HOW DO CONSUMERS EVALUATE BRAND EXTENSIONS RESEARCH FINDINGS FROM INDIA

N. Thamaraiselvan J.Raja

In todays intense competitive environment, companies launch new products to satisfy constantly changing consumers preferences. The new products are prone to failures due to many factors. Companies take efforts to reduce new product failure rates to maximize their returns for their stakeholders. A brand extension, leveraging existing brand names to new product categories is one such strategy to reduce the risk of new product failures. Despite two decades of research in branding, many vagaries are yet to be explored and understood. This study primarily focuses on how consumers evaluate brand extensions for FMCG (Fast Moving Consumer Goods) and service product categories in Indian market conditions. It explores how exactly the consumers evaluate different product categories based on factors like, similarity fit, perceived quality, brand reputation and perceived risk. It brings out the impact of brand reputation of the core brand and perceived service quality on the brand extensions evaluations. It highlights the role of perceived risk involved in the extended product category in brand extensions evaluations. Most importantly, this study establishes the relationships among similarity fit, brand reputation, perceived service quality and perceived risk in extended product categories through appropriate multivariate analysis.

INTRODUCTION

he ever-changing market characteristics have huge impact on the corporate decisions. The global environment also poses several complexities to the marketer in understanding the market. The companies constantly develop newer marketing strategies to stay ahead in the market and reap more benefits for its stakeholders. More number of companies are relying on launching new products in the market to meet the changing consumer needs and preferences. This strategy is proven but not without risk. Some authors estimate that 30-35 % of all new products fail (Montoyo et. al., 1994; Booz et.al., 1982). Others estimate more negatively in that only two out of ten products launched are successful in the market. Adding to the difficulty in accurately predicting the market dynamics, the promotion cost and shelf space cost makes the companys new product launches even more difficult (Aaker 1996). Companies are taking hard steps to reduce these failure rates. One way of dealing with the rate of failures of new products is using a firms competence. Many business organizations are leveraging their brand names to reduce the risk of failure of new products. A brand extension is the use of well-known brand names for newJournal of Services Research, Volume 8, Number 1 (April-September 2008) 2008 by Institute for International Management and Technology. All Rights Reserved.

44 How do Consumers Evaluate product introductions (Aaker and Keller, 1990; Keller, 2003; Klink and Smith 2001). For FMCG (Fast Moving Consumer Goods) as well as services more than 80% of the new products introduced are brand extensions (Rangaswamy, et.al., 1993; Ernest and Young and Nielsen 1999). Brand extension strategies are beneficial because they reduce new product introduction costs, and perceived risk in new product, hence increasing the chances of success (Aaker and Keller, 1990; Keller 1998). These benefits are largely due to the transfer of parent brands awareness and associations to the new product (Keller 1998). Like any other strategy it has both positive side and negative side to it. Brand extension strategy needs a careful analysis of the market before adopting it. If it turns out well in the new product category it will enhance the brand name; otherwise it will dilute the core brand value. This is the reason why many researchers are keen on continuously exploring the different dimensions of brand extensions. Managers assume they can exploit the equity of a well-known brand when entering new markets, capitalizing on recognition, goodwill, and any positive associations. Case studies abound of successful brand extensions. For example, Dettol, with its antiseptic liquid origin, successfully extended into shaving creams, toilet soaps and floor cleaner. Tata successfully extended into telecom and insurance sectors. However, caution needs to be exercised. For example when Ponds extended into toothpaste and was unsuccessful as it moved too far from its core values. Given the importance of brand extensions, a better understanding of this topic is needed. Researchers have predominantly investigated brand extensions among tangible goods. By contrast few have investigated the service sectors (Ruyter and Wetzels 2000; van Riel et. al., 2000). Notable brand extension activity has taken place in services. For example, ICICI entered into banking and insurance, Virgin moved into radio stations, airline, financial services, and bridal services. Likewise the Disney Company, which in the 1950s signified world-class animation, has extended into services such as television, publishing, software, Internet portals, theme parks, hotels and cruises. CONCEPTUAL BACKGROUND Brand extension strategies are used largely by companies because they believed that the brand extension strengthens the brand positioning, improves the brand awareness and enhances the quality associations and increases the trial rate by reducing the perceived risk involved in the new product. In India it is reported that more than 80% of new products additions are using brand extensions
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strategies. A brand extension into same product and new product category enhances and improves their market share and brand equity in the long run (Lane and Jacobson, 1995). New products are getting relatively easy acceptance among the target audience. A good brand association reduces the chances of failure of new product launch. Though, brand extension strategies tasted success in the past, still brand extension success is uncertain. Research carried out by Ernest and Young and Nielsen (1999) in the field of FMCG brand extensions in European countries, reveal that there is a failure rate of around 80%. Moreover, unsuccessful brand extensions can harm the parent brand, which can result in substantial losses of brand equity (GurhanCanli and Maheswaran, 1998; Swaminathan et. al., 2001). The success or failure of brand extensions is vastly dependent on how the customers evaluate the brand extensions (Klink and Smith, 2001). Companies are taking hard steps to improve the success rate of brand extensions. Theoretical and managerial understanding of how a consumer evaluates the brand extensions is given substantial importance. In order to improve the success rate of brand extensions it is imperative to understand the parameters or factors affecting the brand extensions evaluations. Moreover, companies need to understand the significance of these factors and their relative importance to develop a right brand extensions strategy. REVIEW OF LITERATURE Two of the seminal studies (Boush and Loken, 1987; Aaker and Keller, 1990), have investigated several antecedents and consequences. Many studies have been conducted to understand the different vagaries of brand extensions and the area is growing larger. More than 50 research studies since 1987 have empirically analyzed and tested the impact of certain success factors on the overall evaluation of brand extensions. Mostly, the consumer evaluation of brand extension studies focused on parent brand quality and similarity fit in terms of usage, image and features of the original brand product category to extended product category and difficulty of extending the product category by the parent company. These researches throw some excellent insights on the different factors affecting consumer evaluations of brand extensions. If the company launches a high-quality product by exploiting existing weak brand, the brand equity of existing weak brand increases due the positive evaluation of the high quality extended product category (Jun et. al., 1999; Keller and Aaker, 1992). Brand equity built in a certain product catgory can also be exploited by licensing
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46 How do Consumers Evaluate the well-known brand name to third parties for use in a related class. The strategy is used to challenge major players in an industry (Branson 1998). The chances are high for companies to exploit its high prestige brands to stretch to more remote product categories than brands with inferior reputations (Park et. al., 1991). A company can also exploit and overstretch its top quality brands. Cannibalization, a decrease in sales in the original category, can result from competition from the extensions (Buday, 1991; Reddy et. al., 1994; Sullivan, 1990). Failure of brand extensions may weaken brand equity, or positively associate with the original brand (Boush and Loken 1991; Gurhan-Canli and Maheswaran, 1998; John et. al., 1998). Sometimes the unsuccessful brand extensions create undesirable associations, which put the company at a serious risk (Aaker and Keller, 1990: Lane and Jacobson 1995). The more products a company markets under one umbrella brand, the higher the risk that if a disaster occurs to one of them, the effect will spill over to the rest (Sullivan 1990). Opportunities to create a new brand are also foregone (Aaker and Keller, 1990). The following strong research insights can be observed from the brand extensions literature. Most brand extensions research is involved with fast moving consumer goods and durable goods except for one study (Aaker and Keller, 1990) included McDonalds as a service brand but they did not make any analytical distinctions between FMCG and services. Only one study addressed the importance of brand extensions in the services sector (Ruyter and Wetzels 2000). Only one study compared brand extension judgements between FMCG and durable goods (Broniarczyk and Alba, 1994). The majority of the previous studies basically used consumer surveys to investigate consumer evaluations of hypothetical brand extensions (i.e., extension not introduced in the market). Respondents in prior surveys rated the independent (success factors) and dependent variable (success of the extensions) on simple rating scales (Aaker and Keller 1990; Barone et. al., 2000; Bottomley and Doyle, 1996; Bottomley and Holden, 2001; Boush and Loken, 1991; Broniarczyk and Alba, 1994; Dacin and Smith, 1994; Keller and Aaker, 1992; Klink and Smith, 2001; Lane, 2000). Most previous research used students as subjects (Aaker and Keller, 1990; Barone et. al., 2000; Bottomley and Doyle, 1996; Boush and Loken, 1991; Broniarczyk and Alba, 1994; Dacin and Smith, 1994; Klink and Smith, 2001; Lane, 2000; Park et. al., 1991) Therefore, a research issue that has remained underexposed
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concerns the extension of services to unrelated markets by making use of the corporate brand. Yet, this type of service extension is becoming a prevalent phenomenon. For instance, deregulation and privatization caused many companies (TATA, Reliance, LIC, and SBI) to enter into service markets, such as telecommunications, insurance sectors and transport and spurred a number of corporate service brand extensions, particularly service providers active in a myriad of other markets. Service providers attempt to acquire customer trust on the basis of their positive reputation in the market in which they have traditionally been active. As services consist primarily of intangible properties, corporate service brands may be used to reduce perceived risk and to influence frequently unobservable extension evaluation criteria, such as credibility, quality and eventually customer patronage intentions. This seems particularly important when services are extended to markets in which the service provider has no proven expertise. Brands serve as cues for triggering image perceptions based on expressive values associated with the company name. RESEARCH APPROACH With this background literature, this research paper intends to contribute to better understanding of how consumers evaluate brand extension in the Indian perspective. Further we try to find the different consumer evaluation mechanisms in service extensions and FMCG brand extensions. This would help to get more insights on the impact of cultural background on consumer evaluation of brand extensions across different product categories. This research encompasses the most important factors such as similarity effect, quality of the parent brand and brand reputation, quite often used in research studies of brand extensions evaluations. We have also incorporated an additional factorperceived risk and its impact on brand extension evaluations. This research paper has been organized in the following manner. It discusses the hypotheses used in this research, then the research design used for this study, the findings on the impact of independent variables like, similarity fit, service quality, brand reputation and perceived risk involved in the extended product category on the overall brand extensions, conclusions and managerial implications based on the study and finally the limitations and future directions are given. This research focuses more on the dominant factors involved in the consumer evaluation of brand extensions. These factors are
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48 How do Consumers Evaluate identified with the use of the research articles published in the peerreviewed journals of national and international repute. The journals used for this purpose are International Journal of Marketing Research, Journal of Marketing Research, Journal of Consumer Research, Management Science, Journal of Marketing and Marketing Science. The perusal of these studies revealed many factors involved in the success of the brand extensions. For this research paper, the authors strongly felt that it is better to take the most significant factors involved in consumer evaluation of brand extensions. In order to find these significant factors, the authors made analysis on the previous brand extensions studies and arrived at three important factors that are more often used to find out the consumer evaluation of brand extensions. From the literature review the following stimuli are considered for this study. The factors are quality of the parent brand, similarity fit between the core (parent) brand with the extended product category, and reputation of the parent brand. Apart from the above-mentioned three factors the authors strongly felt that the main purpose of brand extensions is to cope with the risk involved in the purchasing of a product category. Moreover the well-known brand acts as a risk reliever and would increase the chance of product trial (Rao and Manroe, 1989). As services predominantly posses experience and credence qualities, the perceived risk is relatively high. This can be reduced with the best use of brand extensions. So it is significant to use the perceived risk involved in the extended product category as another stimuli to find the consumers evaluation of brand extensions. We assume that the perceived risk involved in the new product category would have some significant impact on the brand extensions evaluations. RESEARCH HYPOTHESES The perceived quality of the parent brand: Brand extensions are affected by the overall attitude towards the parent brand. The attitudes toward the parent brand are based on durability, serviceability, incidence of defects, features, performance, etc. Here the overall attitudes towards the brand are perceived quality of the parent brand. Zeithamal (2003) concludes after reviewing research articles that the perceived quality is at a higher level of abstraction than a specific attribute of a product. Since services are more of intangible characteristics the SERVQUAL model is used to understand the perceived quality of the parent brand. Zeithaml (2003) considered perceived quality is the component of
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customer satisfaction. The perceived quality or and the overall attitude towards the original brand should have an impact if the brand has been extended to the new product category. If the perceived quality were high then the extension would get benefited; if perceived quality is low then it would harm the brand extensions. Aaker and Keller (1990) in their study used perceived quality with this assumption but the results do not support the claim. Subsequent study in the brand extensions evaluation proved perceived quality as significant factor. We would like to know the impact of perceived quality in the brand extension evaluations in the services category. Therefore the hypothesis is: H1: If the perceived quality of the parent brand is high, then the attitude towards the brand extension is positive. Brand reputation of the parent brand and service quality: The brand reputation has been defined in terms of consumer perception of quality associated with the brand (Aaker and Keller, 1990). This fact has been further strengthened from the study conducted by Barone et. al., 2000. With this review of literature the authors try to find if there is any relationship between the perceived service qualities of the parent brand with the brand reputation. Hence the hypothesis is: H2: If the quality of the parent brand is high then the reputation of the parent brand is also high. Similarity fit between the parent product and extended product category: Similarity fit is considered to know how far the customer perceives the extended product category is similar to the parent product (Smith and Park, 1992). Further similarity fit may arise in substitute, complement and transfer dimensions. From the literature review, it is clear that similarity fit is frequently considered for brand extension studies. This perceptual similarity fit had been considered in several studies and the findings reveal that the higher the similarity between the parent product and the extended product category, the greater is the possibility of success. (Boush, et al., 1987, Aaker and Keller, 1990, Boush and Loken, 1991, Dacin and Smith, 1994, Keller and Sood 2002). This kindles an interest in the researches mind to explore and find the similarity fit effect in the brand extensions evaluations in services category. Therefore the hypothesis is: H3: If the similarity fit between the extended product categories with the original brand is high then there is high possibility that the extension evaluations will be positive.
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50 How do Consumers Evaluate Brand Reputation of the Original product: One of the underlying principles for the brand extension concept is that stronger brands provide a better opportunity for the company to utilize this advantage to enter new product category products. Brand equity is defined in terms of brand strength articulated implicitly in terms of consumers predispositions towards the brand (Keller 1993). In brand extension research, brand equity is predominantly considered as customer based brand equity rather than company based brand equity. The findings of the previous studies reveal that the greater the brand reputation the higher is the possibility of favorable brand extensions compared to the less reputed brands (Aaker and Keller, 1990; Dacin and Smith, 1994, Bottomley and Doyle, 1996). With this assumption the author has developed a hypothesis: H4: If the brand reputation of the original brand is higher the greater is the chance of favourable attitude of customers towards the extended products. Perceived risk involved in the extended product category: Brand extension has been widely used to reduce the consumers perceived risk. The brand extension literature reveals that the consumers are largely relying on reputation of the brand to cope with the uncertainly level and risk involved in the products. A well-known brand acts as a risk reliever and increases the possibility of purchase trial of the new product. When a brand gets familiar with the customers through repeated exposure, risk perceived by the customers tends to reduce and a favorable attitude towards the product increase (Baker et al., 1986). There is a distinction between the risk involved in the product category and product. The perceived risk involved in the product category means customer perception of the risk involved in buying an average product in that product class. The perceived risk in the product however, is about the risk involved in the buying of a specific product. Every purchase has some risk. This is also applicable to service categories. The magnitude of the perceived risk differs from one product/service category to another product/service category. With this underlying assumption the authors have developed the following hypothesis: H5: If the perceived risk involved in the product category is high, then the evaluation of brand extension is positive. The table 1 would give us a snapshot of hypotheses used for this research study.
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Table 1: Hypotheses of the Study

Hyp. H1 Factors If the perceived quality of the parent brand is high, then the attitude towards the brand extension is positive. If the quality of the parent brand is high, then the reputation of the parent brand is also high If the similarity fit between the extended product categories with the original brand is high then there is a high possibility that the extension evaluations will be positive. If the brand reputation of the original brand is higher the greater the chance of favourable attitude of customers towards the extended products. If the perceived risk involved in the product category is high, then the evaluation of brand extension is positive. Source Boush et al., 1987 Smith and Park 1992 Sunde and Brodie 1993 Lane and Jacobsen 1995 Keller and Aaker 1990 Aaker and Keller 1990 Boush and Loken 1991 Park et. al., 1991 Sunde and Brodie 1993 Bottemley and Doyle 1996 Aaker and Keller, 1990, Dacin and Smith 1994, Bottomley and Doyle 1996 Derbaix 1983 Baker et al., 1986

H2 H3

H4

H5

The following figure would give better understanding of the above hypotheses.
Brand Reputation H2 Perceived Quality

H4

H1

Brand Extensions Success

H3

H5

Similarity Fit

Perceived Risk

Figure1: Showing the Model of Factors Affecting Brand Extensions Evaluations RESEARCH DESIGN To test the above-mentioned hypotheses for this study, six brands are chosen based on the criteria used in similar kind of study (Aaker and Keller, 1990). The criteria are (i) high quality, having strong brand image, (ii) brand not having been broadly extended previously (iii) ability to elicit relatively specific associations. To identify the brands the secondary data has been used. These brands were selected based on the survey on the most trusted services brands in India published in
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52 How do Consumers Evaluate the business news daily, The Economic Times, Brand Equity column on December 14, 2004. This is the largest of its kind in India, with a sample of over 7000 distributed across socio-economic class, age, income and geography. Times Intelligence Group and AC-Nielson ORG-MARG did the survey. They have been doing this kind of study for the past five years. They have ranked the most trusted brands based on the brand attributes like: maintains high level of quality, price premium, definitely considered brand for purchase, popular brand for many years, has something that no other brands have, evokes a feeling of confidence and pride among users and a unique feeling associated with this. Two brands were chosen in the FMCG category and four brands were chosen in the services category, the reason being the substantial literature has been involved with FMCG brands and very little in services brands. So, to get a better insight on consumer evaluation of services brands four service brands were chosen. Two brands from FMCG were Colgate (ranked 1) and Dettol (ranked 4). Four brands from services were LIC-Life Insurance Corporation of India (ranked 1), BSNL- Bharat Sanchar Nigam Limited (ranked 3), SBI- State Bank of India (ranked 2) and ICICI- Industrial Credit and Investment Corporation of India (ranked 4). These brands aptly fit in Indian conditions based on the criteria suggested by Aaker and Keller (1990). Each of the six parent brands was leveraged into 3 hypothetical extensions, providing a total of 18 brand extensions (see Table 2). These extensions were developed after conducting a small survey with the brand management students of National Institute of Technology, Tiruchirappalli, India. Data relating to possible future extensions and their relatedness to the existing core product/business were collected. These extensions had to be relevant and logically connected with the parent brand. In order to test the framed hypotheses, care had been taken to make sure that the extensions provided sufficient heterogeneity to test the similarity fit and perceived risk dimensions. A structured questionnaire was developed to collect data on consumer evaluation of brand extension in services. Separate questionnaires for all the 6 brands were developed. The standardized constructs were used to measure the service quality, brand reputation, similarity fit, perceived risk and overall brand extension are used while developing questionnaire. Questions on the positive attitude, satisfaction on the brand and positive association with the brand were used to find out the brand reputation of the core brand. Questions on overlap between parent product category and extended product category, competence of the original services and people, facilities (resources) and skills were
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used to find out the similarity dimension. Care was taken to include possible dimensions involved in perceived risk. Table 2: Showing Hypothetical Brand Extensions
S. No 1 2 3 4 5 6 Colgate Dettol Life Insurance Corporation of India (LIC) Bharat Sanchar Niagm Limited (BSNL) State Bank of India (SBI) Industrial Credit and Investment Corporations of India (ICICI) Original Brand Hypothetical Brand Extensions in Terms of Relatedness 1. Mouth Wash (High) 2. Breath Mint (Medium) 3. Dental Floss (Low) 1. After Shave Lotion (High) 2. Antiseptic Cream (Medium) 3. Toilet Cleaner (Low) 1. Banking (High) 2. Real Estates (Medium) 3. Hospital (Low) 1. Networks (High) 2. IT & Technical Education (Medium) 3. Insurance (Low) 1. Financial Consultancy Services (High) 2. Educational Institutions (Medium) 3. Hotels (Low) 1. Real Estate (High) 2. Satellite Channels (Medium) 3. Theme Parks (Low)

The subjects were the users of these brands in Tiruchirappalli, Tamil Nadu state, India. The valid samples for different brand users were Colgate 178; Dettol 178; LIC 124; BSNL 125; ICICI 121; SBI 119. The collected data were coded, edited and fed into the SPSS package for analysis purpose. Pearson Correlation coefficient and multiple regression methods were used to test the hypotheses made for this study. FINDINGS AND INTERPRETATIONS From the Table 3 showing the correlation coefficients for FMCG hypothetical brand extensions of Colgate and Dettol, we can infer, that the H2 stating the relationship between brand reputation and quality of the parent brand and H3 stating the relationship between similarity fit and overall brand extensions were supported from the results. So this study reiterates that similarity fit in terms of substitute, complement and transfer are positively evaluated. This study strengthens the previous studies in establishing the associations between similarity fit and brand extensions evaluations. Further it supports the assumption that brand reputation of the parent brand is influenced by the quality it commands in the customers perception. The hypotheses H2 and H3 supported all of Colgate and Dettol hypothetical brand extensions. Hypotheses H1 (perceived quality) and H4 (brand reputation) were partially supported in FMCG category. Hypothesis H5 (perceived risk) was supported in two cases. The remaining four extensions did not have any impact by the perceived risk. Since the perceived risk involved in FMCG is relatively low, and tangible cues are available to reduce the customers perceived
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54 How do Consumers Evaluate risk in FMCG purchase decisions are strong reasons for not considering perceived risk as one of the factor in FMCG brand extensions evaluations. Table 3: Results Showing the Correlations Coefficients for Colgate and Dettol
HYPOTHESES 1. SERVICE QUALITY AND
OVERALL BRAND EXTENSIONS 2. SERVICE QUALITY AND BRAND REPUTATION

HYPOTHETICAL BRAND EXTENSIONS OF DETTOL AFTER MOUTH BREATH DENTAL ANTISEPTIC TOILET SHAVE WASH MINT FLOSS CREAM CLEANER LOTION 0.198** 0.683** 0.757** 0.175* 0.079 0.137 0.683** 0.570** 0.136 0.256** 0.027 0.683** 0.705** 0.050 0.185** 0.274** 0.680** 0.509** 0.149* 0.036 0.253** 0.680** 0.526** 0.176* -0.137 0.078 0.680** 0.313** -0.054 0.064

HYPOTHETICAL BRAND EXTENSIONS OF COLGATE

3.SIMILARITY FIT AND

OVERALL BRAND EXTENSIONS

4. BRAND REPUTATION AND

OVERALL BRAND EXTENSIONS 5. PERCEIVED RISK AND OVERALL BRAND EXTENSIONS

** Correlation is Significant at the level of 0.01 (2- tailed)

Table 4 provides the snapshots of results of five hypotheses in Colgate and Dettol hypothetical brand extensions based on the correlation coefficients. We can infer that similarity fit is having a strong impact on the brand extensions evaluations. A strong positive relationship exits between perceived quality of the parent brand with its reputations. Perceived quality and brand reputation of the parent brand were having partial impact on brand extensions evaluations. Perceived risk in the extended product category was considered least important because only in two out of six hypothetical extensions, perceived risk had an impact. Table 4: Results of the Hypotheses Based on Correlations Coefficients
HYPOTHETICAL BRAND EXTENSIONS
COLGATE DETTOL

ANTISEP TIC CREAM +VE +VE +VE +VE -VE

BREATH MINT

DENTAL FLOSS

1. SERVICE QUALITY AND

OVERALL BRAND EXTENSIONS

+VE +VE +VE -VE -VE

-VE +VE +VE -VE +VE

-VE +VE +VE -VE +VE

+VE +VE +VE +VE -VE

2. SERVICE QUALITY AND

BRAND REPUTATION

3. SIMILARITY FIT AND

OVERALL BRAND EXTENSIONS

4. BRAND REPUTATION AND

OVERALL BRAND EXTENSIONS

5. PERCEIVED RISK AND

OVERALL BRAND EXTENSIONS

+ve = supports hypothesis, -ve = does not support hypotheses

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TOILET CLEANE R -VE +VE +VE -VE -VE

AFTER SHAVE LOTION

MOUTH WASH

HYPOTHESES

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Table 5 shows the correlation coefficient and we can infer that the service quality, brand reputation and similarity fit are having positive relationships in all the hypothetical extended category with the over all evaluation of brand extensions. This strengthens the notion that similarity fit, brand reputation and perceived service quality strongly associated with the service brand extension evaluations. This supports the H1, H3 and H4. Service quality is having a positive relationship with the brand reputation. This strengthens the assumption that service quality augments the brand reputation of the core products thus supporting H2. But H5, which aims at finding the relationship between perceived risk and overall brand extension slightly supports the possibility of extending the BSNL brand name to IT and Computer Education but not on other hypothetical extensions. This is one of the key results that needs to explored further. It shows that perceived risk in the extended product categories have very less association with service brand extensions evaluations. This is contrary to the assumption that brand name is risk reliever in services category. Probably, the customers look more paramount important factors than brand name to evaluate the service brand extensions positively. Table 5: Results Showing the Correlations Coefficients for LIC and BSNL
HYPOTHETICAL BRAND EXTENSIONS OF HYPOTHESES 1. SERVICE QUALITY
AND OVERALL BRAND EXTENSIONS LIC BANK REAL ESTATE HOSPITALS

HYPOTHETICAL BRAND EXTENSIONS OF BSNL NETWORK IT&COMPUTER EDUCATION 0.341 ** 0.566 ** 0.728 ** INSURANCE

0.232 ** 0.627** 0.645 **

0.246 ** 0.627 ** 0.701 **

0.265 ** 0.627 ** 0.671 **

0.259 ** 0.566** 0.619 **

0.343 ** 0.566 ** 0.723 **

2. SERVICE QUALITY
AND BRAND REPUTATION

3.SIMILARITY FIT
AND OVERALL BRAND EXTENSIONS

4. BRAND
REPUTATION AND OVERALL BRAND EXTENSIONS

0.071 -1.154

0.191 ** -0.148

0.346 ** 0.035

0.251 ** 0.094

0.326 ** 0.281 **

0.374 ** 0.165

5. PERCEIVED RISK
AND OVERALL BRAND EXTENSIONS

** Correlation is Significant at the level of 0.01 ( 2- tailed)

Table 6 shows the summary of results for the hypotheses. Perceived service quality shared a strong positive relationship with brand reputation. This augments the theory that strong perceived quality will have high brand reputation. Similarity fit, perceived service quality, brand reputation were influencing the positive brand extension evaluations. Perceived risk had a lesser impact on the brand extensions evaluations.
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56 How do Consumers Evaluate Table 6: Results of the Hypotheses Based on Correlations Coefficients for BSNL and LIC
HYPOTHETICAL BRAND EXTENSIONS BSNL HYPOTHESES
NETWORK IT & COMPUTER EDUCATION INSURANCE BANK

LIC
REAL HOSPITALS ESTATE

1. SERVICE QUALITY AND OVERALL BRAND EXTENSIONS 2. SERVICE QUALITY AND BRAND REPUTATION 3. SIMILARITY FIT AND OVERALL BRAND EXTENSIONS 4. BRAND REPUTATION AND OVERALL BRAND EXTENSIONS 5. PERCEIVED RISK AND OVERALL BRAND EXTENSIONS

+VE +VE +VE +VE -VE

+VE +VE +VE +VE +VE

+VE +VE +VE +VE -VE

+VE +VE +VE -VE -VE

+VE +VE +VE +VE -VE

+VE +VE +VE +VE -VE

Table 7 showing the results of correlations coefficients for SBI and ICICI, similarity fit and brand reputation of the core product had a greater association with brand extensions evaluations. Perceived service quality and perceived risk involved in the extended categories were less associated with brand extensions evaluations. Perceived service quality and brand reputation were largely positively associated. Table 7: Results Showing the Correlations Coefficients for SBI and ICICI
HYPOTHESES 1. SERVICE QUALITY AND
OVERALL BRAND EXTENSIONS 2. SERVICE QUALITY AND BRAND REPUTATION 3.SIMILARITY FIT AND OVERALL BRAND EXTENSIONS

HYPOTHETICAL BRAND EXTENSIONS OF SBI FINANCIAL EDUCATIONAL CONSULTAN INSTITUTIONS CY SERVICES 0.344** 0.681** 0.614** 0.459** 0.100 0.156 0.681** 0.650** 0.303** 0.066

HOTEL

HYPOTHETICAL BRAND EXTENSIONS OF ICICI REAL SATELLITE THEME ESTATE CHANNELS PARKS 0.138 0.635** 0.719** 0.188** -.225** -0.034 0.635** 0.601** 0.082 0.079 -0.053 0.635** 0.647** 0.097 0.090

0.086 0.681** 0.560** 0.156** 0.201*

4. BRAND REPUTATION AND

OVERALL BRAND EXTENSIONS 5. PERCEIVED RISK AND OVERALL BRAND EXTENSIONS

** Correlation is Significant at the level of 0.01 (2- tailed)

The Table 8 given below is showing the summary of results for the developed hypotheses. Contrary to previous service extensions (LIC, BSNL) perceived service quality shared a less significant relationship with brand extension evaluations. This gives a room for doing a further research and come with a strong support that there is possibility of customers viewing the evaluating the different types of service categories differently. The impact of similarity fit over the brand extension evaluations was strengthened again from SBI and ICICI brand
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extension evaluations. Perceived risk had a lesser impact on the brand extension evaluations. Brand reputation had a quite larger impact on service brand extensions evaluations. Table 8: Results of the Hypotheses Based on Correlations Coefficients for SBI and ICICI
HYPOTHETICAL BRAND EXTENSIONS
SBI ICICI

FINANCIAL CONSULTANCY SERVICES

EDUCATIONAL INSTITUTIONS

1. SERVICE QUALITY AND

OVERALL BRAND EXTENSIONS

+VE +VE +VE +VE -VE

-VE +VE +VE +VE -VE

-VE +VE +VE +VE +VE

HOTEL

HYPOTHESES

-VE +VE +VE +VE +VE

-VE +VE +VE -VE -VE

-VE +VE +VE -VE -VE

2. SERVICE QUALITY AND

BRAND REPUTATION

3. SIMILARITY FIT AND OVERALL

BRAND EXTENSIONS 4. BRAND REPUTATION AND OVERALL BRAND EXTENSIONS 5. PERCEIVED RISK AND OVERALL BRAND EXTENSIONS

The following Tables 9, 10 and 11 give the information about the regression results of the hypothetical extensions for Colgate and Dettol, LIC & BSNL and SBI & ICICI. These tables contain the standardized regression coefficients and, in parentheses, the corresponding t values are given. The adjusted R2 were on comparable and sometimes high with some of the hypothetical brand extensions. A possible explanation could be that brand extensions have become much more common over the years. Successful extensions could thereby have set or reinforced the standards for evaluation in consumers, at the same time reinforcing the subsequent explanatory power of the used constructs. Hypothesis stating the impact of similarity fit over the brand extensions evaluations has been supported over the years. This is confirmed in this study also. Although in varying degree it is been confirmed in all hypothetical extensions in this study. Except for Aaker and Kellers (1990) study all other studies supported the impact of perceived service quality over the brand extensions evaluations. But this study supports the Aaker and Keller (1990) study. Service quality is supported only in one hypothetical brand extensions (LIC into Hotels) among the other hypothetical extensions used in this study. Similarly brand reputation had a significant effect only in one case (SBI into Financial consultancy services). Perceived Risk considerably had a effect on two cases in FMCG category (Colgate into breath mint & Dettol into antiseptic cream).
Journal of Services Research, Volume 8, Number 1 (April-September 2008)

THEME PARKS

REAL ESTATE

SATELLITE CHANNELS

58 How do Consumers Evaluate Table 9: Results of the Regression for Colgate and Dettol
Factors
COLGATE DETTOL

ANTISEPTIC CREAM a(b) (4.045) 0.033 (0.363) .002 (0.027) 0.517 (7.543) -0.142 (-2.150) 0.284 0.301 18.582
BSNL

Constant Service Quality Brand Reputation Similarity Fit Perceived Risk Adjusted R2 R2 F

(2.840) 0.059 (0.860) -0.011 (-0.163) 0.745 (14.621) 0.036 (0.720) 0.567 0.576 58.874

(1.193) 0.114 (1.355) 0.023 (0.271) 0.528 (8.454) 0.159 (2.522) 0.346 0.361 24.391

(1.731) 0.062 (0.841) 0.009 (0.121) 0.696 (12.799) 0.068 (1.244) 0.494 0.505 44.188

(3.255) 0.150 (1.622) -0.111 (-1.244) 0.483 (6.719) 0.016 (0.244) 0.254 0.271 16.101

a = Beta Co-efficient (b) = t- Values Adjusted R 2 = Significant at 0.000 level

Table 10: Regression Analysis Results for LIC & BSNL

LIC

CONSTANT SERVICE QUALITY SIMILARITY FIT BRAND REPUTATION PERCEIVED RISK ADJUSTED R2 R2 F

(1.583) .095 (1.337) .648 (9.320) .002 (.026) -1.049 (-1.049) 0.415 0.420 86.669

(2.238) .088 (1.306) .692 (10.554) .07 (1.111) -.111 (-1.707) 0.475 0. 479 111.39

(-.833) .171 (2.560) .646 (9.683) .105 (1.201) .037 (.552) 0.469 0 .447 54.806

(2.754) .071 (.954) 0.619 (8.732) 0.089 (1.214) 0.079 (1.118) 0.378 0. 383 76.242

(0.016) 0.038 (.492) 0.691 (10.88) .133 (2.102) .082 (1.297) 0.539 0. 546 73.50

a = Beta Co-efficient (b) = t- Values Adjusted R2 = Significant at 0.000 level

Journal of Services Research, Volume 8, Number 1 (April-September 2008)

INSURANCE a(b) (3.011) .112 (1.703) .723 (11.591) .119 (1.792) .023 (.357) 0.518 0 .522 134.346

NETWORKS a(b)

HOSPITALS

REAL ESTATE

BANKS

FACTORS

IT & COMPUTER E DUCATION a(b)

a(b)

a(b)

a(b)

TOILET CLEANER a(b) (4.060) 0.090(0. 878) -0.188 (-1.929) 0.324 (4.215) 0.059 (0.827) 0.102 0.122 6.026

DENTAL FLOSS a(b)

BREATH MINT a(b)

AFTER SHAVE LOTION a(b)

MOUTH WASH a(b)

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Thamaraiselvan, Raja

Table 11: Regression Analysis Results for SBI & ICICI

SBI ICICI

FINANCIAL CONSULTANCY SERVICES a(b)

EDUCATIONAL INSTITUTIONS a(b)

Constant Service Quality Brand Reputation Similarity Fit Perceived Risk Adjusted R2 R2 F

(0.471) 0.045 (0.472) 0.255 (2.533) 0.500 (6.634) 0.106 (1.492) 0.431 0.450 23.342

(0.779) -0.053 (-0.555) 0.194 (1.987) 0.609 (8.431) 0.008 (0.117) 0.427 0.447 23.004

HOTEL a(b)

Factors

(0.766) -0.002 (-0.015) 0.051 (0.456) 0.537 (6.842) 0.091 (1.097) 0.303 0.326 13.805

(0.934) 0.094 (1.142) 0.080 (0.972) 0.696 (10.778) -0.075 (-1.147) 0.529 0.545 34.709

(0.795) -0.116 (-1.22) 0.150 (1.567) 0.604 (8.281) 0.085 (1.144) 0.364 0.386 18.207

a = Beta Co-efficient (b) = t- Values Adjusted R2 = Significant at 0.000 level

CONCLUSION AND MANAGERIAL IMPLICATIONS This research paper augments existing literature on consumer evaluation of brand extension in the services category. This examines the importance of similarity fit, impact of perceived service quality, significance of high brand reputation, and influence of perceived risk involved in the FMCG and services. Interestingly, this study strengthens the earlier literature in terms of findings in the similarity dimensions. Similarity between the core products/services and extended products/services are considered most important whenever the consumer evaluates the brand extensions. This study also supports the earlier studies in terms of the relationship between the perceived service quality and brand reputation. The brand reputation could be enhanced by way of enriching the quality of the product or services offered by the company. Again, the very purpose of using brand extension in creating familiarity among customers is fulfilled. These issues are to a large extent supported by brand extensions in the services category. If there is a strong brand reputation, then there is every possibility that the brand extension is successful in a competitive market. Contrary to the earlier
Journal of Services Research, Volume 8, Number 1 (April-September 2008)

THEME PARKS a(b) (0.751) -0.086 (-0.917) 0.126 (1.345) 0.635 (8.984) 0.033 (0.454) 0.411 0.430 21.897

REAL ESTATE a(b)

SATELLITE CHANNELS a(b)

60 How do Consumers Evaluate findings, when perceived risk is high in the extended product category, then the brand extension would help us in reducing the perceived risk involved in the purchase of products/services. But this study does not support the above assumption. This could be because of the inherent difficulties involved in perceiving the risk involved in the services. Since the services by nature have the credence quality it is very difficult for consumers to perceive the risk involved in the services. This research paper gives a comprehensive view of how the consumers evaluate the service brand extensions. The underlying parameters used in the consumer evaluation for service brand extensions are similarity fit, service quality and brand reputation are clearly revealed through the results of this study. Moreover this study strengthens the assumption that the service quality would enhance the reputation of the brand. The researchers may look into the features of perceived risk and its impact on the brand extensions evaluations in the future studies. This study also paves the way for researchers to do a similar kind of brand extensions studies for the different categories of service sectors. Managerial implications could be that the brand extensions strategy may be used most successfully in cases the similarity between the core product and extended product category should be there in some way. The fit may be in terms of substitutability, complimenting the core product, usage relevance, or based on the core facilities used for developing and delivering the product/services. We see significant differences in explanatory power at the individual brand level. This might be due to the evaluation based on brand specific factors. Further customers do not use the reputation of the producer as an important factor for service extension quality than to consumable extension quality. LIMITATIONS AND SUGGESTIONS FOR FUTURE RESEARCH Similarity fit variables were strongly correlated in this study like it did in other similar studies. This may be because the items developed by Aaker and Keller (1990) and used in similarity fit in other studies have also been followed in this study. There is scope for developing a multi-item scale for this purpose. Generalizability is another problem with this research. Since the brand chosen does not represent whole range of product/service categories, there is possibility to do this study across all product/service categories. Bottomley and Doyle (1996) mentioned in their study that brand concept consistency is a very abstract factor, facilitating acceptance of extensions beyond the limitation of productrelated similarity. Another option is to incorporate attributes of services
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and find the explanation, which has an effect on attitude towards extensions. Some of the hypothetical extensions brought no effect of perceived service quality over the brand extensions attitude. This could have been due to price clues used by the customers to assess the service quality. This can be controlled in future studies. Need of the hour especially in services is to bring out the general categorization or classification of services, which would allow a more detailed model taking brand specific associations into consideration. Generalizability can be brought by doing a number of studies of a similar kind in different services/product categories. REFERENCES
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Mr. N. Thamaraiselvan is faculty, in the Department of Management Studies, National Institute of Technology, Tiruchirappalli. Dr. J. Raja is Assistant Professor, and Head of the Department of Management Studies, National Institute of Technology, Tiruchirappalli.
Journal of Services Research, Volume 8, Number 1 (April-September 2008)

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