Status and quality

A second reason why prestige-oriented core brands may be hurt more by introducing step-down extensions is that the core brand image for a prestigeoriented brand is based on status and high quality. Introducing a step-down extension diminishes the status and quality which are at the very heart of the prestige-oriented core brand.

Direction of brand extension

Vertical brand extensions can go in one of two directions: step-up or stepdown. A step-up brand extension is introduced at a higher quality level and price point than the core brand, while a step-down brand extension is introduced at a lower quality level and price point. The reason why a company introduces a vertical brand extension is to capitalize on the equity built up within their well-known core brand name. It is generally believed that linking the vertical brand extension with the core brand will be helpful in gaining consumer acceptance for the newly launched brand extension (Broniarczyk and Alba, 1994). However, introducing a vertical brand extension almost always has a negative impact on consumer perceptions of the firm’s core brand (Dacin and Smith, 1994). By its very nature, introducing a vertical extension results in a brand extension which exists in the same narrow product category but which differs from its core brand in terms of quality level. This difference in quality level that is perceived between the core brand and the brand extension leads to consumer concerns, questions, or dissonance about the quality level of the core brand. Perceived ambiguity about the quality level of the core brand and the brand extension will inevitably diminish the favorability with which consumers view the brand. Research indicates that regardless of whether the vertical extension is a step-up extension or a step-down extension, the impact on the core brand image is negative (Dacin and Smith, 1994).

Categorization theory

Categorization theory can be applied to brand families in an attempt to understand the dynamics of core brands and brand extensions (Meyers-Levy and Tybout, 1989; Sujan and Bettman, 1989; Sujan and Dekleva, 1987). One model from categorization theory, the bookkeeping model, suggests that new information about a brand extension introduction causes consumers to update their beliefs about the brand family and the core brand. Since a newly introduced vertical brand extension deviates from the core brand on both the price and quality dimensions, this leads consumers to reassess the core brand image. The conflicting information about quality level results in a loss of image clarity for the core brand, and it dilutes the core brand image. The difference in pricing between the core brand and the vertical extension also signals to the consumer that there is a difference in quality level. Attaching a vertical brand extension to a different price point increases the risk that the quality image of the core brand will be adversely affected (Loken and Roedder John, 1993; Ries and Trout, 1986). The net result is a less positive consumer evaluation of the core brand, which occurs regardless of the direction (step-up versus step-down) of the brand extension. 

There have been several real world examples of vertical brand extension introductions harming the equity of the core brand (e.g. Cadillac Cimarron).

The existence of this effect has also been confirmed in our own study (see Appendix). In our experiment we found that after introducing a step-down or step-up brand extension, the post-evaluation of the core brand name was significantly lower than the initial evaluation of the core brand name. This suggests that the core brand image was diluted by introducing a brand extension. Regardless of whether the new brand extension was a step-down version of a prestige-oriented brand or a step-up version of a functionoriented brand, the net result was a reduction in the favorability of consumer evaluations of the core brand. Introducing a brand extension appears to dilute the core brand and erode some of the equity inherent in the core brand name. 垂直品牌延伸英文文献和中文翻译(3):http://www.youerw.com/fanyi/lunwen_45084.html