Vertical versus horizontal line extensions: a comparison of dilution effects
| Date | 17 September 2018 |
| Published date | 17 September 2018 |
| DOI | https://doi.org/10.1108/JPBM-01-2017-1386 |
| Pages | 670-683 |
| Author | Michelle Childs,Byoungho Jin,William L. Tullar |
| Subject Matter | Marketing,Product management,Brand management/equity |
Vertical versus horizontal line extensions: a
comparison of dilution effects
Michelle Childs
Department of Retail, Hospitality and Tourism Management, University of Tennessee, Knoxville, Tennessee, USA
Byoungho Jin
Department of Consumer, Apparel and Retail Studies, The University of North Carolina at Greensboro (UNCG), Greensboro,
North Carolina, USA, and
William L. Tullar
Department of Management, The University of North Carolina at Greensboro (UNCG), Greensboro, North Carolina, USA
Abstract
Purpose –Many apparel brands use growth strategies that involve extending a brand’s line horizontally (same price/quality) and/or vertically
(different price/quality). While such opportunities for growth and profitability are enticing, pursuing the m could dilute a highly profitable parent
brand. Categorization theory’s bookkeeping model and the cue scope framework provide the theoretical framework for this study. The purpose of
this study is to test whether specific attributes of a line extension (i.e. direction of extension, brand concept, price discount and perceived fit) make a
parent brand more susceptible to dilution.
Design/methodology/approach –This experimental study manipulates brand concept (premium or value brand) and price level (horizontal or
vertical: 20per cent, 80per cent) and measures perceived fit to test effects on parent brand dilution. AN OVA and t-tests are used for the
analysis.
Findings –Vertical extensions dilute the parent brand, but horizontal extensions do not. Dilution is strongest for premium (vs value) brands
and when line extensions are discounted (i.e. 20per cent or 80per cent lower than the parent brand), regardless of the perceived fit
between brand concept and brand extension price. Overall, brand concept is the strongest predictor of parent brand dilution in the context of
vertical-downward extensions.
Originality/value –This study establishes which factors emerge as important contributors to parent brand dilution. Although previous studies on
brand dilution are abundant, few studies have compared the effects of horizontal and vertical extensions on brand dilution. This study offers strong
theoretical as well as practical implications.
Keywords Line extension, Rice discount, Perceived fit, Brand concept, Brand dilution
Paper type Research paper
Introduction
In response to an increasingly competitive marketplace and
the high costs associated with developing and launching new
products, an increasing number of apparel brands are
extending parent brand names to new product offerings
(Goetz et al., 2014;Keller, 1993). Parent brands can either
extend through brand extensions by developing new product
categories under the same parent brand name (Keller and
Aaker, 1992) or can extend through line extensions by
offering new products (e.g. different flavors, colors or
varieties) within the same product category as the parent
brand (Kirmani et al.,1999;Randall et al., 1998). Line
extensions are the most common among apparel brands, and
within this classification, brands can either extend their
parent brand using the same price and quality level (i.e.
horizontal extension) or at a lower price and quality level (i.
e. vertical-downward extension) from their parent brand
(Keller and Aaker, 1992;Kim et al.,2001). For instance, a
brand may extend horizontally to a new category by offering
their brand at the same price and quality level, or it may
extend vertically within a similar product category, by
offering lower-quality products at a discounted price. While
vertical-downward line extensions allow brands to attract
additional price-conscious consumers (Kapferer and
Bastien, 2009;Magnoni and Roux, 2012), such line
extensions could potentially harm the brand’sequityand
dilute the parent brand’simage(Heathet al., 2006;Kim and
Lavack, 1996). Parent brand dilution, which occurs when
positive beliefs and specific attributes (e.g. quality,
performance) associated with the parent brand image are
decreased (Loken and Roedder John, 1993), is especially
crucial, as the parent brand generally generates the highest
profit for an apparel company (Thorbjornsen, 2005). In
such a high-risk/high-reward situation, there must be a clear
understanding of which factors leave a brand at greater risk
of negative parent brand evaluations (i.e. brand dilution).
Such an assessment is vital, as extension is a primary brand
growth strategy (Aaker, 1991); yet, previous studies have
not compared the effects of horizontal and vertical-
The current issue and full text archive of this journal is available on
Emerald Insight at: www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
27/6 (2018) 670–683
© Emerald Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/JPBM-01-2017-1386]
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