Consumers’ Evaluation of Co-Brand Extensions

International Management Review Vol. 8 No. 1 2012

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Consumers’ Evaluation of Co-Brand Extensions: The Effects of Concept

Congruity on the Evaluation of Co-branded Products, Analyzing the

Moderating Role of Task Involvement

Sreejesh. S Department of Marketing & Strategy, IBS, IFHE University, Hyderabad, India

[Abstract] This study extends the branding research, especially brand extension evaluation, and centers on a relatively new, but pervasive, phenomenon of co-branding. The term co-branding implies the use of two or more established brands to name a new product. Previously observed findings in brand extension literature show that a moderately incongruent extension evaluation will be more favorable than it is congruent or extremely incongruent when involvement is high. In this context, the present study examines two issues: (a) to analyze the effects of concept congruity on the evaluation of co-brand extensions (b) and to understand the moderating role of task involvement in evaluation of co-brand extensions. Integrating the knowledge of brand extension evaluation and congruity theory, the study tries to develop a model for evaluating co-brand extension is proposed. This study examines whether or not these findings can be extended to co-branding. So, this study proposes experimental factorial design (2X3) to understand the moderating role of task involvement in three different congruity conditions for co-brand extension evaluation. From the analysis, it found that the results are consistent with the predictions of Mandler’s (1982) theory: high evaluation in moderate incongruity than either in high congruity or extreme incongruity.

[Keywords] co-brand extension evaluation; concept congruity; task involvement; MANOVA

Introduction In recent years, marketing practitioners and academicians concentrated on the study of branding strategies. Consumer product manufacturers are very much interested in co-branding as a means to gain more marketplace exposure, fend off the threat of private label brands, and share expensive promotional costs with a partner (Washburn et al., 2000). The fierce competition among manufacturers and retailers in saturated markets, particularly in consumer durables, led them to adopt co-branding strategy. Co-branding is defined as a branding strategy which is popular in consumer products that pairs two or more branded products (constituent brands) to form a separate and unique product (composite brand) (Park et al., 1996). Broadly defined, co-branding occurs when there is a pairing of at least two partner brands that cooperate in a marketing context, such as advertising, product development, product placement, or distribution (Grossman & Priluck, 1997; Leuthesser, Kohli & Suri, 2003; Kumar, 2005).

Co-branding is an increasingly popular technique marketers use in attempting to transfer the positive associations of the partner (constituent) brands to a newly formed co-brand (composite brand) (Washburn et al., 2000). Co-branded products mainly appear among consumer goods; they are also relevant for durables and services (Helmig et al., 2008). In durables, Compaq® and Mattel® introduced high-tech interactive toys. In non-durables, DANONE® and Motta® introduced “Yolka” ice cream; M&Ms® and Pilsbury® invented a new cookie concept. In services, the HDFC Bank® in India has joined hands with the National Insurance Company (NIC) ® and MasterCard International® to launch a successful Credit / Health Card.

Nowadays, companies are using different variations of co-branding: vertical co-branding, often defined as ingredient branding (Desai & Keller, 2002), in which integrating within one product by producers of different value chain steps (e.g. IBM® & Intel®). Another variation is the composite co-branding refers to use of two renowned brand names joined together in a way that they can collectively offer a distinct product or service that could not be possible individually, usually referred to as co-branding. Four sub- divisions of co branding forms are (a) co branding aimed to develop a separate and unique product or brand, (b) co-branding formed using distinct brands that have complementary use, (c)


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co-branding aimed for physical product integration, or (d) co-branding that using different brands in combination with market-related products for complementary use or even physical product integration (Washburn et al., 2000; Leuthesser et al., 2003; Dickinson & Tara Heath, 2008).

Co-branding is used as an attempt to transfer positive associations from the original brands (constituent brands) to new co-branded offering (composite brand). Many of the line extensions use their partners’ brand equity as a way to enter into the market and get acceptance of their product in the market. Many of the companies use co-branding as a tool for maximizing extension success rates, for seeking help from other companies that are already established in the market, i.e. enhancing reputation of the new brand by being in partnership with partners. With this reputation, leveraging occurs when links between parent brands result in inferred product quality, brand image, personality, or reputation (Cooke & Ryan, 2000; Dickinson & Tara Heath, 2008) e.g. Kellogg co-branded its cereals for health-oriented adults with Healthy Choice®. Co-branding helps some companies increase their usage extension. For example, in Europe, Bacardi® and Coca-Cola® use a co-branding strategy of advertising together. This helps Bacardi ® penetrate into the market because this advertising demonstrates another way to drink Bacardi.

Moreover, Bacardi’s® status is a powerful endorsement for Coke as the ideal mixer. Thus, the pairing also benefits Coke, which wants to remain the number one adult soft drink, to get additional market place exposure. Some companies are using co-branding for getting access to new markets. For example, Citibank® India and the Delhi Metro Rail Corporation (DMRC) introduced India's first co-branded, 2-in-1 transit credit card, the Delhi Metro Citibank Credit Card. Some of the companies using co-branding as an image reinforcement tool, e.g. in India, Ariel® and Whirlpool® launched a co-branded advertising campaign that claims “The art of washing” is illustrated by a famous 1914 Renoir painting. Through this, Ariel ®seeks to reinforce its market leader status and has tried to gain a more affective image. For Whirlpool®, the campaign bolsters its European launching strategy and creates a caring image.

However, in co-branding aimed to share the created associations from the original brand to new co-branded products, not all co-branding alliances should be made visible. For example, through a joint venture between Mercedes® and Swatch® started producing a new car, called Smart®, in which each company added its own competencies and expertise, but Mercedes is unlikely to put its trademark on Smart. This is the same way Nestle and Coca-cola® decided to do a co-branding alliance against Unilever’s Lipton®, called Nestea, in which Nestle® would create and market the product and Coca-Cola ®, would distribute it. Coca-cola® got only a small fraction of space on the back of packaging (http://www.management-hub.com/branding-co.html.) Guarav Doshi (2007), (http://thealexanderreport.com/Co-branding/) and Wei-lun Chang (2008) explains the important problems associated with co-branding:

• Proper understanding between two partners is a necessary condition for co-branding; otherwise greed to fetch too much in short time may spoil the relation, and, finally, it will lead to market failure.

• Another important problem associated with co-branding is that once a co-brand takes position in the market, it become very difficult to dismantle the co-brand and difficult to reestablish the brand alone.

• If two companies are co-branded, the companies' different visions and cultures are in-compatible.

• In co-branding, the repositioning by one party may adversely affect another party’s brand.

• Inability to meet the requirements between two brands or parties may result in termination of co-branding.

• Mergers and acquisition activities of one party may be detrimental for another party in co-branding.

Literature Review Co-Branding Research Norris (1992) was the first to contribute a conceptual paper in the series of co-branding that formulated the potential benefits of ingredient branding initiated by an input producer and explain about the potential


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to the beneficiaries. This study was followed by a large number of conceptual articles: Rao and Rueckert (1994) analyzed brand alliances in signaling perspective and presented a rationale for why firms adopt such a strategy. The second, by Hillyer and Tikoo (1995), discusses two important and interrelated issues in co-branding: consumer evaluations of co-branding and conditions under which marketers used co-branding as a strategy. Shocker (1995) examined one type of co-branding strategy which uses complementary attribute associations of an existing brand to reposition an existing branded product (e.g. Jaguar Sedan by Toyota). This study tries to analyze this type of co-branding that is able to enhance original or header brands’ concept (Jaguar sedan) and whether it had positive or negative effects up on the modified brand (Toyota). Park et al. (1996) conducted two studies for evaluating the effectiveness of a composite brand in a brand extension context, and the results of the two studies show that when integrating two brands with complementary attribute levels, the composite brand extension provides a better attribute profile. Levin et al. (1996) provided a common frame work for addressing the consumers’ evaluation of different branding strategies and showed the role of brand name contribution in the evaluation of branding strategy and ultimately affects brand equity.

Dickinson and Tara Heath (2006) examined cooperative branding alliances in a consumer marketing context based on the findings from the brand extension research literature in that the authors showed that attitudes toward the parent brand influence the co-branding evaluation and not only the constituent brands; each requires positive brand attitudes, and they require a good fit to facilitate favorable associations towards the co-brand. Wei-Lun (2008) synthesizes existing co-branding cases and provides a typology of strategies, which provides the aim, category, and role of co-branding. Leuthesser et al. (2003) defined and differentiated co-branding from other types of brand alliances and stated that successful co-branding occurs when both brands add value to the partnership, and the potentiality of value adding process can be examined by assessing how well each brand and potential customer base complement each other . These aspects are backed by the potential of enhancement and diminishment of brand equity.

Role of Categorization, Congruity and Involvement in Extension Evaluation Categories mean cognitive structures which contain instan Medin, 1981; Moonkyu, 1995). Sometimes, for making an evaluative judgment about the product, the consumers will use the affect associated with the category in which the product belongs; at the same time, others would use the attributes of the product or object. Aaker and Keller (1990) suggest that, based on categorization theory, consumers would evaluate brand extensions in two ways: (a) as a piecemeal process in which extension evaluation is a function of inferred brand attribute beliefs and their evaluative importance, and (b) as a category based

process in which extension evaluation depends on overall attitude towards the original brand. In short, when consumers evaluate a product or object based on affect associated with the category in which the object belongs, it is called a category-based process, and when it is based on the product attributes, it is called a piecemeal-based process.

Sujan's (1985) study found that these two types of processes would occur depending on the congruence between the extension and the product category, and congruence lead to category-based process, and incongruence would lead to piecemeal-based process. Mandler (1982) proposed that the level of congruity between product category schema is the important factor that determines the nature of information processing and extension evaluations. The authors come out with the finding that product with moderate incongruity shows better evaluation than either congruent or incongruent. Congruity refers to the match between the attributes of an object/product and a relevant schema, and incongruity involves some mismatch, and it shows the extent that structural correspondence is achieved between the entre configuration of attribute relations associated with the product, object, and configuration specified by the schema, and extreme incongruity means incongruity that cannot be solved or can be solved if some fundamental changes are made in the existing cognitive structure (Meyers & Tybout, 1989).

Moderate incongruity is considered to be “Interesting and positively valued” (Mandler, 1982). This outcome is supposed to occur as a result of increased elaboration because successful resolution of moderate incongruity is inherently satisfying, or it leads to the efforts to seek a resolution that is biased


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towards positive explanation of the congruity (Walchli, 2007). In the case of congruent extension, processing demands are minimal, providing little opportunity for elaboration in memory. But in the case of extremely incongruent extension or stimuli, it needs more elaboration than in the case of moderate congruent stimuli, resulting in frustration and inability to resolve discrepancies or congruity between stimuli and the parent brand. Suppose Bata comes into the hotel business. What would be the consumer evaluation of the new hotel extension of Bata? It is completely incongruent if, at the same time, Bata would introduce cosmetic products. If it is somewhat a moderate incongruity extension in such a situation, a resolution might be accomplished and thereby lead to a more positive outcome than if it is either a congruent extension or an extremely incongruent extension.

Brewer comes out with another finding that perceivers’ level of task involvement must, also, be considered to be one of the important factors that determines these two type of processes; category-based processing occurs under low involvement, and piecemeal-based process occurs under high involvement (Moonkyu, 1995). Maoz and Tybout's (2002) study found that a congruent brand extension is favorable when the task involvement is low, and moderate incongruity is favorable when the task involvement is high. From all this literature, it is evident that a piecemeal-based process will occur only if the task involvement is high; when the task involvement is high, consumers will evaluate the moderately incongruent brand extensions more favorably than either a congruent or an extremely incongruent brand extension.

Objectives

The objective of the paper is two-fold: 1) To analyze the effect of the concept of congruity in co-brand extensions, 2) To study the moderating role of task involvement under different congruity conditions.

Hypothesis Development

Concept Congruity and Involvement Concept congruity in brand extension can be defined as the congruity between the parent brand and the proposed extension (Walchli, 2007). Mandler’s (1982) schema congruity theory stated that moderately incongruent stimuli are predicted to be more highly valued than extremely congruent or incongruent stimuli. This outcome happens due to the increased elaboration; successful resolution of moderate incongruity is inherently satisfying or efforts to seek resolution are biased toward positive explanations of incongruity. Many of the studies in brand extension supported this argument and stated an inverted U relationship in extension evaluation and concluded that consumer evaluation would be higher in moderate incongruity than in congruity and extreme incongruity under high task involvement (Meyers-Levy et al., 1994; Maoz & Tybout, 2002). So, this study tries to analyze the inverted U relationship in co- branding and hypothesizes the following: Hypothesis 1: Consumers’ evaluation of co-brand extension would be higher in moderate incongruity

than in congruity and extreme incongruity under high-task involvement conditions.

Hypothesis 2: Consumers’ evaluation of co-brand extension would be higher in congruity than in

moderate incongruity and extreme incongruity under low-task involvement conditions.

Study Design and Methodology Qualitative Pre-Studies The main objective of qualitative pre-studies was to develop stimuli (both co-brands and their hypothetical extensions) for the study. The first pre-study is for the selection of the product category for choosing brands to test our hypotheses. For that, the study conducted a focus group interview with 20 management students. The second pre-study aimed at selection of brands from the concerned product category. The first objective of this pre-study was selection of a brand that would be familiar to research participants. Second, selecting a brand that had high consumer familiarity, which required them to draw


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upon their knowledge and be able to resolve moderate partner incongruities between the two constituent brands when high involvement encouraged elaboration. Third, selecting a brand that would be able to elicit positive associations among the respondents. This reduced the possibility of type II error, which would prevent the possibility of a positive attitude towards the brand to the co-brand or the affect of any effect generated in the course of incongruity (Maoz & Tybout, 2002).

After the selection of the brands, the study assessed the quality and familiarity of the selected brands. The individuals assessed the quality and familiarity of the brands based on a seven-point Likert scale (ranging from 1= very high quality to 7= very low quality). The result of the study shows that Compaq and Sony are found to be good brands in terms of quality and familiarity.

The third pre-study aimed at selecting hypothetical brand extensions under three congruity conditions (congruity, moderate incongruity, and extreme incongruity). The study conducted a focus group interview with 10 management students; they suggested 3 hypothetical extensions for each congruity condition. After that, the study assessed three levels of congruity (between co-brands and extension) through assessing Compaq and Sony (parent brands) with 10 hypothetical extensions. The similarity is measured using an item on a seven-point Likert scale ranging from highly dissimilar (1) to highly similar (7). The results of the pre-study confirmed that the Compaq/Sony printer possessed high congruity with a mean of 6.5, and the Compaq/Sony CD player was found to have a moderate incongruity mean of 4.8, and, finally, the Compaq/Sony Soft Drinks was found to be extremely incongruent with a mean of 2.1. The results are shown in the Table 1.

Table 1. Perceived Fit between Brands and Their Hypothetical Extensions

S. No. Hypothetical extensions (Compaqa/Sony) Mean Score

1 Tv-Computer 6.1

2 CD-player 4.8

3 Printer 6.5

4 Coffee Maker 5.5

5 Blender 5.1

6 Calculator 6.1

7 Microwave 6.1

8 Soft-drink 2.1

9 Video Games 3.5

10 Video phone 3.6

Data Collection

The study used 2X3 factorial between-subject experimental design. The experiment employed a 2(involvement-high involvement vs. low involvement) X3(congruity- extreme congruity, moderate

incongruity and extreme incongruity) factorial design. There were two levels of processing instruction: the “low involvement” instruction that asked the respondents’ attention on the similarity or dissimilarity between the constituent brands and the extension, and the “high-involvement” instruction that asked for close attention to the task and focused respondents’ attention on rationalizing the relationship between the constituent brand and the extended brand. A self-administered questionnaire was used that required approximately 20-30 minutes for respondents to complete. The total sample size was 130.

Procedures The study used the same procedure as used by Maoz and Tybout (2002) and Walchi (2007). One-hundred-thirty students participated in this survey. Students were run in small groups of 15 to 20 people. When participants arrived at the laboratory, they were given a booklet that contained the experimental manipulations and the dependent measures. They read a short paragraph telling them that the research was being conducted as part of an effort to write a marketing case study about a new product that


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Compaq/Sony, together, were planning to introduce in the Indian market. In the congruent extension condition, the participants were informed the new product was a Sony/Compaq printer, whereas in the moderately incongruent condition, it was a Sony/Compaq Cd-player, and in the extremely incongruent condition, it was a Sony/Compaq soft drink.

The next paragraph in the booklet intended to create elaborate thought regarding the extension. The study used the procedures used by Maheswaran and Sternthal (1990) and Maoz and Tybout (2002). Those assigned in the high-involvement condition were told that they were the only some of very few people providing input for the marketing case, so their decision was very important, and each decision would be evaluated individually. Participants in the low-involvement condition told that they were one of many people providing input and that their response would be averaged with hundreds of others before the results would be examined.

The study used three dependent variables; the dependent measures were mainly designed to capture various aspects of respondents’ attitudes towards the co-branding extension. These dependent variables were the following: Quality, measured in a two-item, seven-point Likert scale (ranging from 1= very high quality to 7=very low quality); Attitude, measured in a two-item, seven-point Likert scale (ranging from 1=totally disagree to 7=totally agree); and the likelihood of buying (purchase) the co-branded extension, measured in a single-item, seven-point Likert scale (1=definitely would not to 7=definitely would). The study used the factor scores (except likelihood of buying) for the dimension as dependent variable (quality, attitude and likelihood of buying) and three categories of fit and involvement as independent variables.

Data Analysis First, it was hypothesized that consumers’ evaluation of co-brand extension evaluation would be higher in moderate incongruity conditions than in congruity and extreme incongruity under high-involvement conditions. Second, it was hypothesized that consumers’ evaluation of brand extension would be higher in congruity than in moderate incongruity and extreme incongruity under low-involvement conditions. A MANOVA entering the quality, attitude, and likelihood of buying the product was performed to test the hypotheses. Under the high-involvement condition, the results followed the predicted condition, but in the low-involvement conditions, it seems to be in different pattern, as shown in the figures. The results show that under the high-involvement condition (see Figures 1 to 3), the quadratic relationship between incongruity and the evaluation of the three dimensions is significant: Quality, F 2, 92 =5.377, p <.01; Attitude, F 2, 92 =3.534, p<.05; and in the case of the likelihood of buying, it was marginally significant: F

2, 92 =2.911, p< .10. In the case of the low-involvement condition (see figures 4 to 6), a negative linear relationship between incongruity and evaluation was expected. Quality, F 2, 89 =4.641, p <.05; Attitude was marginally significant, F 2, 89 =2.971, p<.10; and in the case of the likelihood of buying, the study could not find any negative liner relationship: F 2, 89 =9.606, p< .01 .

extreme incongruitymoderate incongruitycongruity

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Figure 1. Quality rating of co-branding evaluation under high involvement


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Figure 4. Attitude rating of co-branded products under low involvement conditions

Figure 3. Likelihood of buying of co-branding evaluation under high involvement

Figure 2. Attitude rating of co-branding evaluation under high involvement


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The analysis found that the evaluation under the high-involvement condition is consistent with the predictions of the Mandler’s (1982) theory: higher evaluation in moderate incongruity than either in high congruity and extreme incongruity. In this case, when the extension was moderately incongruent, increasing involvement presumably allowed respondents to elaborate on and resolve the incongruity, thereby generating task satisfaction and resulting in a more favorable evaluation of the extension (Maoz & Tybout, 2002). But in case of extreme incongruity, respondents were not able to create an elaboration that would be sufficient enough to resolve extreme incongruity between the constituent brands and the extension.

By contrast, the low-involvement condition appears to encourage a more heuristic process of transferring a positive attitude toward the brand to only those extensions that are readily perceived to fit with it. In short, in the low-involvement condition, respondents were not allowed to create any elaboration process necessary to rationalize the incongruity between the constituent brands and the extension. The results of the study supported Mandlers’s (1982) results, except in the case of purchase dimension because, in that case, evaluation is favorable in the extreme incongruity condition.

Discussion The present study extended the prior work investigating brand extensions (Meyers-Levy et al., 1994; Maoz & Tybout, 2000). In those studies, the authors found that an inverted U relationship between

Figure 5. Quality rating of co-branded products under low involvement

Figure 6. Purchase rating of co-branded products under low involvement


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congruity with a brand and evaluation of an extension under the high-involvement condition, such that a moderately incongruent extension was evaluated more favorably than congruent and extremely incongruent. The study assumed that the high involvement condition, as Mandler (1982) hypothesized, creates an increased elaboration that enables the identification of a means for integrating the new information (the extension) with existing knowledge (associations to the brand). Both the process of elaboration and the satisfaction associated with arriving at a solution to the puzzle of how the extension and brand relate may contribute to the more favorable evaluation of a moderately incongruent extension, relative to a congruent extension or an extremely incongruent extension (Maoz & Tybout, 2000). Further, the evaluation in favor of moderate incongruity is created due to the elaboration that is prompted by high involvement, which helps to resolve moderate incongruity more than congruity and extreme incongruity that resulted in task satisfaction.

Managerial Implications

Recently, companies have been considering co-branding as a strategy for leveraging brand value. When executed properly, it helps as a way or viable means for strategically leveraging brand value. A variety of studies has supported the fact that robust performance of co branding as a strategic option over a variety of circumstances (James, 2005; Vaidyanathan & Aggarwal, 2000; Washburn, Till & Priluck, 2000; 2004; Walchi, 2007). The model developed by this study helps managers understand the framework for co-branding extensions. With that framework, they can develop a successful co- branding strategy.

From the practical point of view, strong co-brands can be successfully extended into incongruent product categories or incongruent extensions, provided consumers are motivated to have an elaboration that would rectify the incongruity between the constituent band and the extension. From a managerial point of view, this study gives better understanding regarding the congruity and extension evaluation. If an extension is moderately incongruent, managers can develop communications so it would create an elaboration that rectifies the incongruity between constituent brands and extension.

From the managerial perspective, the present study added an important contribution to partner selection in co-branding. The general belief about co-branding is that the two brands that constitute co- branding should have high quality and reputation. The present study supports the fact that in co-branding it is not necessary that the two brands are perceived to be of high-quality and well reputed. In co- branding, it is not always possible to collaborate with two brands that are perceived to be of highly quality and reputed. In this situation, the evaluation is based on one brand which is perceived to be of highly quality and reputed.

Limitations

The first concern relates to generalization across product categories and parent brands; this study considered only a limited number of product categories and parent brands, so it is difficult to generalize from the limited number of product categories. From the practical standpoint, it is important that generalizations across extension category and product category are achieved by performing large number of comparisons. The results of some replication studies in brand extension (Sunde & Brodie, 1993) emphasized the need for generalizations across product categories and parent brands. The second concern relates to generalization across consumers; consumers were considered as heterogeneous. Some of the previous studies showed there were some differences in consumer evaluation across cultures. This study was conducted in the Indian context; therefore, there has been difficulty in generalizing the study across other cultures. The third concern relates to the student sample; the study considered a student sample for getting responses for co-brand extension evaluation. They are only a part of all consumers. An exact brand extension study requires consumers who are actual decision-makers. Therefore, the study failed to consider that aspect.

Suggestions for Future Research The present study analyzed the consumer evaluation of co-branding in one product category. One possible


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area for future research is a study that can be extended into other product categories and compare the product categories to understand the possible differences in evaluation across categories. That would give a better picture for understanding the differences across product categories. The structural invariance analysis can be used as a possible tool for analyzing the concerned research problem.

The research focused mainly on the impact of concept congruity on consumer evaluation of co-branding, between partner congruities as deliberately held constant. One extension of the study would be to examine the impact of both between partner congruity and concept congruity simultaneously.

Maos and Tybout (2002) suggested in their concept congruity in brand extension that not only involvement but information about the attribute-level performance of an extension relative to competitive alternatives, also, may moderate this relationship when involvement is high. So, this co-branding study can be extended in such a way that the role of competitive information comes into the picture and helps to understand the moderating role of both involvement and competitive information in co-branding literature.

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Consumers’ Evaluation of Co-Brand Extensions

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