BRAND EXTENSIONS OF FMCG IN PAKISTAN

A

MODULAR APPROACH TO STUDY THE IMPACT OF BRAND EXTENSIONS

BY TARIQ JALEES

THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE DEGREE OF M-PHIL

MAY 2008

i

ACKNOWLEDGMENTS

It took me more time than anticipated, more than a year to finalize my thesis. I

am obliged to and thank acknowledge all those people who have been a

source of encouragement, inspiration and motivation. Since I have not

maintained a proper record of all these helping hands, I would like to

apologize to those whose names I am not able to mention, here. Nonetheless,

I shall ever remain grateful and indebted to them all. I am thankful to the

management PAF-Karachi Institute of Economics and Technology, for having

provided an opportunity to upgrade my qualifications, and a stepping stone for

a Doctorate. In this context, I would like specially to mention the names of Air

Commodore (Retired) Mohammad Khalid Hussain, the President of the

Institution, Ex- Dean of the institute, Dr. Javaid A. Ansari, Ex-Director of

College of Management Science Mr. Raza Kamal, and the present Dean of

the institute Dr. Manzoor A. Khalidi. It would not be fair, if I do not mention the

name of Associate Professor Mr. A.A.Kanwar, of PAF-KiET, who not only

encouraged me all the time, in fact he

has always been breathing on my neck not only to complete the M-Phil, but

also go for a PhD.

I would also like to thank my Dr. Javed R. Laghari, Ms. Azra Maqsood, Dr.

Amanat Ali Jalbani, Dr. Mustaghis-ur-Rahman and Mr. Zia Memon of

SZABIST and Dr Wasim Qazi, Mr. Imtiaz Arif of IQRA with whom I had been

associated for a while before joining the PAF-KIET.

Last but not least, I would like to thank my supervisor Dr. Tahir Ali for

providing all the necessary guidance and supervision due to which I was not

only able to complete the thesis but was also able to present the summarized

versions of the thesis at an international conference at Dubai, UAE and

various other international journals.

 

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CERTIFICATE OF STATEMENT

I hereby certify that this paper constitutes my own product, that where the

language of others is set forth, quotation mark so indicate, and that

appropriate credit is given where I have used the language, idea, expression

or writing of the others

SIGNED ______________________ TARIQ JALEES

iii

APPROVAL PAGE

BRAND EXTENSIONS OF FMCG IN PAKISTAN

A

MODULAR APPROACH TO STUDY THE IMPACT S OF BRAND EXTENSION

BY

TARIQ JALEES

APPROVED____________

SUPERVISOR: Dr. Tahir Ali

APPROVED ______________

Dr. Manzoor A. Khalidi

Dean of College of Management Sciences

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TABLE OF CONTENTS

ACKNOWLEDGMENTS ..........................................................................................................................I CERTIFICATE OF STATEMENT ......................................................................................................... II APPROVAL PAGE ............................................................................................................................... III TABLE OF CONTENTS........................................................................................................................IV ABSTRACT ...........................................................................................................................................VII CHAPTER-1 .............................................................................................................................................. 1 INTRODUCTION ..................................................................................................................................... 1

1.1 PURPOSE OF THE STUDY ..........................................................................................................2 1.3 CONTRIBUTION OF THIS STUDY ............................................................................................2 1.3 PROBLEM STATEMENT.............................................................................................................3

CHAPTER - 2 ............................................................................................................................................ 4 LITERATURE SURVEY......................................................................................................................... 4

2.1 BRAND...........................................................................................................................................4 2.2 BRAND EQUITY...........................................................................................................................6 2.3 BRAND MANAGEMENT STRATEGY.......................................................................................8 2.4 BRAND EXTENSION ...................................................................................................................9 2.5 RISK IN BRAND EXTENSIONS................................................................................................13 2.6 RATIONAL AND BENEFIT OF BRAND EXTENSION...........................................................14 2.7 CATEGORIZATION THEORY ..................................................................................................18 2.8 CONGRUITY THEORY..............................................................................................................19

CHAPTER-3 ............................................................................................................................................ 20 EMPIRICAL MODEL VIZ. HYPOTHESES .............................................................................................20 3.1 EMPIRICAL MODEL..................................................................................................................20 3.2 HYPOTHESES .............................................................................................................................21

CHAPTER -4 ........................................................................................................................................... 22 METHODOLOGY.................................................................................................................................. 22

4.1 STIMULI SELECTION................................................................................................................22 4.2 MEASUREMENTS......................................................................................................................22

4.2.1 DEPENDENT VARIABLE ................................................................................................ 23 4.2.1.1 CONSUMER EVALUATION OF BRAND......................................................................... 23

4.2.2 INDEPENDENT VARIABLES .......................................................................................... 23 4.2.2.1 SIMILARITY......................................................................................................................... 23 4.2.2.2 REPUTATION OF PARENT BRAND ................................................................................ 23 4.2.2.3 PERCEIVED RISK ............................................................................................................... 24 4.2.2.4 INNOVATIVENESS............................................................................................................. 24 4.2.2.5 MULTIPLE BRAND EXTENSIONS................................................................................... 24 4.2.2.6 PARENTS BRAND CHARACTERISTICS......................................................................... 24 4.2.2.7 PARENT BRAND CONSISTENCY .................................................................................... 25 4.2.2.8 BRAND EXTENSIONS FIT................................................................................................. 25

4.3 SAMPLE SIZE..............................................................................................................................25 CHAPTER-5 ............................................................................................................................................ 27 RESULTS AND DISCUSSIONS ........................................................................................................... 27

5.1 DISCUSSIONS RESULTS OF REPUTATION, SIMILARITY & ASSOCIATION.................27 5.1.1 SIMILARITY ...................................................................................................................... 27 5.1.2 PARENT BRAND CHARACTERISTIC & EVALUATION............................................... 28 5.1.3 REPUTATION................................................................................................................... 29 5.1.4 STIMULI ........................................................................................................................... 29

5.1.5 HYPOTHESIS ONE: ...................................................................................................................30 5.1.5.1 CLOSE EXTENSION................................................................................................................... 30

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5.1.5.2 DISTANCE EXTENSION............................................................................................................. 32 5.2 DISCUSSIONS & RESULTS OF INNOVATIONS & PERCEIVED RISK ..............................35 5.2.1 PERCEIVED RISK.......................................................................................................................35

5.2.2 INNOVATIVENESS........................................................................................................... 36 5.2.3 STIMULI ........................................................................................................................... 36

5.2.4 HYPOTHESIS TWO: ...................................................................................................................36 5.2.4.1 CLOSE EXTENSION..................................................................................................................... 37 5.2.4.2 DISTANCE EXTENSION............................................................................................................. 38

5.3 DISCUSSIONS & RESULTS OF CONCEPT CONSISTENCY ................................................41 5.3.1 BRAND CONCEPT CONSISTENCY & EXTENSION..................................................... 41 5.3.2 HYPOTHESIS.................................................................................................................... 42

5.3.2.1 CLOSE EXTENSION.................................................................................................................... 42 5.3.2.2 DISTANCE EXTENSIONS .......................................................................................................... 44

5.4 RESULTS AND DISCUSSIONS ON BRAND EXTENSION FIT.............................................47 5.4.1 BRAND EXTENSION AND PERCEIVED FIT ................................................................ 47 5.4.1 HYPOTHESIS-4 ................................................................................................................ 48

5.4.2.1 CLOSE EXTENSION ........................................................................................................... 49 5.4.2.2 DISTANCE EXTENSION .................................................................................................... 51

5.5 DISCUSSIONS AND RESULTS ON MULTIPLE BRAND EXTENSIONS ............................54 5.5.1 MULTIPLE BRAND EXTENSIONS AND EVALUATION............................................... 54 5.5.1 HYPOTHESIS 5 ................................................................................................................ 55

5.5.1.1 CLOSE EXTENSION ........................................................................................................... 55 5.5.5.2 DISTANCE EXTENSION .................................................................................................... 57

CHAPTER 6............................................................................................................................................. 59 CONCLUSIONS...................................................................................................................................... 59

CHAPTER 7 ................................................................................................................................................64 RECOMMENDATIONS ............................................................................................................................64

REFERENCES........................................................................................................................................ 66 APPNEDIX-1 QUESTIONNAIRE ........................................................................................................ 74 LIST OF TABLES Table 1: Town wise Population and size................................................................................ 26 Table 2: Multiple regression of Close distance extension ...................................................... 31 Table 3: ANOVA (Close Extension) ....................................................................................... 31 Table 4: Coefficient (Close Extension)................................................................................... 31 Table 5: Multiple Regression of Distance Extension .............................................................. 33 Table 6: ANOVA-Distance Extension .................................................................................... 33 Table 7: Coefficients- Distance Extension ............................................................................. 33 Table 8: Multiple Regression of Close Extension................................................................... 37 Table 9: ANOVA of Close Extension ..................................................................................... 37 Table 10: Coefficients of Close Extension ............................................................................. 38 Table 11: Multiple Regression of Distance Extension ............................................................ 39 Table 12: ANOVA, Distance Extension.................................................................................. 39 Table 13: Coefficients, Distance Extension............................................................................ 39 Table 14: Multiple Regression of Close Extension................................................................. 43 Table 15: ANOVA, Close Extension ...................................................................................... 43 Table 16: Coefficients, Close Extension ................................................................................ 43 Table 17: Multiple Regression of Distance Extension ............................................................ 44 Table 18: ANOVA, Distance Extension.................................................................................. 44 Table 19: Coefficients Distance Extension............................................................................. 45 Table 20: Multiple Regression, Close Extension.................................................................... 49 Table 21: ANOVA, Close Extension ...................................................................................... 49 Table 22: Coefficients, Close Extension ................................................................................ 50 Table 23: Multiple Regression Distance Extension ................................................................ 51 Table 24: ANOVA, Distance Extension.................................................................................. 51 Table 25: Coefficients, Distance Extension............................................................................ 52 Table 26: Multiple Regression, Close Extension.................................................................... 56 Table 27: ANOVA, Close Extension ...................................................................................... 56

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Table 28: Coefficient, Close Extension .................................................................................. 56 Table 29: ANOVA, Distance Extension.................................................................................. 57 Table 30: ANOVA, Distance Extension.................................................................................. 57 Table 31: Coefficients, Distance Extension............................................................................ 57

LIST OF GRAPHS Graph 1: Scattered Chart-Close Extension............................................................................ 31 Graph 2: Scattered Chart-Distance extension ....................................................................... 33 Graph 3: Scattered Chart, Close Extension ........................................................................... 38 Graph 4: Distance Extension ................................................................................................. 39 Graph 5: Scattered Chart Close Extension ............................................................................ 43 Graph 6: Scattered Chart, Distance Extension ..................................................................... 45 Graph 7: Scattered Chart, Close Extension .......................................................................... 50 Graph 8: Scattered Chart Distance Extension ....................................................................... 52 Graph 9: Scattered Diagram, Close Extension ...................................................................... 56 Graph 10: Scattered Chart, Distance Extension .................................................................... 58

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ABSTRACT

Most of the previous researches have used up to four factors for ascertaining

how consumers evaluate brand extension by using hypothetical brand

extension and college students as a subject. This study has identified several

variables that could influence the consumer evaluation of the brand extension

and then have used eight of them to ascertain the relationship of these

variables with the dependent variable “consumer evaluation” of brand

extension. The variables used in the empirical models are listed as (1)

similarity (2) reputation (3) innovativeness (4) perceived risk (5) multiple

extensions (6) parent brand characteristics (7) concept and consistency (8)

brand extension fit.

Moreover, four different real life brands have been used as stimulus in this

study which are: (1) Tapal Tea Viz. Tapal Tea Bag., (2) Life Buoy Soap Viz.

Lifebuoy Shampoo. (3) Sufi Vegetable Oil and Sufi Washing Soap. (4)

Woodward Gripe Water and Woodward Toothpaste. Two of the stimuli were

close brand extensions and the other two were distance brand extensions.

Based on these variables, a questionnaire was developed that was

administered to a sample size of 700. Quota sampling was used for drawing

samples from 18 Union District Council (UDC) of Karachi. The subject has

been drawn in such a manner that it would be a representative sample. The

research has established that the relationships of independent and dependent

variables is highly on related to “close brand extension” and “distance brand

extension”

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1

CHAPTER-1

INTRODUCTION

The present chapter introduces the theme of this master thesis, and the motives, problems and findings that lie behind this choice. It includes a short background, of the area of investigated and continues with objective and ends up with the problem statement.

Growth is necessary for companies to stay competitive, and for achieving

growth, firms must launch new products, consistently. However, a failure rate

for a new launch is very high. Researchers found that failure rate of new

product in early eighties and nineties were between 30 to 35% (Montoya-

Weiss & Calanone 1994). Crawford (1997) findings on new products’ failure

were more alarming as he found that the failure rates in nineties were as high

as 80%.

New product failure could hurt the firm quite substantially and the loss could

run in millions. “RCA lost $850 million on its Selecta Vision. Texas instrument

lost a staggering $660 million on disc computer before withdrawing from the

home computer business; web TV lost $725 million before it was shut down.”

(Kotler & Armstrong 2006). It has become very difficult for a new product to

succeed because of ever increasing advertisement cost and sever

competition for limited shelf space. (Aaker 1991; 1996)

In view of the built-in risk associated with new products, brand extensions are

commonly used by companies for pursuing growth strategies.

In 1980s, the brand extension strategy for expansion became so popular that

of the entire new products launched in this era, about 80% of them were

brand extensions (Ries & Trout 1986). However, by 1990s the share of brand

extensions increased to 90%. Firms have adapted to this growth strategy

because financial and marketing benefits of this strategy are enormous (Aaker

1991). The researchers have found that the growth rate of introducing new

products by using brand extension strategy has an increasing trend. The

reasons for such a trend were: (1) substantial benefit and (2) reduced risks

associated with the brand extensions. Market intelligence service (2001) in

2

this context reports that about 31,432 new consumer related products were

launched in the year 2000; this was 21% higher than the preceding year. And

again, the market share of the brand extension remained 90%.

Brand extension may also adversely affect the brand name that happens to

be the most important asset of any company. Wrong extension, not only

results in substantial loss of time and other market opportunities, but it may

also lead to the “damaging association that may be expensive or even

impossible to change” (Ries & Trout 1986).

Consistent and repeated brand extensions may dilute the brand equity and

lead to the death of the brand name associated with the brand equity (Gibson

1990). Other researchers found no evidence that suggests a positive

relationship between unsuccessful brand extension and dilution of brand

equity (Keller & Aaker 1992). Aaker (1992) and Romeo (1991) found that

brand extension failures in terms of sales and product performance had no

adverse impact on the prominent and established brands (Aaker 1992;

Romeo 1991).

Popularity of brand extensions as a growth strategy has opened various

avenues of brand extension related research, including, how consumer

evaluate brand extensions, and what are the factors that contribute towards

the success of brand extensions.

1.1 PURPOSE OF THE STUDY

The objectives of the study were to (1) identify the variables that affect the

consumer evaluation of brand extensions, (2) develop an empirical model

showing relationships of the variables and, (3) test the validity of the empirical

model, separately for close and distance brand extensions.

1.3 CONTRIBUTION OF THIS STUDY

Researchers have made significant contributions in the last few decades

towards explaining how consumers evaluate brand extension (Nkwocha

3

2000). However, the scope of the previous researches has had a certain

degree of limitation. Most of the previous researches have used up to four

factors for ascertaining how consumers evaluate brand extension. The stimuli

in most of the previous studies were found to be hypothetical brand extension,

and the subjects, in most of the studies, were college students. The

contribution of this study is that it has attempted to ascertain the relationship

of eight variables that are related to consumer evaluation of brand extension.

Moreover, four different real life brands have been used as stimulus in this

study. Two of the stimuli were close brand extensions and the other two were

distance brand extensions. The subject has been drawn in such a manner

that it would be a representative sample. To the best of author’s knowledge,

no such comprehensive study on brand extension in Pakistan’s scenario has

ever been carried out

1.3 PROBLEM STATEMENT

The failure rates of new product over the last few decades have increased

tremendously; therefore, firms have resorted to brand extensions, because of

inherent advantages including its acceptability, low promotion cost and

comparatively lesser degree of failures. Despite these advantages, the failure

rate of brand extension has remained significant in the last one decade.

Therefore, the researchers have been focusing in identifying the factors that

consumers use for “evaluating the brand extension”, or the factors that are

contributes towards the success or failure of brand extensions. The focus of

this study is to identify the variables that consumers uses for evaluating brand

extension. The variables used in this study are inclusive of (1) similarity, (2)

reputation of parent brand, (3) perceived risk, (4) Innovativeness, (5) multiple

brand extensions (6) parent brand characteristics (7) parent brand

characteristics (8) brand extension fit. The behavior and relationships of these

independent variables, with the dependent variable “consumer evaluation” of

brand extension will help marketers to use brand extension strategy more

effectively and successfully.

4

CHAPTER - 2

LITERATURE SURVEY

This chapter intends to set a theoretical framework of the thesis by introducing the main areas needed to create basis of our analysis, shaping the way toward our main purpose. Thus, it begins with a short description of the brand, brand equity, brand management strategy, brand extension, risk in brand extension, and rationale behind brand extension, categorization theory and ends on congruity theory.

2.1 BRAND

Branding has an ancient history. It could be traced back to times when the

ancient Egypt brick makers used to stamp symbols on bricks for identification

and distinction purposes (Farghuhar 1990). Nilson (1998) on the other hand

found that ancient farmers used to put symbols on cattle with the help of hot

iron, which meant burning. The word “brand” has been derived from the

Scandinavian word "branna" that means to burn. In Swedish language the

word "brand", means fire. Thus, when a producer puts some marks or

symbols on their product, it will come in the category of branding (Nilson

1998). One of the advantages of strong brand name is that it helps in

penetrating in a new market or a new market category. Globalization has

created tremendous brand awareness and this awareness is not dependent

on the availability of the products. (Czinkota & Ronkainen 2001). For

example, brands such as McDonald, Pizza Hut and KFC had very strong

awareness in Pakistan even before they opened their franchises in the

country.

The evolution of brands continued in early twentieth century. There were

several commonly recognizable brands in this era. By the mid of twentieth

century (1950) this branding concept gained substantial momentum, so much

so that it became strategic marketing activities for market oriented companies

(Blois 2000). Since the nineties, companies started treating brands as an

important asset (Nijssen 1999).

The success stories of leading and powerful corporation will tell that all of

them owned “strong brand”. Realizing the importance of brand, the companies

5

are now giving more attention to brands, which was previously reserved for

employees or tangible assets such as capital and equipment (Daivs 2002).

Kotler and Armstrong (2007) has defined brand as a name, term, sign,

symbol, design or a combination of these attributes used by the firms for

identifying their products and to differentiate the competitor’s brands. Another

important aspect of brand is that it helps consumers in identifying the

manufacturers (Kotler & Armstrong 2007). According to American Marketing

Association a brand is: "A name, term, sign, symbol, or design, or a combination of

them, intended to identify the goods and services of one seller or group of sellers and to

differentiate them from those of competition," (American Marketing Association

2007).

The scope of branding is beyond product identification. Brands not only reflect

quality but it helps in creating competitive advantage and helps customers in

making purchase decisions (Kapoor 2005). Keller (1996) also adds that

branding should be used for creating brand awareness and developing

associations in accordance with the firm's strategic goals.

Branding has two perspectives. One is product plus view and the other is

holistic view. In product plus view, brand is perceived as an addition to the

product; therefore, it is also termed as an identifier. In holistic view, the scope

of brand is not restricted to product. In fact, in holistic view, it is a reflection of

all the 4p’s of the marketing mix. Brand, besides offering product, contains

certain attributes that may provide satisfaction to the purchaser. These

attributes are not restricted to tangibility or rationality but are inclusive of

intangible or invisible features (Ambler & Styles 1996).

Researchers are of the opinion that branding is beyond creating unique

identity, it helps in establishing preferences, creating habits, loyalties and

building relationship between a brand and customers. Thus, the customers

are not only able to distinguish one brand from another but are also able to

develop their relative positioning. Brand also helps in adding more value to

the product. (Wells & Burnett & Moriarty 2000).

6

Branding is an important managerial activity for creating awareness about the

brand and its benefits and helping competitors to differentiate their products.

Brands thus are important assets of organizations and in some cases the

book value of a company may show that brands have a significant share as

compared to other tangibles (Kamakura & Russell 1991). Business week

(2004) reported that the market capitalization of the Coca Cola Company as

of early 2004 was approximately $120 billion, out of which more than 50%

($70 billion) was it’s brand value. Similarly, Procter & Gamble sold to

Cadbury-Schweppes its “Hires” and “Crush” product-line at $220 million. Of

this aggregate, about 90% of the total price was associated with brand assets.

(Kamakura & Russell 1991).

2.2 BRAND EQUITY

Brand equity is a relationship between customers and brands, resulting in a

profit to be realized at a future date (Wood 2000). Kotler and Armstrong

(1996) were of the opinion that measuring brand equity is a tedious job.

Nevertheless, a powerful brand means high brand equity that helps in

achieving ‘higher brand loyalty, name awareness, perceived quality, and

strong brand associations’. Some of the major benefits of brand equity are

brand awareness and consumer loyalty which helps in reducing marketing

costs. Brand is an important equity; therefore, it should be carefully preserved

by adopting strategies that would help in maintaining or improving brand

awareness, perceived brand quality and positive associations. (Kotler &

Armstrong 1996)

Ambler and Styles (1997) are of the opinion that brand equity could be

measured from two perspectives. One is “financial evaluation approach” and

the other is “consumer-based approach”. The financial evaluation approach is

related to the monetary value of the brand, and the consumer-based

approach focuses on the brand itself that is how much value the consumers

give to the brand. Brand equity is also considered as an accumulated profit

that could be realized at a future date. The brand equity concept can also

7

cause confusion, because of the difficulty in measuring it (Amler & Styles

1997).

Importance of brand equity, demands a need for a more practical experience

and comparative research to judge and validate the usefulness of brand

evaluation methods (Farquhar 1990). The recent merger and acquisition trend

has also increased the importance of measuring brand equity (Tauber 1988).

The role of brands is now far beyond product differentiation or competing for

market share. They are accumulated annuities which the firm can acquire from

its balance sheet (Tauber 1998).

Firms could have a strong competitive edge over competitors, if they could

create brand equity ‘through building awareness, image, and linking

associations’ (Keller 1998). A stronger brand would always have a better

understanding of needs, wants, and preferences of consumers than the

brands that are not competitive. Thus stronger brands would help in creating

effective marketing programs that could go beyond consumer expectations. (Keller 1998).

Brand equity, since last one decade, has remained popular for attracting new

market segments (Pitta & Katsanis, 1995). This phenomenon of brand equity

has coincided with the newly emerged but equally popular phenomenon of

brand extension (Ambler & Styles 1997). Research shows a two way

relationship between brand equity and extension. A brand's equity could

influence the success of extensions, and extensions could positively influence

brand's equity. The result is that highly valued brand extensions are more

successful. Consumers tend to choose those brands that have strong brand

equity. Brand position of a firm is strongly dependent on the positive image of

brands. Strong brands are a major source of differentiation and extending the

same towards a specific product category is easier. Successful brand allows

firms to demand high prices and are a source of barrier which makes it difficult

for consumers to switch to other brands (Pitta & Katsanis 1995.)

Investment and brand equity both have a limited life. Brand equity cycle is

comprised of growth, reinforcement or decay, and is vulnerable to

8

competitors. Organizational actions have a direct bearing on the brand equity.

Strong brand equity also helps in reducing the introduction cost of new

brands. (Pitta & Katsanis 1995),

Some of the brand equity definitions are based on strategic marketing

perspective and others on financial theory perspective (Kapoor 2005). Aaker's

definition is: "Brand equity is a set of assets / liabilities associated with a brand such as

name awareness, loyal customers, perceived quality, and associations that are linked to the

brand that add/subtract value to the product or service being offered" (Aaker 1996, p.7).

Keller (1993) definition of brand equity is based on customers' perceptions of

the brand, therefore, could be attributed as customer-based brand equity: "The

differential effect of brand knowledge on consumer response to the marketing of the brand”.

(Keller 1993, p. 2).

The firm could use above definitions of brand equity for developing long term

growth-strategy. For example, predictors’ variables such as “familiarity with

the brand name”, and “level of promotion” may influence “trial purchase” more

strongly as compared to determinants such as distribution, packaging, and

brand awareness achieved by advertising (Aaker 1990). It has been found

that one of the strongest motivating factors for inducing trial purchase is

established brand name (Aaker 1990). The marketing cost at introduction

stage is generally higher as the awareness is low. Firms with strong “brand

equity” have two advantages at the introduction stage of new brand.

Marketing costs at this stage will decline considerably, and it would also

support a higher price, resulting in increased profitability (Aaker 1990).

Retaining customers is more cost efficient than attracting new customers. The

studies have suggested that the customers are more loyal to stronger brands

than weaker brands. Thus, retention of loyal customer is easier than non-loyal

customer (Aaker 1992).

2.3 BRAND MANAGEMENT STRATEGY

The concept of brand management is not entirely new in the marketing of

consumer products. Proctor & Gamble (P&G) when launched “Camy” brand in

9

1930, they were afraid that this brand would fail, as it would have to compete

directly with the company’s established brands (e.g., Ivory). In order to give

protection to the newly launched “Camy” the company for the first time in

history, introduced the “brand manager system.” Under this system, a brand

manager was appointed for “Camy”, and he was given all the authority,

including competing directly against the established brands (Zenor 1994). The

strategy of brand management was so successful that the firm formally adopted

this philosophy. Subsequently, other industries, including food, soap, toiletries,

and chemical industries, adopted the brand management strategy initiated by

Procter & Gamble for Camy Soap (Low & Fullerton 1994).

Four brand strategies are available for a company: multi-brands, to introduce

a new brand, line extensions, or brand extensions (Kotler & Armstrong 2007).

Multi-branding is introducing additional brands in the same product category in

which the company is presently active. The purpose of multi-branding is to

establish different features so that they are appealing to several different

buying segments at the same time. Procter & Gamble following this strategy

has thus included nine different kinds of laundry detergents. The second

strategy is a creation of a new brand when launching into a new product

category. Generally, a new brand is developed when firms believe that the

current brand is loosing its charm and a new brand name is needed or when

the firm feels that the current brand name is not appropriate for a new product

(Kotler & Armstrong 2007). The other two concepts of brand extension and

line extensions are discussed in subsequent sections.

2.4 BRAND EXTENSION

Some of the commonly used definitions of brand extensions are as follows:

Using an established name of one product class for entering another product

class (Aaker 1991). Using a successful brand name for launching a new or

modified product or line is known as brand extension strategy (Kotler 1991).

An expansion strategy in which firms use already established and successful

brand name for introducing a new or modified product (Kotler & Armstrong

1990). Using an established brand name for introducing a new product into

10

product category which is new to the company is known as franchise strategy

(Hartman & Price & Duncan 1990).

There are several ways for “accomplishing” brand extensions, including

horizontal extension, distance extension, and vertical extension (Pitta and

Katsanis 1995).

When a firm uses the existing brand name for extending into a new product in

the “same product class or to a product category new to the company” it is

considered as horizontal extension (Pitta and Katsanis 1995). Horizontal

extension again could be extended into two categories. One is line extension

and other is franchise extension. Aaker and Keller (1990) states that

horizontal brand could be further divided into two categories which are line

extension and franchise extensions, and according to them the focus of these

brand categories is different (Aaker & Keller 1990). Using an existing brand

name and same product class for entering a new market segment comes in

the category of line extension. Examples of line extensions are Pepsi and Diet

Pepsi (Aaker and Keller 1990). Other examples of line extensions are

shampoos for different segments such as dry hair, oily hair, and dandruff

hairs, etc. This strategy is generally more successful for extensions in the

same category as the core product. Franchise extension on the other hand is

a strategy of using current brand name for entering a product category that is

new to the company (Tauber 1981).

If the core brand is extended into related or similar category it is considered

as “close extension”. Extending to unrelated product category is known as

“Distance extension”. In this case overall quality association of core brand is

necessary for success (Pita & Katsanism, 1995).

Distancing is a deliberate effort to increase the perception distance of the core

brand and extension product (Kamal 2003). While using umbrella branding

that is using the same brand name for several products the firm must ensure

that the quality perception of the core products has also been transferred to all

the extensions (Erdem 1998).

11

Firms when launches “related brands” in the same product category with

significant difference in price and quality levels they are considered as vertical

extension. (Pita & Katsanism, 1995) The vertical extension has two directions.

If the new product is of higher quality level with higher pricing it will be called

up-scaling. On the other hand if the extended brand quality is low and is also

of lower pricing it will be known as down scaling (Kamal 2003)

If a newly launched product has a strong association with a strong brand then

customers would have the comfort of believing that the firm will support its

offering. (Aaker 1990). Extensions are significant in creating awareness of the

strong brands especially to the segment that are not purchasing the product.

The cost of “new launch” is increasing, the market is becoming more

competitive and therefore more firms are deriving benefits from strong brand

equity by brand extension strategies.

In view of the high costs associated at introduction stage, firms leverage the

equity of established brand name to introduce products in a totally different

product category (brand extension). The rationale for this strategy is that

consumer perception of the positive image (equity) tends to carry over to the

extension and hence would be beneficial to new launch (Nkocha 2000)

Ambler and Styles (1997), observed that although brand extension and line

extensions are used interchangeably by some of the authors, but there is a

conceptual difference in the definitions of the two. The definition proposed by

Ambler and Styles(1997) is: when a company launches an existing product

and brand name in the same product category with the same name by adding

new flavor, changing form or color of the product, or changing ingredients or

package sizes, it comes in the category of line extension. These line-

extensions are commonly used in dairy products, and shampoo (Kotler &

Armstrong, 2007)

However, launching a new or modified product in a new category but using

successful brand name would be brand-extension (Kotler & Armstrong 1996).

A brand that has strong awareness can easily be launched in new product

category, as the level of recognition and acceptance for such product is higher

12

(Kotler & Armstron, 1996). Virgin, basically a tobacco company has

successfully ventured into businesses such as record company, airline,

financial services, vodka, jeans and cola by using brand extension strategy

(Hart & Murphy 1998).

If the brand is of high quality, and if there is resemblance (fit) between the

new product category and brand, and if a company has relevant expertise

then the chances of successful brand extension would be bright (Ambler &

Styles 1997).

One of the problems in brand extensions is that customers might think that the

company already offers this product and is not new in the new product form

(Nijssen 1999). Despite this problem, the acceptance of the new brand will

be higher for those brands that have strong associations with the brand as

compared to reasonably familiar or weak brand (Nijssen 1999).

Consumers while evaluating the brand extensions tend to assess its suitability

in the relevant product category and the brand’s original category. If the

customers’ perception is positive toward the suitability, then the degree of

acceptance would be higher (Nijssen 1999). If the customers do not find any

suitability between original brand category and brand extension category then

the brand extension would adversely affect the brand equity of the company

(Kim & Lavack 1996). Since last one decade, brand extension is getting

extensive coverage in the academic and trade journals and is extensively

used as growth strategy; therefore, it could be attributed as a branding

strategy (Sharp 1993).

The firms do not deliberate on whether to adopt brand extension strategy or

not. What they deliberate on is timing (when) and place of brand extension

(where) (Keller, 1998). Early 1990’s recession forced the firms to follow cost

saving strategies so that they could be more competitive. This resulted in

extensive usage of this extension strategy (Pitta & Katsanis 1995).) Whether

a brand could be extended or not is very difficult, therefore, such decisions

must be made on “combination of market research, experience and common

sense.” (Nilson 1998). The firm must understand the managerial process

13

involved in brand extensions and study the factors that contribute to the

success of brand extensions (Ambler & Styles 1997).

2.5 RISK IN BRAND EXTENSIONS

Using equity of a brand to leverage into different product category may be

profitable but it has its share of risk as well. Some of the very common risks

associated with brand extensions are (1) a high number of brand extensions

tend to adversely affect value associated with the brand, and (2) brand

extension that fails to make an impact may dilute the equity of a reputable

brand name (Mcarthy 1996)

Ries and Trout (1986) endorsing the preceding opinions, stated that even if

the brand is used “congruously”, the success to extended brand would be at

the expense of parent brand. Aaker and Keller (1990) in this context found

that the brand extension may carry typical attributes of the parent that may be

dangerous to the extended brand. Thus Aaker and Keller were surprised that the

respondents’ thought that Crest Chewing Gum, a brand extension of Crest

tooth paste would taste typically like toothpaste or may not be appealing.

Loken and John (1993) in similar research found that the possibility of dilution

in brand extension cases increases when there are higher degrees of

inconsistency between parent brand and extension brand. Loken & John

(1993) found that when consumers’ perception towards brand extension is

weak, this perception will also be transformed to the parent brands and hence

they would believe that the attributes of the parent’s brand are weak as well.

(Shocker, Srivastava & Rueker 1994)

Another risk associated with brand extension is the cannibalization effect. The

gravity of cannibalization would be higher for (1) those brand extensions that

are more successful in new brand category, and (2) for those extensions that

have higher degree of “closes ness” between parent brands from the

consumers’ perspective. (Sharp 1993; Farquhar 1990).

14

If brand extension is not executed properly, it would not only damage

corporate associations but would have several other adverse impacts (Ries &

Trout 1986; Loken & Roedder 1993).

Reputed brand extensions at times fail. This failure could generate the

following adverse feelings for the parent brands: (1) customers may feel that

the brand extension is not adding value to the product, and (2) it is an

exploitation strategy, in general and specially for increasing the prices (Aaker

& Keller 1990). Failure of extended brand hurts the core brand, especially, if

there is inconsistency between the parent and extended brand. In this context,

the customer did not find any association between Levi tailored Classic, a line

of men suiting that was sold separately, and the old and strong perception

that Levi’s products are casual living and are of rugged material (Aaker 1990).

2.6 RATIONAL AND BENEFIT OF BRAND EXTENSION

The cost of launching a new product has increased tremendously and the risk

of failure is high. These constraints have made brand extension strategy very

popular. Brand extension is not only cost efficient but it is less risky as

compared to a new brand launch (Ambler & Styles 1997). The survival rate of

brand extensions is generally higher than a new brand launch (Grime & Smith

2002).

Of all the reasons for adopting brand extension strategy, the most vital is that

it facilitates growth (Kapferer 2001). The biggest advantage of brand

extension is that the growth could easily be achieved by keeping the cost

within controllable limits (Sharp 1993). The penetration capability of a new

product with the same name would be considerably higher than the product

with a new brand name. The brand extension strategy has the potential to

capture substantial market share of growing segment by drawing a parallel

between the positive values associated with the core brand and extended

brand (Kapferer 2001). Brand extension increases the market coverage, its

strength, and creates a segment that was not in existence previously (Kim &

Lavack 1996)

15

In this context, Virgin Company is one of the many companies that have

successfully ventured into new market by using the reputation of the existing

brand. The company initially was a publisher and a retailer of popular music,

subsequently, it successfully ventured through brand extension strategy into

diversified business such as airlines, cola production, and financial services

(Randall 2000).

Brand extension growth strategy has several economic advantages.

Therefore its popularity has also increased because of this cost advantage.

The cost in brand extension strategy reduces quite considerably as the firms

may not have to incur expenses for searching a suitable name for the product,

advertising expenses would be minimal as the customer may be aware of the

extended brand because of the strong brand name of established parent

brand (Aaker 1992). According to an estimate, launching a new brand is

expensive as it cost about one billion dollars in USA, whereas the cost of

launching an extended brand is a fraction of new brand (Randall 2000). The

extended brands inherit a strong positioning from the established core brand,

therefore, the risk of failure of extended brand is also low (Aaker 1992).

Whether a new product is launched with a new brand or is extended with an

established name in both the cases a certain portion of sales are allocated for

advertising and other fixed expenses. In case of brand extension the

possibility of a reasonable return on small volume is higher as the advertising

and other fixed expenses in this case are reasonably low (Buday 1998).

Ambler and Styles (1997) were of the opinion that the cost of building

awareness is low in case of brand extension because the core brand has a

certain reputation, thus parent and extension both will promote each other as

both of them have the same strong brand name. Advertisement costs in brand

extension are distributed to more than one product, thus this advantage of

economies of scale makes the brand extension more attractive. Customers

are more familiar with the strong brand therefore its extension generally

receives positive and stronger response. In view of high revenue generating

capability of well-managed brand extension this expansion strategy is

becoming more attractive to the firms ( Buday 1989; Nilson 1998).

16

While deliberating on the economic rationales for brand extension Kapferer

(2001) warned that the firms should not get mixed up between two different

issues which are (1) increasing profitability and (2) reducing cost. The

production cost, distribution cost and communication cost varies from one

market to other, therefore, the profitability may also vary accordingly. Hence,

the profitably ratios of all the companies may not be the same. Thus, the

brand extension strategy should be used for those markets where the degree

of profit is high and cost structure is low (Kapferer 2001). If the extension is of

a strong brand then the company could take the liberty of charging a higher

premium of about 17% on it extended product (Buday 1989).

Brand extensions of strong and familiar core brands provide a certain degree

of comfort and assurance to the customers, therefore, the customers would

not hesitate in trying such extended brands. Thus, the trial cost for brand

extension would be quite lower than the new brand (Smith & Park 1992).

Other researchers also found that brand extension of established name have

several advantages including low cost, high success rate and it helps

“customer trial” ( Pitta & Katsanis 1995; Aaker & Keller 1990).

One of the major advantages of brand extension is that the reputation and

image may silently transmit from parent’s brand to the extended brand. One

such example is that of Heinz. The firm after acquiring “Weight Watcher”

launched low calories food and got instant recognition and positive brand

association. The parent brand and the brand extension advertisements not

only complement each others but the quality of the core brand leads to higher

level of acceptance and increase the awareness of the brand extension (Pitta

& Katsanis 1995).

Brands with strong reputation can capitalize its name and success by

extending it in other categories (Randall 2000). Pitta and Katsanis (1995)

were of the opinion that a core brand's associations with the extended brands

are complex and well defined, as most of the core brands also possess well-

defined brand image. Ambler and Styles (1997) also observed that the degree

of acceptance between core and extended brand would be higher if there is a

strong association between the two in terms of quality.

17

Customer based equity helps in increasing the brand image while the parent

brand and the extended brand makes the brand stronger and helps in creating

a “mega brand” (Pitta & Katsanis 1995). A mega-brand helps in increasing

distributors’ bargaining power creating investment opportunities, and

enhancing value of brands that critically affects brand positioning (Ambler &

Styles 1997). The firm, thus, in its media campaign could focus on perceived

quality and value of brands that helps in avoiding product specification based

advertising battle (Pitta & Katsanis, 1995).

The environment is constantly changing, and according to Kapferer (2001),

brand extensions help in increasing and maintaining its equity in this

vulnerable environment within and outside the country. The old brand tends to

have an aging affect. Brand extensions helps in “revitalizing” the old and

aging brands of the company. Launching a new brand with the same name

not only allows the company to recaptures its reputation, but also helps in

enhancing the image, and widens its appeal (Kapferer 2001).

The competitors are always targeting the niche gaps that the prevailing

brands may not be protecting effectively and efficiently. Brand extensions help

firms to fill those vulnerable gaps which the competitors may target. Filling

shelf space is an important marketing strategy for preventing the competitors

to sneak in. The brand extensions help in filling shelf space in the market and

make it more difficult for the competitors to attack from this end (Randall

1997). Some product categories lack quality and may not fulfill the consumer

needs in one part of the world. The brand extensions help to fulfill the demand

of other parts of world where the brand has strong reputation and more need

for it (Weilbacher 1995).

The company, at times, possesses certain technologies and expertise. This

indigenous technology and the expertise in Research and Development could

be utilized to develop a new product with the objective of extending the strong

core brand (Randall 2000; Ambler & Styles 1997). Consumer perceives the

level of transferability of expertise from one product to other differently. If

customer feels that the technological transferability to new product is difficult

18

the consumer acceptance would be positive, otherwise the level of

acceptance would be low (Randall 2000).

2.7 CATEGORIZATION THEORY

Categorization theories state that consumer attitude would be positive for

those extensions that are closer to the parent brand category (Fiske &

Pavelchak 1986; Sujan 1985). Consumer, while evaluating brand extension,

either adopts category based process or a piece meal process. If there is a

similarity between the extension and the schema (previous perception), then

according to categorization theory the consumer judgment would be based on

family resemblance. If there is a mismatch between the parent brand and

extension in terms of category then according to piece meal process the

consumer judgment is based on the specific attribute of the extension

(Nkwockha 2000). Aaker and Keller (1990) extension study was based on the

categorization theory. This study was carried out to study the consumer

perception and reactions on brand extensions. For this purpose, Aaker and

Kelly (1990) used six non-durable consumer goods and twenty hypothetical

brand extensions for ascertaining how the consumers evaluate brand

extension. The consumer evaluation for the product extension was positive for

those extensions that have a certain level of fit between core brand and

extended (Nkwocha 2000). The subject in the study had positive attitude

towards the core brand (crest) and hypothetical extension (crest mouth wash).

In view of the similarity between the core brand and extension, some of the

respondents were of the opinion that the crest mouthwash not only tastes like

tooth paste but would also fight cavities. Comparatively, the respondents’

opinion on the extension of Heineken beer to Heineken wine and popcorn was

poor, despite the positive opinions on the two brands. Thus, this example

supports the premise of categorization theory that positive attitude would only

transfer to the extension, when there is a certain level of fitness between two

product classes. Respondents felt that the beer and wine is a bad

combination and also beer and popcorn does not mix (Nkwocha 2000).

19

2.8 CONGRUITY THEORY

Schema congruity theories (Handler 1982) propose that cues (e.g., brand

names) state that some degree of congruity has a relationship with the level of

processing used by the consumers. If there is some degree of incongruity

than the consumer will process brand extension more positively. However, the

consumer evaluation will not be that positive if the (1) cues are congruent or

extremely incongruent (Nkwocha 2000).

How consumer makes judgment depends on structural congruity between

event and schema. If new events are similar to the existing schema it would

have a positive evaluation familiarity, acceptability, and liking. On the other

hand if the new events are “incongruent”, then it would lead to evaluation

process that may have positive or negative results (Mandler 1982). In this

context, when one sees a Pierre Cardin clothing on display with no price tag

he will assume that the displayed clothing is expensive. In this case, the

consumer has drawn the conclusion from schema (past experience) that

Pierre Cardin products are expensive and prestigious (Nkwocha 2000).

20

CHAPTER-3

EMPIRICAL MODEL VIZ. HYPOTHESES

This chapter illustrates an empirical model showing relationships of variables used in the study and ends with the derived hypothesis which is the main theme of the study.

3.1 EMPIRICAL MODEL

The relationships of different variables with the dependent variables have

been illustrated through an empirical model which is presented below:

FIGURE-1 EMPIRICAL MODEL

SIMILARITY

H1 REPUTATION

PARENT BRAN. CHARACTERISTIC CONSUMER

EVALUATIONPERCEIVED RISK

H2 OF INNOVATION BRAND

H3 EXTENSIONMULTIPLE EXTENSION

H4 CONCEPT AND CONSISTENCY

H5 BRAND EXTENSION FIT

In the above empirical model, the dependent variable is consumer evaluation

of brand extension. The relationships of the independent variables with

dependent variables have also been illustrated through five derived

hypothesis which are discussed in the subsequent section.

21

3.2 HYPOTHESES Based on the literature survey and variables discussed in the previous

chapters, the hypotheses that have been derived for testing have been stated

below:

H1: Those brands that have a stronger (a) reputation, (b) extended to

similar brand category, (c) share strong association, would get a

stronger consumer evaluation.

H2: There is a positive relationship between (a) how consumer perceived

risk (b) consumer level of innovativeness and how consumer

evaluates brand extension.

H3: Consumer evaluation would be positive for those brand extensions

that have a strong reputation for introducing multiple brands.

H4. The “consumer’s brand evaluation” would be positive for those brands

that have more “concept consistency”

H5: The “consumer perception fit” between the core brand and

extended brand would have a positive impact on the “consumer

evaluation of the brand”.

22

CHAPTER -4

METHODOLOGY

The research methodology chapter explains the author’s research position,

the approaches used in determining the structure, of the thesis, and the

research strategy that was necessary for achieving the paper’s objective.

Initially, the paper discusses the procedure adopted for stimuli selection,

followed by discussions on the variables used in the questionnaire along with

the required citations. The population and sampling procedures discuss its

size and how it was drawn and administered. This section ends with the

methods used for data analysis.

4.1 STIMULI SELECTION

There are more than 30 brand extensions associated to FMCGs, in Pakistan.

In order to have a manageable stimulus, a focus group discussion was held in

which the respondents were asked to select four sets of core brand and their

extensions in such a manner that they have varied degree of similarity ranging

from “very close” to “far”. Thus, the following four brand extensions were

finalized each representing different level of synergy amongst them:

a) Tapal Tea and Tapal Tea Bag.

b) Lifebuoy Soap and Lifebuoy Shampoo

c) Sufi Vegetable Oil and Sufi Washing Soap.

d) Woods wards Gripe Water and Woods ward Toothpaste.

The first two stimuli come in the category of close extension, and the later two

in the category of distance extension.

4.2 MEASUREMENTS

The dependent variables and independent variables of this study are

presented below along with discussions on how they were measured:

23

4.2.1 DEPENDENT VARIABLE

4.2.1.1 CONSUMER EVALUATION OF BRAND

The dependent variable for the study was “consumer evaluation” of brand

extension. Keller and Aaker (1992) have used the following statement for

measuring overall evaluation: “I am very positive to the extension of the

“XYZ.” In this study, the same was used for measuring “Consumer Evaluation”

of brand extension. Reference may be made to question No.8 of the

questionnaire attached as Appendix -1.

4.2.2 INDEPENDENT VARIABLES

4.2.2.1 SIMILARITY

Similarity between the parent brand and extended brand has been measured

differently by different researchers (Aaker and Keller (1990) and Smith and

Park (1992) have measured similarity by asking “think of a brand__ how

similar is the competence for making the original and extension brand”. “Think

of what you associate with brand____ how much overlap exists” (Bouschs

et.al 1987). In this study, the (Boush et. Al 1987) statement was modified for

measuring the similarity between for brands and their extensions. (Refer

question no.1, appendix-1).

4.2.2.2 REPUTATION OF PARENT BRAND

Aaker and Keller (1990); Loken and John (1993) have used similar measures

for measuring reputation of parent brand. (1) “All- together, I am very positive

with the brand XYZ” (2) “Altogether, I am very satisfied with the brand XYZ”.

(3) “Altogether, I associate positive things with the brand XYZ”.

In this study, the statement-1 above was modified for measuring reputation of

parent brands. (Refer to Question -2 of the questionnaire, appendix-1).

24

4.2.2.3 PERCEIVED RISK

Heim (2001) has used five factors for measuring perceived risk. Of those five

factors, the following two factors have been used in this study for measuring

perceived risk. (Refer question No.3 of Appendix one)

a) “When I am in front of the___ section, I always feel unsure about what

to pick”.

b) “When you buy an____, it is easy to make wrong choices”.

4.2.2.4 INNOVATIVENESS

Heims (2001) has used five different sub-variables for measuring

innovativeness. In this study the following two statements have been used for

measuring innovativeness:

(1) “I am continuously seeking new ideas” (2) “When things get boring, I like to

find some new and unfamiliar experience”. Based on these constructs two

questions were developed. (Refer question number-4, of the questionnaire at

appendix-1)

4.2.2.5 MULTIPLE BRAND EXTENSIONS

Aaker (1992) has found a relationship between the brand extension history

and the consumer evaluation of the brand. Respondents in this study were

asked to rate the history of introducing multiple brand extensions. (Refer

question number 5, questionnaire at appendix-1)

4.2.2.6 PARENTS BRAND CHARACTERISTICS

Smith (1994) has defined parents’ characteristics in reference to “broad

association”. For example, “Sony” has broad association as this brand name

could be associated with several product categories. Narrow associations

means that brand could be associated with limited number of products. Based

on this construct, the respondents were asked to rate the selected brand in

terms of broad and narrow association. (Refer question number 6 of the

questionnaire at appendix-1).

25

4.2.2.7 PARENT BRAND CONSISTENCY

The independent variable parent brand consistency has been defined by

(Park.et.al 1991) in terms of “price” and “product expensive design”. The

respondents in this study were asked to rate the four selected core brands in

terms of “price perception” and “expensive design”. (Refer to question number

7.1 and 7.2 of Appendix 1).

4.2.2.8 BRAND EXTENSIONS FIT

The independent variable has been defined by Aaker and Keller (1990) and

Keller, (1992), in terms of (1) Complimentary, (2) Suitability (3) Transferability

and (4) Difficulty. In this context, the respondents were asked to rate the four

brands in terms of these four sub dimensions. (Refer question number 8a, 8b,

8c, 8d, of the questionnaire, appendix-1).

4.3 SAMPLE SIZE

For multivariate sampling, at least 30 samples per variable are required to

have an appropriate representation (Sekran 2005). This study has 12

variables; therefore sample size of 360 would have been appropriate.

However, in order to have more appropriateness a sample size of 700 has

been used in this study.

Karachi is divided into 18 Union District Council (UDC) and each UDC

different population. It is as high as 0.723 million for Orangi and as low as

0.289 million for Gadap. To ensure appropriate representation from each

UDC, quota sampling technique was used for drawing 700 samples. The

population of all the 18 UDC along with the samples drawn form each town is

presented below:

26

Table 1: Town wise Population and size

Sr. No. Union

District Council Population as per

1998 census Sample size 1 Baldia town 406,165 30 2 Bin Qaisim town 315864 23 3 Gadap 289,564 21 4 Gulberg 453490 34 5 Gulshan-e-Iqbal 646,662 48 6 Jamshed_town 733,821 54 7 Kemari 383,778 28 8 Korangi town 564,504 42 9 Landhi town 666,784 49

10 Liquatabad 649,091 48 11 Lyari Town 607,922 45 12 Malir town 389,289 29 13 New Karachi 684,183 51 14 North Nazimabad 496,194 37 15 Orangi town 723,694 54 16 Saddar Town 616,151 46 17 Shahra-eFaisal 335,823 25 18 Site 476,560 35

9,439,539 700

It may be pointed out that and Gulshan and Orangi Towns are the most

populated towns with populations of and 646, 662 and 616,151, respectively.

Comparatively, the Bin Qasim and Gadap are the least populated with the

population of 315,864 and 289,564, respectively.

27

CHAPTER-5

RESULTS AND DISCUSSIONS Results and discussions have been presented into five sub-chapters with each chapter containing the derived hypothesis and its results, along with the variables used in the hypothesis.

5.1 DISCUSSIONS RESULTS OF REPUTATION, SIMILARITY & ASSOCIATION

In this sub-chapter, the derived hypothesis was based on four variables.

Dependent variable was “consumer evaluation” of brand extension, and

independent variables were: (1) similarity between parent brand and extended

brand, (2) stronger reputation, and (3) stronger association. These variables

were measured through four stimuli: (1) Tapal Tea Viz. Teabag (2) Lifebuoy

Soap viz. Shampoo (3) Sufi Vegetable oil viz. Soap (4) Woodward Gripe

Water viz. Tooth paste. The first two stimuli come in the category of close

extension, and the other two in distance extension. In this and subsequent

sub-chapters, the close-extensions and distance extensions have been tested

separately.

The empirical model developed earlier shows that the independent variables

reputation, similarity and brand association have strong relationship with the

consumer evaluation of the brand. These variables have been briefly

discussed below:

5.1.1 SIMILARITY

The similarity refers to degree of resemblance of consumer perception on the

extensions and the core brand (Smith & Park 1992). Most of the researches

have deliberated on the level of perceived similarity between the original and

extended brand and found that if the level of similarity is higher between the

core and extended brand category then the extended brands would have

more chances of inheriting the positives and negative aspects of the core

brand (Aaker & Keller 1990; Park, et al. 1991; Boush & Loken 1991; Dacin &

Smith 1994; Herr, et al. 1996; Keller and Sood 2001). This conjecture is

28

based on the premise that consumers’ attitude will be more favorable towards

those extensions where they find higher level of congruence between the

extended and the original brand (Boush, et al. 1987)

5.1.2 PARENT BRAND CHARACTERISTIC & EVALUATION

The terms such as product attributes, product benefits and costumers

characteristics are generally used for conceptualization of brand association

(Keller 1993). Brand names such as “Sony” have broad association and are

used for diversified range of products. There are some brand names like

“close-up” that has narrow association and could be used for one or few

products (Bousch & Loken, 1999).

Product portfolio characteristics of parent brands generally have moderating

effect on product category fit and the evaluation of parent brand (Dacin &

Smith, 1994). Dacin and Smith (1994) studied the impact of: (1) number of

products associated with brand (2) the quality of variance across these

products and (3) the relatedness of product to each other and the parent

brands.

Dacin and Smith (1994), major findings were: The consumer’s evaluation

would be positive for those brands that are associated with several products,

provided there is no significant parity between the qualities of product. In fact,

addition of product would enhance positive evaluation, provided the quality

level of additional product is the same. Their research also found that it may

not be advisable to extend the brands un-discriminately into unrelated

product, even if the quality of the core brand is high. First, extension must be

carried out into moderately related categories and then to unrelated category.

This step wise extension from one category to moderately unrelated category

would help consumer in maintaining the perception of relatedness (Kapoor

2005).

A brand could have association with several products. However, the level of

association of brand name with all products may vary. Products that have

strong association with the core brand could be easily evaluated by

29

consumers. Contrarily, products that have weaker association with the core

brand are dependent on a certain degree of “cues” for evaluation purpose

(Kapoor 2005)

5.1.3 REPUTATION

The basic assumption in brand extension strategy is that the leverage

providing capabilities of parent brands to extensions varies from brand to

brand. It is higher for stronger brands and lower for weaker brands (Aaker &

Keller 1992; Smith & Park 1992). Brand reputation refers to consumer’s

perceptions on the quality associated with a brand (Aaker & Keller 1990;

Barone, et al. 2000). The consumers tend to evaluate those brands more

favorably that have higher perceived quality as compared to low perceived

quality brands (Aaker & Keller 1990; Keller & Aaker 1992; Sunde & Brodie

1993; Dacin & Smith 1994; Bottomley and Doyle 1996). Reputation in the

above studies has been conceptualized as a combination of: (a) product

quality, (b) firm’s marketing activities and (c) acceptance in the market place

(Fombrun & Van Riel 1997). Consumer while evaluating brands that have

higher perceived reputation would feel that purchasing the same would be

comparatively less risky, thus their evaluations would be more positive

towards these brands as compared to brands carrying lower brand

reputation (Wernerfelt 1988; Zeitham & Berry & Parasuraman 1996).

5.1.4 STIMULI

The stimuli used for this study can be categorized into two categorize. One is

close and other is distance extension. Brand extensions such as Tapal Tea

Viz. Teabags, comes in the category of close-extension. The brand

extensions such as Sufi Soap viz. Vegetable Oil and Woodward Gripe Water

viz. Tooth Paste comes in the category of distance extension. The hypothesis

for close and distance extensions have been tested separately.

30

5.1.5 HYPOTHESIS ONE:

Variables such as brand reputations, similarity, and associations have been

used by various authors for measuring the relationship of these variables with

consumers’ overall evaluation of brand extensions. The hypothesis developed

in this context is presented below:

H1O: Brands that have (a) stronger reputation (b) similarity between parent

brands and extended brand, and (c) strong associations would have strong

consumer evaluation.

H1A. At least one of the variables has linear relationship with the dependent

variable “consumer evaluation”

Statistical representation of the above hypothesis is presented below:

H1O: β1=β2=β3=0 H1A: β1≠β2≠β3≠ 0

The above hypothesis was tested separately for close and distance

extensions:

5.1.5.1 CLOSE EXTENSION

Brands such as Tapal viz. Teabags and Lifebuoy viz. Shampoo have lesser

distance. The combined relationships of these stimuli in terms of similarity,

reputation and association with overall evaluation were tested through

multiple regressions.

The multiple estimating regression equation for close extensions used as

stimuli is presented below:

Y= a + b1SimilarityTapal tea + b2SimilarityLifebuoy + b3ReputationTapal tea +

b4ReputationLifebuoy + b5AssociationTapal tea + b6AssocaitonLifebuoy

Summarized multiple regression results are presented below:

31

Table 2: Multiple regression of Close distance extension

Regression Statistics Multiple R 0.96 R Square 0.92 Adjusted R Square 0.92 Standard Error 0.11 Observations 700.00

Table 3: ANOVA (Close Extension)

Df SS MS F Significance F Regression 6.00 95.69 15.95 1,292.32 - Residual 693.00 8.55 0.01 Total 699.00 104.25

Table 4: Coefficient (Close Extension)

Coefficients Standard

Error t Stat P-value Lower 95%

Intercept 0.01 0.05 0.19 0.85 (0.09) Similarity –Lifebuoy 0.42 0.01 31.31 0.00 0.40 Similarity –Tapal Tea 0.18 0.02 9.86 0.00 0.15 Reputation –Tapal Tea 0.10 0.02 5.72 0.00 0.06 Reputation -Lifebuoy 0.31 0.02 16.14 0.00 0.28 Association – Tapal Tea (0.03) 0.02 (1.74) 0.08 (0.06) Association. Lifebuoy 0.01 0.00 1.92 0.06 (0.00)

Graph 1: Scattered Chart-Close Extension

-1.002.003.004.005.006.00

0 5 10 15

Close Extension

Bran

d E

valu

atio

n

Similarity-tapal

Similarity-lifbuoyReputation-tapalReputation-LifebuoyAssosciation-TapalAssosciation-

(Respondent’s opinions have been grouped) The hypothesis that at least one of the independent variables will have the

relationship with the dependent variable “consumer evaluation” of the brand

extension was accepted. The ANOVA Table shows that the F< 0, meaning it

is significant. Moreover, all the P values are less than .05 except

“association”. This indicates that all the coefficients are relevant to the model

except “Association-Tapal” and “Association-Lifebuoy”. The R2 is 0.92, which

32

indicates that the combined effect of the independent variables that is

similarity, reputation and parent brand characteristics (association) will cause

the dependent variable, consumer evaluation of brand extension to move by

92%, which is an indication of a very strong relationship.

The coefficient of determination for similarity Lifebuoy, and reputation lifebuoy are

0.42 and 0.31, respectively indicating that these two predictor variables/stimuli

have comparatively stronger influence on the dependent variable as

compared to other variables/stimuli.

The above tables and graphs indicates that in case of “Lifebuoy Soap Viz.

Shampoo” similarity and reputation were found to be stronger predictors for

“consumer evaluation” of brand extensions as compared to “reputation” and

“parent brand characteristics (association)”. The variable “similarity” was

found to be, comparatively, stronger predictor in case of “Tapal Tea viz.

Teabag”, as compared to other variables.

5.1.5.2 DISTANCE EXTENSION Brands such as “Sufi viz. Vegetable Oil” and “Lifebuoy viz. Shampoo”

Woodward viz. Grip Water” have more distance. The combined relationships

of these stimuli in terms of similarity, reputation and association with overall

evaluation were tested through multiple regressions. The multiple estimating

regression equation for distance extensions used as stimuli is presented

below:

Y= a + b1SimilaritySufi + b2SimilarityWoodward + b3ReputationSufI +

b4Reputation Woodward + b5Assocation Sufi + b6AssciationWoodward.

Summarized multiple regression results of distance extensions are presented

below:

33

Table 5: Multiple Regression of Distance Extension

Regression Statistics Multiple R 0.76 R Square 0.58 Adjusted R Square 0.58 Standard Error 0.47 Observations 700.00

Table 6: ANOVA-Distance Extension

Df SS MS F Significance F Regression 6.00 216.43 36.07 162.51 0.00 Residual 693.00 153.82 0.22 Total 699.00 370.25

Table 7: Coefficients- Distance Extension

Coefficients Standard Error

t Stat P-value Lower 95%

Upper 95%

Intercept 0.25 0.11 2.24 0.03 0.03 0.47 Similarity-Sufi 0.09 0.02 4.47 0.00 0.05 0.13 Similarity Woodward (0.04) 0.02 (2.05) 0.04 (0.08) (0.00) Reputation –Sufi 0.26 0.02 11.09 0.00 0.21 0.30 Reputation –Woodward 0.37 0.03 11.72 0.00 0.30 0.43 Association –Sufi 0.06 0.01 4.26 0.00 0.03 0.09 Association –Wood 0.20 0.03 6.17 0.00 0.14 0.26

Graph 2: Scattered Chart-Distance extension

0.00

1.00

2.00

3.00

4.00

5.00

0 5 10 15Distance

Brand Extension

Ove

rall

eval

uatin

Similarity-Sufi

Similarity-Woodw ar

Rep-Sufi

Rep-Wood

Assos-Sufi

Assos-Wood

(Respondents’ opinions have been grouped)

The hypothesis that at least one of the independent variables will have the

relationship with the dependent variable “consumer evaluation” of the brand

was also accepted for the distance extension. The ANOVA table shows that

the F< 0, meaning it is significant. Moreover all the P values are less than .05,

further confirming the relationship of the model. The R2 is 0.58, which

34

indicates that the combined effect of the independent variables will cause the

dependent variable “consumer evaluation” of brand extension to move by

58%, which is an indication of a strong relationship.

The coefficient of determinations for Reputation Sufi, and Reputation Woodward

are 0.26 and 0.37, respectively indicating that these two predictor

variables/stimuli have comparatively stronger influence on the dependent

variable “consumer evaluation” of brand as compared to other variables.

From the above, it could also, be inferred that in case the parent brand is

extended to similar category, then the similarity between parent brand and

brand extension would be vital for respondents’ evaluation of brand extension.

In case extension is of distance nature (not in similar category) than

reputation of parent brand would be used by respondents for evaluation of

brand extension. It may also be observed from the above that the predicator

variable “reputation” is comparatively stronger in case of close and distance

extensions.

Firms, whose brands have strong reputation, could afford the luxury of

venturing into distance brand extension. Firms with weaker brand reputation

should focus on enhancing the brand reputation, and if they have to extend

their brand, it should be in the same category (Close distance).

35

5.2 DISCUSSIONS & RESULTS OF INNOVATIONS & PERCEIVED RISK

In this sub-chapter, the derived hypothesis was based on two variables. Dependent variable was “consumer evaluation” of brand extension, and independent variables were: (1) consumer’ innovativeness, and (2) how consumer perceives risks. Close and distance extensions were again tested separately, followed by recommendation.

The major premise in this case is that consumer evaluation of brand

extensions is not dependent on the characteristics of parent or extended

brand but on consumers’ personally traits like how innovative consumers are,

and how they perceive risks. These variables have been briefly discussed

below:

5.2.1 PERCEIVED RISK

Consumers before purchasing goods feel uncertainty in reference to expected

loss that may incur from purchasing and using the product. This uncertainty is

referred as perceived risk (Bauer 1960; Cox 1967). The term uncertainty has

two perspectives: (1) consequences of making a mistake; and (2) uncertainty

about the outcome (Derbaix 1983; Gronhaug & Stone 1995; Mitchell 1999)

Most of the researches on perceived risk suggest that consumers while

dealing with a recognized brand feel that it has lesser degree of perceived risk

(Cox 1967; Roselius 1971; Rao & Monroe 1989). Brand extension to a new

category affects consumers from two perspectives. One, it provides new

alternative; second, it enhances the consumer perception of risk. Thus, a well

known brand not only induces trial but also helps in relieving the risk (Heim

2000). Berlyne (1970) observed that novel stimuli give adverse reactions.

However, repeated exposure helps in developing familiarity with a brand

which not only helps in decreasing perceived risk but also helps in increasing

positive affect (Baker, et al. 1986; Obermiller 1985).

36

5.2.2 INNOVATIVENESS

An individual who is receptive to new ideas and is willing to try new practices

and brand is considered to possess a personality trait of innovativeness

(Rogers 1989). “The innovators are venturesome; they try new ideas and take

some risk…where as late adopters (laggard) are tradition bound, they are

suspicious of changes, and adopt innovation when it has become some thing

of a tradition itself” (Kotler & Armtrong, 2007). The innovative consumers tend

to get comfort when they take risk.

5.2.3 STIMULI

Like preceding section, close brand extensions such as “Tapal Tea Viz. Tea

Bags”, and “Lifebuoy Soap viz. Shampoo”, and distance brand extensions

such as “Sufi Soap viz. Vegetable oil” and “Woodward Gripe Water viz.

Tooth Paste” have been tested, separately.

5.2.4 HYPOTHESIS TWO:

Variables such as respondent’s innovative nature, and the perceived risk

according to several authors would effect how consumers evaluate brand

extensions. The hypothesis developed in this context is presented below:

H2O: There is a positive relationship between (a) how consumer perceived

risk, and (b) consumer level of innovativeness with “consumer evaluation” of

brand extension.

H2A. At least one of the variables has linear relationship with the dependent

variable “consumer evaluation”

The statistical representation of the above hypothesis is presented below:

H2O: β1=β2=0 H2A: β1≠β2≠ 0

37

The above hypothesis was tested by two different methods. In method one,

the relationship of the close-extensions was tested and in method two the

relationship of distance-extensions was tested:

5.2.4.1 CLOSE EXTENSION

The relationship of independent variables “Perceived Risk” and consumer

level of “Innovativeness” were, also, measured with the dependent variable

consumer evaluation of close brand extensions that is “Tapal Tea viz.

Teabag”, and “Lifebuoy Soap Viz. Shampoo

The multiple estimating regression equation for the above variables is

presented below:

Y= a + b1Innovativeness + b2Percived Risk.

Where “Y” in the above equation is an average of consumer evaluation of

close extensions, (1) “ Tapal Tea viz. Teabag, and (2) Lifebuoy Soap viz.

Shampoo.

The summarized multiple regression results are presented below:

Table 8: Multiple Regression of Close Extension

Regression Statistics Multiple R 0.37 R Square 0.14 Adjusted R Square 0.14 Standard Error 0.36 Observations 700.00

Table 9: ANOVA of Close Extension

Df SS MS F Significance F Regression 2.00 14.46 7.23 56.12 0.00Residual 697.00 89.79 0.13 Total 699.00 104.25

38

Table 10: Coefficients of Close Extension

Coefficients Standard

Error t Stat P-value Lower 95%

Upper 95%

Intercept 3.78 0.07 53.50 0.00 3.64 3.91Perceived Risk 0.05 0.02 2.94 0.00 0.02 0.08Innovativeness 0.15 0.02 9.03 0.00 0.12 0.19

Graph 3: Scattered Chart, Close Extension

0

2

4

6

1 2 3 4 5 6 7 6 9 10

Close Brand Extension

Bra

nd

Eva

luat

ion

Percieved Risk InnovativenessClose Extension

The hypothesis that at least one of the independent variables will have the

relationship with the dependent variable “consumer evaluation” of the close

brand extension was accepted. The ANOVA Table shows that the F< 0,

meaning it is significant. Moreover, all the P values are less than .05, further

confirming the relationship of the model. The R2 is 0.14, which indicates that

the combined effect of the independent variable will cause the dependent

variable to move by 14% which is a very weak relationship. Innovative

consumers tend to evaluate close brand extension more positively (coefficient

of determination being 0.15) as compared with consumer with a higher degree

of “perceived risk” (coefficient of determination being 0.05).

5.2.4.2 DISTANCE EXTENSION

The relationship of independent variables “perceived risk” and consumer level

of “innovativeness” were also measured with the dependent variable

“consumer evaluation” of distance brand extensions that is “Sufi Soap Viz.

Vegetable Oil” and “Woodward Grip Water viz. Tooth paste”. Multiple

estimating regression equation for the above variables is presented below:

39

Y= a + b1Innovativeness + b2Percived Risk Where Y is the average of consumers responses in relation to how they

evaluate distance extensions that is: (1) Sufi viz. Vegetable oil, and

Woodward viz. Gripe water. Summarized multiple regression results are

presented below:

Table 11: Multiple Regression of Distance Extension Regression Statistics

Multiple R 0.42 R Square 0.18 Adjusted R Square 0.18 Standard Error 0.66 Observations 700.00

Table 12: ANOVA, Distance Extension

df SS MS F Significance F Regression 2.00 66.06 33.03 75.68 0.00 Residual 697.00 304.19 0.44 Total 699.00 370.25

Table 13: Coefficients, Distance Extension

Coefficients Standard Error

t Stat P-value Lower 95%

Upper 95%

Lower 95.0%

Intercept 2.53 0.13 19.46 0.00 2.27 2.78 2.27 Perceived Risk 0.36 0.03 12.16 0.00 0.30 0.41 0.30 Innovativeness (0.04) 0.03 (1.41) 0.16 (0.11) 0.02 (0.11)

Graph 4: Distance Extension

The hypothesis that at least one of the independent variables will have the

relationship with the dependent variable “consumer evaluation” of brand was

accepted. The ANOVA Table shows that the F< 0, meaning it is significant.

Moreover, all the P values are less than .05 except “innovativeness” indicating

that “innovativeness” has no relationship with the dependent variable that is

-

2.00

4.00

6.00

1 2 3 4 5 6 7 8 9 10

Distance Extension

Con

sum

er

Eva

luat

ion

Perceived Risk InnovativenessDistance Extension

40

“consumer evaluation” of brand extension. The R2 is 0.18, which indicates that

the combined effect of the independent variables will cause the dependent

variable to move by 18% which is a very weak relationship. The overall level

of “innovativeness” and “perceived risk” of respondents were high, but their

relationships to distance brand extensions were weak.

The coefficients for “perceived risk” and “innovativeness” are 0.36 and -0.04,

respectively indicating that consumers with high level of innovativeness would

tend to evaluate distance brand extensions lowly and negatively. Consumers

with high level of “perceived risk” have evaluated distance extensions

comparatively more positively with coefficient being 0.36

Firms that are extending their brands to similar category (close extension)

should target consumers that have high level of “innovativeness”.

Comparatively, companies that are extending their brand into non-similar

category (distance extension) must target those customers that have high

level of “perceived risk”.

41

5.3 DISCUSSIONS & RESULTS OF CONCEPT CONSISTENCY

In this sub-chapter, the derived hypothesis was based on dependent

variable “consumer evaluation” of brand extension, and independent

variable was “Brand Concept Consistency”. Like preceding sections,

first the related variable concept consistency is discussed and

subsequently the derived hypothesis was tested separately for close

extensions, and distance extension followed by recommendations

5.3.1 BRAND CONCEPT CONSISTENCY & EXTENSION

Market is dynamic, therefore is always changing. To remain aligned with

market, firms must modify their offering, enter different market segments, and

re-position their offering. In view of such complexities, the measure of fit while

introducing brand extension may be relevant in one situation and not in

another situation (Kapoor 2005). Park et.al. (1991) were of the opinion that

the measure of fitness between core brand and extended brand based on one

factor “similarity” has certain limitation. They were of the opinion that

consumer evaluation would only be positive for those brand extensions that

have consistency in brand concept. Brand concept is “Brand unique abstract

meaning (e.g high status that typically originate from a particular configuration

of product features. (eg. High price, expensive looking design, etc.) and a

firms efforts to create meanings for these arrangements (e.g. The relentless

pursuit of perfection by Lexus)” (Park .et, al. 1991, p.186)

Factor “similarity” is important but it fails to explain all the aspects related to

fitness. Two objects could have several common physical attributes, but it

does not mean that both the objects would have similar brand concepts. For

example Sieko and Rolex watches share several common product level

features. But as far as brand concepts of the two watches are concerned,

Seiko has reputation of functional brand and Rolex as a prestige brand (Park

et al 1991). Thus the perceived fit is “combination of (1) product feature

similarity and (2) brand concept consistency.

42

5.3.2 HYPOTHESIS

Variable such as parent “brand concept consistency” have been used by

various researchers for ascertaining how consumer evaluate brand

extensions. The product concept consistency is related to (1) design, and (2)

price. The hypothesis developed in this context is presented below:

H3O. The “consumer’s brand evaluation” would be positive for those brands

that have more “concept consistency”

H3A. The “consumer’s brand evaluation” would be positive for those brands

that have more “concept consistency”

Statistical representation of the above hypothesis is presented below:

H3O: β1=β2=0 H3A: β1≠β2≠ 0

The above hypothesis was tested for close extensions and distance

extension, separately.

5.3.2.1 CLOSE EXTENSION

The brands “Tapal viz. Teabags” and “Lifebuoy viz. Shampoo” have lesser

distance. The combined relationships of these stimuli in terms of: (1) design,

and (2) price, with overall evaluation were tested through multiple regressions.

Multiple estimating regression equation for close extensions used as stimuli is

presented below:

Y= a + b1PriceTapal + b2Price Lifebuoy + b3DesignTapal +b4DesignLifebuoy

Summarized multiple regression results are presented below:

43

Table 14: Multiple Regression of Close Extension Regression Statistics

Multiple R 0.82 R Square 0.67 Adjusted R Square 0.67 Standard Error 0.22 Observations 700.00

Table 15: ANOVA, Close Extension

Df SS MS F Significance F Regression 4.00 70.19 17.55 358.04 0.00 Residual 695.00 34.06 0.05 Total 699.00 104.25

Table 16: Coefficients, Close Extension

Coefficients Standard Error

t Stat P-value Lower 95%

Upper 95%

Intercept 1.25 0.10 12.60 0.00 1.05 1.44 Price-Tapal Tea (0.04) 0.01 (2.54) 0.01 (0.07) (0.01) Price-Lifebuoy 0.20 0.02 12.46 0.00 0.17 0.23 Design-Tapal Tea 0.55 0.02 26.38 0.00 0.51 0.59 Design-Lifebuoy 0.01 0.01 1.37 0.17 (0.01) 0.03

Graph 5: Scattered Chart Close Extension

-1.002.003.004.005.006.00

1 2 3 4 5 6 7 8 9 1

Close Extension

Bra

nd e

valu

atio

n

Price-TapalTeaPrice-Lifebuoy

Design-TapalTeaDesign-LifebuoyEvaluation ofclose brands

The hypothesis that at least one of the independent variables will have the

relationship with the dependent variable “consumer evaluation” of brand was

accepted. The ANOVA Table shows that the F< 0, meaning it is significant.

Moreover, all the P values except design of lifebuoy are less than .05. This

indicates that except the design of lifebuoy other variables validate the model.

The R2 is 0.67, which indicates that the combined effect of the independent

44

variables will cause the dependent variable

to move by 67% which is an indication of strong relationship.

The coefficients for design and price of Tapal Tea is 0.55, and -0.04,

respectively indicating that consumers while evaluating Tapal tea were more

influenced with the “design” of tea as compared to the “price” of Tapal tea. In

case of Lifebuoy, the coefficients for “design” and “prices” were 0.01, and

0.20, respectively, indicating that while evaluating Lifebuoy, consumer

appears to be more influenced with price, as compared to design of Lifebuoy

soap.

5.3.2.2 DISTANCE EXTENSIONS

The brand concept consistency for distance extensions “Sufi Soap viz.

Vegetable Oil”, and “Woodward Gripe Water viz. Tooth Paste” brands were

measured in terms of: (1) design, and (2) price, which were then related with

“consumer overall evaluation” of brand extension. Multiple estimating

regression equation for distance extensions used as stimuli is presented

below:

Y= a + b1Price Sufi + b2PriceWoodward + b3DesignSufi +b4DesignWoodward

The summarized multiple regression results are presented below:

Table 17: Multiple Regression of Distance Extension

Regression Statistics Multiple R 0.56 R Square 0.32 Adjusted R Square 0.31 Standard Error 0.60 Observations 700.00

Table 18: ANOVA, Distance Extension

Df SS MS F Significance F Regression 4.00 117.68 29.42 80.96 0.00 Residual 695.00 252.57 0.36 Total 699.00 370.25

45

Table 19: Coefficients Distance Extension Coefficients Standard

Error t Stat P-value Lower

95% Upper 95%

Intercept 1.88 0.10 19.69 0.00 1.70 2.07 Price-Sufi 0.14 0.03 5.05 0.00 0.08 0.19

Price Woodward 0.13 0.02 5.79 0.00 0.09 0.18 Design-Sufi 0.19 0.03 6.76 0.00 0.14 0.25

Design-Woodward 0.01 0.02 0.71 0.48 (0.02) 0.05 Graph 6: Scattered Chart, Distance Extension

-2.004.006.008.00

10.0012.00

0 5 10 15

Distance Extension

Bra

nd E

valu

atio

n

Price-Sufi

PriceWoodward

Design-Sufi

Design-Woodward

The hypothesis that at least one of the independent variables will have the

relationship with the dependent variable “consumer evaluation” of the brand

was accepted. The ANOVA Table shows that the F< 0, meaning it is

significant. Moreover, all the P values except of the design of Woodward

Gripe water are less than .05. This indicates that the design of Woodward has

no relationship with the dependent variable “consumer evaluation” of brand

extension. The R2 is 0.32, which indicates that the combined effect of the

independent variables will cause the dependent variable to move by 32%

which is a weak relationship.

The coefficient of determinations for Sufi’ design and price are 0.19 and 0.14,

respectively indicating that in case of Sufi design is comparatively a stronger

predictor than price. Comparatively, price of Woodward is stronger predictor

and design has no relationship with consumer evaluation of distance brand.

In case of close extensions such as Tapal Teabag the firm must concentrate

on the design, which Tapal was found to be doing it. However, in case of

46

distance extension, no relationship was found with the design of Woodward

Gripe Water. Woodward needs to improve the design of the gripe water

packaging in order to remain competitive.

47

5.4 RESULTS AND DISCUSSIONS ON BRAND EXTENSION FIT

In this sub-chapter, first the related variable brand extension fit has been deliberated and subsequently the derived hypothesis was tested separately for close extensions, and distance extension, followed by recommendations.

5.4.1 BRAND EXTENSION AND PERCEIVED FIT

Different researchers have defined “perceived fit”, differently. The commonly

used determinants of the perceived fit are, (1) complementary, (2) suitability,

and, (3) transferability. These determinants relate to consumer perception on

the degree of similarity between the two products (Aaker & Keller 1990; Aaker

& Keller, 1992). Rousch and Loken (1991) believe that “typicality” is an

important concept of perceived fit. Where as (Park & Melberg & Lawsan 1991)

are of the opinion that “product similarity” and “brand concept consistency”,

are the determinants of “perceived fit”. Kling and Smith, (1997) are of the

opinion that determinants such as component parts, product feature, product

function, needs they satisfy, usage situations, manufacturing processes are

related to perceived fit. Most of the researchers suggest that affect of brand

name in one category will transfer to another product category, if consumer

perceptions about the core, and extended product category is same in terms

of similarly and fitness. Smith (1997) while criticizing the earlier studies

observed that most of such studies had remained focused on product related

or attributes information while comparing two product classes. Additionally,

these researches have restricted factor “attribute information” to one cue i.e.

brand name (Klink & Smith, 1997). Since most of the previous brand

extension studies are based on (1) attribute information, and (2) single cue,

therefore, it may give an inflated effect of “perceived fit” (Nkowocha 2000).

Some of the researchers have used two components in their brand extension

fit studies. For example Park and Srivnvason (1994) proposed two concepts

which were (1) product related similarities (2) and product concept

consistency. The relationship between function orientation and prestige

48

orientation were used for studying brand concept consistency (Nkwocha

20005). Similarly, Park et.al., (1991) proposed a concept in which they

identified product related similarity through concrete measures i.e. attribute

matching or abstract (e.g. shared usage situation) for studying the relationship

between the parent brand and extended brand(Nkwocha 2000)

In another brand extension related study, a comparison of relative influence of

brand specific association against category similarity was proposed (Broniarcz

& Alba’s 1994). The authors were of the opinion that those brands that are

less effective in their category will be more successful in another category,

provided consumer perceives that this brand contains some attributes that are

more relevant to the extended category (Brioniarzh & Alba’s 1994).

Broniarcz and Alba’s (1994) in the same study used two tooth pastes that are

“close-up” and “crest” as stimuli for extending into product category

“mouthwash”. The finding of this research was that crest tooth paste was

more acceptable in mouth wash category. Reasons for these conclusions

were that “crest” tooth paste is more associated with breath-freshening, which

is relevant to mouth wash category. In the same context “crest” toothpaste

was not evaluated favorably because, it is more associated with “dental care”,

which has little or no relevance with mouth wash category (Nkwocha 2000).

5.4.1 HYPOTHESIS-4

Variable such as parent brand fitness have been used by various author in

relation to how the consumer evaluates brand. Some of the commonly used

sub-variables for brand fitness are complimentary, supplementary,

transferability, and difficulty, which have, also, been used in this study. The

developed hypothesis in this context is presented below:

H4O: The “consumer perception fit” between the core brand and

extended brand would have a positive impact on the “consumer

evaluation of the brand”.

49

H4A: The “consumer perception fit” between the core brand and

extended brand would not have a positive impact on the “consumer

evaluation of the brand”.

Statistical representation of the above hypothesis is presented below:

H4O: β1=β2=β3=β4=0 H4A: β1≠β2≠ β1≠β2≠0

The above hypothesis was tested for close and distance extensions

separately.

5.4.2.1 CLOSE EXTENSION

The independent variable “perceived fit” comprised of four sub-variables

which are, (1) complimentary (2) substitute, (3) transferability, and (4)

difficulty. These sub-variables of perceived fitness were measured for close

stimuli “Tapal Tea viz. Tea Bag”, and “Lifebuoy Soap Viz. Shampoo. The

multiple estimating regression equation for the above variables is presented

below:

Y= a + b1ComplimentaryTapal-Tea + b2SuplimentaryTapal Tea + b3Tranferabiity Tapal

Tea +b4DifficutlyTapal-Tea + b5ComplimentaryLifebuoy + b6SuplimentaryLifebuoy+

b7Tranferabiity Lifebuoy +b8DifficutlyLifebuoy

Summarized multiple regression results are presented below:

Table 20: Multiple Regression, Close Extension Regression Statistics

Multiple R 0.84 R Square 0.71 Adjusted R Square 0.71 Standard Error 0.21 Observations 700.00

Table 21: ANOVA, Close Extension

Df SS MS F Significance F Regression 8.00 73.89 9.24 210.29 0.00 Residual 691.00 30.35 0.04 Total 699.00 104.25

50

Table 22: Coefficients, Close Extension

Coefficients Standard Error

t Stat P-value Lower 95%

Upper 95%

Intercept 1.67 0.08 20.83 0.00 1.51 1.83 Tapal compliment 0.01 0.01 0.85 0.40 (0.01) 0.02 Tapal substitute 0.24 0.03 8.58 0.00 0.19 0.30 Tapal transferability 0.23 0.03 8.02 0.00 0.17 0.29 Tapal difficulty (0.01) 0.02 (0.49) 0.62 (0.05) 0.03 Lifebuoy-Compliment 0.07 0.01 5.40 0.00 0.04 0.09 Lifebuoy-Substitute (0.09) 0.01 (9.11) 0.00 (0.11) (0.07) Lifebuoy-Transferability 0.18 0.01 12.21 0.00 0.15 0.21 Lifebuoy-Difficulty 0.02 0.01 2.54 0.01 0.00 0.04

Graph 7: Scattered Chart, Close Extension

-1.002.003.004.005.006.00

1 2 3 4 5 6 7 8 9 1

Close Brand Extension

Bra

nd E

valu

atio

n

Tapal- comp.

Tapal- sub.

Tapal-trans.

Tapal-diff.

Lifebuoy-Comp.Lifebuoy-Sub

(Respondents have been grouped) The hypothesis that at least one of the independent variables will have the

relationship with the dependent variable “consumer evaluation” of the close

brand extension was accepted. The ANOVA Table shows that the F< 0,

meaning it is significant. Moreover, all the P values except tapal- difficulty and

Tapal tea-compliment are less than .05. This indicates tapal-tea difficulty, and

tapal tea-compliment has no relationship with the dependent variable that is

consumer evaluation of brand. The R2 is 0.71, which indicates that the

combined effect of the independent variables will cause dependent variable to

move by 71% which is an indication of very strong relationship.

Comparatively, stronger predictors in this relationship were Tapal(substitute),

Tapal (Transferability), and Lifebuoy (Transferability) with coefficient of

determinations being, 0.24, 0.23 an 0.18 respectively. This indicates that

51

these variables are stronger predictors for the dependent variable “perceived

fitness”. The rest of the variables are weak predictors for the perceived fitness

with all the coefficients of determination being less than 0.18.

5.4.2.2 DISTANCE EXTENSION

The independent variable “perceived fit” comprised of four sub-variables

which are (1) complimentary (2) substitute, (3) transferability, and (4) difficulty.

These sub-variables of perceived fitness were measured for distance stimuli

“Sufi viz. Vegetable Oil”, and “Woodward Gripe Water viz. Tooth Paste”. The

multiple estimating regression equation for the above variables is presented

below:

Y= a + b1ComplimentarySufi Soap + b2SuplimentarySufi Soap + b3RTranferabiitySufi

Soap

+b4DifficutlySufi Soap + b5ComplimentaryWoodward + b6SuplimentaryWoodward +

b7Tranferabiity Woodward +b8DifficutlyWoodward

Summarized multiple regression results are presented below:

Table 23: Multiple Regression Distance Extension

Regression Statistics Multiple R 0.39 R Square 0.15 Adjusted R Square 0.14 Standard Error 0.36 Observations 700.00

Table 24: ANOVA, Distance Extension

Df SS MS F Significance F Regression 8.00 15.51 1.94 15.09 0.00 Residual 691.00 88.74 0.13 Total 699.00 104.25

52

Table 25: Coefficients, Distance Extension

Coefficients Standard Error

t Stat P-value Lower 95%

Upper 95%

Intercept 4.46 0.05 88.52 - 4.36 4.55 Sufi-Complimentary (0.02) 0.01 (1.20) 0.23 (0.04) 0.01 Sufi-Substitute 0.00 0.01 0.35 0.73 (0.02) 0.03 Sufi-Transferability 0.08 0.02 4.30 0.00 0.05 0.12 Sufi-Difficulty (0.09) 0.01 (7.06) 0.00 (0.12) (0.07) Woodward compliment 0.01 0.01 0.78 0.44 (0.02) 0.04 Woodward substitute 0.03 0.00 6.19 0.00 0.02 0.04 Woodward transferability (0.06) 0.02 (3.65) 0.00 (0.09) (0.03) Woodward difficulty 0.07 0.02 4.40 0.00 0.04 0.10

Graph 8: Scattered Chart Distance Extension

-

1.00

2.00

3.00

4.00

0 5 10 15

Distance Extension

Bra

nd E

valu

atio

n

Suf-Comp.

Sufi-subs.

Sufi-Trans

Sufi-diff.

Woodward.ComWoodward.Sub

The hypothesis that at least one of the independent variables will have the

relationship with the dependent variable “consumer evaluation” of the close

brand extension was accepted. The ANOVA Table shows that the F< 0,

meaning it is significant. Moreover, all the P values are less than .05 except

Sufi-complimentary, Sufi-substitute, and Woodward complimentary, indicating

that these mentioned variables have no relationship with the dependent

variable. The R2 is 0.15, which indicates that the combined effect of the

independent variables will cause dependent variable to move by 15% which is

a very weak relationship.

The entire image of coefficients was weak. It was as high as 0.08 for Sufi-

transferability, and as low as 0.01 for Woodward complimentary. Almost no

relationships were found in cases of Sufi-complimentary, Sufi-substitute, and

Woodward-complimentary.

53

Sufi vegetable oil does not compliment soap, and Sufi vegetable oil does not

substitute soap. Similarly, the Woodward toothpaste does not compliment

gripe water.

In case of distance extension, firms must not extend their brands to category

that consumer would hate to assume it as substitute or complement. The

owners of Sufi and Woodward despite knowing this has dared to extend in

these categories assuming that while evaluating their extension, the

customers will take cues from the reputation of the company.

54

5.5 DISCUSSIONS AND RESULTS ON MULTIPLE BRAND EXTENSIONS

In this sub-chapter, first the related variable “Multiple brand extension”

has been deliberated and subsequently the derived hypotheses were

tested separately for “close extensions”, and “distance extensions”,

followed by recommendations

5.5.1 MULTIPLE BRAND EXTENSIONS AND EVALUATION

Firms that pursue growth strategy through multiple brand extension are

dynamic and their brand association modifies with introduction of brand

extension. Thus, this process has an impact on the perception of fit between a

brand and its future extension. On the introduction of new brand extension,

consumer recalls the previous perception of brand and modifies it that affects

the fit between a brand and its future extension (Lynch & Sru1 1982). Keller

and Aaker (1992) have suggested that the relationship between core brand

and its extension would be moderated on previous brand extension history

and the quality levels of the parent brands. If a firm has previous history of

brand extension then consumer while evaluating brand extension would see

(1) if previous extensions were successful or not (2) If there is any similarity in

the core brand and proposed extension (Keller & Aaker 1992). If brand

extensions were "dissimilar" (lacked fit) consumer perception on the quality of

brand will also be adversely affected. The proposed brand extension would be

affected, if there was no parity between the quality of the core brand and

intermediate extension. If the quality of the intermediate brand is lower than

the core brand, the consumer evaluation would be low. Intermediate brand will

improve perception of core brand, if the quality of intermediate brand is of

average level. If there is parity between intermediate and core brand, then

there will be no change of perception on proposed brand (Kapoor 2005).

55

5.5.1 HYPOTHESIS 5

The consumers tends to evaluate the “brand extension”, positively that have

a strong reputation of introducing multiple brand extensions. The hypothesis

developed in this context is presented below:

H50. : Consumer evaluation would be positive for those brand

extensions that have strong reputation for introducing multiple

brands.

H5A. : Consumer evaluation would not be positive for those brand

extensions that have strong reputation for introducing multiple

brands.

Statistical representation of the above hypothesis is presented below:

H5O: β1=0 H5A: β1≠ 0

The above hypothesis was tested for close extensions and distance

extension, separately.

5.5.1.1 CLOSE EXTENSION

The independent variable “Multiple brand extension” was measured through

close stimuli “Tapal Tea viz. Tea Bag”, and “Lifebuoy Soap Viz. Shampoo.

The multiple estimating regression equation for the above variables is

presented below:

Y= a + b1Multiple-Brand-ExtensionTapal-Tea + b2Multiple-Brand-ExtensionLifebuoy

The summarized multiple regression results are presented below:

56

Table 26: Multiple Regression, Close Extension Regression Statistics

Multiple R 0.35 R Square 0.12 Adjusted R Square 0.12 Standard Error 0.36 Observations 700.00

Table 27: ANOVA, Close Extension

df SS MS F Significance F Regression 2.00 12.65 6.32 48.12 0.00 Residual 697.00 91.60 0.13 Total 699.00 104.25

Table 28: Coefficient, Close Extension

Coefficients Standard

Error t Stat P-value Lower 95%

Upper 95%

Lower 95.0%

Intercept 3.49 0.11 32.22 0.00 3.28 3.70 3.28 Tapal 0.14 0.02 6.95 0.00 0.10 0.18 0.10 Lifebuoy 0.10 0.02 4.37 0.00 0.06 0.15 0.06

Graph 9: Scattered Diagram, Close Extension

-

1.00

2.00

3.00

4.00

5.00

0 5 10 15

Close Brand Extension

Bra

nd E

valu

atio

n

Mult-tapalMult-LifbuoyOverall-Assoc.

The hypothesis that at least one of the independent variables will have the

relationship with the dependent variable “consumer evaluation” of the brand

was accepted. The ANOVA Table shows that the F< 0, meaning it is

significant. Moreover all the P values are less than .05 further confirming the

relationship of the model. The R2 is 0.12, which indicates that the combined

effect of the independent variables will cause dependent variable to move by

12% which is a very weak relationship.

57

The coefficients of Tapal tea and lifebuoy in reference to multiple extension

are o.14 and 0.10, respectively indicating that the consumers while

evaluating Tapal tea and Lifebuoy soap were not influenced with the

reputation of multiple extensions. In fact, it has diluted the brand reputation.

5.5.5.2 DISTANCE EXTENSION

The relationship of “Multiple brand extension” and “consumer evaluation” of

the brand extension were measured through distance stimuli “Sufi Vegetable

Soap viz. Oil”, and “Woodward Gripe Water viz. Shampoo”

The multiple estimating regression equation for the above variables is

presented below:

Y= a + b1Multiple-Brand-ExtensionSufi + b2Multiple-Brand-ExtensionWoodward .

The summarized multiple regression results are presented below:

Table 29: ANOVA, Distance Extension

Regression Statistics Multiple R 0.51 R Square 0.26 Adjusted R Square 0.26 Standard Error 0.63 Observations 700.00

Table 30: ANOVA, Distance Extension

df SS MS F Significance F Regression 2.00 97.95 48.98 125.36 0.00 Residual 697.00 272.30 0.39 Total 699.00 370.25

Table 31: Coefficients, Distance Extension

Coefficients Standard Error

t Stat P-value Lower 95%

Upper 95%

Intercept 2.49 0.07 36.70 0.00 2.36 2.63 Sufi 0.04 0.02 1.81 0.07 (0.00) 0.07

Woodward 0.27 0.02 13.95 0.00 0.23 0.31

58

Graph 10: Scattered Chart, Distance Extension

-1.002.003.004.005.006.00

0 5 10 15

Distance ExtensionB

rand

Eva

luat

ion Mult-suf

Mult-woodward

OverallEvaluation

The hypothesis that at least one of the independent variables will have the

relationship with the dependent variable “consumer evaluation” of the brand

was accepted. The ANOVA Table shows that the F< 0, meaning it is

significant. Moreover the P value for Sufi is more than five and for Woodward

it is less than .o5. This indicates that Woodward validates the model where as

Suif does not. It also means that consumers’ evaluation for sufi extension

would not increase with the multiple brand extension. The R2 is 0.26, which

indicates that the combined effect of the independent variables will cause

dependent variable to move by 26% which is a very weak relationship.

Firms must not go for all kind of extensions as it would have adverse affect on

parent brand and would also adversely affect reputation of the parent brand.

59

CHAPTER 6 CONCLUSIONS

This chapter of thesis aims to conclude the paper with a conclusion,

suggestion and further research aspects. The conclusions are drawn from the

literature survey and analyzing of the data. It ends with directions for future

research.

The objectives of the study were to, (1) identify the factors that affect the

consumer evaluation of brand extensions, (2) develop empirical model on of

the variable associated with how consumer evaluates brand extension, (3)

test the validity of the empirical model.

While reviewing the literature, several variables were found to have

relationships on how consumers evaluate the brand extensions. The variables

used in the empirical models are, (1) similarity (2) reputation (3)

innovativeness (4) perceived risk (5) multiple extensions (6) parent brand

characteristics (7) concept and consistency (8) brand extension fit

The conceptual definitions of different authors were used for identifying the

determinants of the above variables. Based on these variables, a

questionnaire was developed that contained seventeen questions. Nine

questions were related to the personal data and the rest were related to the

subject study.

The sample size for the study was 700. Stratified proportionate non-random

sampling was used for drawing samples from the 18 UDC of Karachi.

Based on the focus group discussions, the following four different brand

extensions were finalized each representing different level of closeness

among: (1) Tapal Tea Viz. Tapal Tea Bag., (2)Life Buoy Soap Viz. Lifebuoy

Shampoo. (3) Sufi Vegetable Oil and Sufi Washing Soap. (4) Woodward

Gripe Water and Wood ward Toothpaste.

60

The major findings fare disused below:

a) The hypothesis that at least one of the variables amongst these, (1)

stronger reputation (b) similarity (c) strong association has relationship

with “consumer evaluation” brand was accepted.

• In case of close extensions, the R2 was 0.92 indicating a very

strong relationship. All the P values are less than .05 except

“association”. This indicates that all the coefficients are relevant

to the model except “Association-Tapal” and “Association-

Lifebuoy”. The coefficient of determination for Similarity Lifeuoy,

and Reputation lifebuoy are 0.42 and 0.31 respectively, indicating

that in overall consumer evaluation relationship these two

predictor variables/stimuli have comparatively stronger influence

on the dependent variable as compared to other

variables/stimuli.

• In case of distance extension the e R2 is 0.58, which indicates

that the combined effect of the independent variables will cause

the dependent variable consumer evaluation of brand extension

to move by 58%, which is an indication of a strong relationship.

The coefficient of determinations for RepuatationSufi, and

ReputationWoodward are 0.26 and 0.37, respectively indicating that

in the relationship of consumer evaluation of brand extension

these two predictor variables/stimuli have comparatively

stronger influence on the dependent variable as compared to

other variables. From the above, it could be inferred that in case

the parent’s brand is extended to similar category, then the

similarity of the brand extension would be vital for the

respondents’ evaluation of the brand extensions. In case, the

extension is of distance nature (not in similar category) than the

reputation of the parent brand would be used by the

respondents for evaluation brand extension. It may also be

observed from the above that the predicator variable “reputation”

61

is comparatively stronger in case of close and distance

extensions.

b) The hypothesis that at least one of the consumers traits that is (1)

perceived risk (2) level of innovativeness was accepted

• In case of close extension the R2 is 0.14, which indicates that

the combined effect of the independent variable will cause the

dependent variable to move by 14% which is a very weak

relationship. The innovative consumers tend to evaluate the

close brand extension more positively (coefficient of

determination being 0.15) as compared with consumer

perceived risk (coefficient of determination being 0.05).

• In case of close extension, the R2 is 0.18, which is a very weak

relationship. The overall level of innovativeness and perceived

risk of the respondents were high, but their relationships to the

distance brand extensions were weak. The coefficients for

perceived risk and innovativeness are 0.36 and -0.14,

respectively indicating that the consumers with high level of

innovativeness would tend to evaluate distance brand

extensions lowly and negative. The consumers with high level of

perceived risk have evaluated distance extensions

comparatively more positively with coefficient being 0.36

c) The hypothesis that brand evaluation would be positive for those

brands that have more concept consistency was accepted

• In case of close extension the R2 is 0.67, which an indication of

strong relationship. Moreover, all the P values except design of

lifebuoy are less than .05. This indicates that except the design

of lifebuoy others validate the model. The coefficients for design

and price of Tapal tea is 0.55, and -0.04, respectively indicating

62

that the consumers while evaluating Tapal tea were more

influenced with the design of tea as compared to the price of

Tapal tea. In case of Lifebuoy, the coefficients for design and

prices were 0.01, and 0.20 indicating that while evaluating the

Lifebuoy, the consumer appears to be more influenced with the

price, as compared to the design of the Lifebuoy soap.

• In case of distance extension the R2 is 0.32, which indicates a

weaker relationship. Moreover, all the P values except the

design of Woodward gripe water are less than .05. This

indicates that the design of Woodward has no relationship with

the dependent variable “consumer evaluation of brand

extension.” The coefficient of determinations for Sufi’ design

and price are 0.19 and 0.14, respectively indicating that in case

of Sufi the design is comparatively, stronger predictor than price.

Comparatively, price of Woodward was stronger predictor and

design has no relationship with consumer evaluation of distance

brand.

d) The hypothesis that those brands would be evaluated positively that

has high level of fitness in terms of (1) complimentary, (2)

supplementary (3) transferability (4) difficulty was accepted.

• In case of close extension the R2 is 0.71, which indicates a very

strong relationship. Moreover all the P values except Tapal-

difficulty and Tapal tea-compliment are less than .05. This

indicates tapal-tea difficulty, and tapal tea-compliment has no

relationship with the dependent variable that is consumer

evaluation of brand.

Comparatively, stronger predictors in this relationship were

Tapal(substitute), Tapal (Transferability), and Lifebuoy

(Transferability) with coefficient of determinations being, 0.24,

63

0.23 an 0.18 respectively. Indicating that these variables are

stronger predictors for the dependent variable perceived fitness.

The rest of the variables are weak predictors for the perceived

fitness with all the coefficients of determination being less than

0.18.

• In case of distance extension the R2 is 0.15, which is a very

weak relationship. Moreover all the P values are less than .05

except Sufi-complimentary, Sufi-substitute, and Woodward

complimentary, indicating that these mentioned variables have

no relationship with the dependent variable. The entire

coefficients were weak. It was as high as 0.08 for Sufi-

transferability, and as low as 0.01 for Woodward complimentary.

Almost no relationships were found in cases of Sufi-

complimentary, Sufi-substitute, and Woodward-complimentary.

e) The hypothesis that the consumer evaluation would be positive for

those brands that have strong reputation of introducing multiple brands

was accepted, but had very weak relationship.

• In case of close extension the R2 is 0.12, which is an indication

of a very weak relationship. The coefficients of Tapal tea and

Lifebuoy in reference to multiple extension is o.14 and 0.10,

respectively indicating that the consumers while evaluating

Tapal tea and Lifebuoy soap were not influenced with the

reputation of multiple extensions. In fact, it has diluted the brand

reputation.

• In case of distance extension, R2 is 0.26, which is an indication

of very weak relationship. Moreover the P value for Sufi is

more than five and for Woodward it is less than .05. This

indicates that Woodward validates the model where as Sufi

does not. It also means that consumers’ evaluation for Sufi

extension would not increase with the multiple brand extension.

64

CHAPTER 7 RECOMMENDATIONS

This chapter deals with the recommendations that have been derived from the

analysis and conclusions and literature survey

The major recommendations are as follows:

1) The firms whose brands have strong reputation could afford the luxury

of venturing into distance brand extension. The firms with weaker

brand reputation should focus on enhancing the brand reputation, and

if they have to extend their brand it should be in the same category

(Close distance)

2) The firms that are extending their brands to similar category (Close

brands), should target the consumer that have high level of

innovativeness. Comparatively, the companies that are extending their

brand into non-similar category (distance extension) must target those

customers that have high level of perceived risk.

3). In case of close extensions such as tea and tea bag, the firm must

concentrate on the design, which Tapal was found to be doing.

However, in case of distance extension, no relationship was found with

the design of Woodward gripe water. Woodward needs to improve the

design of the gripe water packaging in order to remain competitive.

4) In case of distance extension, the firms must not extend their brands to

the category that consumer would hate to assume it as substitute or

complement. The owners of Sufi and Woodward despite knowing this

has dared to extend in these categories assuming that while evaluating

their extension, the customers will take cues from the reputation of the

company.

65

5) The firms must not go for all kind of extensions (multi-branding) as it

would have adverse affect on the parent brand and would also

adversely affect the reputation of the parent brand.

66

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APPNEDIX-1 QUESTIONNAIRE SIMILARITY

Q1 Rate the “similarity” of the following brand extensions on the scale of 1-5.

Five being “very similar” and one being “not similar” at all

PARENT BRAND EXTENDED BRAND

1.1 Tapal tea Tapal tea bag 5 4 3 2 1

1.2 Lifebuoy soap Lifebuoy shampoo 5 4 3 2 1

1.3 Sufi vegetable oil Sufi soap 5 4 3 2 1

1.4 Woodward grip water Woodward tooth paste 5 4 3 2 1

REPUTATION

Q2 Rate the “reputations” of the following Parent brands on the scale of 1-5.

Five being “very high reputation” and one being “very low reputation”.

PARENT BRAND

2.1 Tapal tea 5 4 3 2

2.2 Life buoy soap 5 4 3 2

2.3 Sufi vegetable oil 5 4 3 2

2.4 Woodward grip water 5 4 3 2

PERCEIVED RISK

Q3 Rate the following statements related to “perceived risk”. Five showing

“very strong agreement” and one showing “very strong disagreement”

3.1 When I am in front of __section I always feel unsure what to pick 5 4 3 2 1

3.2 When I buy an ___ it is easy to make wrong choice. 5 4 3 2 1

INNOVATIVENESS

Q4 Rate the following statements related to “innovativeness”. Five showing

“very strong agreement” and one showing “very strong disagreement”

3.1 I am continuously seeking new ideas and experience 5 4 3 2 1

3.2 When things get boring I like to find some new experience 5 4 3 2 1

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MULTIPLE BRANDS

Q5 Rate which of the core brands have a strong history of introducing

“multiple brands”. Five being “very high” and one being “very low”.

PARENT BRAND

1.1 Tapal tea 5 4 3 2 1

1.2 Lifebuoy soap 5 4 3 2 1

1.3 Sufi Vegetable Oil 5 4 3 2 1

1.4 Woodward Grip water 5 4 3 2 1

PARENT BRAND CHARACTERISTICS

Q6 Rate which of the core brands have strong “association”. Five being “strong

association” and one being “low association”.

Strong association is brand like “Sony” that can be used for multiple products.

Products.

PARENT BRAND

1.1 Tapal tea 5 4 3 2 1

1.2 Life buoy soap 5 4 3 2 1

1.3 Sufi vegetable oil 5 4 3 2 1

1.4 Woodward Grip water 5 4 3 2 1

BRAND CONCEPT CONSISTENCY

Q7.1 Rate your “price perception” about the following core brands. Five being

very high and one being very low

PARENT BRAND

1.1 Tapal tea 5 4 3 2 1

1.2 Lifebuoy soap 5 4 3 2 1

1.3 Sufi Vegetable Oil 5 4 3 2 1

1.4 Woodward Gripe water 5 4 3 2 1

BRAND CONCEPT CONSISTENCY

Q7.2 Rate your “design perception” about the following core brands. Five being

“very expensive” and one being “not expensive at all”.

PARENT BRAND

1.1 Tapal tea 5 4 3 2 1

1.2 Life buoy soap 5 4 3 2 1

1.3 Sufi Vegetable Oil 5 4 3 2 1

1.4 Woodward Grip water 5 4 3 2 1

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PARENT BRAND EXTENSION BRAND COMPLEMENT

Q8.a Rate how much the following core brands and extended brand “compliment” each

Other. Five being “very highly complimentary” and one being “very low

complimentary” (Complimentary: tea and milk)

PARENT BRAND EXTENDED BRAND

1.1 Tapal tea Tapal tea bag 5 4 3 2 1

1.2 Life buoy soap Life buoy shampoo 5 4 3 2 1

1.3 Sufi Vegetable Oil Sufi Soap 5 4 3 2 1

1.4 Woodward Grip water Woodward tooth paste 5 4 3 2 1

PARENT BRAND EXTENSION BRAND SUBSTITUTE

Q8.b Rate how much the following core brand and parent brand “substitute” each

Other. Five being “highly substitute” and one being “low substitute”

(substitute:: tea and coffee)

PARENT BRAND EXTENDED BRAND

1.1 Tapal tea Tapal tea bag 5 4 3 2 1

1.2 Lifebuoy soap Lifebuoy shampoo 5 4 3 2 1

1.3 Sufi vegetable oil Sufi soap 5 4 3 2 1

1.4 Woodward Grip water Woodward tooth paste 5 4 3 2 1

TRANSFERABILITY

Q8.c Rate the level of “transferability” between core brand and parent brand.

Five being “ very highly transferability” and one being “very low transferability”

(Transferability mean closeness in the manufacturing process of two products

PARENT BRAND EXTENDED BRAND

1.1 Tapal tea Tapal tea bag 5 4 3 2 1

1.2 Life buoy soap Life buoy shampoo 5 4 3 2 1

1.3 Sufi vegetable Oil Sufi Soap 5 4 3 2 1

1.4 Woodward Grip water Woodward tooth paste 5 4 3 2 1

PERCEIVED DIFFICULTY

Q8.d Rate the level of “perceived difficulty” between core brand and extended brand.

Five being highly “Perceived difficulty” and one being low level of difficulty

(Difficulty means: how difficult it is to make the product.

PARENT BRAND EXTENDED BRAND

1.1 Tapal tea Tapal tea bag 5 4 3 2 1

1.2 Lifebuoy soap Lifebuoy shampoo 5 4 3 2 1

1.3 Sufi vegetable oil Sufi soap 5 4 3 2 1

1.4 Woodward gripe water Woodward tooth paste 5 4 3 2 1

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OVERALL CONSUMER EVALUATION OF THE BRAND

Q9 Over all I am very positive to the following extensions. Five being very

Positive and one being not very positive

PARENT BRAND EXTENDED BRAND

1.1 Tapal tea Tapal tea bag 5 4 3 2 1

1.2 Life buoy soap Life buoy shampoo 5 4 3 2 1

1.3 Sufi vegetable oil Sufi Soap 5 4 3 2 1

1.4 Woodward Grip water Woodward tooth paste 5 4 3 2 1

Q10. Age

21 – 30 31 – 40 41 – 50 50 and Above

Q11. Qualification

Graduation Post

Graduation

Masters Doctoral

Q12 Gender

Male Female

Q13. Income

10,000 –

20,000

21,000 –

30,000

31,000 – 40,000 41,000 & Above

Q14. Household Size

2 – 5 6 – 10 11 and Above

Q15. Area of residence?

DHA Clifton P.E.C.H.S Gulshan-e-Iqbal

F.B. Area North

Nazimabad

Saddar Others

Q16. Profession

Marketing Banking Engineering Doctor

Teacher Others

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