HOW DO CONSUMERS EVALUATE OVERLAPPING BRANDS? THE ROLE OF CORPORATE VERSUS PRODUCT BRAND DOMINANCE
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Most major consumer goods manufacturers market multiple brands within a single product category. Companies may sell brands of different quality levels (e.g., Giorgio Armani, Armani Collezioni, and Armani Exchange). And, within each quality level, companies sell variants of a brand, which differ in functionality (Crest’s cavity protection, tartar control, and whitening toothpastes). With the ultimate goal of securing consumer purchase, companies offer an increasing number of brands, which can result in “overlap” between the brands in a firm’s portfolio. We define overlap from a consumer’s perspective as the degree to which a brand is perceived to offer the same product features as other brands owned by the same firm.
The few seminal papers (Aribarg & Arora, 2008; Hui, 2004; Morgan & Rego, 2009) indicate that overlap brings with it a number of compelling advantages and disadvantages, thereby having the potential for positive or negative outcomes. Thus the question arises: When does overlap have a positive or negative effect on consumers’ brand evaluations? We argue that the actual effect of overlap on consumer evaluations depends on two strategic marketing factors: (1) the dominance of the corporate brand versus the product brand in marketing communications of a product, and (2) the type of overlap – vertical (i.e., overlap between products that vary in quality) or horizontal (i.e., overlap between products that vary in functionality).
A 2 x 4 between-subjects factorial design was employed to test consumers’ responses to overlap of product extensions under different conditions. The stimulus was developed in two categories: chocolate and wine. The stimulus involved a picture of the packaging for a fictitious product extension for a real parent company (Hershey’s in the chocolate category and Yellow tail in the wine category), accompanied by a descriptor providing product information such as details of its price and features. We collected data using an online questionnaire via Amazon Mechanical Turk. A sample of 366 individual consumers provided data across both the chocolate and wine categories.
Our initial results for the chocolate product category indicate that, for the vertical extension, Cocoa Black, consumers evaluated the chocolate bar for which the product brand was dominant more favourably (μ = 5.44) than that for which the corporate brand was dominant (μ = 4.95). This evaluation difference was statistically significant (t = -1.84, p < .05). For the horizontal extension, Peppermint Air Delight, there was a significant difference in evaluation for overlapping products (t = 1.74, p < .05) for which the corporate brand was dominant (μ = 4.60), compared to that for which the product brand was dominant (μ = 3.96). These preliminary results show promise in terms of providing practitioners with prescriptive guidelines for managing overlap to their benefit. The results of this study will be presented in full at the Global Marketing Conference 2016.