Abstract

The purpose of this study was to examine the effects on the original brand name image and that of the extension when a vertical extension of the brand is introduced. Three variables were examined in the context of step-up and step-down extensions to determine their effect on the evaluation of the core brand and extension: brand concepts, distancing techniques and the presence of an information or attribute elaboration cue. An experiment was conducted using four well-known brand names (Rolex, Timex, Lexus and Toyota) from two product categories. The differences in evaluations between the three types of vertical extensions (prestige-oriented downscale, function-oriented upscale and function-oriented downscale) were examined. The findings indicate that introducing the step-down Rolex, Lexus and Toyota, and an upscale Toyota and Timex lower brand name evaluations. The downscale extensions for Rolex and Timex and upscale extensions for Timex and Toyota received favourable evaluations. Both the step-down Timex and Toyota extensions received unfavourable evaluations. Distancing the step-down extension name from Rolex led to a significantly more favourable evaluation of the Rolex name than when the extension name was closely tied to Rolex. Having the Toyota name closely associated with the downscale extension was also found to significantly improve the evaluation of the brand name than when the Toyota name was not salient. Further experimental findings showed that extension evaluations can be significantly improved, for all types of vertical extensions, by introducing an attribute elaboration cue which is designed to reduce concerns consumers may have about the extension.