Drivers of Brand Extension Success:

What Really Matters for Luxury Brands

Carmen-Maria Albrecht and Christof Backhaus
University of Mannheim
Hannes Gurzki and David M. Woisetschl ager
Technische Universit at 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 Vuitton or Chanel have expanded into traditional
luxury sectors beyond their core business. Some brands such as Armani or Prada even crossed
boundaries to nontraditional lifestyle segments to pursue new business opportunities. Given the high
practical relevance of brand extensions for luxury brands and the importance to understand the
success 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 nonluxury
brands. The current research reveals extension-related differences between luxury and nonluxury
brands by simultaneously analyzing key dimensions of parent brand value, t, and extension
category involvement on the consumers attitude toward the brand extension, which in turn
inuences the postextension image of the parent brand. Results of a structural equation model based
on a survey among 492 participants show that the predominant driver of brand extension success for
both luxury and nonluxury brands is overall extension t, followed by the consumers involvement in
the extension category. The inuence of functional value of the parent brand on the extension
evaluation is more important for nonluxury brands. The hedonic value of the parent brand is found
to be of relevance only in case of luxury brands. Moreover, a reciprocal spillover effect between the
extension evaluation and the parent brand evaluation is observed. The degree of luxuriousness of the
parent brand moderates this relationship. This effect is weaker for luxury brands.
C
2013 Wiley
Periodicals, 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
rst launched by luxury brands (Stankeviciute &
Hoffmann, 2011). Brands such as Louis 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 of 230 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/mar
C 2013 Wiley Periodicals, Inc. DOI: 10.1002/mar.20635
647
further: The offerings of Armanione of the most ac-
tive players inthis eld (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 Caff` e) and clubs (The Cavalli Club) (Roberto
Cavalli, 2013). With the use of co-branding, Prada or
Hugo Boss even offer mobile telephones (Hugo Boss,
2009; Prada, 2012). Dior also 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 luxury
brands 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 themso alluring for consumers.
Luxury brands face the risk that this dreamvalue 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 specically, this re-
search makes two main contributions to the elds of
consumer research, luxury branding, and brand exten-
sions: First, the ndings 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 nonluxury
contexts, 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
newcategories 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
fewauthors (e.g., Lye, Venkateswarlu, &Barrett, 2001;
Monga & John, 2010; V olckner & 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 stronger
on symbolic and experiential benets (Vickers &
Renand, 2003).
In the context of nonluxury brand extensions, a con-
siderable amount of research (e.g., Aaker & Keller,
1990; Bhat & Reddy, 2001; V olckner & Sattler, 2006)
that has been conducted aimed at understanding which
factors inuence 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,
648 ALBRECHT ET AL.
Psychology and Marketing DOI: 10.1002/mar
2003) or purchase intentions (e.g., Bhat &Reddy, 2001).
The factors inuencing the brand extension evalua-
tion and the reciprocal effect on the parent brand can
generally be grouped into the following dimensions
(Czellar, 2003; V olckner & 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. In
their comprehensive study, V olckner and Sattler (2006)
have identied the t 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 inu-
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, V azquez, and Iglesias (2001), Salinas
and P erez (2009), Pina, Iversen, and Martnez (2010),
and Martnez and Pina (2010), most studies have fo-
cused only on specic image dimensions. The study
by Ro, V azquez, and Iglesias (2001) simultaneously
analyzes the effects of guarantee, personal identica-
tion, social identication, and status on brand exten-
sion acceptance (more specically, the authors use the
terms functional or value dimensions). However, in
their study, Ro, V azquez, and Iglesias (2001) do not
include further variables, such as t, 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 P erez (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 t and image t are able to strengthen
consumers attitudes toward the extension, which, in
turn, inuences 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 t, image t, and perceived
difculty 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
ndings in the context of nonluxury brands (e.g., with
regard to the research setting, the sample, and different
fast moving consumer goods (FMCG) categories), the
type of parent brand might moderate consumers reac-
tions toward the extension (V olckner & Sattler, 2007).
Thus, it is important to take into account the different
nature of luxury brands in comparison to that of other
brands, suchas FMCGbrands, whichare 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 t. 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 identied conceptual
t 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 their
hedonic potential. Monga and John (2010) have also
shown that prestige or luxury brands are more ex-
tendible than functional brands. More specically, 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 protability 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 nd-
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 and
limits of luxury brand extensions to avoid overexten-
sion, which could result in image dilution. In addition,
the relevance of brand equity and brand-specic 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
LUXURY BRAND EXTENSIONS 649
Psychology and Marketing DOI: 10.1002/mar
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-tting 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; DallOlmo
Riley, 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) benet theory is
that the benet a product provides to the consumer can
be subdivided into a basic benet and additional ben-
ets. Whereas a basic benet refers to the functional
benet of a product, the additional benets, which are
also referred to as socio-psychological benets, com-
prise all other benets that are not central to the ac-
tual function of a product. Functional benets 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) benets 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), nancial, 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 benets can further be
categorized into interpersonal versus personal benets
(Vigneron & Johnson, 1999) or extrinsic versus intrin-
sic benets (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 benets (e.g., emo-
tional value) refer to benets 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 benets (e.g., prestige
value, uniqueness value, and afliation value) refer to
benets 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 benet 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
t 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 specically focuses on functional value and
hedonic 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
fulll 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; V olckner
& Sattler, 2006) and a positive effect of the guarantee
function or benet of a brand on the consumers attitude
toward the extension (Ro, V azquez, & Iglesias, 2001).
Moreover, functional value might affect both the over-
all extension evaluation of the brand and, specically,
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 inuences the
consumers attitude toward the brand exten-
sion.
Hedonic Value. The hedonic value of a brand in-
uences the consumers perception of the brand to
arouse feelings, to create affect, to provide pleasure,
and to deliver emotional benets (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
650 ALBRECHT ET AL.
Psychology and Marketing DOI: 10.1002/mar
Figure 1. Conceptual model and hypotheses.
prestige brands, Bhat and Reddy (2001) have shown
that parent brand affect positively inuences 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 inuences the
consumers attitude toward the brand
extension.
Fit between the Parent Brand
and 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 difcult to apply. Thus, the current research
rather focuses on overall t that refers to whether the
extension is viewed as being legitimate for the brand
(Roux, 1995).
Overall t 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 t on the
perceived quality of luxury brand extensions. These re-
sults are also consistent with studies in nonluxury con-
texts (Aaker & Keller, 1990; V olckner & Sattler, 2006).
Hence:
H2: Fit between the parent brand and the exten-
sion positively inuences the consumers atti-
tude toward the brand extension.
Involvement in the Extension Category
In addition to brand-related and t dimensions, the ex-
tension category itself, that is, the consumers involve-
ment in the extension category 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 t 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
specic 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 inuences the consumers atti-
tude toward the brand extension.
Reciprocal Spillover Effect from the Brand
Extension to the Parent Brand
Prior researchresults have 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,
LUXURY BRAND EXTENSIONS 651
Psychology and Marketing DOI: 10.1002/mar
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 inuences 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 superior
quality is assumed to be an inherent characteristic of
luxury brands, the inuence 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 benets 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 benets rather than for
functional benets (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, afliation, 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/
afliation/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 inuenced 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 specic 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 rm 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 effect
from 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, and
smartphones; 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
652 ALBRECHT ET AL.
Psychology and Marketing DOI: 10.1002/mar
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 with
the brand fromthe survey, a minimumrequirement (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 dened 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 nal 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 specied minimum
level of knowledge was required for each brand. Details
on the sample composition are given in Table 2. 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 nding 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 signicant
differences between the six brands (F=42.56, p <0.01).
More importantly, the pairwise comparisons reveal sig-
nicant differences between the luxury and nonluxury
brands, while the differences in luxuriousness within
the two groups are not signicant. 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
LUXURY BRAND EXTENSIONS 653
Psychology and Marketing DOI: 10.1002/mar
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 <25 21 4.3
2640 118 24.0
4160 260 52.8
>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). Specically, the functional dimension was rep-
resented by three items based on Valtin (2005) and
V olckner 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 afliation dimension was based on Keller
(2001). The uniqueness dimension was measured with
two items adapted from Heine and Trommsdorff (2010)
and Valtin (2005).
Overall t was captured based on Keller and Aaker
(1992), Roux (1995), V olckner 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 to
the brand attitude used by V olckner and Sattler (2006).
Reciprocal effects of the parent brand image were con-
ceptualized as overall attitude toward the brand based
on V olckner and Sattler (2006).
To account for potential biases arising from the
different stimuli used in the study, dummy variables
were created for ve of the brands and three of the
extensions. For similar reasons, involvement in luxury
brands measured with a three-item scale based on
V olckner 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 coefcient 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 t 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 t. Results of structural equation modeling show
that attitude toward the extension is signicantly inu-
enced by functional brand value ( = 0.09, p < 0.10),
overall t ( =0.62, p <0.01), and category involvement
( =0.17, p <0.01). Hedonic value, however, is not iden-
tied as signicantly determining attitude 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 of attitude toward the exten-
sion as a determinant of attitude toward parent brand,
model results conrm the positive effect proposed in
H4 ( = 0.17, p < 0.01). Looking at the effects imposed
by moderating variables, it can be noted that the pos-
itive relationship between functional brand value and
attitude toward the extension is negatively moderated
by the degree of luxuriousness of the parent brand ( =
0.20, p < 0.10). A positive moderating effect of brand
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, afliation value, and
uniqueness value (all ps > 0.10). As hypothesized, the
654 ALBRECHT ET AL.
Psychology and Marketing DOI: 10.1002/mar
Table 3. Reliability and Validity of the Constructs.
Scale/Item CR AVE
Parent Brand Value Dimensions
a
(Pre-extension)
Functional Value
a
(Valtin, 2005; V olckner & Sattler, 2006) 0.93 0.93 0.82
<Parent Brand> provides excellent functionality and performance.
<Parent Brand> has a high quality.
<Parent Brand> is reliable.
Hedonic Value
a
(Wiedmann, Hennigs, & Siebels, 2009) 0.96 0.96 0.89
<Parent Brand> is a way of rewarding myself.
<Parent Brand> gives me pleasure.
<Parent Brand> gives me a good feeling.
Prestige Value
a
(Heine & Trommsdorff, 2010; Valtin, 2005) 0.84
b
0.91 0.84
<Parent Brand> helps me to make a good impression on others.
With <Parent Brand> I can convey social status.
Afliation Value
a
(Keller, 2001) 0.94 0.94 0.84
I can relate to other people who use <Parent Brand>.
I feel like I almost belong to a club with other users of <Parent Brand>.
<Parent Brand> is used by people like me.
Uniqueness Value
a
(Heine & Trommsdorff, 2010; Valtin, 2005) 0.75
b
0.86 0.75
<Parent Brand> provides me with an opportunity to stand out.
<Parent Brand> is something special that few other people have.
Extension-Related Attitudes
Attitude toward extension
a
(V olckner & Sattler, 2006) 0.97 0.97 0.91
I like <Parent Brand> <Extension>.
<Parent Brand> <Extension> is attractive.
<Parent Brand> <Extension> is appealing.
Overall t
a
(Keller & Aaker, 1992; Roux, 1995; V olckner & Sattler, 2006) 0.92 0.92 0.80
<Extension category> ts well with <Parent Brand>.
<Extension category> is a logical extension for <Parent Brand>.
<Extension category> should be offered by <Parent Brand>.
Category involvement
a
(Kopalle & Lehmann, 2001; Laurent & Kapferer, 1985) 0.95 0.95 0.86
I attach great importance to <Extension category>.
<Extension category> interests me a lot.
<Extension category> matters a lot to me.
Consumer Characteristics (Control Variable)
Involvement in luxury brands
a
(V olckner & 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 brand
a
(Valtin, 2005; V olckner & Sattler, 2006) 0.97 0.97 0.91
I like <Parent Brand>.
<Parent Brand> is attractive.
<Parent Brand> is appealing.
Note: = coefcient alpha; CR = composite reliability; AVE = average variance extracted.
a
7-point Likert scales anchored at 1 = not at all and 7 = to an extreme extent.
b
Correlation.
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), conrming H6 (see also Table 5 for all
results).
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 t. While the predom-
inant role of t as a driver of extension success has been
emphasized in the literature on brand extension in gen-
eral (Roux, 1995; V olckner & Sattler, 2006), the magni-
tude of the effect leads to the assumption that extension
success hardly can be reached if extension t is not or
only 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 conrm the differen-
tial role of basic and additional benets in explain-
ing extendibility of luxury and nonluxury brands.
Thereby, functional value isin generalidentied
as being important for both luxury and nonlux-
ury brands extension capabilities. Functional value,
LUXURY BRAND EXTENSIONS 655
Psychology and Marketing DOI: 10.1002/mar
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. Afliation 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 0.59
9. 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 < 0.10 H1a Conrmed
Extension Hedonic Value 0.05 - H1b Rejected
(R
2
= 0.80) Overall Fit 0.62 < 0.01 H2 Conrmed
Category Involvement 0.17 < 0.01 H3 Conrmed
Functional Value x Luxuriousness 0.20 < 0.10 H5a Conrmed
Hedonic Value x Luxuriousness 0.24 < 0.05 H5b Conrmed
Prestige Value 0.15 - Control Variable
Prestige Value x Luxuriousness 0.06 - H5c Rejected
Afliation Value 0.05 - Control Variable
Afliation Value x Luxuriousness 0.01 - H5d Rejected
Uniqueness Value 0.07 - Control Variable
Uniqueness Value x Luxuriousness 0.13 - H5e Rejected
Involvement Luxury Brands 0.03 - Control Variable
Brand Ownership 0.02 - Control Variable
Extension Category 0.04 - Control Variable
Parent Brand: Mango 0.05 - Control Variable
Parent Brand: Chanel 0.05 - Control Variable
Parent Brand: Dolce & Gabbana 0.05 - Control Variable
Parent Brand: Yves Saint Laurent 0.01 - Control Variable
Parent Brand: Abercrombie & Fitch 0.07 - Control Variable
Extension Category: Interior Design 0.14 < 0.01 Control Variable
Extension Category: Pralines 0.05 - Control Variable
Extension Category: Smartphones 0.14 < 0.01 Control Variable
Attitude Toward Attitude Toward Extension 0.17 < 0.01 H4 Conrmed
Parent Brand
(R
2
= 0.83) Attitude Tow. Ext. x Luxuriousness 0.11 < 0.05 H6 Conrmed
Functional Value 0.28 < 0.01 Control Variable
Hedonic Value 0.44 < 0.01 Control Variable
Prestige Value 0.01 - Control Variable
Afliation Value 0.03 - Control Variable
Uniqueness Value 0.09 - Control Variable
Involvement Luxury Brands 0.05 < 0.10 Control Variable
Brand Ownership 0.07 < 0.05 Control Variable
Parent Brand: Mango 0.04 - Control Variable
Parent Brand: Chanel 0.02 - Control Variable
Parent Brand: Dolce & Gabbana 0.05 - Control Variable
Parent Brand: Yves Saint Laurent 0.01 - Control Variable
Parent Brand: Abercrombie & Fitch 0.02 - Control Variable
Note: / = standardized coefcient; italic text and numerals refer to the control variables.
656 ALBRECHT ET AL.
Psychology and Marketing DOI: 10.1002/mar
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 nonluxury
brands. 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 reected 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 identied 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 be
noted that prestige, afliation, and uniqueness val-
ues are found to be unrelated to the evaluation of the
hypothetical brand extension. These ndings 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 Woisetschl ager (2013)
has shown that prestige value seems to play a major
role when focusing on brand extendibility in the pure
case 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 inuenced by extension attitudes. No-
tably, this effect is weaker for luxury brands. Apossible
explanation could be that the dominance of existing at-
titudes about luxury brands results in a conrmatory
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 t 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 bene-
cial both for the extension itself but also for the parent
brand can be implemented and dilutive spillover effects
can be avoided.
As withall 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 of
luxury 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
(carmen-maria.albrecht@bwl.uni-mannheim.de).
LUXURY BRAND EXTENSIONS 659
Psychology and Marketing DOI: 10.1002/mar