A Hybrid Model: Price and Branding Issues

Abstract

Brand extension has been extensively discussed during the past two decades. The current research identifies and examines the effect of several price-related variables on consumers’ judgments of brand extensions. We expect and find that consumers’ price expectations of a brand extension are affected by the price of the parent brand. The relative price of the parent category in relation to the extension category also affects consumers’ price expectations of the brand extension’s price, and moderates the effect of the parent brand price. In addition, the impact of the price of the parent brand and relative price of the parent category on brand extension evaluations is moderated by the distribution or heterogeneity of prices in the extension category. Finally, we find that the impact of consumers’ expectation of the brand extension’s price is stronger when they are confronted with the actual price of the extension than when they are not.

Keywords: hybrid model, price perception, Brand extensions, Brand attitudes