All the P values are less than .05 except “association”. This indicates that all the coefficients are relevant to the model except “Association-Tapal” and “AssociationLifebuoy”. The coefficient of determination for Similarity and Reputation

lifebuoy

Lifeuoy,

are 0.42 and 0.31 respectively, indicating

that in overall consumer evaluation relationship these two predictor variables/stimuli have comparatively stronger influence on

the

dependent

variable

as

compared

to

other

variables/stimuli. •

In case of distance extension the e R2 is 0.58, which indicates that the combined effect of the independent variables will cause the dependent variable consumer evaluation of brand extension to move by 58%, which is an indication of a strong relationship. The coefficient of determinations for RepuatationSufi, and ReputationWoodward are 0.26 and 0.37, respectively indicating that in the relationship of consumer evaluation of brand extension these

two

predictor

variables/stimuli

have

comparatively

stronger influence on the dependent variable as compared to other variables. From the above, it could be inferred that in case the parent’s brand is extended to similar category, then the similarity of the brand extension would be vital for the respondents’ evaluation of the brand extensions. In case, the extension is of distance nature (not in similar category) than the reputation of the parent brand would be used by the respondents for evaluation brand extension. It may also be observed from the above that the predicator variable “reputation” 60

is comparatively stronger in case of close and distance extensions.

b)

The hypothesis that at least one of the consumers traits that is (1) perceived risk (2) level of innovativeness was accepted •

In case of close extension the R2 is 0.14, which indicates that the combined effect of the independent variable will cause the dependent variable to move by 14% which is a very weak relationship. The innovative consumers tend to evaluate the close

brand

determination

extension being

more

positively

as

compared

0.15)

(coefficient with

of

consumer

perceived risk (coefficient of determination being 0.05). •

In case of close extension, the R2 is 0.18, which is a very weak relationship. The overall level of innovativeness and perceived risk of the respondents were high, but their relationships to the distance brand extensions were weak.

The coefficients for

perceived risk and innovativeness are 0.36 and -0.14, respectively indicating that the consumers with high level of innovativeness

would

tend

to

evaluate

distance

brand

extensions lowly and negative. The consumers with high level of perceived

risk

have

evaluated

distance

extensions

comparatively more positively with coefficient being 0.36 c)

The hypothesis that brand evaluation would be positive for those brands that have more concept consistency was accepted •

In case of close extension the R2 is 0.67, which an indication of strong relationship. Moreover, all the P values except design of lifebuoy are less than .05. This indicates that except the design of lifebuoy others validate the model. The coefficients for design and price of Tapal tea is 0.55, and -0.04, respectively indicating 61

that the consumers while evaluating Tapal tea were more influenced with the design of tea as compared to the price of Tapal tea. In case of Lifebuoy, the coefficients for design and prices were 0.01, and 0.20 indicating that while evaluating the Lifebuoy, the consumer appears to be more influenced with the price, as compared to the design of the Lifebuoy soap. •

In case of distance extension the R2 is 0.32, which indicates a weaker relationship. Moreover, all the P values except the design of Woodward gripe water are less than .05. This indicates that the design of Woodward has no relationship with the

dependent

extension.”

variable

“consumer

evaluation

of

brand

The coefficient of determinations for Sufi’ design

and price are 0.19 and 0.14, respectively indicating that in case of Sufi the design is comparatively, stronger predictor than price. Comparatively, price of Woodward was stronger predictor and design has no relationship with consumer evaluation of distance brand. d)

The hypothesis that those brands would be evaluated positively that has high level of fitness in terms of (1) complimentary, (2) supplementary (3) transferability (4) difficulty was accepted.

•

In case of close extension the R2 is 0.71, which indicates a very strong relationship. Moreover all the P values except Tapaldifficulty and Tapal tea-compliment are less than .05. This indicates tapal-tea difficulty, and tapal tea-compliment has no relationship with the dependent variable that is consumer evaluation of brand. Comparatively, stronger predictors in this relationship were Tapal(substitute),

Tapal

(Transferability),

and

Lifebuoy

(Transferability) with coefficient of determinations being, 0.24, 62

0.23 an 0.18 respectively. Indicating that these variables are stronger predictors for the dependent variable perceived fitness. The rest of the variables are weak predictors for the perceived fitness with all the coefficients of determination being less than 0.18. •

In case of distance extension the R2 is 0.15, which is a very weak relationship.

Moreover all the P values are less than .05

except Sufi-complimentary, Sufi-substitute, and Woodward complimentary, indicating that these mentioned variables have no relationship with the dependent variable. The entire coefficients were weak. It was as high as 0.08 for Sufitransferability, and as low as 0.01 for Woodward complimentary. Almost no relationships were found in cases of Suficomplimentary, Sufi-substitute, and Woodward-complimentary.

e)

The hypothesis that the consumer evaluation would be positive for those brands that have strong reputation of introducing multiple brands was accepted, but had very weak relationship. •

In case of close extension the R2 is 0.12, which is an indication of a very weak relationship. The coefficients of Tapal tea and Lifebuoy in reference to multiple extension is o.14 and 0.10, respectively indicating that the consumers while evaluating Tapal tea

and

Lifebuoy soap were not influenced with the

reputation of multiple extensions. In fact, it has diluted the brand reputation. •

In case of distance extension, R2 is 0.26, which is an indication of very weak relationship.

Moreover the P value for Sufi is

more than five and for Woodward it is less than .05. This indicates that Woodward validates the model where as Sufi does not. It also means that consumers’ evaluation for Sufi extension would not increase with the multiple brand extension. 63

CHAPTER 7 RECOMMENDATIONS This chapter deals with the recommendations that have been derived from the analysis and conclusions and literature survey The major recommendations are as follows: 1)

The firms whose brands have strong reputation could afford the luxury of venturing into distance brand extension. The firms with weaker brand reputation should focus on enhancing the brand reputation, and if they have to extend their brand it should be in the same category (Close distance)

2)

The firms that are extending their brands to similar category (Close brands), should target the consumer that have high level of innovativeness. Comparatively, the companies that are extending their brand into non-similar category (distance extension) must target those customers that have high level of perceived risk.

3).

In case of close extensions such as tea and tea bag, the firm must concentrate on the design, which Tapal was found to be doing. However, in case of distance extension, no relationship was found with the design of Woodward gripe water. Woodward needs to improve the design of the gripe water packaging in order to remain competitive.

4)

In case of distance extension, the firms must not extend their brands to the category that consumer would hate to assume it as substitute or complement. The owners of Sufi and Woodward despite knowing this has dared to extend in these categories assuming that while evaluating their extension, the customers will take cues from the reputation of the company.

64

5)

The firms must not go for all kind of extensions (multi-branding) as it would have adverse affect on the parent brand and would also adversely affect the reputation of the parent brand.

65

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APPNEDIX-1 QUESTIONNAIRE SIMILARITY Q1

Rate the “similarity” of the following brand extensions on the scale of 1-5. Five being “very similar” and one being “not similar” at all PARENT BRAND

EXTENDED BRAND

1.1

Tapal tea

Tapal tea bag

5 4 3 2 1

1.2

Lifebuoy soap

Lifebuoy shampoo

5 4 3 2 1

1.3

Sufi vegetable oil

Sufi soap

5 4 3 2 1

1.4

Woodward grip water

Woodward tooth paste

5 4 3 2 1

REPUTATION Q2

Rate the “reputations” of the following Parent brands on the scale of 1-5. Five being “very high reputation” and one being “very low reputation”. PARENT BRAND

2.1

Tapal tea

5 4 3 2

2.2

Life buoy soap

5 4 3 2

2.3

Sufi vegetable oil

5 4 3 2

2.4

Woodward grip water

5 4 3 2

PERCEIVED RISK Q3

Rate the following statements related to “perceived risk”. Five showing “very strong agreement” and one showing “very strong disagreement”

3.1

When I am in front of __section I always feel unsure what to pick

3.2

When I buy an ___ it is easy to make wrong choice.

5 4 3 2 1 5 4 3 2 1

INNOVATIVENESS Q4

Rate the following statements related to “innovativeness”. Five showing “very strong agreement” and one showing “very strong disagreement”

3.1

I am continuously seeking new ideas and experience

5 4 3 2 1

3.2

When things get boring I like to find some new experience

5 4 3 2 1

74

MULTIPLE BRANDS Q5

Rate which of the core brands have a strong history of introducing “multiple brands”. Five being “very high” and one being “very low”. PARENT BRAND

1.1

Tapal tea

5 4 3 2 1

1.2

Lifebuoy soap

5 4 3 2 1

1.3

Sufi Vegetable Oil

5 4 3 2 1

1.4

Woodward Grip water

5 4 3 2 1

PARENT BRAND CHARACTERISTICS Q6

Rate which of the core brands have strong “association”. Five being “strong association” and one being “low association”. Strong association is brand like “Sony” that can be used for multiple products. Products. PARENT BRAND

1.1

Tapal tea

5 4 3 2 1

1.2

Life buoy soap

5 4 3 2 1

1.3

Sufi vegetable oil

5 4 3 2 1

1.4

Woodward Grip water

5 4 3 2 1

BRAND CONCEPT CONSISTENCY Q7.1

Rate your “price perception” about the following core brands. Five being very high and one being very low PARENT BRAND

1.1

Tapal tea

5 4 3 2 1

1.2

Lifebuoy soap

5 4 3 2 1

1.3

Sufi Vegetable Oil

5 4 3 2 1

1.4

Woodward Gripe water

5 4 3 2 1

BRAND CONCEPT CONSISTENCY Q7.2

Rate your “design perception” about the following core brands. Five being “very expensive” and one being “not expensive at all”. PARENT BRAND

1.1

Tapal tea

5 4 3 2 1

1.2

Life buoy soap

5 4 3 2 1

1.3

Sufi Vegetable Oil

5 4 3 2 1

1.4

Woodward Grip water

5 4 3 2 1

75

PARENT BRAND EXTENSION BRAND COMPLEMENT Q8.a

Rate how much the following core brands and extended brand “compliment” each Other. Five being “very highly complimentary” and one being “very low complimentary” (Complimentary: tea and milk) PARENT BRAND

EXTENDED BRAND

1.1

Tapal tea

Tapal tea bag

5 4 3 2 1

1.2

Life buoy soap

Life buoy shampoo

5 4 3 2 1

1.3

Sufi Vegetable Oil

Sufi Soap

5 4 3 2 1

1.4

Woodward Grip water

Woodward tooth paste

5 4 3 2 1

PARENT BRAND EXTENSION BRAND SUBSTITUTE Q8.b

Rate how much the following core brand and parent brand “substitute” each Other. Five being “highly substitute” and one being “low substitute” (substitute:: tea and coffee) PARENT BRAND

EXTENDED BRAND

1.1

Tapal tea

Tapal tea bag

5 4 3 2 1

1.2

Lifebuoy soap

Lifebuoy shampoo

5 4 3 2 1

1.3

Sufi vegetable oil

Sufi soap

5 4 3 2 1

1.4

Woodward Grip water

Woodward tooth paste

5 4 3 2 1

TRANSFERABILITY Q8.c

Rate the level of “transferability” between core brand and parent brand. Five being “ very highly transferability” and one being “very low transferability” (Transferability mean closeness in the manufacturing process of two products PARENT BRAND

EXTENDED BRAND

1.1

Tapal tea

Tapal tea bag

5 4 3 2 1

1.2

Life buoy soap

Life buoy shampoo

5 4 3 2 1

1.3

Sufi vegetable Oil

Sufi Soap

5 4 3 2 1

1.4

Woodward Grip water

Woodward tooth paste

5 4 3 2 1

PERCEIVED DIFFICULTY Q8.d

Rate the level of “perceived difficulty” between core brand and extended brand. Five being highly “Perceived difficulty” and one being low level of difficulty (Difficulty means: how difficult it is to make the product. PARENT BRAND

EXTENDED BRAND

1.1

Tapal tea

Tapal tea bag

5 4 3 2 1

1.2

Lifebuoy soap

Lifebuoy shampoo

5 4 3 2 1

1.3

Sufi vegetable oil

Sufi soap

5 4 3 2 1

1.4

Woodward gripe water

Woodward tooth paste

5 4 3 2 1

76

OVERALL CONSUMER EVALUATION OF THE BRAND Q9

Over all I am very positive to the following extensions. Five being very Positive and one being not very positive PARENT BRAND

EXTENDED BRAND

1.1

Tapal tea

Tapal tea bag

5 4 3 2 1

1.2

Life buoy soap

Life buoy shampoo

5 4 3 2 1

1.3

Sufi vegetable oil

Sufi Soap

5 4 3 2 1

1.4

Woodward Grip water

Woodward tooth paste

5 4 3 2 1

Q10. Age

{

21 – 30

{

31 – 40

{

41 – 50

{

50 and Above

{

Post

{

Masters

{

Doctoral

{

31,000 – 40,000

{

41,000 & Above

6 – 10

{

11 and Above

Clifton

{ {

P.E.C.H.S

Gulshan-e-Iqbal

Saddar

{ {

{

Engineering

{

Doctor

Q11. Qualification

{

Graduation

Graduation

Q12 Gender

{

Male

{

Female

{

21,000 –

Q13. Income

{

10,000 – 20,000

30,000

Q14. Household Size

{

2–5

{

Q15. Area of residence?

{ {

DHA F.B. Area

{ {

North

Others

Nazimabad

Q16. Profession

{ {

Marketing Teacher

{ {

Banking Others

77

78

79