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CHAPTER 1

Introduction

Background Information
In the Current market scenario, a brand thought strategically is the lifeline to the

success of a company. Brands make possible to proficiently instruct their well-designed and

emotive values in the minds of the consumers Franzen & Bouwman (2001). It is a commonly

known factor that new brand launch costs more therefore brand extensions are considered as

strategically more useful in a company’s national and international growth. To launch a new

product, a Brand Extension strategy comprises of using a recognized brand name Keller, K. L.

(2009). Brand image is defined as the perceptions regarding a brand as revealed by the brand

association apprehended in a consumer’s mind Keller, K.L. (1993).

These associations submit to any feature that links the brand with the memory of the

consumers Aaker, D. A. (1996). Therefore in order to attain the knowledge of how consumer’s

attitude is towards brand extension if they have a favourable brand image of the parent brand,

this study takes a balancing method to estimate. Firstly it assess that popular parent brands paves

a positive perception for a new brand extension. Secondly it also explains the initial perceptions

about adaption of the brand extension due to brand loyalty. Aligned with these mentioned

objective, this study is anticipated to observe the effect of consumers attitude towards brand

extension of a successful parent brand regarding in three different industrial sectors that is to

observe consumers attitude towards brand extension.

According to Fayyaz et al (2015), strong consumers involvement with a specific brand of

any kind can assist in a high evaluation of brand extension or it situations can also result in
harmful evaluations. Extensions in brand include its name develope product group with

the perspective of entering in to other one Aaker(1990) & Tauber (1988). That scheme

viewed many times as having good effects, the reason is that this decreases the obtainable price

on advertisement and launching of latest brand with the chances of raising the achievement and

popularity because of great liking originated by basic product worth.

Extensions in brand include its name develope product group with the perspective of

entering in to other one Aaker(1990)& Tauber (1988) . That scheme viewed many times as

having good effects, the reason is that this decreases the obtainable price on advertisement and

launching of latest brand with the chances of raising the achievement and popularity because of

great liking originated by basic product worth Chen & Lue (2004). According to Aaker(1991)

brand extension occurs when the firm stretches its brand in to new classes of product. He said

that extensions in brand may not only help in increasing profits but also take part in

penetrating and acquiring different new markets. A better scheme of brand extension is that

in which the name of the brand helps the addition in the brand, where as the best

extension in brand also helps in return in increasing the name of the brand Aaker(1991).Sheinin

(2000) Brand extension strategy is very much common in fast moving consumer goods

(FMCG‟S) class and FMCG‟S can be defined as “Those products which have fast shelf

turnover rate, with comparatively low cost and do not need very much time, effort and

investment to acquire”, which includes product of different and investment to acquire”, which

includes product of different classes such as toilet items, different food products and

beverages means those products which are uses on daily basis such as cold drinks, juices, soap,

shampoos etc. Ambler & Styles (1997).


In the category of FMCG‟S and services it has been viewed that greater than 80%

of the latest brands or products were launched as a brand extension and are considered as a

good and profitable in the sense of reducing the cost of launching new products along with

increase in the success rate Rangaswamy, Brurke and Olivia (1993), Ernst et. al (1999) and

AcNielson (2005) Surveys conducted in United States shows that fast moving consumer goods

market projects much likeness of additions in brand. It is developing with the increasing rate and

became so much popular because of new introductions in products which according to some

statistical figures show that launching of new brand in USA during the period of 1997 to 1984

were 120 to 175 annually out of which 60% were additions or extensions Aaker (1990). In the

year of 1991, it has been seen that launches of new products were 1600 out of which 90% were

the extensions Rangaswamy et. Al (1999). In the retailing industry in 2005 launching of

new products were 30,000 and the percentage of extensions were 90% AcNielson (2005).

Some of the best examples of brand extension in the FMCG‟S category are Coca-Cola which

introduced apple flavour for its Fanta brand, Nestle introduced its yogurt, Pepsi also

introduced Pepsi Max, Diet Pepsi, Lays etc., Gillette introduced shaving foams, shaving

creams, after shave lotions, Colgate introduced different flavours in its tooth pastes and many

more examples come in the domain of extensions in FMCG‟S category. According to

Keller K.L (2009) brand image is defined as the perceptions regarding a brand held in the

memory of a consumer as reflected by the brand associations. On elaborating the topic

further it is observant that a manger shall seldom create a set of optimistic associations of a

brand in the minds of the consumers, once after the creation of brand awareness has

incurred.
This chore is the main ingredient in creating a positive and optimistic brand image. In

addition, there are three essential facets established to brand image which establishes the base

for dissimilar consumer response for dissimilar products. Despite the acknowledged and

obvious importance of using brand extension as a marketing strategy for introducing new

products relatively known about how consumers react to them, consumer reaction to brand

extension appears to involve a categorization process in which the new product is judge Park

& Lawson (1991). According to Park & Lawson (1991)the most important task for advertisement

is to identify the brand extension of the products and the image of the brand among customers.

Prestige oriented brand image shows the consumer reaction about the self-expression for

a product e.g. Mercedes 560 SL. Here consumers are more focused on the status and prestige

which they get from it. Past researches also said that no matter either the consumers have

prestige oriented approach or function oriented, the basic thing is how much the brands

have high consistency and consumers reaction about that consistency and its core features. .

The main purpose of this study is to check the impact of brand extensions on the parent brand

image. Brand extensions have become a popular way of introducing new product into the market

and leverage a firm’s most valuable hidden asset, its brand name

Statement of the Problem

This study attempts to examine how consumer attitude vary toward brand extensions in

terms of brand similarity, brand reputation, multiple brand extension, parent brand characteristics

and brand concept consistency.

Specifically, it attempts to the following question;


1. What is the respondents’ attitude towards brand extension considering;

1.1 Brand similarity

1.2 Parent Brand reputations

1.3 Multiple brand extension

1.4 Parent brand characteristics

1.5 Brand concept consistency

2. Is there a significant difference in the attitude of the consumer towards brand extension

considering;

2.1 Demographic Profile

2.2 Brand similarity

2.3 Parent Brand reputation

2.4 Multiple Brand extension

2.5 Parent brand characteristics

2.6 Brand concept consistency

SIGNIFICANCE OF STUDY

This study aims to determine the attitude of consumers toward brand extension. The

finding of the study will be beneficial to the following:


Student

This will enable the student to be more knowledgeable about brand extension and it will

help them a lot when they engage in business.

Businessman

This study will help businessman to understand and fully aware of business environment

and it will serve as a guide of changing decision or strategies.

Future Researcher

Other researcher may use this study especially to those who conduct the similar study.

Some details of this study can also benefit to the future researchers and willing to come up the

best important detail on how to make a relevant analysis and who will be interested to do the

same.

Marketers

The result of the study will guide the marketers to evaluate consumer attitude towards

brand extension in terms of promoting new products. Some details will help them to identify if

they will continue producing in the market with different category

Scope and Delimitation


This study will be conducted at PHINMA- Cagayan De Oro College located at Max

Suniel, 9000 Cagayan De Oro City, Misamis Oriental. The respondents for this study are 100

Senior High School Students under Accountancy Business Management (ABM) strand of

Academic Year 2019-2020. The researchers choose the ABM students because they are exposed

to all types of business strategies and they are future entrepreneur.

The possible limitation that might be encounter by the researchers is the conflict on class

schedules for the respondents. The researchers may overcome this limitation knowing that the

schedule of the respondents and setting time to conduct the study especially that the respondents

are afternoon class and the researchers are in morning class so there will be a conflict of the time

to conduct the study.

DEFINITION OF TERMS

Brand-fit level

Refers to the match between the explicit image of the brand and the category extension

(Sandor Czeller, 2002)

Brand Similarity

Refers to the degree of resemblance of consumer perception between extended and parent

brand (Smith and Parle, 1992).

Brand Reputation

Refers to consumers perception on the quality associated with core brand (Barrne,et

al.,2000).
Consumer Evaluation

Information coming directly from customers about the satisfaction or dissatisfaction they feel

with a product or service.

Consistency

Conforming in the application of something typically that which is necessary for the sake of

logic, accuracy or fairness.

Reciprocal Effect

An agreement or obligation bearing on binding each of two parties equally.

Resemblance

The state or quality of resembling, especially similarity in appearance or in external or

superficial details.

Conceptualized

Form a concept or idea of something.

Explicit Image

Fully and clearly expressed; leaving nothing implied.

Reputation

Overall quality or character as seen or judged by people in general.

Brand Extension

Is a marketing strategy in which a firm marketing a product with a developed image uses the

same brand name in a different product category.


CHAPTER II

Review of Related Literature and Study

The brand extension adds or deletes something in the core brand concept. A recognized

brand name that provides competitive advantages is considered on a firm’s most valuable assets.

Owing to the high costs of launching new products, brand extensions have been the basis of

national and international strategic growth. Brand extensions strategy consists of using an

established brand name to launch new products (Keller, 2007). According to Klink and Smith

(2001) consumers play an important strategic role towards brand extension because the failure

and success of the brand is based on the consumers’ judgement. Creating a brand name with

well-established associations is one way of achieving this aim. It is very costly process that has

many returns once success is achieved (Keller, 2008). It is also a new style for brand

management which creates value for single name and ranks it a mega Parent Brand. The parent

brand becomes stronger with each successful extension it has.

This study would add the value to the society’s body of knowledge having been

conducted in the Philippines. This study, attempts to examine how consumer attitude vary

toward brand extensions in terms of brand similarity, brand reputation, multiple brand extension,

parent brand characteristics and brand concept consistency. Klink and Smith (2001) have

warned about a limitation in current research on consumer attitudes towards brand extensions,

stating that “in this area, as is often the case during the initial stages of knowledge development,

concerns about external validity have taken a back seat to those about internal validity" (Klink &

Smith, 2001, p. 326). Indeed, the bulk of research investigates, essentially through experimental

designs, the main and interaction effects between a handful of cognitive and affective attitude
constructs. Although the studies' internal validity seems high, their generalization to real-life

decisions and consumption contexts is debatable. Most of them fail to take into account

background factors such as individual consumer heterogeneity, marketer-controlled factors and

competitive activity, which might exert a significant impact on their generalization. This article

responds to Klink and Smith's (2001) call by offering a guideline for future inquiry on consumer

attitudes toward brand extensions in the form of an integrative model and research propositions.

The paper is organized according to a three-step logic, following the structure of previous

review studies on other marketing topics (e. g. Gatignon & Robertson, 2001; Alpert & Kamins,

2003; Bettman, Luce & Payne, 2002). First, a conceptual model of consumer attitude towards

brand extensions is proposed based on the theoretical and empirical developments in the area.

Second, the model serves as a guideline for the identification of gaps and underdeveloped areas

in past research. Third, research propositions are advanced aiming for the encouragement of

empirical inquiry on these underdeveloped areas. Attitude is defined as the response to a

stimulus or event. The response includes three components: cognitive, emotional, and

behavioral. The cognitive component refers to the beliefs about an item. Beliefs are pieces of

information that a person has about an item, subject, or another person. Beliefs are usually the

result of information processing and the learning process. The emotional component refers to a

person's evaluation of a subject or item. It specifically represents the desirable or undesirable

emotional bond with the subject. The behavioral component is usually innate and has a sense of

commitment because the person has made a decision and this decision has led to a certain

behavior such as making a purchase (Rapp and Stan, 2000). In brand literature, attitude is

defined as a cognitive state which is reflected in various aspects and creates preference for one

product or brand.
In other words, the consumer's attitude to the new product and the extended brand is the

result of the consumer's perception of the extended brand quality and the chances of buying a

new product of the brand (Wilkie, 1995). The most important variables that affect the

consumer's attitude to the new extended product of the brand are initial brand image, image fit

and similarity of categories (Martinez and Pinna, 2009)

Brand Extension Strategies

Brand extension involves the use of a brand name established in one product class to enter

another product class (Tauber, 2008). Launching of a new product is usually done through brand

extensions. The newly introduced brand extension capitalizes on the equity of the already

established (core) brand name or even the company or corporate name (e.g. panadol extra of

GSK). Consumer familiarity with the existing core brand name aids new product entry into the

market place and helps the brand extension to capture new market segments quickly (Milewicz

and Herbig, 2004). This strategy is often seen as beneficial because of the reduced new product

introduction marketing research and advertising costs and the increased chance of success due to

higher preference derived from the core brand equity. In addition, a brand extension can also

produce possible reciprocal effects that enhance the equity of the parent brand (Chen and Liu,

2004).

Successful brand extensions depend on consumers' perceptions of fit or similarity between

the new extension and the parent brand (Volvkner and Sattler, 2006). Many companies adopt

brand extension as strategy with the aim of benefiting from the brand knowledge achieved in the

current markets. When a company launch a new product and market under the umbrella of well -

known brand name, failure rates and marketing costs are reduced (Keller, 2008). Keller (2008)
states that more than 80 per cent of firms resort to brand extensions as a way of marketing goods

and services. Competition forces firms to adopt strategies that create a competitive advantage for

the firm. Creating a brand name with well-established association in one way of achieving this

aim. Firms invest heavily in developing a brand. It is a very costly process but has many returns

once success is achieved (Keller, 2008).

Brand Similarity

Brand similarity refers to the degree of resemblance of consumer perception between

extended and parent brand (Smith & Park, 1992). If the level of similarity is higher between the

parent and extended brand category then the brand extension would have great chances of

inheriting the positive and negative characteristics of the core brand (Aeker & Keller, 1990; Park

et al., 1991 and Boush & Loken.,1991). This assumption is primarily based on the premise that

consumers attitude will be more positive towards those extensions where they find higher level

of similarity between the extension and the parent brand (Boush et al., 1987).

A brand extension in a new product category is viewed as a new occurrence that can be

more or less similar to the brand and its existing product line. Perceived similarity also called

perceived fit is characterized by the “number of shared associations between the extensions and

the brand product category (SandorCzellar, 2002). Researchers have identified two dimensions

of the fit construct (Park et al.,1991; Bhat & Reddy,2001). The first is product category fit,

which refers to the perceived similarity between the extension and the existing brand categories

of the core brand. Other is known as brand-level fit, which refers to the match between the

explicit image of the brand and the product category extension (SandorCzellar, 2002). For a clear

look, consider these two aspects of fit, think about Malboro launching a ball-pen (SandorCzellar,
2002). The perceived fit between Malboro and the Ball-pen category will be comprised of a

category-level fit (the shared product attributes between cigarettes and ball-pens) & a brand-level

fit e.g. the match between Marlboro’s brand image and the image consumer holds about the Ball-

pen category” (Bhat & Reddy, 2001).

A brand name can also serve as category label, thus lead to a category-based evaluated of a

new product extension (Park et al., 2002). Evaluating a brand extension somewhat involves a

transfer process, wherein original brand associations are associated with the brand extension.

Congruent with this theory, the evaluation of extensions is dependent upon their similarity to the

core brand category, which has been conceptualized as a category-based processing phenomenon

(Nan, 2006).

Brand Reputation

The basic supposition in brand extension strategy is that the leverage providing capabilities

of parent’s brand and lower for weaker brand (Aaker & Keller, 1992; Smith and Park, 1992).

Brand reputation refers to “consumer’s perceptions on the quality associated with a core brand”

(Barone et al., 2000). When a consumer is first confronted to a brand extension, it is new and

unfamiliar to him. Though, consumers may already be familiar with the core brand, they are

expected to laid their evaluation regarding the extension upon their knowledge of the core brand.
Multiple Brand Extension

The brand association is dynamic of those firms that aggressively follow expansion

strategy through multiple brand extension given the fact that consumer perception of brand

image and its association vary with the introduction of brand extension (Tariq Jalees and Tahir

Ali, 2008). Therefore, this process has an impact on the perception of fit between a brand and its

future extension. Keller (1992) has proposed "the relationship between parent brand and its

extension would be moderated on previous brand extension bistort and the quality levels of the

parent brand". If the firm has an account of brand extension, then the consumer, while evaluating

the brand extension would see whether previous extensions were successful or not and if there is

any similarity in the parent brand and its proposed extensions. (Keller, 1992). If the brand

extension were "dissimilar" or lacked fit then it will negatively affect the consumer quality

perception and consumer attitude will also be adversely affected. Along with transfer of affect to

a new category member, many researchers also proposed the existence of a more complex

processing mechanism in the evaluation of new extension.

Parent Brand Characteristics

The consumer's confidence on brand extension evaluation would be favorable for brands

those are associated with several products, given that there is no significant similarity between

the qualities of products. Their research results also specify that arbitrarily brand extensions into

unrelated product, provided that the feature and value of the parent brand is high are still not

advisable.

Therefore, the first extension should be into moderated categories and then to unrelated

category. This gradually stepwise extension from one category to moderated unrelated category
would assist the consumers in maintaining the perception of relatedness. A brand name may have

association with several products, but the level of association of all the products related to brand

may differ. Brand extension having strong association with the core brand, could be easily

evaluated by the consumers, as oppose to products that have weaker association with the core

brand (Kapoor, 2005). In other words, the more similar the extension is to a parent brand, the

more like it are consumers to infer the parent brand's characteristics in the brand extension.

Empirical support from many studies verifies that higher the "fit", the more positive extension

evaluation would be (Aajer and keller. 2005: Boush and Loken, 2006).

Brand Concept Consistency

The market is vibrant. In response to dynamic markets, firms modify their offerings, enter

different market segments, and sometime reposition their offerings. 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).

Object similarity may be necessary, bur may not fully explain the brand category fit for an

extension. Two objects may have several common physical attributes, but the brand concept s of

both the object may be completely different to each other e.g Sieko and Rolex watches share

numerous product level features but as far as brand concepts of the two watches are concerned,

Sieko has reputation as functional brand and Rolex as prestige brand (Park et.al.., 2005).Thus,

the perceive fit is combination of (1) product feature similarity and (2) brand concept consistency

(kapoor, 2005).
Theoretical framework

Research in this area is based on the categorization theory of cognitive psychology

(Barsalou, 1985). Brands and product categories are conceptualized as cognitive categories in

consumer memory (Boush & Loken, 1991; Broniarczyk & Alba, 1994). A brand extension in a

new product category is viewed as a new instance that can be more or less similar to the brand

and its existing products. Perceived similarity, called also perceived fit is characterized by the

number of shared associations between the extension product category and the brand.

Researchers have identified two dimensions of the fit construct (Park, Milberg& Lawson, 1991;

Bhat & Reddy, 2001). The first is the product category fit, which refers to the perceived

similarity between the extension category and the existing product categories of the parent brand.

The second is brand-level fit, referring to the match between the specific image of the brand and

the extension product category. To illustrate these two aspects of fit, consider Marlboro

launching a ball-pen. The perceived fit between Marlboro and the ball-pen category will be

composed of a category-level fit (the shared product attributes between cigarettes and ball-pens)

and a brand-level fit (e. g. the match between Marlboro's rough, Western brand image and the

image the consumer holds about the ball-pen category).

It deals mainly with the effect of consumer mood and advertising on fit perceptions. Thus,

recent research shows that positive consumer mood improves fit perceptions for moderately far

extensions (Barone, Miniard & Romeo, 2000). To our knowledge however, research on other

consumer-level factors has not yet been undertaken. Advertising can be used in several ways to

directly improve consumers' fit perceptions. Through increased exposure, it can facilitate
information retrieval processes and thus improve fit perceptions (Lane, 2000; Klink & Smith,

2001). By manipulating the informative content of ads through priming and distancing

techniques, marketers can also enhance fit perceptions (Boush, 1993; Pryor & Brodie, 1998;

Kim, Lavack & Smith, 2001). However, marketers can also use marketing-mix variables other

than advertising to improve fit perceptions. These as well as other possible background factors

such as competitor and distributor activity have not yet been studied. The following lines

indicate several paths for future research in these underdeveloped areas.

Figure 1. Schematic Diagram of the Study

Independent Variable Dependent Variable

 Demographic
Profile
 Brand Similarity Attitude towards Brand
 Brand Reputation Extension
 Multiple Brand
Extension
 Parent Brand
Characteristics
 Brand Concept
Consistency
CHAPTER 3

METHODOLOGY

This chapter will describe the research and sampling design that will be used in the study.

In addition, this chapter will also discuss the data gathering procedure and the treatment of data

that will be employed in the study.

Research Design

This study will utilize a descriptive research design which aims to see the association of

the variables being subject to study. In the case of this paper, the variables under investigation

are brand similarity, brand reputation, multiple brand extension, parent brand characteristics and

brand concept consistency and its possible impact to consumer attitude towards brand

extensions.

Research Locale

This study will be conducted at PHINMA-Cagayan De Oro College during the first

semester in the year 2019-2020.

Sample/Respondents

The respondents of this study will be PHINMA- Cagayan de Oro College students

specifically Grade 12 ABM 1B-4B afternoon classes. This study will involve 150 respondents.
Thus, two are the following brand extensions were finalize for further study;

Coca- Cola Magnolia

Energy Drink Energy Drink

Detergent Soap Detergent Soap

Research Instruments

The research instrument to be used to gather the necessary data for this study is an

adapted survey questionnaire. The research questionnaire has two parts. The first part aims to

determine the demographic profile of the respondents. The second part of the questionnaire aims

to know the effects of consumer attitude towards brand extension.

Research Procedure

Data Collection Procedure

The instruments will be personally distributed to PHINMA-Cagayan de Oro College.

Random sampling technique will be used to determine the respondents. The logic behind simple

random sampling is that it removes bias from the selection procedure and should result in

representative samples. An approval letter from our research adviser is needed. Once the letter is
approved, this will be attached to a different letter addressed to the respondents. The respondents

will then answer the questionnaire during their free time at their most convenient place in school.

Treatment of Data

To determine the effects of consumer attitude towards brand extension as perceived by

Accountancy Business Management (ABM) students will be weighted mean.


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