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Vertical versus horizontal line extensions: a comparison of dilution effects

Michelle Childs (Department of Retail, Hospitality and Tourism Management, University of Tennessee, Knoxville, Tennessee, USA)
Byoungho Jin (Department of Consumer, Apparel and Retail Studies, The University of North Carolina at Greensboro (UNCG), Greensboro, North Carolina, USA)
William L. Tullar (Department of Management, The University of North Carolina at Greensboro (UNCG), Greensboro, North Carolina, USA)

Journal of Product & Brand Management

ISSN: 1061-0421

Article publication date: 6 November 2018

Issue publication date: 4 December 2018

Abstract

Purpose

Many apparel brands use growth strategies that involve extending a brand’s line horizontally (same price/quality) and/or vertically (different price/quality). While such opportunities for growth and profitability are enticing, pursuing them could dilute a highly profitable parent brand. Categorization theory’s bookkeeping model and the cue scope framework provide the theoretical framework for this study. The purpose of this study is to test whether specific attributes of a line extension (i.e. direction of extension, brand concept, price discount and perceived fit) make a parent brand more susceptible to dilution.

Design/methodology/approach

This experimental study manipulates brand concept (premium or value brand) and price level (horizontal or vertical: −20per cent, −80per cent) and measures perceived fit to test effects on parent brand dilution. ANOVA and t-tests are used for the analysis.

Findings

Vertical extensions dilute the parent brand, but horizontal extensions do not. Dilution is strongest for premium (vs value) brands and when line extensions are discounted (i.e. −20per cent or −80per cent lower than the parent brand), regardless of the perceived fit between brand concept and brand extension price. Overall, brand concept is the strongest predictor of parent brand dilution in the context of vertical-downward extensions.

Originality/value

This study establishes which factors emerge as important contributors to parent brand dilution. Although previous studies on brand dilution are abundant, few studies have compared the effects of horizontal and vertical extensions on brand dilution. This study offers strong theoretical as well as practical implications.

Keywords

Citation

Childs, M., Jin, B. and Tullar, W.L. (2018), "Vertical versus horizontal line extensions: a comparison of dilution effects", Journal of Product & Brand Management, Vol. 27 No. 6, pp. 670-683. https://doi.org/10.1108/JPBM-01-2017-1386

Publisher

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Emerald Publishing Limited

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