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Vertical line extension is an attractive growth strategy that allows brands to address heterogeneous consumer needs and react to competitive pressure. The purpose of this paper is to systematically review and summarize vertical line extension research to derive general insights into vertical upward and downward line extension.

Drawing on a systematic review of 536 academic articles and predefined inclusion criteria, this research identifies and evaluates all articles that add knowledge to the topic of vertical line extension (n = 64).

This research derives general insights in several vertical line extension-specific issues. Different forms of vertical line extension, conceptual differences between upward and downward extensions, as well as the role of perceived fit, extension degree and the parent brand are crucial for the study and evaluation of extension and parent brand feedback effects. Those effects are complex and often work in opposing directions not only for the parent brand but also for the extension. Future research needs to face that complexity as well as methodological issues and different research contexts to further advance the literature stream.

This paper provides a comprehensive, state-of-the-art review of vertical line extension research characteristics and results. It provides new insights on the characteristics and effects of vertical line extensions and guides future research on the topic.

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.

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.

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.

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.

The purpose of this study is to analyze the problem of optimal product line design in marketing channels where consumers are heterogeneous in both horizontal and vertical dimensions.

This paper develops a model to evaluate when it is preferable for a firm to extend the product line in a vertical or horizontal direction. Consumers are modeled as being vertically heterogeneous with respect to their valuation of quality and horizontally heterogeneous with respect to their preference on the esthetic component of the product. These model characteristics allow us to consider a broader set of product line extension strategies. By considering both a vertically integrated channel and a decentralized channel, this study investigates how channel structure influences optimal product line design. The problem with supplemental numerical analyses is mathematically analyzed.

The analysis shows that a horizontal product line extension strategy that offers the customized product can be used as an alternative to a vertical product line extension strategy. If the fixed cost is not too high, offering the customized product with low quality may be preferred to the quality-based segmentation strategy. Furthermore, the analysis shows that the channel structure is influential as the preference for the horizontal product line extension strategy is more pronounced in the decentralized channel than in the centralized channel.

The analysis presented in this paper is limited by the consideration of full market coverage. Further research is needed to see how the results can be generalized to the case with partial market coverage.

The analysis suggests that a firm may consider product customization as part of its product line strategy. Information regarding market characteristics and channel structure is important when deciding on the optimal product line design.

The model reflects a more realistic marketing strategy and channel structure than previous studies that typically consider product line extension in only one direction and focus on the centralized distribution channel. Combining the standard product line extension and customization strategies also represents an important contribution to the literature. These extensions produce interesting new results and insights into a firm’s optimal product line design strategy.

The purpose of this paper is to examine the extent to which perceived extension innovativeness, extension quality, and consumer involvement affect reciprocal attitudes toward a newly launched vertical service line extension and the parent brand.

An empirical investigation using a survey methodology was conducted with a sample of 664 respondents representative of the target population. Three pre‐tests were conducted. Partial least squares structural equation modeling and analysis of variance helped test the complex paths of nominal, mediating, and moderating variables.

Extension innovativeness, extension quality, and consumer involvement positively mediate the relationship between the new extension and the parent brand. In addition, parent brand perceived innovativeness negatively moderates the impact of extension innovativeness on attitudes toward the parent brand. Perceived quality of the extension does not solely mediate a reciprocal attitude but is partially mediated by extension innovativeness.

Future studies should investigate different types of services and consumer goods to generalize the results. Other dimensions of involvement could also be tested.

This study provides key findings to managers who are responsible for launching newly‐created upscale service extensions. When evaluating a new vertical service line extension, consumers actively process the available information. Thus, marketers must be careful to communicate the quality and the innovativeness of a new service because both factors can dynamically influence reciprocal attitudes toward the parent brand.

This article brings new insights as well as closing an important theoretical gap in the literature regarding the complex dynamic effects of perceived innovativeness, quality, and involvement in a context of a vertical service line extension during launch as it reciprocally impacts attitude toward the parent brand.

Research on vertical line extensions shows that consumers tend to evaluate upward extensions higher than downward ones. This paper examines the opposite situation. It also investigates the process underlying consumer responses by identifying a moderator and mediators.

Two studies were conducted to assess the effect of extension direction (upward vs downward) on consumers' extension evaluations. Study 1 incorporated implicit theories of relationships (the growth belief) as a moderator and inferred motives for launching a vertical line extension as mediators in the effect. Study 2 presented a firm's rationale for undertaking the extension to examine whether it influenced evaluations.

Consumers' preferences for downward over upward extensions appeared in markets where the exclusivity of luxury brands had been reduced. However, the resistance to upward extensions was weaker when consumers endorsed stronger growth beliefs in human relationships. Consumers inferred customer- and selling-oriented motives more strongly from downward than upward extensions, enhancing the evaluations. Finally, when presenting a rationale for launching an extension in the launch announcement, customer-oriented reasoning raised the evaluations higher than selling-oriented reasoning but did not elevate the evaluations higher than the announcement showing no reason.

This study advances the literature on vertical line extensions and shows that consumers' preference for upward over downward extensions is not universal. The opposite pattern exists in markets with a lower distinction between high- and low-end brands. It supports the theoretical notion that responses are driven by the differences in growth belief and in cognitive inferences vis-à-vis motives.

Literature in brand extensions has relied greatly on categorization theory and on prototypical models of categorization to explain the affect transfer from a parent brand to its extensions. Drawing on the range theory exemplar models of categorization, this paper aims to show the effects of parent brand endpoint prices on consumer judgments of vertical line extensions.

Three experiments have been conducted. Experiment 1 tests the hypothesis that consumers rely on the parent brand price range when making judgments of an upscale extension. Experiment 2 tests the hypothesis that the effect of price range on extension evaluation is mediated by perceived risks for upscale extensions but not downscale extensions. The final experiment shows a boundary condition to the product line range effect on upscale extensions.

This research shows that upscale extensions are judged more favorably in the context of a wide versus a narrow product line even when the highest endpoints in both product lines are equally close to the extension and that this effect is mediated by perceived consistency and perceived risk. The range effect disappears, however, when consumers have a broad focus in which attention shifts to category endpoint prices, making parent brand prices less diagnostic of upscale extension judgments.

Managers may display a wider range of products and/or reduce prices of low-end models to expand product line price width. In consequence, low-end products become more competitive in terms of price and at the same time improve favorability ratings of the new upscale product.

Vertical line extensions and product line pricing are important topics to both academics and practitioners. Nonetheless, this is the first research to demonstrate how product line price width can influence consumer perceptions of vertical line extensions.

The purpose of this study is to assess the extent to which gender impacts the evaluation of vertical line extensions of luxury brands in a cross-national context. The topic of brand/line extensions has been investigated in the mainstream branding literature. On the other hand, the topic has received less attention in the luxury literature. At the same time, while research has examined brand/line extensions from an international perspective, the impact of gender on consumer purchase intentions of luxury downward line extensions in different countries has remained unexplored.

Based on an ANOVA design (2 extension types × 2 genders × 2 countries). The independent variables were ordered as follows: gender (male/female), vertical line extensions (upscale/downward) and country of living (France/USA). The purchase intention of the extension was chosen as the dependent variable.

The study results show that key differences exist between men and women regarding vertical luxury line extensions. For instance, women in both countries rate a new downward line extension of a luxury brand more positively than men. In contrast, although women evaluate a new upscale line extension of a luxury brand similarly to men in France, women are more positive than men in the USA. Also, US men rate an upscale extension less positively than their French counterparts. Finally, women in both countries rate luxury downward extensions more positively than men.

This study contributes to the literature of luxury brand management by examining how gender types process and respond to upscale and downward luxury line extensions versus purchase intentions in two different countries. This paper is unique as gender types are not often compared in previous research while fundamental distinctions exist, leading to significant differences. Practically, this study also provides key insights for marketing strategy development and adjustment for luxury manufacturers in terms of their target market, more specifically men versus women.

The purpose of this paper is to investigate the extent to which the accessibility of established parent brand information and the diagnosticity of newly launched horizontal and upward service line extensions affect transfer and reciprocal transfer of brand associations.

A field study using a survey methodology based on a 2×2 experimental random design was conducted with a sample representative of the target population of an established bank in Eastern Canada. Two levels of parent brand accessibility (high/low) and two levels of line extension (upward/horizontal) were tested. Pretests were conducted, and the analysis of results was done using a three-point-in-time confirmatory factorial analysis for each cell.

The findings indicate that for a newly launched horizontal service line extension, when accessibility of an established parent brand is high, information transfer and reciprocal transfer of brand associations is strong and complete. When accessibility is low, transfer is strong but incomplete, leading to partial dilution of the parent brand. In the case of a newly launched upward service line extension, for both high- and low-accessibility contexts, only key diagnostic parent brand associations transfer to the extension. Reciprocal transfer is strong, leading to a significant dilution of the parent brand.

Other kinds of extensions (e.g. downward, distant), other types of services, and consumer goods could be tested to observe the extent to which transfer works.

This study provides key findings to managers who are responsible for launching newly created service line extensions (horizontal and upward). When evaluating a new vertical service line extension, consumers actively process the available information at hand (e.g. print advertising, point-of-purchase materials), but key diagnostic associations of the parent brand tend to persist over time. Thus, marketers must be careful when using or not using parent brand information during launch, though an upward service line extension is likely to dilute the parent brand’s equity, either positively or negatively.

This paper brings new insights to the service branding literature with respect to the dynamics of transfer of brand associations between service line extensions (horizontal and upward) and their parent brands. Drawing on the accessibility-diagnosticity framework, it closes an important theoretical knowledge gap regarding the persistence over time of accessible vs diagnostic parent brand information in the mechanisms of transfer of brand associations to and from different types of service extensions.

In this paper, the authors aim to propose that status differentiation, the extent to which people differentiate their behaviors or attribute power to others according to perceived status differences, moderates the effect of stretch direction upward or downward and brand image prestige or functional on consumers 2019 responses to line extensions.

This study was a 2 (culture: Chinese vs American) × 2 (stretch direction: up vs down) × 2 (brand image: prestige vs functional) experiment design. Study 2 was a 2 (status differentiation: high vs low) × 2 (stretch direction: up vs down) × 2 (brand image: prestige vs functional) experiment design.

The results of two studies show that high status differentiation has a positive prestige-enhancement effect on an upward extension but a detrimental effect on a downward extension. This effect is more pronounced for prestige brands than for functional brands. In addition, the authors have found similar patterns for the prestige perceptions of the parent brands after extension.

This research makes important contributions to the fields of cross-cultural psychology. The status differentiation beliefs could be primed temporarily and had a significant impact on individuals’ responses to line extension.

The research identifies status differentiation as an important factor for marketers to consider when extending their brands to global markets.

Past research on vertical extensions has examined numerous factors influencing consumers’ responses. This paper is the only one to examine culture factor.

In mature industries, downward vertical (line) extension has become an increasingly popular strategy, particularly for automobile manufacturers aiming at expanding their consumer bases and/or avoiding competition in higher market segment. This paper aims to examine how Mercedes-Benz (MB) practiced a downward vertical line extension within the same product category. When commercialized as a product line innovation, the MB A-Class was the first and most symbolic move made by a premium brand in the automobile industry.

This paper investigates the microfoundations of a vertical downward extension strategy. To do so, the authors adopt a narrative style to analyze the story of the MB A-Class from its inception to its commercialization. Secondary data sources, such as company websites, annual reports, internal documents, books, public relations and press releases, were used. Qualitative as well as quantitative performance outcomes were assessed using market and product sales in Western Europe (1997-2016) and the results of an MB brand image survey conducted in 1998 following the accident faced by the A-Class.

The case illustrates that contrary to initial assumptions, lower-quality extensions may be relevant for prestige brands under certain conditions and identifies four strategy components that may drive a successful downward stretch: combine organizational, product, process and marketing innovation with the support of dynamic capabilities; manage paradoxes/contradictions in terms of product development; target the high-end of a lower consumer segment; and adopt a “brand humility talk scheme”.

Existing studies primarily focus on consumers’ evaluations of vertical step-down extensions. Rare are the articles that adopt the company’s perspective. Moreover, additional research is needed to assess the short- and long-term impacts of vertical downward extension on performance outcomes.

The case of the MB A-Class encourages top executives to consider the trade-offs inherent to a down-market strategic move: keeping the (premium) brand’s standards high within a reduced cost/price envelope while learning the codes of the new/bottom of the market. In addition, the A-Class may serve as a fundamental school case for marketing managers and creative advertising agencies on what should and should not be done, whether at the product or at the advertising level.

This paper demonstrates that a premium brand that practiced a vertical downward line extension can expand its sales in a mass market, by targeting a small but growing segment with a high willingness to pay for more expensive products. This adds to the contention that it is not the downscale extension product price per se that negatively affects the parent brand but rather where it stands in the hierarchy of the market segment considered and the ability of the premium brand to integrate the downscale extension to its own history (i.e. combining its original values with tangible product benefits while backing the cause of the new market). Finally, the story of the A-Class strongly suggests that any company needs to upgrade its capabilities as part of the learning process of a new market to convert a business opportunity into a market success.