– Written by Jack Lechich for the Center for Services Leadership
According to the Chinese zodiac, 2019 was the year of the pig. This is ironic seeing as how the U.S.’s 2019 can be seen as the year of the hard seltzer, a time when people everywhere pigged out on spiked seltzer water. Last year, seemingly every alcohol company on the market attempted to chase the newest craze spurned by hard seltzer heavyweight White Claw Hard Seltzer. While certain companies choosing to go down this avenue makes sense in the minds of consumers such as Natural Light’s foray into hard seltzer, others such as Four Loko’s recent announcement that they will soon be selling their own hard seltzer has left others scratching their collective heads. So how do consumers react to such brand extensions where the new product seemingly fits the parent brand more (or less) so than other competing products?
According to a recent article published in the Journal of Retailing, the answer to that question might be the display format of the brand extensions. The researchers conducted two studies to see if consumers’ evaluations of brand extension products were impacted by two display formats: by-brand and by-category. The by-brand format presents the brand extensions alongside the parent brand’s other products while the by-category format displays the brand extensions with competing brands in that extension category. Researchers also conducted a third study to see if these consumer evaluations formed their expectations for the product and subsequently influence the consumption experience.
In Study 1, the participants were asked to read an introduction that stated that Nike was attempting to increase growth by launching a new product: an electric razor. In the by-brand condition, participants were given a scenario where they see the Nike razor in a Nike store, where it is displayed alongside various Nike sports apparel. In the by-category condition, the participants were given a scenario where the Nike razor was on display in a razor product department alongside other brands’ (Gillette, Philips, etc.) razors. After having finished reading the scenario, they then evaluated the Nike razor. The results indicated that the Nike razor was viewed as more favorable in the by-category than in the by-brand display condition.
The goal of Study 2 was for the research team to uncover the mediating factor behind the results of Study 1. The participants read an online shopping scenario where they encountered the brand extensions (i.e. Nikon electric razor, Nikon photo printer, Minolta electric razor, Minolta photo printer) either in the brand department or the category department of a widely-used online retailer. After viewing screenshots of the products displayed either by-brand or by-category, participants then evaluated the brand extensions and also noted why they made said evaluations. “These results confirmed our hypotheses that a by-category display leads consumers to weight quality over fit than a by-brand display, which increases evaluations for low fit extensions of high quality brands but decreases evaluations for high fit extensions of low quality brands.” The results thus indicate that the quality-fit thoughts of the consumer acted as the mediating factor.
Increasing a brand’s growth is among the top priorities for upper management in the service field and while introducing low fit extensions comes with obvious risks, there is some serious value that can come with these extensions. The glaring challenge with offering low fit brand extensions is getting consumers to look past the lack of fit. This research would suggest that managers would benefit from displaying low fit extensions with similar products of competing brands instead of displaying them with the parent brand products.
However, if a low quality brand were to introduce a high fit extension in an adjacent category, the display format should feature the extension product alongside products made by the parent brand rather than with competing brands’ products.
If you want to learn more on the impact of display formats in the aforementioned quality-fit conditions, go to the Journal of Retailing at this link. (A fee may apply.)