Cole, G. (2014), "Executive summary of “Perceived fit and deal framing: the moderating effect of perceived fit on sales promotions in line and brand extensions”", Journal of Product & Brand Management, Vol. 23 No. 4/5. https://doi.org/10.1108/JPBM-07-2014-0674Download as .RIS
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Executive summary of “Perceived fit and deal framing: the moderating effect of perceived fit on sales promotions in line and brand extensions”
Article Type: Executive summaries and implications for managers and executives From: Journal of Product & Brand Management, Volume 23, Issue 4/5
This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefits of the material present.
The launch of new products has captured much research attention. It is widely apparent that introducing new offerings to the market is inherently risky, and failure rates remain high. Adding products to the same category or extending into different categories account for the vast majority of new products released. Many scholars have explored the relative likelihood of success of these line and brand extensions.
Consumers use their previous knowledge and experience of products within a certain category to form expectations about new offerings. Such “category-based processing” succeeds when features of the new product align well with the “category schema”. In such circumstances, consumer perceptions and attitudes toward existing category products extend to the new offering. Fit is typically easier to perceive when the new product is an extension of a current line than when the brand is extending into a different category.
Researchers point out how involvement impacts on how consumers evaluate new products. The likelihood is that individuals who are less involved with a product will expend less effort in the evaluation process. In such circumstances, greater reliance on peripheral cues is more likely. One such cue is existing membership of a product category. In the view of various scholars, the attitude that consumers display toward a new product which is closely aligned to the parent brand becomes even stronger in low involvement conditions. This is the case whether the attitude is positive or negative.
Perceived fit is also closely linked to the perception of risk associated with making a purchase. Because line extensions are better aligned with the parent brand, they are regarded as less risky option than brand extensions. Different types of risk are discussed in the literature, but financial, social and performance risks are considered the main ones. Painkillers are the focal product in the current study, meaning that financial and social risk are minimal due to the low purchasing cost and “non-conspicuous” form of consumption. Performance risk is therefore the most relevant type. Difference in perceived fit with the parent brand suggests that risk will be higher for a brand extension than for a line extension.
Earlier research established that perception of risk is also influenced by sales promotions, which are essentially monetary or non-monetary in nature. A price discount of 50 per cent is an example of the former, and non-monetary promotions can take the form of an additional product such as in a buy-one-get-one-free (BOGOF) offer. Although these promotions are often equivalent in economic terms, they are respectively framed as either a loss or gain. Some scholars argue that gain is more appealing, and consumers would thus be more enticed by a BOGOF campaign than a 50 per cent price reduction.
A further attraction of receiving free products is the opportunity to stockpile them for future consumption. Such appeal is greater for goods which are not highly perishable. However, poor product performance, subsequently, means that benefits of bulk buying are significantly offset by the “inventory costs” to the consumer inherent in the stockpiling process. In this context, it is thus mooted that BOGOF will be the preferred promotion for new painkillers where performance risk is considered low. Conversely, any belief that performance risk is high for this product is likely to make the 50 per cent cut in price the most attractive promotion to consumers. In light of this, Shen proposes that BOGOF should be the preferred option for line extensions and 50 per cent price cut for brand extension and that consumers will be more inclined to stockpile a line extension than a brand extension.
These issues are further examined in a study involving 166 undergraduate students with a mean age of 20 years. Females accounted for 52 per cent of the sample. Each subject was exposed to one of four conditions: high or low perceived fit combined with either BOGOF or 50 per cent off promotion type. Painkillers were selected for the study because they are readily available in the travel-sized packages often used to promote new products. Tylenol, a leading painkiller brand in the USA, was chosen as the line extension and Colgate, a top toothpaste brand, as the brand extension. The latter is owned by Colgate-Palmolive and has never figured in the painkiller product category. Respondents were informed that each packet contained four chewy, orange-flavored tablets whose effect lasted four hours. The packets retailed at $1.19.
Perceived fit of the respective extensions was measured in a pre-test, which also established familiarity with and attitudes toward the study brands. As expected, perceived fit was markedly higher for the Tylenol extension than for its Colgate counterpart. The main survey was computer-based, and subjects were asked for their response to questions relating to attitude toward the new painkiller, perceived performance risk, stockpiling tendency, transaction value and purchase intention.
Analysis of the data confirmed that:
Attitude toward parent brand has a stronger influence on line-extension attitude than on brand-extension attitude.
Performance risk is perceived to be higher for brand extension than for line extension.
Consumers are likelier to stockpile line extensions than brand extensions.
For line extensions, consumers prefer BOGOF promotions, but favor 50 per cent cuts in price for brand extensions. These indications are with regard to the perceived transaction value and purchase intention.
Shen claims that these findings can help make sales promotions for new products more effective. He recommends using BOGOF offers to promote line extensions because of the lower perceptions of performance risk and higher tendency for consumers to stockpile such products. Another factor is the possibility that BOGOF promotion can positively impact on purchase quantity and potential result in higher market share and profits.
Sales promotions are widely deployed, and many marketers opt to mimic the strategy deployed by their competitors. The logic of this tactic is questioned by Shen, who argues that potential advantages can be eroded. He illustrates the point with the supposed scenario of Tylenol offering a 50 per cent price discount for its new painkiller just because Colgate was marketing its new product the same way. Instead of focusing on competitor moves, decisions about which promotion strategy to use must be founded on whether the new offering constitutes a line or brand extension.
The effect of sales promotions in high- and low-priced product categories can be examined in future research. Other potential factors to explore include differences in savings percentage and levels of consumer interest in purchasing sale products. A consideration of these findings with regard to such different product categories, promotion types and consumer groups is recommended too.
To read the full article, enter 10.1108/JPBM-12-2013-0463 into your search engine.
(A précis of the article “Perceived fit and deal framing: the moderating effect of perceived fit on sales promotions in line and brand extensions”. Supplied by Marketing Consultants for Emerald.)