Line extension diluting parent brand and flagship product - an experiment

Sandhaug, Lars Erik
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Master of Business
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Auckland University of Technology

This dissertation reports on a study aiming to establish a causal relationship between consumer beliefs about a line extension perceived by consumers to be inconsistent with its parent brand and the dilution of consumer beliefs about the parent brand. The relationship between the same line extension and its flagship products and other individual products labelled under the parent brand will also be investigated. A flagship product is defined as the product consumers most closely associate with the brand name, while “dilution” refers to negative belief changes or image degradations. This experiment replicates parts of a study conducted by John, Loken and Joiner (1998). Three hypotheses are presented predicting the dilution of beliefs of the parent brand, the flagship product and two individual products after the introduction of a line extension containing inconsistent attributes with regards to the parent brand. The hypotheses were tested in an experiment with one treatment group receiving information on a hypothetical line extension with inconsistent attributes relative to the parent brand, and one control group. The results showed that (a) the parent brand beliefs were diluted after the introduction of an inconsistent line extension, (b) the flagship product beliefs proved to be resistant to change and that (c) beliefs about an individual product marketed under the same brand name were diluted while another product seemed immune. Contrasting previous findings, the results from the present experiment indicate that while the parent brand beliefs were diluted by an inconsistent line extension, the flagship product beliefs remained immune. An inconsistent line extension has the potential to not only damage its own market opportunity, but also beliefs about its parent brand. The results of the present experiment indicate that an inconsistent line extension might harm consumer beliefs, but it may not have too negative an impact on the company as there is a significant chance for the flagship product and sub-branded product beliefs to remain intact.

Consumers -- New Zealand -- Attitudes , Brand name products -- Public opinion , Brand choice -- New Zealand
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