research@hec - Issue #31 - (Page 4)

marketing research hec Extending product lines up and down in quality: Asymmetric effects on brand evaluation Companies frequently extend product lines in a bid to target diverse market segments and increase sales, though this risks diluting brand image, especially when extending the brand to lower-quality products. But a series of studies shows that the positive effects of line extensions to higher quality are stronger than the negative effects of line extensions to lower quality. Also, the risk of image dilution can be mitigated through various branding strategies. Timothy Heath B iography Timothy Heath began teaching marketing and consumer behavior at HEC in January 2012. Before that, he taught at the University of Pittsburgh in the US for 13 years, at Miami University for eight years, then at Essec in Paris for two years. He holds a Ph.D. in Business Administration from the University of Iowa and sits on the editorial review boards of the Journal of Marketing and the Journal of Consumer Psychology. 4 Be it creating new flavors of a given pasta sauce by adding every possible spice, vegetable or amount of cheese, or introducing a bargain-priced line of vehicles by a given carmaker, offering more products under the same umbrella brand is one of many ways for companies to boost growth. What is known as “line extension” can be done horizontally—within the same quality or price level—or vertically - across price or quality levels. For example, chemical and pharmaceutical giant Bayer, known in the US for aspirin, is now beginning to sell fertilizer and weed killer under its own brand name. It’s a matter of exposure, of making consumers more comfortable with the brand, as Timothy Heath explains. “If consumers have the choice, they are more likely to go for a brand they know, an effect known as ‘neophobia’,” he adds. And as consumers travel, as the globe shrinks, brands want to be recognized around the world—so they splash their names across wider ranges of products. DILUTING BRAND IMAGE? But in the case of downward line extensions, doesn’t associating a recognized brand name with lowerquality risk tainting the brand’s image? That’s what Timothy Heath and his co-authors hypothesized, wondering why a successful multinational such as Procter&Gamble would risk diluting brand equity by marketing, say, inferior paper towels under • January-February 2013 the name of the market’s leading paper towel, Bounty. After all, humans tend to give more weight to negative experiences than to positive ones, a tendency known as “the negativity bias.” But when the researchers asked consumers to rate middlequality brands in common product categories (beer, pasta sauce, restaurants, etc.) now seen with lower or higher quality line extensions, they repeatedly found the opposite: Higher-quality line extensions improved brand perception and evaluation far more than lower-quality extensions damaged brand them. Two psychological mechanisms contributed to this asymmetric effect: Opponent processes and what the authors dubbed “best-of-brand processing.” OPPONENT PROCESSES Offering a higher-quality line extension associates the brand with higher quality (a positive quality association effect) and also increases the number of products under the brand’s umbrella, which consumers generally like (a positive variety effect; e.g., more products signal brand energy, expertise, and innovativeness while offering options to a wider range of consumers). Both effects then improve overall brand evaluation. However, offering a lowerquality line extension associates the brand with lower quality (negative quality-association effect) but still increases the number of products offered

Table of Contents for the Digital Edition of research@hec - Issue #31

Cover & Contents
Countries falsifying economic data: How statistics reveal fraudulent figures
Extending product lines up and down in quality: Asymmetric effects on brand evaluation
Institutional change Promoting the emergence of a natural order

research@hec - Issue #31