1. MSc in INTERNATIONAL BUSINESS WITH MARKETING
2011
CONSUMER EVALUATIONS OF BRAND
EXTENSIONS: CAN ONLINE BRANDS BE EXTENDED
TO OFFLINE MARKETS?
By
ANTONIO MARTINEZ
H00023227
Presented for the award of MSc.
Heriot-Watt University
i

2. Can online brand be extended to offline products?
ACKNOWLEDGEMNENT
I would like to thank my parents for their continual support throughout my
undergraduate and postgraduate years of study.
To my supervisor, Steve Clode, thank you for allowing me to learn from my own
mistakes, and for encouraging me to explore. Your faultless guidance and unwavering
trust will remain a standard of comparison for me in my future academic endeavours.
To Ana Martinez, for being there, and for providing an ever-sympathetic ear to my
grievances. Thank you for your succor and faith.
To my friend, Claudio Rider, without whom these academic year would have been
considerably less enriching. I also thank Dolores Rider for her assistance in providing
grammatical proof reading.
Lastly, I offer my regards and blessings to all of those who supported me in any
respect during the completion of the dissertation.
Declaration
I declare that the thesis embodies the results of my own work and has been
composed by myself and meets the University policies on plagiarism and ethical
research. Where appropriate within the thesis I have made full acknowledgement to
the work and ideas of others or have made reference to work carried out in
collaboration with other persons.
Signature of student ………………………… Date: …………….
Word count: 14,989
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3. ABSTRACT
Increasing competence within the marketplace has provoked that firms seek to
go beyond the boundaries of their actual businesses by offering products in totally
new markets. Companies attempt to reduce the risk associated with launching these
new products by using an existing brand name, which allows the companies to
leverage brand equity in the new product categories. Brand extension has become a
popular strategy not only within the limits of offline markets but, also in an online
context to the extent that numerous offline companies have extended their brands to
online markets. Nevertheless, a recent trend shows that the reverse is also possible,
and Internet brands can also benefit from entering in new offline product categories.
This study examines whether online brands can be successfully extended to offline
product categories from a consumer perspective. Specifically, this study develops an
explanatory model of consumer evaluation of brand extensions which combines
variables previously studied in the literature with other extracted from online branding
and applies them to the research context. Empirical survey data are analysed through a
regression analysis applied to different online brands and their offline extensions to
identify the most important factors influencing consumers´ attitude toward the brand
extensions. The main results indicate that the attitude towards the offline extensions
launched by online companies is determined by the degree of product similarity, the
transference of emotional associations with the parent brand to the new product, the
marketing support received by the extension and the extent to which the consumers
are involved with the new product category. As consequence of these findings, the
success of online brands going offline will depend on the capability of managers to
build a strong and positive brand personality and organisational relationships with
consumers as well as implementing marketing activities which reinforce product
similarity perceptions and foster consumer involvement with the brand extension.
Keywords: Brand extensions, Brand equity, Brand associations, Brand knowledge,
Brand loyalty, Brand image, online companies, perceived quality, similarity,
consumer innovativeness, consumer involvement.
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4. TABLE OF CONTENTS
ACKNOWLEDGEMNENT ...................................................................................................................... I
ABSTRACT .......................................................................................................................................... II
LIST OF FIGURES ................................................................................................................................VI
LIST OF TABLES ..................................................................................................................................VI
CHAPTER 1.INTRODUCTION ...................................................................................................... 1
1.1 BACKGROUND..................................................................................................................................... 1
1.2 PROBLEM STATEMENT.......................................................................................................................... 3
1.3 CONTRIBUTIONS .................................................................................................................................. 4
1.3.1 Theoretical Contributions ........................................................................................................ 4
1.3.2 Practical Contributions ............................................................................................................ 5
1.4 THESIS OUTLINE .................................................................................................................................. 5
CHAPTER 2.BRAND EXTENSIONS ............................................................................................. 6
2.1 INTRODUCTION ................................................................................................................................... 6
2.2 CONCEPTUALISATION. .......................................................................................................................... 6
2.3 PSYCHOLOGICAL PROCESSES INVOLVED IN BRAND EXTENSION EVALUATIONS .................................................. 9
2.4 CONSUMER EVALUATIONS OF BRAND EXTENSIONS .................................................................................. 10
2.4.1 Similarity ............................................................................................................................... 12
2.4.2 Characteristics of the parent brand ...................................................................................... 13
2.4.3 The extension´s marketing context ....................................................................................... 14
2.4.4 Consumer characteristics ...................................................................................................... 14
2.4.5 Limitations of the current research on brand extensions...................................................... 15
2.5 BRAND EXTENSIONS OF ONLINE BRANDS ............................................................................................... 16
2.6 SUMMARY ....................................................................................................................................... 18
CHAPTER 3. HYPOTHESES........................................................................................................ 20
3.1 INTRODUCTION ................................................................................................................................. 20
3.2 BRAND EQUITY VARIABLES................................................................................................................... 20
3.2.1 Brand knowledge .................................................................................................................. 22
3.2.2 Perceived Quality .................................................................................................................. 23
3.2.3 Brand Associations. ............................................................................................................... 24
3.2.4 Brand Loyalty ........................................................................................................................ 27
3.3 MARKETING SUPPORT ........................................................................................................................ 28
3.4 PERCEIVED SIMILARITY ........................................................................................................................ 29
3.4.1 Product category similarity ................................................................................................... 29
3.4.2 Brand image Similarity .......................................................................................................... 30
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5. 3.5 INVOLVEMENT IN THE EXTENSION PRODUCT CATEGORY ............................................................................. 31
3.6 CONSUMER INNOVATIVENESS .............................................................................................................. 32
3.7 THE HYPOTHESIZED MODEL ................................................................................................................ 34
3.8 SUMMARY ....................................................................................................................................... 35
CHAPTER 4. METHODOLOGY .................................................................................................. 36
4.1 INTRODUCTION ................................................................................................................................. 36
4.2 RESEARCH PHILOSOPHY ...................................................................................................................... 36
4.3 RESEARCH DESIGN ............................................................................................................................. 37
4.3.1 Research strategy ................................................................................................................. 38
4.3.1 Time horizon ......................................................................................................................... 39
4.4 SURVEY DEVELOPMENT ...................................................................................................................... 39
4.4.1 Selection of brands and extensions ....................................................................................... 40
4.4.2 Scaling and multi-item scales................................................................................................ 41
4.5 SAMPLING........................................................................................................................................ 46
CHAPTER 5. DISCUSSION .......................................................................................................... 48
5.1 INTRODUCTION ................................................................................................................................. 48
5.2 RELIABILITY AND CORRELATION ANALYSES. ............................................................................................. 48
5.2.1 Reliability analysis ................................................................................................................. 48
5.2.2 Correlation analysis............................................................................................................... 49
5.3 REGRESSION ANALYSIS ........................................................................................................................ 50
5.4 HYPOTHESES TESTING ........................................................................................................................ 53
5.5 DISCUSSION ..................................................................................................................................... 55
5.6 SUMMARY ....................................................................................................................................... 57
CHAPTER 7. CONCLUSION........................................................................................................ 59
7.1 CONCLUSION .................................................................................................................................... 59
7.2 IMPLICATIONS ................................................................................................................................... 59
7.2.1 Theoretical Implications ........................................................................................................ 59
7.2.2 Managerial Implications ....................................................................................................... 60
7.3 LIMITATIONS AND DIRECTIONS FOR FURTHER RESEARCH ........................................................................... 61
REFERENCES ..................................................................................................................................... 63
APPENDIX ........................................................................................................................................ 78
APPENDIX A – SPSS DATA ...................................................................................................................... 78
Appendix A.1: Reliability Analysis .................................................................................................. 78
Appendix A.2: Correlation analysis ................................................................................................ 80
Appendix A.3: Regression analysis ................................................................................................. 82
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6. APPENDIX B - QUESTIONNAIRES ........................................................................................................... 90
QUESTIONNAIRE 1: GOOGLE.......................................................................................................... 91
QUESTIONNAIRE 2: AMAZON ........................................................................................................ 95
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7. LIST OF FIGURES
FIGURE 2.1: TAUBER´S GROWTH MATRIX ......................................................................................................... 7
FIGURE 2.2: E-SERVICE PORTALS GRID ........................................................................................................... 17
FIGURE 3.1: HYPOTHESIZED MODEL .............................................................................................................. 35
LIST OF TABLES
TABLE 2.1: MAIN FACTORS OF BRAND EXTENSION EVALUATION ......................................................................... 11
TABLE 3.1: HYPOTHESES ............................................................................................................................. 33
TABLE 4.1: OVERVIEW OF ONLINE BRANDS AND OFFLINE EXTENSIONS .................................................................. 41
TABLE 4.2: SCALES USED IN THE QUESTIONNAIRES ............................................................................................ 44
TABLE 5.1: CRONBACH´S ALPHA COEFFICIENTS FOR MULTI-ITEMS CONSTRUCTS.................................................... 49
TABLE 5.2: CORRELATIONS .......................................................................................................................... 50
TABLE 5.3: REGRESSION I (AGGREGATED COMPONENTS OF SIMILARITY) ............................................................... 51
TABLE 5.4: REGRESSION II (SEPARATED COMPONENTS OF SIMILARITY)................................................................. 52
TABLE 5.5: REGRESSION ANALYSIS BY TYPE OF COMPANY .................................................................................. 53
TABLE 5.6: REVIEW ON HYPOTHESES ............................................................................................................. 58
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8. Can online brand be extended to offline products?
CHAPTER 1.INTRODUCTION
1.1 Background.
Increasingly competitive forces in the global markets are forcing companies to
differentiate themselves from competitors in order to survive and take advantage of
the current opportunities of growth. One way to differentiate from competitors is the
establishment of strong brands that allow companies to increase the efficiency of their
marketing expenses (Keller, 1993) achieving thus benefits to the company such as a
more favourable perception of the products by the customers, greater loyalty, less
vulnerability to competitors´ marketing actions, high profits margins, less negative
reactions by consumers to price increases, higher support of middlemen, higher
marketing promotion effectiveness, increasing licensing and brand extensions
opportunities (Keller, 2008). In other words, while competitors can emulate financial
and physical assets, intangible assets, as brands, represent a more sustainable
competitive advantage (Hunt and Morgan 1995). The importance of brands is not only
measured in terms of the competitive advantages that they provide in their present
markets but also the future opportunities that they provide in untapped markets
(Srivastava and Shocker, 1991). This way, firms can enter new markets by using an
existing, well-known brand name in order to reduce both the cost of launching new
products and the risk of product failure. The strategy behind the leverage of the
company brand equity to new markets, products or sectors is known as brand
extension.
The acceptance of brand extension is principally due to the benefits that both
brand and extension provide (Keller, 2003). On the one hand, the product
commercialised under a well-known brand is more attractive to the consumers (Aaker
and Keller 1990) and suppliers, thus reducing the marketing costs and increasing the
chance of success (Morrin, 1999). On the other hand, brand extensions reinforce
brand image and notoriety, which make consumers purchase other products offered by
the brand (Chen and Liu, 2004). All this allows an increase of the market share and
efficiency of market efforts (Smith and Park, 1992). In other words, extensions benefit
the companies because they transfer intangible components of the brand such as brand
awareness, trust or other specific brand associations (Broniarczyk and Alba, 1994)
1

9. stored in the consumers´ minds to the new products. For example, National
Geographic has been able to extend successfully its brand by transferring associations
of nature, adventure and multiculturalism from photography and documentaries to
travel products, furniture or outdoors clothing (shop.nationalgeographic.com).
Despite the positive effects of brand extensions, their inappropriate use may
harm the company´s brand image if the new products do not fit with the consumers´
brand associations. This does not mean that a high degree of similarity between the
parent brand product category and the new product has to be present; in fact, some
companies have stretched their brands to very dissimilar product classes. For instance,
Louis Vuitton successfully extended to luxury resorts although it is a different
business from fashion (Passariello, 2010).
The use of brand extensions as a strategy to achieve growth has drastically
increased in recent years. In fact, between 80 and 90% of new products are launched
under the name of an existing brand (Völckner and Sattler, 2004). This recent
proliferation of brand extensions has contributed to change market structures in many
sectors. For example, in the financial services sector the entry of new competitors
from the retailing sector (e.g., Tesco or Sainsbury´s) has intensified the competence
and divided even more the market among participants. On the other hand, extensions
have also gone through the borders of the offline markets to markets from the online
domain. Consequently, companies have stretched their brands within and towards the
online markets. Traditionally based offline companies, in addition to use the internet
as an alternative distribution channel (Levin et al. 2003) or mean of running
communication campaigns (Srisuwan and Barnes, 2008), have considered the online
domain as a valuable market to commercialise both their current products or services
and their extensions. For instance, Apple sells mobile applications and music on the
internet through its iTunes shop (Bravo et al., 2010). For offline brands, the expansion
into the online market increases the brand value for consumers by providing
additional availability and exposure through the internet (Rubinstein and Griffiths,
2001).
On the other hand, some online businesses, such as Google, Amazon, Yahoo
and eBay, have extended their brands within the Internet limits, becoming some of the
top 100 global brands according to the Interbrand report (Interbrand, 2010). Amazon,
for instance, started to sell electronic goods and music online in addition to books.It is
also possible to extend online brands to offline markets. Following this trend, Google
2

10. has launched a new mobile phone which uses Google´s mobile operation system,
Android. Besides, Amazon has extended its name to a new device, Amazon Kindle,
which enables consumers to read eBooks, newspapers and magazines through an
Internet connection. Therefore, offline markets enable Internet brands to enhance
brand awareness by making them more tangible for consumers, which may create
stronger trust and consequently higher brand loyalty (Yoo and Donthu, 2001; Delgado
and Hernández, 2008). Furthermore, the adaptation of online brands´ competences
(communication, customer service, IT) to the commercialisation of offline products
and the absence of some of the costs originally attributed to brick and mortar
companies such as, costs linked to the establishment of stores, turn offline product
into attractive markets where online brands can be extended. Hence, it would be
interesting to investigate how online brands can leverage brand equity to new offline
products.
1.2 Problem Statement.
Customer evaluation of brand extensions plays a vital role in the success or
fail of new products launched into the markets (Klink and Smith, 2001). Numerous
academic studies have contributed to determinate the factors that shape customer
attitudes towards the extension. However, there is a lack of agreement regarding the
validity of these factors across sectors, brands and product categories. This study
investigates the applicability of the aforementioned factors in the context of online
brands that launch their products into offline markets. In other words, the study
attempts to answer the following statement:
Can online brands be extended to offline products?
Additionally, the purpose of this research is to: (1) determine the feasibility of
factors proposed by previous research within the context of online brands, (2) assess
the significance of the variables within the brand equity construct (Aaker, 1996) in
predicting consumer attitude towards extensions, (3) examine whether antecedents
from brand extension theory can be combined with those related to online brand
management in order to build a valid model to predict consumer acceptance of brand
extensions in the research context; and (4) establish managerial recommendations
3

11. based on the research´s findings that may help online brand managers to develop
strategies oriented to enhance the acceptance of brand extensions.
1.3 Contributions
1.3.1 Theoretical Contributions
Extensive research on brand extension has added a considerable number of
potential determinants of brand extension success without achieving generally
accepted conclusions (Czellar, 2003; Völckner and Sattler, 2007). Indeed,
approximately 15 explicative factors of brand extension success have been found to
be significantly relevant in at least one empirical study (Völckner and Sattler, 2006).
However, the majority of these studies are focused on a limited number of variables
and they do not consider possible relationships among determinants (Buil et al.,
2008b).
The current study includes the determinants that have been mostly accepted by
scholars within a unique model with the objective of assessing the validity of these
factors when they are applied to a different scope (online brands). In other words, the
study will examine whether current research is extra-sectoral and thus, brand equity
can be leveraged beyond the online limits towards offline products.
Besides the above mentioned replication, the study contributes to the existing
theory on brand extension by measuring the similarities between the parent brand and
the extension as a multidimensional construct. Along with the product category
dimension suggested by Aaker and Keller, (1990), the proposed model includes the
perceive similarity between the new extension and brand image (Park et al., 1991).
On the other hand, an additional contribution of this study is the incorporation
of brand equity variables such as brand loyalty (Yoo and Donthu, 2001), brand
knowledge (Dawar, 1996) and brand associations (Aaker, 1996) as determinants
factors of the success of brand extensions. Specially, brand associations are
introduced within the model according to the differentiation made by Aaker, (1996)
who distinguished three types of associations: brand-as-product (value associations),
brand-as-person (brand personality) and brand-as-organisation (organisational
associations).
This study also contributes to extend the current research on online brand
extensions (van Riel and Ouwersloot, 2005) by incorporating new factors, relative to
4

12. consumer characteristics such as innovativeness and involvement with the extension,
to the explanatory model of brand extension evaluations.
Finally, the theoretical findings of this study contribute and complement the
current understanding within the online branding theory.
1.3.2 Practical Contributions
This study may help managers identify and monitor the factors that stimulate
the acceptance of offline products launched under online brand names as well as to
detect harmful factors to the parent brand image. Moreover, the findings of this
research may determine whether the explicative factors affect in the same manner to
different kinds of online brands which have a virtual origin (e-portals and e-tailers)
and thus, brand extension strategies for each of these types of online brands should be
adapted accordingly.
1.4 Thesis Outline
The thesis is structured as follows: the first part reviews the existing literature
on brand extension concepts and antecedents as well as the studies that have
considered brand extensions in the context of online brands. Thereafter, the second
part introduces a conceptual framework and, establishes a set of hypotheses based on
the theories provided in the preceding chapters and presents the hypothesized
theoretical model applied to online companies. This is followed by a research design
section where the applied methodology is described. The third part presents the
research findings, where the proposed hypotheses and model are tested by analysing
and interpreting the empirical data. Finally, the last section is related to the
conclusions and provides a summary of the main findings, obtained conclusions,
theoretical and managerial implications, as well as, limitations and directions for
future research.
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13. CHAPTER 2.BRAND EXTENSIONS
2.1 Introduction
Brand extensions represent an important growth strategy for companies facing
a fierce competence within the marketplace. The use of an already existing brand
when launching new products into the market increases the likelihood of success
because consumers perceive a lower risk in their purchasing process (Montgomery
and Wernerfelt, 1992) and transfer positive consumer associations to the new product
(Aaker and Keller, 1990). Therefore, the way in which consumers evaluate the new
extensions and the determinants involved in this process will determine the success or
fail of brand extensions and, consequently, the image of the parent brand may be
reinforced or harmed (Keller, 2003)
In order to investigate how consumers evaluate brand extensions, scholars
have proposed numerous explicative factors of consumers´ attitude towards the new
products and they have applied them to different types of products, companies and
markets. Following this idea, this chapter reviews the existing literature regarding
consumer evaluation of brand extensions. The chapter begins with a conceptualisation
of the different strategies in which a company can make use of its band in order to
launch new products. Afterwards, the psychological processes involved in consumers´
evaluations of new products are described. Thirdly, a review of the main explicative
factors of brand extensions evaluation is provided along with the limitations on brand
extension research. Finally, the chapter concludes with a review of the studies that
have been applied to the context of online companies in which this research work
takes place.
2.2 Conceptualisation.
Intense competition forces companies to adopt strategies that allow them to
remain in the market while taking advantage of the opportunities of growth that are
present across sectors. Tauber (1981) categorised the opportunities of growth for a
firm by using two dimensions: product category and firm´s brand name as shown in
the matrix in Figure 1.
6

14. FIGURE 2.1: Tauber´s growth matrix
New Existing
New New product Flanker brand
Brand name
Existing Franchise extension Line extension
Product category
Source: Tauber, (1981)
Tauber made a difference between four possible strategies that utilise a new or
existing brand name in order to commercialise products within a new or existing
product category for the company (new product, flanker brand, franchise extension
and line extension). Regarding the strategies where the company adopts an existing
brand name to take advantage of market opportunities by leveraging the benefits
linked with the brand such as customer awareness, goodwill and impressions
conveyed by its brand name, Tauber identified two ways to extent an existing brand,
termed as line extension and franchise extension. Whereas line extension represents
new sizes, flavours, and the like where items use an existing brand name in a firm´s
present category, franchise extensions refers to taking a brand name familiar to the
consumer and apply it to products that are in a new category to the parent brand.
Following Tauber´s definition of extension strategies, scholars have also identified
two extension strategies: line extensions and brand extensions. Keller and Aaker
(1992) defined line extension as the fact of extending a current brand name into a new
market segment in its product category. In contrast, Brand extensions are those that
use a current brand name to enter a completely different product class or category
(Aaker and Keller, 1990). According to Ambler and Styles (1997) the definition of
brand extension proposed by Aaker and Keller (1990) acknowledges to the Tauber´s
concept of franchise extension.
The different attempts to define brand extension by academics show
noticeable variations in the literature. Kotler (1991) defined brand extensions using a
holistic approach as “any effort to extend a successful brand name to launch new or
modified products or lines”. On the other hand, Choi (1998) supported that brand
extensions are explained as the use of an existing brand name in a category to
7

15. introduce products in a totally different category. A more general definition of brand
extension was given by Keller (2003, p. 577) who held that “a brand extension is
when a firm uses an established brand name to introduce a new product”.
Extension strategies have not only been classified according to differences in
product category but also regarding quality of the extension and similarity among
categories. In this line, Randall et al. (1998) distinguished between horizontal and
vertical brand extensions. The former is regarded as dissimilar brand extensions
which apply an available brand name to enter a new product category. Vertical brand
extensions involve products with similar or modified features within the same product
category, although at a different price or quality level (Reddy et al., 1994). Therefore,
according to Buil et al. (2008b) the definition of vertical brand extension adds
differences in quality and price to the definitions of line extension proposed by Tauber
(1981) and Keller and Aaker (1992), but represent the same concept.
The differences in quality and price within vertical brand extensions can be
categorized in upscale and downscale brand extensions (Pitta and Katsanis, 1995).
The first one is related to extension with higher quality and price than the parent brand
products. On the other hand, downscale extensions involve products in the same
category of the parent brand products but at a lower price and quality. The category of
vertical extension, upscale or downscale, depends on the type of product offered by
the company. Whereas downscale vertical extensions allow consumers try and learn
about the new functional product based on brand awareness and parent brand
company prestige (Xie, 2008), upscale extensions are more effective for luxury
products where consumers are more likely to transfer perceptions about quality and
consequently high price to the new products (Pitta and Katsanis, 1995)
All these definitions agree with the fact that an existing or established brand
can be used as ways of commercialising products which are, in certain degree, new to
the firm. Nevertheless, the degree to which scholars define the product category has
caused that the terms of brand and line extensions are used interchangeably depending
on how broad the product category is defined (Ambler and Styles, 1997). For
example, Sony´s range of mobile phones could not be considered as brand extension
if Sony´s product category was defined more broadly as “consumer electronics” and
thus mobile phones would represent a line extension in this case (Ambler and Styles,
1997). Regardless, the existence of variations in defining brand extension, researchers
8

16. (Volckner and Sattler, 2007) have mostly adopted the definition proposed by Aaker
and Keller (1990) who defined brand extension as:
“Brand Extensions involve the use of an established brand name to enter a
new product category”
However, whether the existing brand name is used to a new or existing
product category; the company pursues the objective of transferring positive
consumers´ associations towards the brand to the new products (Aaker and Keller,
1990) and thus, the psychological processes by which customers assign certain
products to one category rather than another (Kapferer, 1997), create impressions of
brand extensions as well as of the factors involved in these processes, which will
determinate whether a brand can be successfully extended to a given category (Klink
and Smith, 2001).
2.3 Psychological Processes Involved in Brand Extension
Evaluations
Consumers play a significant role within brand extension strategy because
their judgements regarding the new extensions will be one of the principal
determinants of successful brand extensions (Klink and Smith, 2001). Therefore,
understanding how consumers evaluate brand extensions and the subjacent
psychological processes involved is crucial in order to elaborate and implement
efficient branding strategies for new products.
Two main psychological processes have been used in order to explain how
consumers evaluate the new products: categorical and piecemeal evaluation process.
The former suggests that individuals evaluate the new instances by comparing them
with previous acquired information stored in form of categorical structures within
memory (Fiske, 1982). In contrast, “piecemeal” information processes (Fiske, 1982),
“analytical” (Cohen, 1982) or “computational” (Brooks, 1978) stated that evaluations
of a new instance are based on its specific attributes rather than on initial beliefs
(Bristol, 1996).
Related to the evaluation of brand extensions, Boush and Loken (1991)
maintained that a categorical evaluation process is developed when the brand
extension is perceived by consumers as belonging to an already existing category
(brand). Therefore, beliefs and attitudes associated with the parent brand are
9

17. transferred to the new product (Romeo, 1991). However, if consumers do not
identified congruence with the mental category associated to the brand, a piecemeal
process is activated in which consumers evaluate the new product by making
inferences over the extension individual attributes (Fiske and Pavelchack, 1986).
Thus, both theories are not exclusive and result on a two-stage process where brand
extensions are evaluated according to previous affect associations towards the brand
in the first place and a second stage where consumers elicit an analytical evaluation of
the extension (Fiske and Pavelchack, 1986).
2.4 Consumer Evaluations of Brand Extensions
Ever since the first relevant article on customer evaluations of brand
extensions was published by Boush et al. (1987), researchers have focused their
researches on investigating the antecedents, processes, and consequences of brand
extension evaluation (Hem et al. 2003), as well as achieving a generalisation of these
factors across product categories and parent brands (Volckner and Sattler, 2007;
Czellar, 2003).
Boush et al. (1987) identified perceived similarity and parent brand reputation
as explicative factors of positive customer evaluations of extensions. They concluded
that similarities between product categories, original product and extension, enable
the transfer of positive affection to the new product. On the other hand, the study
suggested that a brand´s good reputation in one product area cannot be transferred in
the same way to a dissimilar product category, since it would produce negative
evaluations from consumers.
Following the research line supported by Boush et al., (1987), Aaker and
Keller´s (1990) seminal article assessed not only the role of similarity between
original and extension product classes but also proposed that customers´ quality
perceptions about the parent brand and the difficulty of producing the extension
determined the consumer acceptance of brand extensions. Despite of the fact this
article stated the base of subsequent research on brand extensions and it has been
applied to different contexts such as services (Hem et al. 2003) or online extensions
(van Riel and Ouwersloot, 2005), replications have emerged about the validity and
generalisation of its conclusions (e.g., Broniarczyk and Alba, 1994; Bottomley and
Doyle, 1996; Bottomley and Holoden, 2001). Moreover, additional factors such as
10

18. consumer innovativeness (Klink and Smith, 2001), familiarity (Dawar et al., 1996) or
marketing support (Reddy et al. 1994) were subsequently tested in brand extension
literature with mixed conclusions. These factors can be classified, as shown in Table
1, in four groups: (1) parent brand characteristics, (2) perceived similarity, (3) the
extension´s marketing context (Völckner and Sattler, 2006), and (4) consumer
characteristics (Czellar, 2003).
TABLE 2.1: Main factors of brand extension evaluation
Factors related to the parent brand
Factor Consumers evaluate positively the extension if… Source
Bottomley and Holden, (2001);
Perceived quality The perceived quality of the parent brand is high
Gronhaug et al., (2002)
Park et al., (1991); Hem et al.,
They transfer positive brand associations to the
Brand associations (2003); De Ruyter and Wetzels,
extension
(2000)
Hem et al, (2003), Buil and Pina,
Brand Loyalty They are loyal to the parent brand
(2008)
Familiarity The familiarity with the parent brand is high Swaminathan, (2003)
Similarity
Product category similarity There is congruence between product categories Aaker and Keller, (1990)
Brand concept consistency Parent brand and extension share the same image Park et al., (1991)
The extension´s marketing context
Marketing support The extension receives appropriate marketing support
Reddy et al.,(1994)
Advertising The extension is well supported in terms of advertising Völckner and Sattler, (2006)
Consumer characteristics
Klink and Smith, (2001); Hem et al.,
Innovativeness They are highly innovative (early adopters)
(2003)
They have a high motivation for purchasing the
Motivation Gürhan-Canli and Maheswaran, (1998)
extension
There is an involvement in the brand extension Hansen and Hem, (2004); Steenkamp
Involvement
category and Baumgartner, (1992).
11

19. 2.4.1 Similarity
One of the most important contributions of Aaker and Keller´s (1990) study
was the role of similarity in consumer attitude towards brand extensions. Aaker and
Keller (1990) included three dimensions of similarity: complementarity, substitution
and transfer. Whereas the two first concepts allude to how consumers view two
products classes as complement or substitutes respectively, transfer shows how
consumers evaluate whether the skills, competences and resources owned by the
parent brand can be employed in producing the extension. The authors concluded that
only the transfer dimension presented a direct association with attitude towards the
extension.
Boush and Loken (1991) defined similarity by evaluating how typical brand
extensions are for consumers in terms of product features shared by the brand´s
current products and the extension. Whereas typical or atypical extensions are
evaluated by categorisation, moderately typical extensions are likely to be assessed
through piecemeal process. Furthermore, they suggested that the direct relationship
between similarity and consumer evaluations of brand extensions can also produce
negative effects to the parent brand, in the case of atypical brand extensions.
Unlike the aforementioned studies that explain similarity by using a product-
category approach, Park et al. (1991) suggested that extensions are more favourably
evaluated when they are consistent to the consumers´ brand-concept associations such
as reliability or status. Consequently, they concluded that similarity is explained by
two factors, product feature similarity and brand-concept consistency. The importance
of brand concept consistence has been supported by subsequent studies (Broniarczyk
and Alba, 1994; Volcker and Sattler, 2006; Hem and Iversen 2009)
In this line, Broniarczyk and Alba (1994) indicated the existence of specific
brand associations (e.g., friendliness or reliability) that moderate the influence of
product category similarity in extension evaluations because of the fact that these
associations are strong, so they enable a brand to extend to dissimilar product
categories. Thus, the existence of a high degree of congruence between the consumer
brand specific associations and extension product concept has positive effects on
consumer appraisal. (Czellar, 2003)
Regardless of the fact that positive outcomes of similarity have been
recognised, scholars have found moderating conditions which affect similarity when it
12

20. comes to explaining consumers´ attitude towards the extensions. Smith and Park
(1992) considered that when a greater amount of product related information is
available, consumers do not use similarity between the brand and the extension
categories as a major cue in their evaluations and, hence, more analytical evaluation
processes take place. Supporting these findings, Klink and Smith, (2001) argued that
the limited extension attribute information provided in prior research has provoked an
overestimation of similarity as evaluation factor.
Most recent studies have included other moderating variables of similarity
such as the number of products associated with the brand (Del Vecchio, 2000), the
exposure to the extension (Klink and Smith, 2001); and the price and perceived
quality of the extension (Taylor and Bearden, 2002). Despite of the aforementioned
moderating variables, there is an agreement among academics regarding the
importance of similarity on brand extension evaluation (Völckner and Sattler, 2006).
2.4.2 Characteristics of the parent brand
The research on factors related to the parent brand has principally focused on
different elements of the brand equity construct (Aaker, 1996) such as perceive
quality, brand familiarity, brand associations and brand loyalty. In Aaker and Keller´s,
(1990) study, perceived quality of the parent brand did not present any positive direct
effect on brand extension evaluation. Nevertheless, further empirical research
(Bottomley and Holden, 2001; Gronhaug et al., 2002) demonstrated a positive
relationship between perceived quality and brand extension success. Supporting these
finding, Rao et al., (1999) suggested that quality perceptions of parent brands are
transferred to new products. In a recent article, Völckner et al., (2010) went even
further by stating that perceived quality is the principal driver of brand extensions
success rather than similarity in the case of services. On the other hand, brand
familiarity has proved to have a positive direct effect on brand extension evaluation
because consumers are more inclined to buy products of brands they have previously
consumed (Swaminathan, 2003). Dawar, (1996) studied familiarity in relation to
perceived fit and found contrasting results depending on the different associations
between the extension and the brand. Brand associations represent another important
feature of the parent brand. These associations have been investigated in terms of
perceptions of credibility (De Ruyter and Wetzels, 2000), reputation (Hem et al.,
13

21. 2003), prestige (Park et al., 1991) and the consumers’ affection for the brand (Sheinin
and Schmitt, 1994). Regardless of the fact that brand associations have proved to
produce positive effect on quality, similarity and, consequently, attitude towards the
extension (Martinez and Pina, 2005); there is a lack of agreement in the way in which
they are measured. Finally, brand loyalty has been incorporated by recent studies
(Hem and Iversen, 2003, Build and Pina, 2008) as an important driver of brand
extension success. However, the implications of brand loyalty in brand extension
evaluation have not been replicated and tested in different contexts.
2.4.3 The extension´s marketing context
A third group of brand extension factors has emerged in order to explain the
marketing context in which extensions are developed. Therefore, scholars have
proposed variables such as the marketing support of the brand towards the new
products and the role of advertising in brand extension evaluation. Reddy et al.,
(1994) studied the effects of marketing competences and advertising support on brand
extension evaluations. The author concluded that extensions which receive greater
marketing support in terms of advertising and promotional effort are more favourably
evaluated by consumers. However, this relationship was studied regarding line
extensions rather than brand extension. In order to test these findings, Völckner and
Sattler, (2006) applied Reddy et al´s, (1994) measures of marketing support to the
context of fast moving consumer goods, supporting the positive effect of marketing
support on consumers´ attitude towards extensions .
2.4.4 Consumer characteristics
Certain consumer characteristics such as innovativeness, motivation or
involvement with the extension category, have been introduced within the explicative
factors of consumer attitude towards brand extensions. Klink and Smith, (2001)
suggested that highly innovative consumers (early adopters) perceive a lower risk
from the new products and consequently, they do not base their evaluations on
similarity. Hem et al., (2003) demonstrated a direct relationship between
innovativeness and consumer acceptance of brand extensions and suggested that this
is even stronger in the case of service brand extensions. A second factor is the
consumers´ motivation towards the extension. Gürhan-Canli and Maheswaran, (1998)
14

22. found that whereas highly motivated consumers tend to evaluate the new products in a
piecemeal manner, under low motivation conditions, consumers are more likely to
transfer affect and prior beliefs from the parent brand to the new extension. On the
other hand, consumer´s involvement with the extension product category has been
found to increase the purchase intention of brand extensions (Hansen and Hem, 2004).
In this way, highly involved consumers tend to be less risk averse than other
consumers and therefore, they are believed to evaluate extensions more positively
(Steenkamp and Baumgartner, 1992).
The review of brand extension factors presented above only explains those
factors that have been proved to be significantly relevant, as they are significant in at
least one empirical study, following the line proposed by Völckner and Sattler,
(2006). However, literature on brand extension has not achieved a generalisation
which is applicable across sectors, brands and extensions. In addition, it still presents
a series of limitations which have prevented scholars from elaborating an explanatory
empirical model of consumer evaluation of brand extensions. These limitations are
outlined in the following section.
2.4.5 Limitations of the current research on brand
extensions
According to the previous review of the drivers of brand extension success, the
limitations of the current research on brand extension are explained by: (1) the use of
hypothetical brand extensions rather than real extensions already introduced in the
market, (2) the scarce number of studies dedicated to obtain general conclusions
(Völcker and Sattler, 2007) and (3) lack of studies in the online context.
There is a preponderance of studies that have evaluated consumer attitude
towards brand extensions by making use of hypothetical brand extensions associated
to real brands (Aaker and Keller, 1990; Bottomley and Holden, 2001; Broniarczyk
and Alba, 1994). These extensions do not provide additional information from the
marketplace as it is the case of extensions already introduced into the markets. As
mentioned, Klink and Smith, (1992) suggested that additional product information
moderates the significance of perceived quality and similarity. Nevertheless, Völckner
and Sattler, (2007) argued that similarity and perceived quality are the two more
significant drivers of both real and fictitious brand extensions.
15

23. According to Buil et al., (2008) the majority of explanatory models proposed
by scholars are centred on a limited number of factors rather than seeking
generalisation. Only three studies have been addressed to achieve general results
(Klink and Smith, 2001; Bottomley and Holden, 2001; Völckner and Sattler, 2007).
Whereas Klink and Smith, (2001) considered that the positive effects of perceived
similarity were generally applicable across brands and extensions, Bottomley and
Holden, (2001) suggested that, along with similarity, perceived quality and the
difficulty of producing the extension (Aaker and Keller, 1990) were common factors
of consumers´ evaluations of brand extensions. However, the pointed out that cultural
differences may affect the intensity of these variables. Finally, Völckner and Sattler´s,
(2007) findings reinforced the empirical generalizability of similarity and perceived
quality across product categories, parent brands, samples, success measures and both
real and hypothetical extensions. Notwithstanding, these generalizations did not test
other significant determinants of brand extension success (e.g., brand loyalty) and are
focused on fast moving consumer goods extensions and offline brands without
making any consideration for online brands and extensions.
Numerous empirical studies have been conducted in order to establish the
predictive factors of consumer attitude towards extensions in the cases of fast moving
consumer goods, durable goods and services within an offline context (Aaker and
Keller, 1990; Martínez and De Chernatony, 2004; Völckner and Sattler, 2006;
Martinez et al. 2008; Salinas and Perez 2009). However, scholars have not dedicated
much research to the study of the effects of these factors on online brands which
stretch their products or services (van Riel and Ouwersloot, 2005). The following
section is dedicated to review the brand extension research in the case of online
companies.
2.5 Brand Extensions of Online Brands
As mentioned, to the date, only a limited number of studies have investigated
the explicative factors of brand extension success in the online context. Van Riel and
Ouwersloot, (2005) introduced the first study on brand extension applied to online
services. They categorised online services in four groups depending on the origin of
the company (online or physical) and the type of product that provide (tangible goods
16

24. and traditional services or virtual products). These four types of online companies are
shown in Figure 2.
FIGURE 2.2: e-service portals grid
ORIGIN
Virtual Physical
E-portals (Click & bits) Company portals (Bricks & bits)
Virtual
 Google  MSN
PRODUCT
 Yahoo  CNN
E-tailers (Click & mortar) E-sellers (Bricks & mortar)
Physical  Amazon  EasyJet
 Dell
Source: van Riel and Ouwersloot, (2005)
Van Riel and Ouwersloot, (2005) tested the model proposed by Aaker and
Keller, (1990) for each of the aforementioned types of e-service providers, mentioned
in the grid. They found that the variables of similarity, perceived quality and difficulty
of producing the extension help explain consumer attitude towards online services
extensions. Therefore, they concluded that consumers perceive online extensions in a
similar way to other product categories. Despite these affirmations, the authors
maintained that online services are subject to a more complex evaluation mechanism
than offline goods or services. Moreover, the research presented the limitation of
considering only factors previously proposed by Aaker and Keller, (1990) neglecting
other important determinants of brand extension success such as brand image,
consumers innovativeness or involvement in the extension.
Following the line of van Riel and Ouwersloot, (2005), Song et al., (2010)
proposed an explanatory model of brand extensions success in the online context. In
addition to perceived quality and fit between the parent brand and the extension, they
noted that the existence of hyperlinks in the online environment enables interactions
between different online products and fosters the perceived tie between the current
products and the extension. For example, Google search engine provides access to
other services such as Google Earth, Google News or Gmail with one click.
Therefore, Song et al., (2010) suggested perceived tie as a significant factor of online
brand extension evaluation. The two aforementioned studies were only focused on
17

25. extensions launched by online brands within the Internet limits. However, they did not
consider potential offline extensions.
Bravo et al., (2010) covered this research gap by examining potential offline
extensions of online brands. In their study, they incorporated, along with perceived fit,
brand image variables such as emotional, commitment or functional associations in
order to explain consumers´ evaluation of offline extensions. Their findings regarding
similarity or fit are in line with the previous research (van Riel and Ouwersloot,
2005), considering similarity as a key determinant of brand extensions. Moreover,
they found that whereas emotional and commitment associations with the parent
brand are more likely to be transferred in the case of internet brands, more functional
associations (e.g., perceived quality) are transferred from offline companies to brand
extensions. Even though these findings contributed significantly to the current
research the authors recognised that this study did not test the moderating effects of
consumer characteristics. Therefore, they recommended further research in order to
build an updated model in the online context.
2.6 Summary
Consumer evaluation of brand extension is explained by means of two
psychological processes: a categorical evaluation process and a piecemeal or
analytical process. In the first one, consumer previous beliefs are transferred to the
new product. The analytical process is based on product attributes rather than
memories in order to evaluate the new product. In addition to these psychological
processes, scholars have identified a series of factors which explain consumer attitude
towards extensions. These factors have been classified in: factors of similarity,
consumer characteristics, factor related to the parent brand and factors related to the
extension´s marketing context.
The current research shows an agreement regarding the generalizability of two
explicative factors: similarity and perceived quality of the parent brand. However,
scholars have proposed a broad variety of additional factors which call for further
research in order to prove their significance as predictors of attitude towards
extensions across sectors and extensions. On the other hand, the literature review
revealed that scarce brand extension research has been addressed to the online
environment and these research efforts have only considered a limited number of
18

26. factors. Therefore, the following chapters of this study are oriented to build and test
an empirical model applied to online brands which bridges these research gaps with
the aim of contributing to a better knowledge of brand extension evaluations.
19

27. CHAPTER 3. HYPOTHESES
3.1 Introduction
Chapter 2 has reviewed the most relevant studies in the field of brand
extension. It has also suggested the existence of a series of limitations in brand
extension research such as the utilisation of a reduced number of factors in
consecutive research and the scarce investigation in the field of online companies,
specifically in those online companies that utilise a brand extension strategy in order
to stretch their brands away from the internet world.
In addition to address these research gaps in the literature, this chapter
contributes to fulfil the research objectives of contrasting the conclusions obtained by
scholars regarding the implication of the explicative factors of consumer evaluations
of brand extensions in the area of online companies and particularly when extensions
are produced in an offline context, and examining whether antecedents from brand
extension theory can be combined with those related to brand equity and online brand
management in order to build a valid model to predict consumer acceptance of brand
extensions. In order to do so, hypotheses based on previous research in brand
extension and online brand management are proposed by selecting those factors that
have generated major research and acceptance among scholars but have never been
investigated simultaneously in the context of online companies.
Finally, the chapter concludes by describing the hypothesized model, based on
the formulated hypotheses, in which the overall attitude toward the extension
performs as the dependent variable that is explained by the effects either positive or
negative of the independent variables or explicative factors included in the model.
3.2 Brand Equity variables
Brand equity has been the subject of increased interest in marketing in recent
years. The current research has identified benefits from achieving high brand equity
such as consumer preference and purchase intention (Cobb-Walgren et al., 1995);
consumer perceptions of quality (Dodds, Monroe and Grewal 1991) and consumer
evaluations of brand extensions (Aaker and Keller 1990; Bottomley and Doyle 1996).
Even though scholars agree on the positive effects of strong brands that have high
brand equity, the conceptualisation of the brand equity construct lacks of a general
20

28. agreement that has provoked that numerous definitions and dimensions arise from the
literature (Christodoulides et al., 2006)
Brand equity can be measured either from a consume level or a firm level.
Whereas the firm-based brand equity is defined in terms of the financial market value
of a company and the cash flows generated from a product as a consequence of having
a brand name (Simon and Sullivan 1990), the consumer-based approach measures
brand equity in terms of consumer behaviour which can be object of actionable brand
strategies (Keller 1993).
Brand equity from a consumer perspective has been defined by two main
frameworks. On the one hand, Keller (1993) defined brand equity as “the differential
effect of brand knowledge on consumer response to the marketing of the brand.”
Therefore, he considered brand knowledge as the main determinant of brand equity
and measured it in terms of two components, brand awareness and brand image. On
the other hand, Aaker (1996) defined the concept of brand equity as “a set of assets
and liabilities linked to a brand, its name and symbol that adds to or subtracts from
the value provided by its product or service to a firm and/or to that firm’s customers”
and identified five dimensions of brand equity: brand awareness, perceived quality,
brand associations, brand loyalty and proprietary brand. Although this last dimension,
proprietary brand assets, is normally omitted in brand equity research since it is not
directly related to consumers (Buil et al., 2008a)
Both Keller´s and Aaker´s definitions of brand equity have been applied to the
context of online companies. Page and Lepkowska-White, (2002) adopted Keller´s
definition and stated that web equity (brand equity) for online companies can be made
similar to offline companies´ brand equity by enhancing brand awareness and brand
Image. They also suggested that Aaker´s dimension of brand loyalty was an outcome
rather than a determinant to create high brand equity. In contrast, Rios and Riquelme
(2008) used the conceptual framework from Aaker (1996) and considered brand
Loyalty as an important source of online brand equity.
Recent studies have introduced Aaker´s (1996) brand equity variables with the
aim of evaluating consumer attitude towards brand extensions (Lassar et al. 1995; De
Chernatony et al., 2004; Pappu et al., 2005; Buil et al. 2008b), However, these studies
have investigated a small group of these dimensions rather than them as if they were a
unique construct in which the relationships between dimensions can be tested in order
to predict attitudes towards the extensions.
21

29. The following sections develop the conceptual framework supported by Aaker
(1996) in the context of online companies by establishing the hypotheses
corresponding to the dimensions of brand awareness, perceived quality, brand
associations and brand loyalty.
3.2.1 Brand knowledge
Aaker (1996) defined brand awareness as the salience of the brand in the
customers´ mind and identified six levels of awareness: recognition, recall, top-of-
mind, brand dominance, brand knowledge and brand opinion. The brand extension
research has focused its attention on brand knowledge in order to explain extension
evaluations. According to Aaker (1996), the concept of consumer brand knowledge is
concerned with the consumer awareness of what the brand stands for. Brucks (1985)
identified three types of consumer knowledge, named subjective knowledge, objective
knowledge and usage experience. Whereas subjective knowledge refers to what
customers believe they know about the brand, objective knowledge is related to what
is actually stored in consumer’s memory. The third type of knowledge, usage
experience, is related to the purchased amount or experience with the brand. Brucks
also stated that objective and experience-based measures are less directly linked to
purchase behaviour than subjective knowledge measures and therefore customer
behaviour research has mostly utilised subjective consumer knowledge to measure
brand knowledge.
Subjective knowledge has been applied within the brand extension domain to
different variables (original product category, parent brand and extension category)
with mixed results. Keller and Aaker (1992) examined the effects of high subjective
knowledge about the original product category without finding any direct
relationships with the way in which customers evaluate extensions. However, they
concluded that a high perceived knowledge of the extension product category presents
positive effects on extensions assessments. In contrast, Smith and Park (1992)
supported that if the knowledge of the extension category is low, consumers evaluate
extensions more favourably. On the other hand, studies that researched the subjective
knowledge or familiarity with the parent brand (Herr et al., 1996; Dawar, 1996) found
positive effects on consumer attitude toward extensions. Finally, in a most recent
study, Hem and Iversen (2009) discovered that a high subjective knowledge about the
22

30. current product category of the parent brand correlates negatively to consumer
evaluations, while knowledge about the parent brand and extensions favours how
extensions are assessed. Hem and Iversen (2009) suggested that the conflicting results
regarding brand knowledge are produced by the use of fictitious parent brand in the
research (Keller and Aaker, 1992), the limited number of parent brands involved in
the studies (Dawar, 1996) and the diverse number of products associated with the
parents brands.
In the case of online companies which offer offline products, the role of
subjective knowledge has not been investigated and therefore, in order to replicate the
aforementioned conclusions, this research proposes the following hypothesis:
H1. A high consumer subjective knowledge of the online brand, original
product category and offline extension category has positive effects on the extension
evaluation.
3.2.2 Perceived Quality
According to Zeithaml (1988), Perceive quality designates a global assessment
of a consumer´s judgement about the superiority or excellence of a product. The
perceived quality construct has been included in diverse brand extension articles.
Aaker and Keller (1990) suggested that when consumers have a high overall
perception about the quality of the brand, the extension should be assessed more
positively than when they infer a low overall quality. Nevertheless, they found that
quality only affected the attitude towards the extension favourably when it was
accompanied by a high degree of similarity. In contrast, Bottomley and Holden,
(2001) concluded that there is a direct relationship between the quality of the parent
brand per se and consumer evaluations of the brand extension. Subsequent studies
have supported the positive effects of quality on consumers´ attitudes towards
extensions (van Riel et al., 2001), suggesting that if the brand is associated with a high
level of quality, this perception is transferred to the extension products. However, if
there is a perceived low quality of the parent brand, the extension is harmed as a
result. Völckner et al., (2010) measured the implications of parent brand quality in
service brand extension evaluation by distinguishing three different dimensions of
quality: outcome quality, interaction with service employee quality and psychical
23

31. environment quality. They concluded that, in the case of extensions from service
brands, quality represented the most significant factor of consumer evaluation rather
than perceived fit or similarity. The implications of perceived quality have been tested
in numerous contexts (Völckner and Sattler, 2006). For online brands, Danaher et al.,
(2003) suggested that consumers base their quality inferences on the brand name
rather than in more tangible product attributes due to the fact that products acquired
online cannot be usually assessed prior to purchase. Therefore, only the dimension
suggested by Völckner et al., (2010) regarding outcome quality is applicable to online
brands. Finally, van Riel and Ouwersloot, (2005), in their pioneer study about online
brand extensions, suggested that the quality of the parent brand helps explain positive
evaluations of extensions but its weight is relatively low compared to similarity.
Hence:
H.2 Higher quality perceptions toward the original online brand are
associated with more favourable attitudes toward the offline extension.
3.2.3 Brand Associations.
Keller (1998) defines brand associations as “informational nodes linked to the
brand nodes in memory that contain the meaning of the brand for consumers”. Aaker,
(1991, pp. 109-13) highlighted the importance of brand associations for both
marketers and consumers. Consumers use their previous beliefs and attitudes towards
the brand to help their purchase decision making process. On the other hand,
marketers seek to differentiate the brand by creating positive attitudes and feeling
towards the brand.
Brand associations have been considered as a multidimensional construct. In
this line, Keller (1998) used the concept of brand image in order to explain
consumers´ perceptions about the brand. He suggested that brand image consists of
associations of brand quality and attitude toward the brand. On the other hand, Aaker
(1996) considered that brand associations can be categorised in value associations,
organisational associations and brand personality. The first group of associations,
value associations, is linked to functional benefits that the brand represents under the
perspective of brand as a product. The value proposition is considered as a
multidimensional concept (Anckar et al., 2002) which is formed by variables such as
shopping convenience, customer service, broad product assortment and after sale-
24

32. care. The organisational associations represent the brand-as-organisation perspective
and consider facts such as concern for customers, being innovative, being successful,
having visibility, being oriented towards the community, providing trust and being a
global player. Finally, brand personality follows the brand-as-person approach which
might transfer emotional and self-expressive benefits to consumers as well as being a
basis for customer/brand relationships and differentiation.
3.2.3.1 Value associations
In previous brand extension research (Bravo et al., 2010); value associations have not
been separated from the concept of perceived quality. However, Aaker (1996)
suggested that value associations represent a different dimension from perceived
quality. Whereas perceived quality makes reference to a more overall construct
related to a higher level of abstraction (Zeithaml, 1988), perceived value reflect more
specific functional benefits and practical utility of the brand. Therefore, Zeithaml
(1988) defines brand value as the consumer's overall assessment of the utility of a
product based on perceptions of what is received and what is given. These specific
functional benefits have been measured in terms of convenience, value for money,
accuracy and quality of product information (Burke, 2002).
In the case of online brands, functional benefits can be measured in terms of
online experience (Christodoulides et al., 2006), value for money (Anckar et al.,
2002), shopping convenience, product breadth, and compensation (Rios and
Riquelme, 2008). According to Aaker (1996, p.81), value associations also add the
price component to perceived quality. In addition, (Burke, 2002) noted the importance
of price availability and price comparison as required characteristics in online
shopping. Hence, hypothesis 3 is proposed as follows:
H.3 The offline extension will be more positively evaluated, if consumers
perceive brand value in the online business
3.2.3.2 Brand personality
The brand-as-person approach is represented in the concept of brand
personality. Aaker, (1997, p.347) defined bran personality as “a set of human
characteristics associated with a brand”. In this line, Keller (1993) suggested that
brand personality consists of symbolic values which shape and maintain consumers´
25

33. social identity (Fiske, 1989). According to Aaker, (1996), brand personality provides
self-expressive benefits to consumers. Thus, consumers can express their actual self,
ideal self or social self through their relationships with the brand (Malhotra, 1988).
Aaker (1997) also noticed that the formation of brand personality can be produce
directly or indirectly. Direct sources of brand personality are those related to the
human characteristics of people associated with the brand such as customers, users,
employees or managers. Indirect sources include decisions made by the company in
terms of marketing-mix variables such as advertising, promotion or brand symbol
(Plummer, 1985).
Freling and Forbes (2005) found that strong and positive brand personality has
positive effects on product evaluations. Moreover, Wang and Yang, (2008) suggested
that brand personality also influences positively the consumers´ purchase intention. In
the case of brand extensions, Czellar, (2003) suggested that consumers who give more
importance to self-expressive associations with the parent brands are also more likely
to evaluate positively the new extensions. Hence:
H.4 The offline extension will be more positively evaluated if consumers
perceive a positive brand personality of the online brand.
3.2.3.3 Organisational associations
Aaker (1996) identified a third category of brand associations which reflect the
brand as an organisation rather than as a product or a person. These organisational
associations are related to consumer perceptions and attitudes of the brand in terms of
people, values and programs that lie behind the brand. In this line, Keller and Aaker,
(1992) identified corporate credibility within these associations and noted its
importance in consumer evaluation of new products. They distinguished three
dimensions of credibility: expertise, trust and likability. Expertise refers to the
capability of the parent brand to produce or provide its products. Trust reflects the
extent to which the brand is considered honest and sensitive to consumers´ needs.
Finally, likability is the degree of interest and prestige that consumers perceive in the
organisation. On the other hand, Keller (1998) suggested that marketing campaigns
addressed to reinforce organisational associations such as innovativeness,
environmental concern and community involvement favour brand extension
26

34. evaluations even in presence of product-specific advertisement. Therefore, the
following hypothesis is suggested:
H.5 The offline extension will be more positively evaluated if consumers
perceive positive organisational associations in the online brand.
3.2.4 Brand Loyalty
As mentioned before, Aaker (1991; 1996) introduced the concept of brand
loyalty within the brand equity construct. Aaker (1991, p. 39) defines brand loyalty as
“the attachment that a customer has to a brand”. This attachment involves a
behavioural and attitudinal component (Keller, 1993). The customer behaviour linked
to loyalty is measured in terms of repeat purchase, whilst the attitudinal component
reflects the positive disposition towards the brand, which includes a commitment in
terms of some unique values associated with the brand (Chaudhuri and Holbrook,
2001). Depending on the level of commitment with the brand, Oliver, (1997)
identified four stages in which loyalty moves: First, cognitive loyalty, where the
consumer makes a cost-benefit evaluation of the product and act in consequence.
Second, an affective loyalty in which consumers create positive feelings towards the
product as a result of satisfactory usage occasions. Then, a conative loyalty is
developed by means of repeated affective situations which generate a behavioural
intention of repurchasing the product. Finally, an action loyalty in which behavioural
intention turns into a routine and positive word-of-mouth behaviour. Therefore,
Oliver´s phases suggest how loyalty is created from attitude to behaviour (Kabiraj,
2010). In this way, customers who are loyal to the brand present an action loyalty,
which benefits the brand in terms of reduced customer acquisition costs, increased
base revenues, positive word-of-mouth, and the ability to impose price premiums
(Edvardsson et al., 2000).
Brand loyalty has also had a significant relevance in studies focused on the
online context. Srinivasan et al., (2002), defined e-loyalty as a customer’s favourable
attitude toward the e-retailer that results in repeat buying behaviour. Clarke, (2001)
highlighted the difficulty of earning and maintaining customer loyalty for Internet
companies where the cost of switching between online services is extremely low, and
thus online companies often face constant competition with numerous others
27

35. companies which are just one click away. In this line, van Riel and Ouwersloot,
(2005) pointed that the lower heterogeneity among Internet services makes it more
difficult to create consumer loyalty. Regardless loyalty is more challenging for online
companies, Srinivasan et al., (2002) coincided with previous offline brand loyalty
studies (Edvardsson et al., 2000) in the positive outcomes of online brand loyalty (e-
loyalty): positive word-of-mouth and willingness to pay more for products or services.
However, the majority of studies on online brand loyalty focus their research on e-
retailers rather than other types of online companies such as e-portals in which there is
not a transactional component.
The concept of brand loyalty has been scarcely studied in the context of brand
extensions. Hem and Iversen, (2003) found that loyal behavioural intention towards
the parent brand affects significantly the evaluation of brand extensions. Moreover,
Buil and Pina, (2008) supported these findings by stating that grater consumer loyalty
increases the probability of brand extension success. However, this relationship has
not been investigated in the case of brand extensions from online companies.
Therefore, the following hypothesis is proposed:
H.6 Online brand loyalty has a positive effect on consumer attitude
towards the offline brand extension launched by online companies.
3.3 Marketing Support
As commented in chapter 2, the marketing support of brand extensions has
been found by previous literature as a crucial success factor (Klink and Smith, 1992;
Reddy et al., 1994, Völckner and Sattler, 2006). Within these marketing activities,
Sattler et al., (2010) studied the impact of advertising support and product availability
in the distribution channel on consumers´ attitudes towards brand extensions. They
concluded that both advertising and product availability increase the probability of the
new extensions being purchased. In the case of online brands going offline,
advertising and appropriate availability of the new offline product are necessary to
create consumer awareness and perceptions of similarity on consumers´ minds.
Hence:
H.7 Offline brand extensions that received competent marketing support
from the online parent brand are more favourably evaluated by consumers.
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36. 3.4 Perceived similarity
As mentioned in chapter 2, perceived similarity has been found to be a major
determinant of brand extension evaluations (Aaker and Keller, 1990; Volckner and
Sattler, 2006). According to Gierl and Huettl, (2011), the rationale behind the effects
of similarity on attitude towards extensions is explained by the application of the
categorisation theory (see chapter two, section 2.4.1.2) to the brand extension domain.
In this line, consumers compare their knowledge category related to the parent brand
to the characteristics presented by the extension product (Park et al., 1991) and, if
there is a sufficient level of similarity, this information about the brand, stored in
consumers’ memories, is transferred to the extension product (Boush and Loken,
1991). Therefore, consumers evaluate more favourably those extensions that present a
high degree of similarity or fit with the parent brand (Aaker & Keller, 1990; Czellar
2003; Hem et al. 2003; Völckner & Sattler 2006, Hem and Iversen, 2009). This
overall dimension of similarity leads to the following hypothesis:
H8. The overall perceived similarity between the online parent brand and
the extension has a positive effect on consumer attitude toward the offline extension.
The provided definition of similarity mentions the congruence between the
parent brand and extension in general terms. However, scholars have identified
different levels within the similarity construct. Park et al., (1991) suggested that the
degree of consistency between the brand concept or image and the extension product,
along with the product category similarity (Aaker and Keller, 1990), form the overall
similarity perception in consumers´ minds so that consumers can establish attribute-
based (features, or benefits) and non-attribute-based (image, or context) associations
that link the parent brand and the extension.
3.4.1 Product category similarity
Product category similarity is the degree to which consumers perceive the
extension as similar to other products affiliated with the brand in terms of the needs
they satisfy, situations in which they are used, physical features or component parts,
and skills necessary to manufacture them (Smith and Park, 1992).
29

37. In the case of online brands going offline, the lack of practical examples may
produce that consumers perceive a low overall degree of similarity between the brand
and the extension, and thus consider offline extensions as incoherent with the image
of online brands (Bravo et al., 2010). However, product category fit can be explained
by the transference of competences or resources required to produce online products
to the new offline extensions. For example, the IT knowledge acquired by online
brands creating web applications may be applied to the development operating
systems for electronic devices such as computers, mobile phones or GPS as Google
did by launching its operating system Android (Gandhewar and Sheikh, 2010).
Moreover, the extensions to devices with connection to the internet enable the
complementarity and adaptability between the parent brand original products (e.g.,
search engines, web applications or ecommerce portals) and the new devices.
Therefore, consumers may perceive these offline extensions as coherent with the
online parent brand. Hence:
H8a. Offline brand extensions in to categories perceived as more similar to
the original product category of the online parent brand are more likely to be
evaluated favourably by consumers.
3.4.2 Brand image Similarity
Although a product class similarity may determine a positive attitude towards
the extensions, the existence of successful brand extensions in dissimilar product
categories from those of the parent brand as for example, Tesco moving its brand into
financial services (Alexander and Colgate, 2005), highlights the need to go beyond
the dimension of product category similarity (Hem and Iversen, 2009).
Consumers also perceive similarity between the extension and the parent
brand image formed in their minds (Bhat and Reddy, 2001). This way, brand image is
made up of specific associations that set the brand apart from other competing brands.
Park et al., (1991) suggested that whereas product features can vary from concrete
levels to other more abstract ones, brand concepts are brand-unique abstract meanings
that typically originate from a particular configuration of product features and a firm's
efforts to create meanings from these arrangements. Hence, consumers evaluate the
30

38. extensions more positively when there is a match between these associations towards
the brand and the new product (Broniarczyk and Alba, 1994).
In the case of online companies, associations linked to the brand image must
be coherent with perceptions of the new product in order to achieve consumer
acceptance. For example, if users consider Google as an innovative brand that
incorporate the latest technology to their products, they will expect that both online
and offline extensions share the same degree of innovativeness. Hence:
H8b. The match between the specific image of the online brand and the
extension product has a positive effect on the attitude towards the offline extension.
3.5 Involvement in the extension product category
The relevance of consumer involvement in consumer behaviour has been
explained by its influence in consumers´ decision making and communication
behaviour (Hansen and Hem, 2004). Involvement concerns to “a person’s perceived
relevance of the object based on inherent needs, values, and interests” (Antil, 1984;
Zaichkowsky, 1985). The concept of consumer involvement has been categorised by
Houston and Rothschild, (1978) as a multidimensional construct. The authors
differentiated between three types of involvement: enduring, situational and response.
Enduring involvement is related to the long-term attachment of a consumer to a
specific product category. This type of involvement is characterised as an extensive
information search, brand knowledge and, eventually brand loyalty. (Mittal, 1989)
considered that consumers who became involved with a specific situation, generally a
purchase decision, present a situational involvement. Finally, a response involvement
refers to a behavioural orientation characterised as information acquisition and
decision processes (Leavitt et al., 1981).
The study of involvement in brand extension evaluation has been focused on
the first type of involvement (enduring) which was measured by two dimensions:
consumers' knowledge of the product class of the extension (Smith and Park, 1992)
and the importance of purchase decisions in the extension's product category (Nijssen
and Bucklin, 1998). Therefore, high consumer´s knowledge of the extension product
class reduces the perceived risk of purchasing the new product and fosters the positive
evaluation of the extension (Smith and Park, 1992). Hence:
31

39. H.9 High involved consumers in the extension category will positively
evaluate the brand extension.
3.6 Consumer innovativeness
Rogers and Shoemaker, (1971, p. 27) defined consumer innovativeness as “the
degree to which an individual is relatively earlier in adopting an innovation than
other members of his system”. Roehrich, (2004) identified four explicative causes of
this early adoption from consumers: (1) new products help satisfy consumers´ need of
stimulation, (2) consumers seek novelty in the new products in terms of information,
adoption or use; (3) consumers make innovative decisions independently from the
communicated experience of others (Midgley and Dowling, 1978), and (4) the need of
uniqueness which differentiates the consumer from others. Therefore, consumers who
present a high degree of innovativeness, also known as early adopters, play a very
important role in the success of new products (Goldsmith and Flynn, 1992), since they
are more willing to try new products and brands (Steenkamp and Baumgartner 1992),
are less price sensitive, but more knowledgeable about new products and less risk
averse (Rogers, 1983). Therefore, these characteristic of early adopters affect their
purchase and learning processes within the marketplace.
In evaluating brand extensions, consumer innovativeness has been considered
as an antecedent of positive consumer attitude towards extensions. Klink and Smith,
(2001) concluded that early adopters react positively to a new extension in the case of
durable goods. Furthermore, the authors found consumer innovativeness as a
moderating factor of similarity, stating that consumers with high degree of
innovativeness do not base their extension evaluation on perceived similarity. Hem et
al., (2003) extended the Klink and Smith´s (2001) study to fast moving consumer
goods and services finding positive effects of consumer innovativeness on consumers’
evaluation of brand extensions. Xie (2008) studied consumer innovativeness with
regard to different types of extensions, product information and interpersonal
communication. The study found that innovative consumers evaluate extensions in
different categories more favourably than those of the parent brand (horizontal
extensions) and than those which present a lower degree of similarity with the parent
brand. In addition, the availability of product information and interpersonal
32

40. communication moderate the effects of consumer innovativeness and the evaluation
of extensions. Despite the research on consumer innovativeness for different kinds of
product and extensions, there is no study regarding the positive role of consumer
innovativeness in the evaluation of extensions from online companies. Therefore, the
following hypothesis is suggested:
H.10 Consumers with a high degree of innovativeness will evaluate more
positively offline brand extensions from Internet brands.
The hypotheses proposed by this research are summarised in the following
table:
TABLE 3.1: Hypotheses
H.1 A high consumer subjective knowledge of the online brand, original product category and offline
extension category has positive effects on the extension evaluation.
H.2 Higher quality perceptions toward the original online brand are associated with more favourable
attitudes toward the offline extension.
H.3 The offline extension will be more positively evaluated, if consumers perceive brand value in the
online business
H.4 The offline extension will be more positively evaluated if consumers perceive a positive brand
personality of the online brand.
H.5 The offline extension will be more positively evaluated if consumers perceive positive organisational
associations in the online brand.
H.6 Online brand loyalty has a positive effect on consumer attitude towards the offline brand extension
launched by online companies.
H.7 Offline brand extensions that received competent marketing support from the online parent brand
are more favourably evaluated by consumers.
H.8 The overall perceived similarity between the online parent brand and the extension has a positive
effect on consumer attitude toward the offline extension.
H.8a Offline brand extensions into categories perceived as more similar to the original product category
of the online parent brand are more likely to be evaluated favourably by consumers.
H.8b The match between the specific image of the online brand and the extension product has a positive
effect on the attitude towards the offline extension.
H.9 High involved consumers in the extension category will positively evaluate the brand extension.
H.10 Consumers with a high degree of innovativeness will evaluate more positively offline brand
extensions from Internet brands.
33

41. 3.7 The Hypothesized Model
Following the procedures of the previous research (Aaker and Keller, 1990),
the hypotheses proposed above are studied within a linear regression model, where the
dependent variable, the attitude towards the extension, is explained by ten explicative
factors that represent the independent variables of the regression. The linear
regression model is as follows:
Where the dependent variable:
ATT= Overall attitude towards the brand extension, and where the independent variables are:
FAM= Brand knowledge or familiarity
PQ= Perceived quality of the parent brand
BAV= Value associations
BAP= Brand personality
BAO= Organisational associations
BLO= Brand loyalty
SIMP= Product category similarity
SIMI= Brand image similarity
MS= Marketing support
INE= Consumer involvement in the extension product category
CIN= Consumer innovativeness
34

42. The hypothesized model is summarised in Figure 3.1:
3.8 Summary
This chapter has reviewed the factors that build an explanatory model of consumer
attitude towards brad extensions which is applied to online brands that extend the brand name
to the offline context. A set of hypotheses related to the principal factors involved in the
model was proposed in order to demonstrate their implications on consumer evaluations of
brand extensions. The next chapter will describe the research methodology which was used in
order to gather the required information to test the aforementioned hypotheses.
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43. CHAPTER 4. METHODOLOGY
4.1 Introduction
Chapters 2 and 3 have introduced the general theory about consumer
evaluations of brand extensions. They have also stated the principal hypotheses that
configure a model applicable to offline brand extensions produced by online
companies. Therefore, with the aims of determining the feasibility of the factors
proposed by previous research within the context of online brands as well as
responding to the main research question of whether online companies can leverage
the brand equity to offline products, this chapter justifies the research methods utilised
in this study by which the data has been gathered in order to test the suggested
hypotheses and validate the proposed model in chapter three (see Figure 3.1)
The chapter begins by making a general description of the philosophy
underpinning the research project. The research design then justifies the adoption of
quantitative research in the field of brand extensions as well as the utilisation of the
method of survey as the most suitable to gather the required information to this study.
The following section describes the different types of data, primary and secondary,
that have been used in the research. Thereafter, a description of how the survey has
been built is provided by explaining the reasons that support the election of online
brands (Google and Amazon) and the extensions linked to them (Smartphone and
eBook reader). This section also describes the typology and scaling of the items or
questions which have been introduced in the questionnaires to be answered by the
respondents. Finally, the section related to the sampling describes the characteristics
of the used sample.
4.2 Research philosophy
The selection of an appropriate methodology which fits the research purpose and
focus, has to be underpinned by a philosophical framework within which the research
project is situated (Quinlan, 2011). In this line, two philosophical positions can be
adopted by researchers: ontology and epistemology. Blaikie (1993) define ontology as
“the science or study of being”, therefore, ontology describes the nature of being and
our ways of being in the world (Crotty, 2005). On the other hand, epistemology
considers what knowledge is and what the sources and limits of knowledge are
36