95 Product Management.docx

SEPTEMBER 22, 2018

DILUTION OF BRAND BELIEFS A CONCISE REPORT ON DILUTION OF BRANDS

DEEPANJAN LAMTURE ROLL NO - 95 Batch of 2017-19

INDEX Introduction

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What makes a brand?

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Brand dilution

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Causes of brand

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dilution

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Conclusion

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Bibliography

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Introduction Leveraging a brand by introducing new line or brand extensions is a popular strategy that is cost effective in the short run. However, few models of branding have identified empirically-based strategies that are important in extending brands. The risks of introducing brand extensions not only include the possibility of failure of the brand extension, but also dilution of the parent brand. This presentation discussed the empirical research on brand extensions and brand dilution and identified key prescriptive themes for extending brands. The key ingredients of a brand, as discussed frequently in the brand extension literature, are image attributes and products. For example, the Coke brand can be associated with image attributes such as refreshing, tastes great, All-American, etc. Conversely, the Coke brand can also be associated with products such as Coke Zero, Cherry Coke, Diet Coke, and so on. Marketing activities and communications can convey either brand image attributes or product category information. The important thing is that the prominent information communicated to consumers is presented consistently between the brand and the brand extension. Brands are viewed as categories not only by managers in companies, but also by consumers. Many companies are organized by brand, and brand leveraging-strategies are becoming increasingly popular. Therefore, it is common to see the promotion of a full range of products under a brand name in a single communication. In this environment, consumers will be more inclined to think about brands as categories when evaluating a brand name. Research in consumer psychology also shows that brand categories function psychologically like other types of categories. Whether or not a new brand extension will be accepted is determined to a great extent by what information about the brand is prominent for consumers and the extent to which the brand and brand extension are consistent on that important information (Loken, Barsalou, and Joiner, forthcoming). In order to communicate information that is consistent in the marketplace, the first step is to understand the factors that represent a match between the parent brand and the extension. Brand managers use several different strategies to maintain consistency between a brand and a brand extension. For example, Ralph Lauren used a sequential strategy 2

when introducing house paint into their repertoire. Instead of moving directly from apparel to paint, Ralph Lauren moved from apparel to an introduction of bedding, and then on to other home furnishings. While using the sequential strategy, the company consistently communicated a “prestige” image across all of its marketing activities. Although paint was a different product from apparel, Ralph Lauren succeeded in its brand extension with a sequential brand extension strategy and a consistent “premium” image. Taking a different approach, Snickers used a sub-brand strategy when introducing energy bars for sale. Energy bars may not be a product category consistent with the Snickers brand name, as the brand has been traditionally perceived as a candy bar brand. Perhaps in order to maintain consistency, the company chose to use the sub-brand Marathon when it introduced energy bars into the market. In this report I will be explaining how brand extensions and other attributes of a brand can cause dilution of a brand if not handled properly.

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What makes a brand? To measure a brand is to get in depth and find out of the attributes of the brand which are inflicted in the consumers mind. In this report before going to the dilution part of the brand I will be explaining some other attributes of brands which are interlinked and are the prime factors in dilution of brand beliefs. Brand belief is defined as perceptions about a brand as reflected by the brand associations held in consumer memory. Brand associations are the other informational parts linked to the brand in memory and contain the meaning of the brand for consumers. The favorability, strength, and uniqueness of brand associations are the dimensions distinguishing brand belief, that plays an important role in determining the differential response that makes up brand equity, especially in high involvement decision settings. Brand belief plays an important role in consumer decision making for three major reasons. First, it is important that consumers think of the brand when they think about the product category. Raising brand awareness increases the likelihood that the brand will be a member of the consideration set the handful of brands that receive serious consideration for purchase. Second, brand awareness can affect decisions about brands in the consideration set, even if there are essentially no other brand associations. For example, consumers have been shown to adopt a decision rule to buy only familiar, well-established brands. In low involvement decision settings, a minimum level of brand awareness may be sufficient for product choice, even in the absence of a well-formed attitude. Consumers may base choices on brand awareness considerations when they have low involvement, which could result from either a lack of consumer motivation (i.e., consumers do not care about the product or service) or a lack of consumer ability (i.e., consumers do not know anything else about the brands). Brand extensions have become an increasingly popular option for firms launching new products in the marketplace. As the financial risk and promotional costs have increased for introducing new products, firms have renewed their efforts to capitalize on the goodwill associated with existing brand names by launching brand extensions. Well over one-half of all new brands introduced in the 1980s were extensions marketed under existing brand names. Capitalizing on brand equity through brand extensions has truly become the "guiding strategy of product 4

planners" Amidst the enthusiasm for brand extensions, however, have come concerns about the negative effects that extensions may have on brand names in the long run. Questions have been raised about the possibility that repeated brand extensions will eventually "wear out" a brand name and that unsuccessful brand extensions will "dilute" the equity associated with a wellestablished brand name. In fact, some observers believe that the combination of "wear out" and "dilution" effects will eventually result in the total demise of a brand's equity. Customer-based brand equity is defined as the differential effect of brand knowledge on consumer response to the marketing of the brand. A brand is said to have positive (negative) customer-based brand equity when consumers react more (less) favorably to an element of the marketing mix for the brand than they do to the same marketing mix element when it is attributed to a fictitiously named or unnamed version of the product or service. Brand knowledge is conceptualized according to an associative network memory model in terms of two components, brand awareness and brand image (i.e., a set of brand associations). Customer-based brand equity occurs when the consumer is familiar with the brand and holds some favorable, strong, and unique brand associations in memory. Issues in building, measuring, and managing customer-based brand equity are discussed, as well as areas for future research. Much attention has been devoted recently to the concept of brand equity Brand equity has been viewed from a variety of perspectives In a general sense, brand equity is defined in terms of the marketing effects uniquely attributable to the brand-for example, when certain outcomes result from the marketing of a product or service because of its brand name that would not occur if the same product or service did not have that name. There have been two general motivations for studying brand equity. One is a financially based motivation to estimate the value of a brand more precisely for accounting purposes (in terms of asset valuation for the balance sheet) or for merger, acquisition. Several different methods of brand valuation have been suggested For example, Interbrand Group has used a subjective multiplier of brand profits based on the brand's performance along seven dimensions (leadership, stability, market stability, interationality, trend, support, and protection); Grand Metropolitan has valued newly acquired brands by determining the difference between the acquisition price and fixed assets. Simon and Sullivan (1990) define brand equity in terms of the incremental discounted future cash flows 5

that would result from a product having its brand name in comparison with the proceeds that would accrue if the same product did not have that brand name. Based on the financial market value of the company, their estimation technique extracts the value of brand equity from the value of a firm's other assets. A second reason for studying brand equity arises from a strategy-based motivation to improve marketing productivity. Given higher costs, greater competition, and flattening demand in many markets, firms seek to increase the efficiency of their marketing expenses. As a consequence, marketers need a more thorough understanding of consumer behavior as a Customer-Based Brand Equity . Perhaps a firm's most valuable asset for improving marketing productivity is the knowledge that has been created about the brand in consumers' minds from the firm's investment in previous marketing programs. Financial valuation issues have little relevance if no underlying value for the brand has been created or if managers do not know how to exploit that value by developing profitable brand strategies. The goal of this article is to assist managers and researchers who are interested in the strategic aspects of brand equity. Specifically, brand equity is conceptualized from the perspective of the individual consumer and a conceptual framework is provided of what consumers know about brands and what such knowledge implies for marketing strategies. Customer-based brand equity is defined as the differential effect of brand knowledge on consumer response to the marketing of the brand. That is, customer-based brand equity involves consumers' reactions to an element of the marketing mix for the brand in comparison with their reactions to the same marketing mix element attributed to a fictitiously named or unnamed version of the product or service. Customer-based brand equity occurs when the consumer is familiar with the brand and holds some favorable, strong, and unique brand associations in memory. Conceptualizing brand equity from this perspective is useful because it suggests both specific guidelines for marketing strategies and tactics and areas where research can be useful in assisting managerial decision making. Two important points emerge from this conceptualization. First, marketers should take a broad view of marketing activity for a brand and recognize the various effects it has on brand knowledge, as well as how changes in brand knowledge affect more traditional outcome measures such as sales. Second, marketers must realize that the long-term success of all future marketing programs for a brand is greatly affected by the 6

knowledge about the brand in memory that has been established by the firm's shortterm marketing efforts. In short, because the content and structure of memory for the brand will influence the effectiveness of future brand strategies, it is critical that managers understand how their marketing programs affect consumer learning and thus subsequent recall for brand-related information. The next section provides a conceptualization of brand knowledge by applying some basic memory notions. Brand knowledge is defined in terms of two components, brand awareness and brand image. Brand awareness relates to brand recall and recognition performance by consumers. Brand image refers to the set of associations linked to the brand that consumers hold in memory. Then the concept of customer-based brand equity is considered in more detail by discussion of how it can be built, measured, and managed. After the conceptual framework is summarized, areas for future research are identified. Brand Knowledge Background A brand can be defined as "a name, term, sign, symbol, or design, or combination of them which is intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors". These individual brand components are here called "brand identities" and their totality "the brand." Some basic memory principles can be used to understand knowledge about the brand and how it relates to brand equity. The importance of knowledge in memory to consumer decision making has been well documented. Understanding the content and structure of brand knowledge is important because they influence what comes to mind when a consumer thinks about a brand-for example, in response to marketing activity for that brand. Most widely accepted conceptualizations of memory structure involve some type of associative model. For example, the "associative network memory model" views semantic memory or knowledge as consisting of a set of nodes and links. Nodes are stored information connected by links that vary in strength. A "spreading activation" process from node to node determines the extent of retrieval in memory. A node becomes a potential source of activation for other nodes either when external information is being encoded or when internal information is retrieved from long-term memory. Activation can spread from this node to other linked nodes in memory. When the activation of another node exceeds some threshold level, the information contained in that node is recalled. Thus, the strength of association between the activated node and all 7

linked nodes determines the extent of this "spreading activation" and the particular information that can be retrieved from memory. For example, in considering a soft drink purchase, a consumer may think of Pepsi because of its strong association with the product category. Consumer knowledge most strongly linked to Pepsi should also then come to mind, such as perceptions of its taste, sugar and caffeine content, or even recalled images from a recent advertising campaign or past product experiences. Brand knowledge is conceptualized as consisting of a brand node in memory to which a variety of associations are linked. As developed here, the relevant dimensions that distinguish brand knowledge and affect consumer response are the awareness of the brand (in terms of brand recall and recognition) and the favorability, strength, and uniqueness of the brand associations in consumer memory. These dimensions are affected by other characteristics of and relationships among the brand associations. For example, factors related to the type of brand association (such as its level of abstraction and qualitative nature) and the congruity among brand associations, among others, affect the favorability, strength, and uniqueness of brand associations. To simplify the discussion, emphasis is placed on the brand name component of the brand identities, defined as "that part of a brand which can be vocalized), though other components of the brand identities (e.g., brand logo or symbol) are considered also. Brand Awareness, The first dimension distinguishing brand knowledge is brand awareness. It is related to the strength of the brand node or trace in memory, as reflected by consumers' ability to identify the brand under different conditions. In other words, how well do the brand identities serve their function? In particular, brand name awareness relates to the likelihood that a brand name will come to mind and the ease with which it does so. Brand awareness consists of brand recognition and brand recall performance. Brand recognition relates to consumers' ability to confirm prior exposure to the brand when given the brand as a cue. In other words, brand recognition requires that consumers correctly discriminate the brand as having been seen or heard previously. Brand recall relates to consumers' ability to retrieve the brand when given the product category, the needs fulfilled by the category, or some other type of probe as a cue. In other words, brand recall requires that consumers correctly generate the brand from memory. The relative importance of brand recall and recognition depends 8

on the extent to which consumers make decisions in the versus outside the store, among other factors. Brand recognition may be more important to the extent that product decisions are made in the store. Finally, brand awareness affects consumer decision making by influencing the formation and strength of brand associations in the brand image. A necessary condition for the creation of a brand image is that a brand node has been established in memory, and the nature of that brand node should affect how easily different kinds of information can become attached to the brand in memory. Brand Image Though brand image long has been recognized as an important concept in marketing, there is less agreement on its appropriate definition.. Before considering those dimensions, it is useful to examine the different types of brand associations that may be present in consumer memory. Types of brand associations. Brand associations take different forms. One way to distinguish among brand associations is by their level of abstraction that is, by Customer-Based Brand Equity. Along this dimension, brand associations can be classified into three major categories of increasing scope: attributes, benefits, and attitudes. Several additional distinctions can be made within these categories according to the qualitative nature of the association. Attributes are those descriptive features that characterize a product or service-what a consumer thinks the product or service is or has and what is involved with its purchase or consumption. Attributes can be categorized in a variety of ways. Here, attributes are distinguished according to how directly they relate to product or service performance. Product-related attributes are defined as the ingredients necessary for performing the product or service function sought by consumers. Hence, they relate to a product's physical composition or a service's requirements. Product-related attributes vary by product or service category. Non-product-related attributes are defined as external aspects of the product or service that relate to its purchase or consumption. The main types of non-product-related attributes are 

Price information - The price of the product or service is considered a nonproduct-related attribute because it represents a necessary step in the purchase process but typically does not relate directly to the product performance or service function. Price is a particularly important attribute

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association because consumers often have strong beliefs about the price and value of a brand and may organize their product category knowledge in terms of the price tiers of different brands. 

Packaging or product appearance information - Similarly, packaging is considered part of the purchase and consumption process but, in most cases, does not directly relate to the necessary ingredients for product performance.

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User and Usage imagery - User imagery is, what type of person uses the product or service and usage imagery is, where and in what types of situations the product or service is used). User and usage imagery attributes can be formed directly from a consumer's own experiences and contact with brand users or indirectly through the depiction of the target market as communicated in brand advertising or by some other source of information (e.g., word of mouth). Associations of a typical brand user may be based on demographic factors (e.g., sex, age, race, and income), psychographic factors (e.g., according to attitudes toward career, possessions, the environment, or political institutions), and other factors. Associations of a typical usage situation may be based on the time of day, week, or year, the location (inside or outside the home), or the type of activity (formal or informal), among other aspects. User and usage image attributes can also produce brand personality attributes. One component of brand image is the personality or character of the brand itself.

Brand personality attributes may also reflect emotions or feelings evoked by the brand. Benefits are the personal value consumers attach to the product or service attributes-that is, what consumers think the product or service can do for them. Benefits can be further distinguished into three categories according to the underlying motivations to which they relate 

Functional benefits - Functional benefits are the more intrinsic advantages of product or service consumption and usually correspond to the product-related attributes. These benefits often are linked to fairly basic motivations, such as physiological and safety needs and involve a desire for problem removal or avoidance

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Experiential benefits - Experiential benefits relate to what it feels like to use the product or service and also usually correspond to the product-related

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attributes. These benefits satisfy experiential needs such as sensory pleasure, variety, and cognitive stimulation. 

Symbolic benefits - Symbolic benefits are the more extrinsic advantages of product or service consumption. They usually correspond to nonproductrelated attributes and relate to underlying needs for social approval or personal expression and outerdirected self-esteem. Hence, consumers may value the prestige, exclusivity, or fashionability of a brand because of how it relates to their self-concept. Symbolic benefits should be especially relevant for socially visible, "badge" products. Brand attitudes are defined as consumers' overall evaluations of a brand. Brand attitudes are important because they often form the basis for consumer behavior (e.g., brand choice). Though different models of brand attitudes have been proposed, one widely accepted approach is based on a multi-attribute formulation in which brand attitudes are a function of the associated attributes and benefits that are salient for the brand.

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Brand Dilution? Brand extension failures can cause "dilution" of specific attribute beliefs that consumers have come to hold about an established brand name, rather than "dilution" of the global affect associated with an established brand name emphasized in previous research. When brand names are extended to new products, it is often the specific attribute associations that consumers identify with the brand name that are being transferred and that form the basis for positioning the new product in the market. For example, consumer beliefs that "Neutrogena is mild" have formed the basis for extensions of the Neutrogena name from soap to new lines, such as shampoo and moisturizer. If brand extension failures result in a dilution of specific beliefs about the brand name, the consequences could be devastating. For instance, if a core belief, such as "Neutrogena is mild," is destroyed by an entry in the shampoo category that consumers feel is "harsh," not only does the brand name suffer in terms of the consumer's general disposition toward the brand name but it also suffers in terms of its positioning and differential advantage in the marketplace. The purpose of this research is to identify situations in which brand extensions may be more or less likely to dilute specific attribute beliefs consumers have learned to associate with the family brand name. In the sections that follow, we describe theoretical perspectives from categorization theory that allow us to make predictions about the factors that may increase or decrease dilution of beliefs about a family brand. In particular, the impact of information that is inconsistent with previous category beliefs and the concept of "typicality" from categorization theory will be explored as a way to understand when brand extension failures will or will not spill over to beliefs associated with the family brand name. Generally speaking, dilution of a belief about a family brand will increase as the prototypicality of the extension, including inconsistent information, increases. Therefore, the more consumers perceive the new brand extension's attributes as inconsistent with the attributes of the family brand name, that extension will be perceived as less typical of the family brand name, and, contrary to predictions of the bookkeeping model, generalization of the extension's attributes to the family brand name is less likely to occur. In other words, if information about the brand extension suggests that the extension is atypical (low in prototypicality) of brands marketed 12

under the family brand name, then consumers will be less likely to make an inference from the individual extension to the family brand beliefs. The less typical the product extension of the family brand, the less dilution will occur for corresponding brand beliefs, and the more typical the extension, the greater the dilution will be. If Neutrogena (again, a name associated with "mildness") introduces a new product perceived by consumers as "harsh" with the same family brand name (e.g., a "strong" Neutrogena shampoo), the amount of dilution of the belief "Neutrogena products are mild" depends on the perceived typicality of the new shampoo to the Neutrogena name. As the number of inconsistent attributes salient to the category (e.g., harsh, low quality) increases, the perceived typicality of the extension should decrease, and according to the typicality-based model, the amount of dilution of Neutrogena brand beliefs should decrease.2 Thus, an extension that is harsh and low quality should be perceived as less typical of the Neutrogena name than an extension that is harsh and high quality, and unlike the predictions of the bookkeeping model, the former extension should result in less dilution of Neutrogena beliefs about mildness than the latter. In other words, information about an attribute that is inconsistent with the family brand belief will lead to belief dilution, regardless of whether that information is presented in the context of a low or moderately typical extension. it is somewhat unclear whether the relationship between the brand extension and family brand category should influence the impact of brand extension failures. In fact, a category different from that of the family brand may actually be more or less compatible, depending on the types of attributes considered important in the category, common usage situations for products in the category, or technical capabilities required in manufacturing products in the category.

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Causes of Brand Dilution Formally, we propose that parent brand dilution is a function of these three factors, as follows: 

Strength of the extension experience. Only an extension experience that is sufficiently strong has the potential to trigger brand dilution. Strength of extension experience can be viewed in terms of salience (i.e., how attentiongetting) and ambiguity (i.e., how objectively interpretable). A strong experience is salient and unambiguous. A weak experience – whether it is less salient or more ambiguous – may be ignored or discounted.

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Diagnosticity or relevance of the extension experience. The diagnosticity of an extension experience concerns whether consumers find the experience as relevant to the parent brand. Experience will only impact parent brand evaluations if consumers feel that extension performance is indicative, in some way, of the parent brand (e.g., when the extension is similar and close in perceived fit).

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Inconsistency of the extension experience with the parent brand image. The evaluative inconsistency of the extension experience depends on the relationship of the experience to the corresponding parent brand image. A consistent extension experience is less likely to change the existing parent brand image. An inconsistent extension experience creates the potential for change – the direction and extent of change depending on the relative strength and favorability of the experience. Note that highly inconsistent extension experiences, however, may be discounted or ignored if not viewed as relevant.

Given the strategic value of brands as a key intangible asset, brand dilution is a critically important managerial topic. Our review of the academic literature revealed that the circumstances under which a parent brand is damaged from a failed extension would seem to be actually fairly rare, such that in the vast majority of cases, unsuccessful extensions would not hurt the parent brand. These research findings underscore the important point that although consumers “own” a brand in terms of the expectations, perceptions, attitudes, etc. that they hold about the brand in memory, marketers can – and should – actively manage consumers’ brand knowledge structures. Creating a strong brand with much brand equity not 14

only permits further growth opportunities but also helps to provide a defense against a failed brand extension

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Conclusion More and more firms realize that some of their most valuable assets are the brand names associated with their products or services. Creating, maintaining, and enhancing the strength of those brands has become a key management imperative. One important advantage of having a strong brand is that it can facilitate acceptance of new products launched using that brand name, i.e., brand extensions. Because they reduce consumer risk and significantly lower the cost of introductory marketing programs, brand extensions have become the predominant new product strategy, and the last two decades have seen an explosion in the number of brand extensions. Well managed brand extensions not only provide new sources of revenue, they can also reinforce brand meaning and help to build brand equity. A concern of many managers, however, is what happens when brand extensions are not successful. After all, most new products fail, and brand extensions are no exception. Will a failed brand extension damage the parent brand in some way, squandering the millions of dollars and countless man-hours invested in building its equity? If so, brand extensions could pose considerable risk, and managers would have to develop much more cautious approaches with their brand extension strategies. Because of its fundamental importance, much academic research has been directed at understanding brand equity dilution. The good news from this research is that, by and large, parent brands do not appear to be particularly vulnerable to failed brand extensions. Research on brand extensions reveals a surprising robustness of parent brand equity when examining failed extensions that varied in similarity or “fit” to the parent brand. The clear conclusion drawn from recent studies is that parent brands are more resistant to changes in evaluations than perhaps previously thought. Years of brand building activities evidently help consumers develop well-learned brand knowledge structures that can withstand the negative impact of a failed extension. Consumers use their knowledge about the parent brand to determine whether or not the negative extension experience is relevant enough to warrant a change in attitude. The general rule of thumb that emerged from early academic research and industry experience was that an unsuccessful brand extension potentially could damage the parent brand image only when there was a high degree of similarity or "fit" involved. Because 16

similar extensions represented an area where the company should have considerable expertise, consumer confidence in the parent brand was more likely to be weakened as a result of a failed similar, rather than dissimilar, extension. Subsequent research has examined moderating factors or “boundary conditions” which provide some important qualifications to these basic findings and has identified other circumstances where brand dilution could potentially occur. The authors examined the effects of direct experience with the extension and alternative extension naming strategies. In a beverage context, dilution effects resulted when consumers directly experienced a poorly performing, similar brand extension. On the other hand, as expected, consumers did not downgrade parent brands after a negative experience with dissimilar beverage extensions. Moreover, no dilution effects were found when consumers were only provided with negative product ratings of similar extensions or if they evaluated these extensions without direct experience. This suggested that direct experience led to dilution because consumers considered it to be more diagnostic than other forms of learning about the extension. Interestingly, we found that if the extension was sub-branded (e.g., Quencher by Pepsi) rather than family branded (e.g., Pepsi), dilution effects disappeared even though consumers tasted exactly the same drink. This indicates that direct experience with a close extension provides consumers with a vivid, compelling experience that creates the potential of a change in parent brand attitudes. Sub-branding, however, credibly sends a signal to consumers to expect differences in the extension and distances the extension from the parent brand. Subbranding strategies can thus alter consumer attributions regarding whether or not the parent brand should be held directly responsible for failed extensions. Marketplace evidence also supports these findings. For example, a recent study found that the sudden acceleration problems associated with the Audi 5000 automobile had greater spillover to the Audi 4000 model than to the Audi Quattro model, which she interpreted as a result of the fact that the latter was branded and marketed differently. Thus, sub-branding is one managerially controllable factor that permits firms to engage in a more active extension strategy, allowing the brand to “make mistakes” and extend farther than otherwise would be the case Brand extension dilution has also been shown to depend on consumer involvement at the time of the extension experience. When consumers actively process negative information about 17

an extension, the vividness of the negative experience can overwhelm the effects of similarity and lead to dilution for both similar and dissimilar extensions. Researchers have found that when consumers were not highly involved (e.g., the extension decision was seen as fairly inconsequential), dilution effects were only observed with similar extensions. Less similar extensions were considered exceptions and their impact on the parent brand was reduced. When consumers were motivated to more deeply process information about an extension, however, they found that unfavorable experiences with even dissimilar extensions could potentially lead to parent brand dilution. Similarly, a recent study found some evidence of greater brand dilution for consumers with a high need for cognition (i.e., consumers who generally like to think), as compared to those with a low need for cognition, presumably because they processed extension information more deeply. Finally, researchers have observed parent brand dilution for both failed similar and dissimilar extensions when attitudes were measured immediately after an extension trial experience. When parent brand attitudes were measured after a delay, however, then only unsuccessful similar extensions led to dilution. Collectively, these findings imply that unless consumers are enticed to more extensively consider the reasons behind a product failure, dilution effects are only likely to be manifested when the extension is seen as highly similar to the parent brand and thus as diagnostic. A product failure may not harm the parent brand if the extension category is far enough removed because consumers can compartmentalize the brand's products and disregard its performance in what is seen by consumers as an unrelated product category. Another factor influencing the likelihood of brand dilution is how familiar consumers are with the parent brand. One important factor influencing familiarity is brand ownership or usage. In an experimental study, one of the authors observed different patterns of brand dilution depending upon whether consumers owned the automobile brand being extended. When low-priced extensions were introduced, dilution occurred with owners of a prestige brand (e.g., BMW) but not with owners of a non-prestige brand (e.g., Acura). Similarly, using national household scanner data, researchers found evidence for potential negative effects of unsuccessful extensions among prior users of the parent brand but not prior non-users. An implication of these results is that even successful extensions can lead to brand dilution because the basis of brand meaning may be 18

different for loyal users compared to non-loyal users. Loyal users have richer, more developed knowledge structures of the brand and may have deeper convictions regarding what is central to brand meaning than non-users. Extensions may therefore be successful in attracting new users and increasing sales, but at the same time these extensions may be perceived to be inconsistent by loyal users and result in brand dilution with this group of consumers. To the extent that loyal users are more valuable to the firm, successful extensions could dilute total brand equity. In order to succeed with brand extensions and enhance parent brands, brand managers should keep prominence and consistency in mind. When extending brands, managers need to find the commonality between the brand and the extension and must then make this commonality evident. Prominent-consistent brand extensions are often able to enhance and shore up parent brands. Brand extensions can also run the risk of diluting parent brands; therefore, brand managers should be cautious. Brand dilution occurs particularly when prominent brand extension associations are viewed as moderately (rather than extremely) different from the brand. To mitigate dilution effects, or when the risk of dilution is high, an ideal strategy is often to create distance through co-brands, sub-brands, and/or marketing communications, distribution, and product packaging stressing differences between the extension and its parent brand.

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Bibliography 

Aaker, David A. and Kevin Lane Keller (1990), "Consumer Response to Brand Extension," Journal of Marketing, 54 (January), 27-41.

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Keller, Kevin and David A. Aaker (1992), "The Effects of Sequential Introduction of Brand Extensions," Journal of Marketing Research, 29 (February), 35-50.

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Strategic Brand Management Building by Kevin Lane Keller

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Keller, K. L. (1993, January). Journal of Marketing Conceptualizing, Measuring, Managing Customer-Based Brand Equity pp. 1-22

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Kotler, P., Armstrong, G., Wong, V., & Saunders, J. (2008). Principles of Marketing. In Principles of Marketing- Fifth European Edition (pp. 521-533). Essex: Pearson Education Limited

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