Brand equity and the extendibility of brand names

Brand extensions represent an opportunity for firms to use the equity built up in the names of existing brands in order to enhance marketing productivity. However, before considering a specific extension, managers must first determine how extendible a brand name is likely to be. We hypothesize that consumer utility for a brand consists of three components and that the extendibility of a brand name is limited by how closely the brand name interacts with the physical product attributes in consumers' utility for the brand in the parent category. If two brands are preferred equally by consumers, but the utility for one brand is partly due to the interaction of the brand name and physical attributes, then that brand name will have a lower value in distant extensions compared to the other brand that does not exhibit these interactions. We develop a model of consumer utility for experimentally testing this hypothesis using several real brand names and their hypothetical extensions. Overall, the results support our model and suggest that in order to maximize future extendibility, a brand should try to enhance the value to consumers of characteristics associated with its brand name such as quality, style, durability, and reputation that are not product-specific.