Can Brand Extension Signal Product Quality?

نویسنده

  • Sridhar Moorthy
چکیده

This paper asks whether brand extension can serve as a signal of product quality given that it costs less than a new brand. (Existing literature has assumed either that brand extension is cost-neutral or that it costs more.) I show that it can as a Perfect Bayesian Equilibrium, but the argument is unconvincing. For one thing, the separating equilibrium is not unique; a pooling equilibrium also exists in which brand extension signals nothing. For another, the separating equilibrium relies on off-equilibrium beliefs that are poorly motivated in the model. I propose a refinement of Perfect Bayesian Equilibrium that resolves both issues. Empirical off-equilibrium beliefs requires that consumers’off-equilibrium beliefs be justifiable on the basis of their prior beliefs and their product performance observations. With empirical off-equilibrium beliefs, two necessary conditions for brand extension to signal product quality are identified: (i) consumers must perceive old and new products of the firm to be positively correlated in quality, and (ii) at least some consumers must identify with brands, and not the firm behind the brand. Even with these conditions in place, the signaling argument is fragile: firm observability of past performance diminishes brand extension’s signaling capability; an arbitrarily small probability of failure for good products eliminates it. My results suggest that going forward the case for brand extension must rest on foundations other than signaling product quality.

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

منابع مشابه

The Effect of Brand Extension Strategy on Its Image: The Case of Majid Brand

This descriptive-correlational study examined the effect of brand extension on current image in the scope of Tabriz Majid products in the city of Tabriz. The study population comprised consumers of Majid products and fans of Tractorsazi, and the sample size was 380 persons. A simple random sampling method and an infinite population formula were used as well as a five-option Likert questionnaire...

متن کامل

The Effect of Brand Extension Strategies upon Competitive Advantage in Service Companies from Costumers point of View

This study analyzes the impact of brand extension strategies upon Competitive Advantage in Service Companies from Costumers point of View among Parsian Bank and its Affiliated Service Companies in Isfahan City. In this study, for collecting data a questionnaire was used. The samples were selected randomly. Also, SPSS and Amos software were used to analyze data and test hypotheses .The results i...

متن کامل

Brand Equity and Vertical Product Line Extent

This paper addresses the question of how the vertical structure of a product line relates to brand equity. Does the presence of “premium” or high-quality products in a product line enhance brand equity? Conversely, does the presence of “economy” or low-quality products in a product line diminish brand equity? Economists and marketing researchers refer to variation in quality levels of products ...

متن کامل

The Relationship between Brand Personality dimensions and Consumer’s Loyalty to Sports Brands in Rasht city

The purpose of the present study was to explain the relationship between brand personality dimensions and customers’ loyalty to sport brands in Rasht.  The method of present survey was descriptive and applied, also the statistical population was loyal customers to sport brands in Rasht.  In order to data collection two questionnaires; Geuens & Wulf (2009) for measuring brand personality dimensi...

متن کامل

Testing the brand loyalty model and types of customers in the Iranian sportswear industry

 The purpose of this study was to examine the brand loyalty and types of customers (diversified and diehard customers) model in the Iranian sportswear industry, which was conducted on a case-by-case basis in bodybuilding clubs in Fars province. The method of this research was correlation which was done in the form of structural equations. 350 people participated in this study voluntarily. The ...

متن کامل

ذخیره در منابع من


  با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

عنوان ژورنال:
  • Marketing Science

دوره 31  شماره 

صفحات  -

تاریخ انتشار 2012