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    Drivers of Brand Extension Success:What Really Matters for Luxury Brands

    Carmen-Maria Albrecht and Christof BackhausUniversity of Mannheim

    Hannes Gurzki and David M. Woisetschl agerTechnische Universitat Braunschweig

    ABSTRACT

    The use of brand extensions has become fundamental to the business model of most luxury brands.Many traditional luxury brands such as Louis Vuittonor Chanelhave expanded into traditionalluxury sectors beyond their core business. Some brands such as Armanior Pradaeven crossedboundaries to nontraditional lifestyle segments to pursue new business opportunities. Given the highpractical relevance of brand extensions for luxury brands and the importance to understand thesuccess factors for their extendibility and potential backward effects on the parent brand,surprisingly little research has addressed these issues for luxury brands in comparison to nonluxurybrands. The current research reveals extension-related differences between luxury and nonluxurybrands by simultaneously analyzing key dimensions of parent brand value, fit, and extensioncategory involvement on the consumers attitude toward the brand extension, which in turninfluences the postextension image of the parent brand. Results of a structural equation model basedon a survey among 492 participants show that the predominant driver of brand extension success forboth luxury and nonluxury brands is overall extension fit, followed by the consumers involvement inthe extension category. The influence of functional value of the parent brand on the extensionevaluation is more important for nonluxury brands. The hedonic value of the parent brand is foundto be of relevance only in case of luxury brands. Moreover, a reciprocal spillover effect between theextension evaluation and the parent brand evaluation is observed. The degree of luxuriousness of theparent brand moderates this relationship. This effect is weaker for luxury brands. C 2013 WileyPeriodicals, Inc.

    Brand extensions refer to the use of an established

    brand name for the introduction of new products or

    services (Aaker & Keller, 1990) and represent an essen-

    tial growth driver for luxury brands (DallOlmo Riley,

    Lomax, & Blunden, 2004). Companies have recognized

    that extending their brands represents an important

    strategy for many new product and service introduc-

    tions since the use of an established brand in a new cat-

    egory can help facilitate the acceptance and adoption of

    the new product or service. Apart from reducing overall

    costs and risk, brand extensions can provide synergis-

    tic effects. For example, the new product can borrow

    brand associations from the parent brand, thereby re-

    ducing costs for introductory and marketing campaigns

    (Keller, 2003; Martin, Stewart, & Matta, 2005).

    Brand extensions help luxury brands grow faster

    without being constrained to organic internal growth

    (Stankeviciute & Hoffmann, 2011, p. 27). Thus, the

    use of brand extensions has become central to the

    business model of most luxury brands, as it provides

    the opportunity to leverage the most important asset

    of a luxury brand, that is, its brand image, to enter

    new markets across a range of categories (Kapferer,

    2008). One even assumes that brand extensions were

    first launched by luxury brands (Stankeviciute &

    Hoffmann, 2011). Brands such asLouis Vuitton,Prada,

    or Chanel have stretched beyond their core business

    and now offer a wide range of products under their

    brand name, most often including fashion and cloth-

    ing, leather goods and accessories, cosmetics and fra-

    grances, watches, and jewelry (Bellaiche, Mei-Pochtler,

    & Hanisch, 2010; Kapferer, 2008). These traditional

    hard luxury (e.g., watches and jewelry) and soft lux-

    ury (e.g., fashion and clothing) segments of the luxury

    market possess a relevant business opportunity with

    an overall market potential of230 billion (Bellaiche,

    Mei-Pochtler, & Hanisch, 2010). The overall market for

    luxury is even larger, with a size close to 1 trillion

    (Bellaiche, Mei-Pochtler, & Hanisch, 2010).

    While many luxury brands have already extended

    across these traditional segments of the luxury

    market, some have started to address the sizeable

    opportunity represented by extensions into nontradi-

    tional categories. Brands such as Bulgari or Versace

    now offer services such as hotels under their brand

    (Bulgari, 2012; Versace, 2012). Other brands go even

    Psychology and Marketing, Vol. 30(8): 647659 (August 2013)

    View this article online at wileyonlinelibrary.com/journal/marC 2013 Wiley Periodicals, Inc. DOI: 10.1002/mar.20635

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    further: The offerings ofArmanione of the most ac-

    tiveplayers in thisfield (McKinsey & Company, 2012)

    nowadays range from books, furniture, and chocolates

    to restaurants, bars, and spas (Armani, 2012). Roberto

    Cavalli is another example of a luxury brand that has

    extended its business far beyond its original core (McK-

    insey & Company, 2012) by offering chocolates, wine,

    and vodka, as well as by running coffee bars (The

    Cavalli Caffe) and clubs (The Cavalli Club) (Roberto

    Cavalli, 2013). With the use of co-branding, Prada orHugo Boss even offer mobile telephones (Hugo Boss,

    2009; Prada, 2012).Dioralso markets a smartphone

    the Dior Phone (Dior, 2013). These nontraditional

    segments, that is, alcohol and food, travel and hotels,

    technology, furniture and decorations, and other expe-

    riences are estimated to represent another 480 billion

    in market size for luxury (Bellaiche, Mei-Pochtler, &

    Hanisch, 2010), and thus hold enormous growth oppor-

    tunities for luxury brands. A recent market research

    study by Bellaiche, Eirinberg Kluz, Mei-Pochtler, and

    Wiederin (2012) also stresses a change in consumers

    preferences from owning to experiencing a luxury

    (p. 3), which underscores the importance of luxurybrands to be active in services as well (see also

    McKinsey & Company, 2012).

    While a favorable brand image might present an op-

    portunity to enter new categories, this move, however,

    is not without risk. A major difference between lux-

    ury and nonluxury brand extensions is the challenge

    for luxury brands to maintain their dream formula

    (Dubois & Paternault, 1995, p. 69) or aura (KPMG,

    2006, p. 6), which make them so alluring for consumers.

    Luxury brands face the risk that this dream value can

    easily be destroyed through overdiffusion (Dubois& Pa-

    ternault, 1995). Pierre Cardinonce a respected and

    admired brandis one such example that illustrates

    the adverse effects of extending far beyond the core (Fi-nancial Post, 2008). The trade-off between accessibility

    and exclusivity has thus become a fundamental strate-

    gic challenge for luxury brands, which is, particularly,

    relevant in the context of brand extensions and growth

    strategies (Keller, 2009).

    While research on brand extensions for nonluxury

    brands has produced many insights into the process

    of brand extension evaluation from a consumer point

    of view, relatively few studies have focused on the ex-

    tendibility of luxury brands. This is surprising since

    existing studies (e.g., Park, Lawson, & Milberg, 1989)

    have shown that luxury brands are more extendible

    than nonluxury brands. Moreover, previous research(Park, Milberg, & Lawson, 1991) has provided only

    partial explanations for the extendibility and has not

    considered reciprocal or backward effects for luxury

    brands. These backward effects, however, can offset

    the forward effects on the extension (Pina, Iversen, &

    Martinez, 2010).

    On this background, the main objective of the cur-

    rent research is to unveil the factors that drive the

    success of brand extensions for luxury brands in com-

    parison to nonluxury brands. More specifically, this re-

    search makes two main contributions to the fields of

    consumer research, luxury branding, and brand exten-

    sions: First, the findings of previous studies on luxury

    brand extensions are extended by providing a frame-

    work and model to analyze the impact of important

    parent brand and extension category related factors

    on the extension evaluation for both luxury and non-

    luxury brands. By considering a holistic set of value

    drivers in a research design that covers comparably

    strong brands stemming from luxury and nonluxurycontexts, the current study reveals extension-related

    differences between luxury and nonluxury brands. This

    is especially relevant as previous research has shown

    that luxury brands are fundamentally different from

    nonluxury brands, which in the past have mainly been

    used in brand extension research (Lye, Venkateswarlu,

    & Barrett, 2001). Prior research on luxury or prestige

    brands has either replicated studies from different con-

    texts without taking into account the characteristics of

    the luxury brands (e.g., Lye, Venkateswarlu, & Barrett,

    2001; Roux, 1995; Roux & Boush, 1996) or has focused

    on one particular dimension of value (e.g., Hagtvedt &

    Patrick, 2009).Second, the current study assesses the potential of

    luxury brands to leverage their brand image to enter

    new categories by taking into account not only the effect

    of the parent brand on the extension (forward effect),

    but also the impact of the extension on the parent brand

    (reciprocal or backward effect), which represents a ma-

    jor part of the value of most luxury brands (Stegemann,

    2006).

    LITERATURE REVIEW ON LUXURY AND

    NONLUXURY BRAND EXTENSION

    RESEARCH

    When it comes to brand extensions, previous research

    has predominantly focused on nonluxury brands. Only

    little research (e.g., Hagtvedt & Patrick, 2009; Monga

    & John, 2010) has been done on brand extensions for

    luxury brands so far. This is surprising because quite a

    few authors (e.g., Lye, Venkateswarlu, & Barrett, 2001;

    Monga & John, 2010; Volckner & Sattler, 2007) explic-

    itly state that the insights gained from brand exten-

    sion research in the nonluxury context cannot easily

    be transferred to the luxury context due to the dif-

    ferent nature of luxury brands. For example, luxury

    brands (as opposed to nonluxury brands) are strongeron symbolic and experiential benefits (Vickers &

    Renand, 2003).

    In the context ofnonluxury brand extensions, a con-

    siderable amount of research (e.g., Aaker & Keller,

    1990; Bhat & Reddy, 2001; Volckner & Sattler, 2006)

    that has been conducted aimed at understanding which

    factors influence the success of brand extensions, which

    is most often assessed by consumer evaluations of the

    extension, such as with regard to attitudes toward

    the extension (e.g., Hem, de Chernatony, & Iversen,

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    2003) or purchase intentions (e.g., Bhat & Reddy, 2001).

    The factors influencing the brand extension evalua-

    tion and the reciprocal effect on the parent brand can

    generally be grouped into the following dimensions

    (Czellar, 2003; Volckner & Sattler, 2006): (1) factors

    relating to the parent brand itself, (2) factors relating

    to the relationship between the parent brand and ex-

    tension product, (3) characteristics of the extension cat-

    egory, (4) consumer characteristics, (5) the marketing

    activities of the brand, and (6) other external factors. Intheir comprehensive study, Volckner and Sattler (2006)

    have identified the fit between the parent brand and the

    extension to be the most important success factor.

    Other research in the context of nonluxury brands

    has been devoted to brand image dimensions that influ-

    ence the evaluation (and thus the acceptance of brand

    extensions) and/or to the reciprocal effects of the exten-

    sion evaluation on the parent brand. Apart from the

    studies by Ro, Vazquez, and Iglesias (2001), Salinas

    and Perez (2009), Pina, Iversen, and Martnez (2010),

    and Martnez and Pina (2010), most studies have fo-

    cused only on specific image dimensions. The study

    by Ro, V

    azquez, and Iglesias (2001) simultaneouslyanalyzes the effects of guarantee, personal identifica-

    tion, social identification, and status on brand exten-

    sion acceptance (more specifically, the authors use the

    terms functional or value dimensions). However, in

    their study, Ro, Vazquez, and Iglesias (2001) do not

    include further variables, such as fit, which have been

    deemed to be important in previous research. More-

    over, they do not take into account the reciprocal ef-

    fects on brand image that can occur for extensions.

    Salinas and Perez (2009) focus on selected brand image

    dimension, such as, for instance, functional and affec-

    tive image, as well as reputation. They have shown that

    both category fit and image fit are able to strengthen

    consumers attitudes toward the extension, which, inturn, influences the postextension brand image. Pina,

    Iversen, and Martnez (2010) provide similar results.

    Martnez and Pina (2010) focus on three brand im-

    age dimensionsfunctional image, affective image, and

    reputation. They examine the impact of brand image,

    brand familiarity, category fit, image fit, and perceived

    difficulty to make the extension, and consumer innova-

    tiveness on extension attitude. Furthermore, they also

    capture changes in brand image variation.

    While it seems to be possible to widely generalize the

    findings in the context of nonluxury brands (e.g., with

    regard to the research setting, the sample, and different

    fast moving consumer goods (FMCG) categories), thetype of parent brand might moderate consumers reac-

    tions toward the extension (Volckner & Sattler, 2007).

    Thus, it is important to take into account the different

    nature of luxury brands in comparison to that of other

    brands, such as FMCGbrands, which are normally used

    in brand extension studies. This study develops a model

    accounting for the particularities in the luxury context.

    Brand extensions for luxury brands differ in key

    aspects from extensions for nonluxury brands. From

    a consumer view, Park, Lawson, and Milberg (1989)

    have found that contingent on the type of brand, con-

    sumers have different structures of memory associa-

    tions that lead to different judgments of fit. Whereas

    memory representations of functional- and usage-based

    brands (i.e., nonluxury brands) are based on concrete

    attributes, associations of symbolic or prestige brands

    are based on more abstract concepts that might lead to

    different modes of cognitive processing. Park, Milberg,

    and Lawson (1991) have shown that prestige brands

    are more extendible if the brand concept is consis-tently transferred, even if product-feature similarity is

    low. To conceptualize prestige-oriented brand concepts,

    the authors mainly resort to dimensions related to the

    self-concept of the consumer (Lye, Venkateswarlu, &

    Barrett, 2001). Roux (1995) has identified conceptual

    fit and brand quality as the main determinants of per-

    ceived extension quality for luxury brands. Hagtvedt

    and Patrick (2009) have found that luxury brands

    are sensitive to inconsistent brand cues. Thus, luxury

    brand extensions have to use consistent brand cues,

    such as a superior quality and a high price. Moreover,

    they have demonstrated that luxury brands are gen-

    erally more extendible than value brands due to theirhedonic potential. Monga and John (2010) have also

    shown that prestige or luxury brands are more ex-

    tendible than functional brands. More specifically, they

    have investigated the role of consumers style of think-

    ing to understand the elasticity of brands. For pres-

    tige brands, they have found that holistic and analyti-

    cal thinkers respond equally favorably to extensions;

    for functional brands, only holistic thinkers respond

    more favorably to distant extensions. From a manage-

    rial view, Reddy, Terblanche, Pitt, and Parent (2009),

    however, have found that the profitability of a luxury

    brand decreases if it is extended into a nonadjacent

    product category, irrespective of the strength of the

    luxury brand in its core product category. Their find-ings also indicate that luxury brands whose perceived

    core value is primarily symbolic instead of functional

    (e.g., Louis Vuitton vs. Porsche) can be more easily

    transferred to nonadjacent product categories (see also

    Reddy & Terblanche, 2005).

    Although brand extensions, in general, might pro-

    vide a way to increase brand awareness and brand fa-

    miliarity, they can also damage brand image. These

    negative reciprocal spillover effects are more likely to

    occur and be severe for luxury brands and thus de-

    serve particular attention (Stankeviciute & Hoffmann,

    2010). Hagtvedt and Patrick (2009) explicitly empha-

    size the importance of understanding the drivers andlimits of luxury brand extensions to avoid overexten-

    sion, which could result in image dilution. In addition,

    the relevance of brand equity and brand-specific as-

    sociations in brand extension evaluation for both for-

    ward and reciprocal effects has also been stressed in

    the literature (e.g., Broniarczyk & Alba, 1994; Chen &

    Chen, 2000; Park, Milberg, & Lawson, 1991; Pitta &

    Katsanis, 1995). Whereas high brand equity might al-

    low luxury brands to extend further, brand extensions

    might harm the image of the parent brand leading to

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    a loss of exclusivity of the brand (Pitta & Katsanis,

    1995). The risk of image dilution by unsuccessful ex-

    tensions is particularly high for brands with a high

    consumer-based brand equity and prestige brands (Lye,

    Venkateswarlu, & Barrett, 2001). Besides, there can be

    negative reciprocity effects even for high-fitting exten-

    sions (Park, McCarthy, & Milberg, 1993). In sum, a

    better understanding of ways to assess the brand eq-

    uity of luxury brands has been highlighted as an area

    for further research (Chen & Chen, 2000; DallOlmoRiley, Lomax, & Blunden, 2004). This study takes up

    this point as well by accounting for differences in recip-

    rocal effects between luxury and nonluxury brands.

    HYPOTHESES DEVELOPMENT

    The main notion of Vershofens (1959) benefit theory is

    that the benefit a product provides to the consumer can

    be subdivided into a basic benefit and additional ben-

    efits. Whereas a basic benefit refers to the functional

    benefit of a product, the additional benefits, which are

    also referred to as socio-psychological benefits, com-prise all other benefits that are not central to the ac-

    tual function of a product. Functional benefits play

    a role for both luxury and nonluxury brands (Valtin,

    2005).

    Vigneron and Johnson (1999) have found that lux-

    ury brands are generally better suited for conveying

    the intangible (and thus the additional) benefits to con-

    sumers than nonluxury brands. Existing frameworks

    in the literature on luxury brands suggest that luxury

    brands, for instance, provide conspicuousness, unique-

    ness, social value, emotional value and quality value

    (Vigneron & Johnson, 1999), conspicuousness, unique-

    ness, quality, hedonic value and extended self-value

    (Vigneron & Johnson, 2004), financial, functional, in-dividual, and social values (Wiedmann, Hennigs, &

    Siebels, 2009), or functional, prestige, uniqueness, self-

    expressive, and hedonic values (Valtin, 2005) to the

    consumers. These additional benefits can further be

    categorized into interpersonal versus personal benefits

    (Vigneron & Johnson, 1999) or extrinsic versus intrin-

    sic benefits (Valtin, 2005; see also Grubb & Grathwohl,

    1967 who have found that brands can represent either

    intrinsic or extrinsic values in the symbolic communi-

    cation process). Personal or intrinsic benefits (e.g., emo-

    tional value) refer to benefits that are directed inwards

    and only play an important role for the persons them-

    selves (i.e., independently from their social surround-ings); interpersonal or extrinsic benefits (e.g., prestige

    value, uniqueness value, and affiliation value) refer to

    benefits that are directed outwards and are vital when

    individuals communicate with their social surround-

    ings (Grubb & Grathwohl, 1967; Valtin, 2005; Vigneron

    & Johnson, 1999). Since emotional value (i.e., hedonic

    value as it is also referred to) is regarded as an intrin-

    sic benefit and therefore focuses more on inner feelings

    and thoughts, it seems to be important for all kind of

    brands.

    Drawing on these frameworks and the insights

    gained through the literature review, the current re-

    search takes parent brand related factors, perceived

    fit between the parent brand and the extension, and

    the consumers involvement in the extension category

    as major drivers of the extension evaluation into ac-

    count. The extension evaluation, in turn, is expected to

    have a reciprocal spillover effect on the parent brand.

    With regard to the parent brand related factors, this

    research specifically focuses on functional value andhedonic value since these two value dimensions seem

    to be of relevance for luxury and nonluxury brands like-

    wise. Moreover, the degree of perceived luxuriousness

    of the parent brand is accounted for in the model (see

    Figure 1).

    Value Dimensions

    Functional Value. Functional brand value refers to

    the consumers perception of how well the brand will

    fulfill utilitarian needs, such as the assurance of prod-

    uct quality, and thus minimize product-related pur-chase risks (Sheth, Newman, & Gross, 1991). While

    a basic functional value is expected for luxury brands,

    it rather refers to excellence and unique functional fea-

    tures that might only be recognized and appreciated by

    perfectionist connoisseur consumers who possess the

    necessary knowledge to value and use these features

    (Wiedmann, Hennigs, & Siebels, 2009). Prior research

    in the nonluxury context has demonstrated a positive

    effect of brand quality on extension evaluation (Aaker

    & Keller, 1990; Bottomley & Holden, 2001; Volckner

    & Sattler, 2006) and a positive effect of the guarantee

    function or benefit of a brand on the consumers attitude

    toward the extension (Ro, Vazquez, & Iglesias, 2001).

    Moreover, functional value might affect both the over-all extension evaluation of the brand and, specifically,

    the consumers perception of the functional value of the

    extension since a consumer transfers the association of

    product quality from the parent brand to the extended

    brand (Czellar, 2003). Hence:

    H1a: Functional value positively influences the

    consumers attitude toward the brand exten-

    sion.

    Hedonic Value. The hedonic value of a brand in-

    fluences the consumers perception of the brand toarouse feelings, to create affect, to provide pleasure,

    and to deliver emotional benefits (Hagtvedt & Patrick,

    2009; Vigneron & Johnson, 1999). Hedonic value is

    also referred to as emotional value (Sheth, Newman, &

    Gross, 1991; Vigneron & Johnson, 1999). It has been

    proposed to be the major driver of the extendibility

    of luxury brands (Hagtvedt & Patrick, 2009). Yeung

    and Wyer (2005) argue that a brand name that elic-

    its affective reactions can extend even into categories

    that are dissimilar to the brands core products. For

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    Figure 1. Conceptual model and hypotheses.

    prestige brands, Bhat and Reddy (2001) have shownthat parent brand affect positively influences affect to-

    ward the extension. However, utilitarian products can

    also have hedonic or emotional value (Sheth, Newman,

    & Gross, 1991). Thus, the following hypothesis is put

    forth:

    H1b: Hedonic value positively influences the

    consumers attitude toward the brand

    extension.

    Fit between the Parent Brandand the Extension

    Since most luxury brands already operate in a wide

    range of diverse categories offering products that range

    from fashion and accessories to perfumes or leather

    goods, the concept of extension typicality, that is, the

    similarity of the extension to the existing product cat-

    egory is difficult to apply. Thus, the current research

    rather focuses on overall fit that refers to whether the

    extension is viewed as being legitimate for the brand

    (Roux, 1995).

    Overall fit has been found to be more important than

    extension typicality (Batra, Lenk, & Wedel, 2010; Bhat

    & Reddy, 2001). Moreover, Roux (1995) has found pos-

    itive forward effects of the overall conceptual fit on the

    perceived quality of luxury brand extensions. These re-

    sults are also consistent with studies in nonluxury con-

    texts (Aaker & Keller, 1990; Volckner & Sattler, 2006).

    Hence:

    H2: Fit between the parent brand and the exten-

    sion positively influences the consumers atti-

    tude toward the brand extension.

    Involvement in the Extension Category

    In addition to brand-related and fit dimensions, the ex-

    tension category itself, that is, the consumers involve-

    ment in the extensioncategory as an expression of over-

    all interest and liking for a category could be expected to

    have a positive effect on the evaluation of the extension.

    In previous studies, category involvement has mainly

    been considered as a moderating variable for parent

    brand related factors or fit by its impact on the cogni-

    tive resources that the consumer invests in the informa-

    tion processing (Dens & De Pelsmacker, 2010; Maoz &

    Tybout, 2002). However, like the dimensions discussed

    for the parent brand, product categories as a whole can

    create personal meaning and therefore have a differen-tial impact on brand extension evaluation (Laurent &

    Kapferer, 1985). If the consumer has a more positive

    attitude toward a category, he or she might like the ex-

    tension more because of the intrinsic product category

    specific characteristics, which might even complement

    and alter the perceived brand equity in the new cate-

    gory (Czellar, 2003). These considerations lead to the

    following hypothesis:

    H3: A consumers involvement in the extension cat-

    egory positively influences the consumers atti-

    tude toward the brand extension.

    Reciprocal Spillover Effect from the Brand

    Extension to the Parent Brand

    Prior research resultshave indicated that successful ex-

    tensions can have a positive impact on the parent brand

    and even lead to more favorable evaluations of addi-

    tional extensions (Balachander & Ghose, 2003; Keller

    & Aaker, 1992; Lane & Jacobson, 1997). Moreover,

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    extension failures have been shown to have negative

    effects on parent brand equity, particularly for pres-

    tige brands (Chen & Chen, 2000; Lye, Venkateswarlu,

    & Barrett, 2001). Accordingly, the consumers attitude

    toward the extension and his or her attitude toward the

    parent brand should be positively related.

    H4: The consumers attitude toward the extension

    positively influences his or her attitude toward

    the parent brand.

    Moderating Role of the Degree of Perceived

    Luxuriousness of the Parent Brand

    Moderating Role of Luxuriousness on the For-

    ward Effects. Since luxury brands are associated with

    the craftsmanship principle, it is assumed that luxury

    brands offer superior quality and performance com-

    pared to nonluxury brands (Kapferer, 1997; Nueno &

    Quelch, 1998). This superior quality is often taken for

    granted for luxury brands (Kapferer, 1997). If superiorquality is assumed to be an inherent characteristic of

    luxury brands, the influence of functional value on the

    extension evaluation should decrease with an increas-

    ing degree of luxuriousness of the brand.

    H5a: The degree of perceived luxuriousness neg-

    atively moderates the relationship between

    functional brand value and the consumers at-

    titude toward the brand extension.

    The literature agrees on the fact that luxury

    brands are better suited for conveying the intan-

    gible and thus symbolic benefits to the consumers

    (DallOlmo Riley, Lomax, & Blunden, 2004; Vigneron

    & Johnson, 1999). Due to their dream value,

    most luxury brands are able to deliver hedonic

    value to consumers (Tynan, McKechnie, & Chhuon,

    2010). Previous studies on the concept of luxury

    have found emotional reactions, such as aesthetic

    beauty or sensory pleasure, with luxury consumption

    (Wiedmann, Hennigs, & Siebels, 2009). Moreover, it is

    assumed that consumers buy luxury brands for their

    hedonic and further symbolic benefits rather than for

    functional benefits (e.g., Liu, Li, Mizerski, & Soh, 2012;

    Nueno & Quelch, 1998; Wilcox, Kim, & Sen, 2009),

    which also leads to the assumption that interpersonal

    values, such a prestige, affiliation, and uniqueness val-ues, can be more easily conveyed by luxury brands.

    Thus, it is proposed that:

    H5bH5e: The degree of perceived luxurious-

    ness positively moderates the rela-

    tionship between hedonic (prestige/

    affiliation/uniqueness) brand value and

    the consumers attitude toward the

    brand extension.

    Moderating Role of Luxuriousness on the Back-

    ward Effect. It can be assumed that the effect of

    extension attitude on the attitude toward the parent

    brand is also influenced by the degree of perceived lux-

    uriousness of the parent brand. Empirical studies have

    shown that the risk of image dilution by unsuccess-

    ful extensions is particularly high for brands with a

    high consumer-based brand equity and prestige brands

    (Chen & Chen, 2000; Lye, Venkateswarlu, & Barrett,

    2001). A reason for a negative or at least less posi-tive backward effect for luxury brands could be that

    consumers associate more specific and unique associa-

    tions with luxury brands and therefore are less likely

    to improve their brand attitude if they perceive incon-

    sistent information about the brand (i.e., the brand ex-

    tension). Additionally, consumers might tend to specif-

    ically question the firm motives for luxury brand exten-

    sions rather than for extensions of nonluxury brands,

    as this strategy might be perceived as being a quite too

    obvious skimming strategy. Hence:

    H6: The degree of perceived luxuriousness nega-

    tively moderates the reciprocal spillover effectfrom the consumers attitude toward the exten-

    sion to his or her attitude toward the parent

    brand.

    METHOD AND RESULTS

    Data Collection Procedure and Sample

    The proposed model was tested via an online consumer

    survey among members of an online panel provider.

    Since the purpose of this study is to determine the par-ticular characteristics that distinguish luxury brands

    from other brands in terms of their extendibility, the

    survey design employs six real brands, of which three

    represent luxury brands (Chanel, Dolce & Gabbana,

    Yves Saint Laurent), while the remaining three brands

    (Abercrombie & Fitch,Mango,Lacoste) are well-known

    brands as well, but are not positioned in the luxury

    sector. The selection was based on personal judgment

    and a review of the literature. To enhance generaliz-

    ability of the results to different extension categories,

    a set of four hypothetical extensions was created,

    covering product and service extensions (products:

    interior design items, chocolates and pralines, andsmartphones; services: hotel services). The extension

    categories were chosen since they represent industry

    sectors into which other luxury brands already have

    successfully extended. Therefore, they are regarded

    as generally appropriate not only for nonluxury

    brand extensions, but also for luxury brands. So far,

    none of the selected brands has stretched into the

    chosen extension categories. Moreover, all sectors

    are economically interesting sectors within the lux-

    ury market and thus provide a clear rationale for an

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    Figure 2. Example of stimulus.

    extension strategy (Bellaiche, Mei-Pochtler, & Hanisch,

    2010).

    At the beginning of the online survey, each respon-

    dent was randomly assigned to one of the six brands

    and asked about his or her involvement in luxury prod-

    ucts and the randomly assigned extension category. In

    order to exclude respondents that are not familiar withthe brand from the survey, a minimum requirement (an

    average score of at least 3.0 on a 7-point Likert scale

    on three items measuring brand knowledge) in terms of

    brand knowledge was defined and assessed in the sur-

    vey, followed by the assessment of brand equity, value

    dimensions, and the degree of perceived luxuriousness.

    Subsequently, one of the four extension stimuli (prod-

    ucts: interior design items, chocolates and pralines, and

    smartphones; services: hotel services; see Figure 2 for

    an illustrative example) was presented as a short news-

    paper article. After being exposed to the stimulus, the

    respondents were asked to indicate parent brand atti-

    tude in order to assess the hypothesized effect poten-

    tially induced by the extension.The initial sample contains 770 responses. Four re-

    spondents who did not provide demographic data and

    another 274 who did not possess the required mini-

    mum level of parent brand knowledge were excluded

    from the analysis. Thus, the final dataset comprises a

    total of 492 cases. The participants are roughly equally

    distributed across the various scenarios (see Table 1),

    since brands were assigned at random to control for

    person-related effects and since a specified minimum

    level of knowledge was required for each brand. Details

    on the sample composition are given in Table2. In order

    to justify the selection of the six brands, two manipula-

    tion checks were performed. First, brand equity values

    of the six brands were compared using a scale devel-

    oped by Yoo, Donthu, and Lee (2000). The analysis of

    variance (ANOVA) results and the corresponding pair-wise comparisons show that the six brands do not differ

    in brand equity (F= 1.40,p > 0.10). This finding is an

    important prerequisite for this study, as differences in

    brand equity are an obvious alternative explanation for

    brand extension success (e.g., Keller, 2003). Second, the

    degree of perceived luxuriousness was examined to ver-

    ify differences between the three luxury and the three

    nonluxury brands. ANOVA results indicate significant

    differences betweenthe six brands (F= 42.56,p < 0.01).

    More importantly, the pairwise comparisons reveal sig-

    nificant differences between the luxury and nonluxury

    brands, while the differences in luxuriousness within

    the two groups are not significant. Hence, the set of

    brands selected for this study is suitable for testing dif-ferences in brand extension evaluation depending on

    the degree of luxuriousness of parent brands.

    Measures and Measurement Properties

    Conceptualization and items for measuring the brand

    value dimensions were developed drawing on prior

    research in the brand equity and luxury brand equity

    literature, using multi-item 7-point Likert scales with

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    Table 1. Participants in Different Scenarios.

    Extension Category

    Brand Level Parent Brand Hotel Interior Design Pralines Smartphones Total

    Luxury brands Chanel 12 28 32 15 87

    Yves Saint Laurent 22 13 15 28 78

    Dolce & Gabbana 26 16 17 25 84

    Nonluxury brands Lacoste 23 21 27 18 89

    Abercrombie & Fitch 24 13 20 15 72

    Mango 22 22 20 18 82

    Note: Number of participants is given in each cell.

    Table 2. Sample Composition.

    Frequency

    abs %

    Gender Female 221 44.9

    Male 271 55.1

    Age 60 85 17.3

    No answer 8 1.6

    Income Below 40,000 EUR 184 37.4

    40,00080,000 EUR 202 41.1

    80,001120,000 EUR 51 10.4

    Above 120,000 EUR 12 2.4

    No answer 43 8.7

    anchors of 1 (= strongly disagree) and 7 (= strongly

    agree). Specifically, the functional dimension was rep-

    resented by three items based on Valtin (2005) and

    Volckner and Sattler (2006). The hedonic dimension

    was assessed by three items based on Wiedmann,

    Hennigs, and Siebels (2009) and Valtin (2005). To cap-ture the prestige dimension, two items based on Heine

    and Trommsdorff (2010) and Valtin (2005) were em-

    ployed. The affiliation dimension was based on Keller

    (2001). The uniqueness dimension was measured with

    two items adapted from Heine and Trommsdorff (2010)

    and Valtin (2005).

    Overall fit was captured based on Keller and Aaker

    (1992), Roux (1995), Volckner and Sattler (2006) and

    Martnez and Pina (2010). In addition, category in-

    volvement was assessed with three items from Kopalle

    and Lehmann (2001) and Laurent and Kapferer (1985).

    Attitude toward the extension was measured as the

    overall liking and appeal of the extension, similar tothe brand attitude used by Volckner and Sattler (2006).

    Reciprocal effects of the parent brand image were con-

    ceptualized as overall attitude toward the brand based

    on Volckner and Sattler (2006).

    To account for potential biases arising from the

    different stimuli used in the study, dummy variables

    were created for five of the brands and three of the

    extensions. For similar reasons, involvement in luxury

    brands measured with a three-item scale based on

    Volckner and Sattler (2006), and brand ownership

    measured with one item were included in the model.

    An overview of the scales used in the study is given in

    Table 3.

    Concerning measurement reliability and validity, it

    can be noted that the coefficient alpha is greater than

    0.7 for all examined constructs, a threshold generally

    proposed in the literature (Nunnally, 1978). Also, com-

    posite reliabilities (CR) are larger than 0.6 for all con-

    structs (Bagozzi & Yi, 1988). Discriminant validity was

    assessed using the criterion proposed by Fornell and

    Larcker (1981). The criterion was met since the average

    variance extracted (AVE) by each construct exceeded

    the squared correlations between all pairs of constructs.

    Therefore, reliability and validity of the constructs in

    this study are within acceptable boundaries and the

    proposed links in the conceptual model can be tested

    (see also Table 4).

    Model Results

    The global fit indices of the conceptual model

    (2/d.f. = 2.31; CFI (Comparative Fit Index) = 0.97;

    TLI (Tucker-Lewis Index) = 0.95; RMSEA (Root Mean

    Square Error of Approximation) = 0.05; SRMR (Stan-dardized Root Mean Square Residual) = 0.03) indicate

    a good fit. Results of structural equation modeling show

    thatattitude toward the extension is significantly influ-

    enced by functional brand value (= 0.09, p < 0.10),

    overall fit (= 0.62,p < 0.01), and category involvement

    (= 0.17,p < 0.01).Hedonic value, however, is not iden-

    tified as significantly determiningattitude toward the

    extension (= 0.05, p > 0.10). In sum, the model ex-

    plains 80.4% of the variation of the construct. With re-

    gard to the proposed effect ofattitude toward the exten-

    sionas a determinant ofattitude toward parent brand,

    model results confirm the positive effect proposed in

    H4 ( = 0.17,p < 0.01). Looking at the effects imposedby moderating variables, it can be noted that the pos-

    itive relationship between functional brand value and

    attitude toward the extension is negatively moderated

    by thedegree of luxuriousness of the parent brand (=

    0.20,p < 0.10). A positive moderating effect ofbrand

    luxuriousness on the link between hedonic value and

    attitude toward the extension can be observed (= 0.24,

    p < 0.05). However, this positive moderating effect can-

    not be found for prestige value, affiliation value, and

    uniqueness value (all ps > 0.10). As hypothesized, the

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    Table 3. Reliability and Validity of the Constructs.

    Scale/Item CR AVE

    Parent Brand Value Dimensionsa

    (Pre-extension)

    Functional Valuea

    (Valtin, 2005; Volckner & Sattler, 2006) 0.93 0.93 0.82

    provides excellent functionality and performance.

    has a high quality.

    is reliable.

    Hedonic Valuea

    (Wiedmann, Hennigs, & Siebels, 2009) 0.96 0.96 0.89

    is a way of rewarding myself.

    gives me pleasure.

    gives me a good feeling.

    Prestige Valuea

    (Heine & Trommsdorff, 2010; Valtin, 2005) 0.84b 0.91 0.84

    helps me to make a good impression on others.

    WithI can convey social status.

    Affiliation Valuea

    (Keller, 2001) 0.94 0.94 0.84

    I can relate to other people who use.

    I feel like I almost belong to a club with other users of.

    is used by people like me.

    Uniqueness Valuea

    (Heine & Trommsdorff, 2010; Valtin, 2005) 0.75b 0.86 0.75

    provides me with an opportunity to stand out.

    is something special that few other people have.

    Extension-Related Attitudes

    Attitude toward extensiona

    (Volckner & Sattler, 2006) 0.97 0.97 0.91

    I like . is attractive.

    is appealing.

    Overall fita

    (Keller & Aaker, 1992; Roux, 1995; Volckner & Sattler, 2006) 0.92 0.92 0.80

    fits well with .

    is a logical extension for .

    should be offered by .

    Category involvementa

    (Kopalle & Lehmann, 2001; Laurent & Kapferer, 1985) 0.95 0.95 0.86

    I attach great importance to .

    interests me a lot.

    matters a lot to me.

    Consumer Characteristics (Control Variable)

    Involvement in luxury brandsa

    (Volckner & Sattler, 2006) 0.93 0.93 0.81

    I attach great importance to luxury brands.

    Luxury brands interest me a lot.

    Luxury brands matter a lot to me.Parent Brand Value (Postextension)

    Attitude toward parent branda

    (Valtin, 2005; Volckner & Sattler, 2006) 0.97 0.97 0.91

    I like.

    is attractive.

    is appealing.

    Note: = coefficient alpha; CR = composite reliability; AVE = average variance extracted.a7-point Likert scales anchored at 1 = not at all and 7 = to an extreme extent.bCorrelation.

    positive relationship between attitude toward the ex-

    tension and attitude toward parent brand is found to

    be negatively moderated by brand luxuriousness ( =

    0.11,p < 0.05), confirming H6 (see also Table 5 for allresults).

    DISCUSSION, IMPLICATIONS, AND

    FUTURE RESEARCH

    Remarkably, the predominant driver of brand exten-

    sion success is not related to the parent brand, but is

    represented by overall extension fit. While the predom-

    inant role of fit as a driver of extension success has been

    emphasized in the literature on brand extension in gen-

    eral (Roux, 1995; Volckner & Sattler, 2006), the magni-

    tude of theeffect leads to the assumption that extension

    success hardly can be reached if extension fit is not oronly partially given. Similarly, category involvement is

    of general importance in terms of consumers attitude

    toward a brand that expands beyond its core business.

    Besides these industry- and consumer-related ef-

    fects, the results empirically confirm the differen-

    tial role of basic and additional benefits in explain-

    ing extendibility of luxury and nonluxury brands.

    Thereby, functional value isin generalidentified

    as being important for both luxury and nonlux-

    ury brands extension capabilities. Functional value,

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    Table 4. Correlation Matrix of Model Constructs.

    1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

    1. Functional Value

    2. Hedonic Value 0.78

    3. Prestige Value 0.65 0.77

    4. Affiliation Value 0.60 0.79 0.87

    5. Uniqueness Value 0.68 0.73 0.88 0.81

    6. Attitude Toward Extension 0.57 0.64 0.64 0.66 0.59

    7. Overall Fit 0.49 0.55 0.56 0.61 0.54 0.85

    8. Attitude Toward Parent Brand (post-extension) 0.81 0.86 0.73 0.73 0.72 0.68 0.599. Involvement Luxury Brands 0.45 0.55 0.57 0.62 0.51 0.47 0.43 0.55

    10. Category Involvement 0.38 0.42 0.40 0.42 0.32 0.56 0.51 0.44 0.48

    AVE 0.82 0.89 0.84 0.84 0.75 0.91 0.80 0.91 0.81 0.86

    Note:AVE = average variance extracted.

    Table 5. Analysis Results.

    Construct Construct / p Hyp. Result

    Attitude Toward Functional Value 0.09

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    respectively, cannot only be considered as important

    for both luxury and nonluxury brands, but also for ex-

    tension success in both brand categories (Valtin, 2005).

    The provision of high-quality core offerings is thus a

    precondition not only for nonluxury, but also for lux-

    ury brands. Respectively, a brands risk-reducing func-

    tion and reputation for reliable core products helps

    luxury and nonluxury brands extend beyond their orig-

    inal scope. More interestingly, this effect is weaker

    for luxury brands and more relevant for nonluxurybrands. This result provides empirical support for the

    notion that luxury brandsin comparison to nonlux-

    ury brandsmore heavily rely on aspects beyond func-

    tional value as determinants of extension success. In

    case of nonluxury brands, however, functional aspects

    are per se more importantwhich is reflected in their

    extendibility capabilities. Consequently, conventional

    brands should emphasize the functional value of the

    brand, as the importance of functional value as a pre-

    condition to extension success is higher in case of non-

    luxury brands. For luxury brands, conversely, func-

    tional value might not be an adequate starting point

    to communicate a luxury brand extension.Similarly, luxury brands differ from nonluxury

    brands in terms of hedonic value. While hedonic value

    has not been identified as a general determinant of

    brand extension success in the current study, hedonic

    value is relevant for luxury brand extensions. While

    the relevance of hedonic value is consistent with previ-

    ous studies investigating the hedonic potential of lux-

    ury brands (Hagtvedt & Patrick, 2009; Yeung & Wyer,

    2005), this result underlines that the distinct dimen-

    sions of functional and hedonic brand value are of dif-

    ferential importance in explaining extension success

    when comparing parent brands stemming from luxury

    and nonluxury contexts.

    With regard to the empirical results, it has to benoted that prestige, affiliation, and uniqueness val-

    ues are found to be unrelated to the evaluation of the

    hypothetical brand extension. These findings have to

    be interpreted in the context of the brands used in

    the survey: Given that three of the brands that have

    been utilized as experimental stimuli are nonluxury

    brands, it does not seem surprising that the value di-

    mensions associated to luxury brandson average

    do not emerge as important determinants of extension

    evaluation. In this context, a recent study by

    Albrecht, Backhaus, Gurzki, and Woisetschlager (2013)

    has shown that prestige value seems to play a major

    role when focusing on brand extendibility in the purecase of luxury brands.

    With respect to the role of the extension itself as a

    potential driver of parent brand value and the stated

    reciprocal effect, results show that the consumers eval-

    uation of the extension does indeed impact the percep-

    tion of the parent brand for both luxury and nonlux-

    ury brands. Given the observed magnitude of the effect

    and taking into consideration that initial brand atti-

    tude dimensions were controlled for in the study de-

    sign, consumers attitudes toward luxury and nonlux-

    ury brands are influenced by extension attitudes. No-

    tably, this effect is weaker for luxury brands. A possible

    explanation could be that the dominance of existing at-

    titudes about luxury brands results in a confirmatory

    processing of new stimuli (i.e., the extension category)

    with the result that the attitude toward the luxury par-

    ent brands remains the same. Contrary, nonluxurious

    brands are found to be stronger affected by attitude to-

    ward a brand extension, representing a double-edged

    sword for brand managers. In both cases, therefore,brand managers should very carefully evaluate poten-

    tial extension venues. This does not only include an

    analysis of overall fit between extension category and

    parent brand. In addition, the parent brands capabil-

    ities in terms of functional and hedonic values should

    be assessed. By this means, extensions that are benefi-

    cial both for the extension itself but also for the parent

    brand can be implemented and dilutive spillover effects

    can be avoided.

    As with all empirical studies, the current model faces

    several limitations, which can be seen as avenues for

    further research. First, the model is limited to a few

    yet centralvariables to explain extension success ofluxury brands. In future research projects, the explana-

    tory role of additional variables such as consumer char-

    acteristics could be assessed and the observed forward

    and backward effects should be analyzed in a real-

    life, longitudinally designed study. Furthermore, the

    investigation of moderator variables, such as extension

    category distance from a brands core offerings, seems

    worthwhile, especially concerning the spillover link be-

    tween attitude toward the extension and attitude to-

    ward the parent brand.

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    Correspondence regarding this article should be sent

    to: Carmen-Maria Albrecht, Assistant Professor of

    Marketing, Department of Marketing II, University

    of Mannheim, L9, 1, D-68131 Mannheim, Germany

    ([email protected]).

    LUXURY BRAND EXTENSIONS 659

    Psychology and Marketing DOI: 10.1002/mar