Testing the Limits of Brand Extensions: An investigation of how far it is possible to stretch a brand by using the strategy of brand extension

Torstein Åsbø Eike

Student thesis: Master thesis

Abstract

Companies are experiencing increased competition and the need to find new areas of growth. As a result of this, brand extensions (i.e., use of an established brand name to enter a new product category (Aaker and Keller, 1990)) has increased in popularity over the last decades. This trend will challenge brand managers of how to manage their product portfolios. As managers use the strategy of brand extension, they will at some point face the question of how far they can push it. The issue becomes especial sensitive when two products, which initially do not have anything in common, are put under the same brand name. This leads to the research question; How far is it possible to stretch a brand from its core product? The research design is explorative/explanatory through a worldview of Social constructivism / Hermeneutics. The paper applies the case study methodology using Hennes & Mauritz (H&M) and Änglamark as companies. Data is collected using the sequential multiple method approach by first conducting a literature review, then a qualitative research (in-depth interviews) to identify how consumers evaluate brand extensions. This led to ten hypotheses, which were tested in a questionnaire on Norwegian and Danish respondents. The researcher found that there are five variables that have an effect on remote brand extensions. These are brand awareness, perceived competencies and abilities, customer loyalty, concept fit and consumer involvement. The last factor contains that products from low involvement categories will have a hard time expanding into high involvement categories. Brand managers should take these factors into consideration before doing a brand extension. However, it should be emphasized that these are first and foremost applicable for companies that are compatible with H&M and Änglamark.

EducationsMSocSc in Management of Creative Business Processes , (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2013
Number of pages107