The Relative Effect of Subjective and Objective Fit on Brand Extension Success

Abstract

This paper focuses on the relative importance of subjective and objective fit on brand extension success. Brand fit refers to consumer perceptions on the degree of similarity or correspondence between a parent brand and the extended brand. To evaluate brand fit, consumers often use both objective and subjective measures. A subjective fit measures the similarity in brand image

an objective fit measures the similarity of the category of the brand. This paper details the relative importance of each of the fit criteria in brand success. Specifically, it examines their importance when risks (social, financial and performance) are associated with a purchase. It also examines their importance when consumer knowledge- both familiarity and expertise- of the parent brand and of the extended category and the expertise is also related to confidence. I use survey methods to collect data on subjective and objective fits, consumer risks, knowledge, and confidence on category as well as the parent brand, and purchase intention for various number of brand extensions. I then model it using nonparametric Multivariate Adaptive Regression Splines model (Friendman, 1991). I estimate three models: 1) the covariates (including a category and a brand-specific dummy variable) impact on purchase intention, 2) asimultaneous equation model of subjective fit, objective fit, and purchase intention and 3) the covariates impact on purchase intention (interaction allowed only for brand fit variables). Then simulation methods are used to find the relative purchase intention through two types of brand fit for any single variable while controlling for effects of other variables. Next, the bootstrapping method is used to test whether the influence of subjective and objective fit are equal for each variable. With the result from bootstrap, a simulation method is used once again to find the relative purchase intention through two types of brand fit when two variables are considered at the same time while controlling for effects from other variables. From our simultaneous equations model, I find that consumers weigh objective fit more heavily than subjective fit. When any single variable is considered for finding purchase intention, objective fit has a greater influence at low perception levels and subjective fit has a greater influence at high perception levels, regardless of variable type. The hypothesis -that the influence of subjective and objective fit is equal- is supported for three variables: extended category confidence, social risk, and parent brand expertise (i.e., these variables had similar purchase intention influence through subjective and objective fits). Relative purchase intention through subjective and objective fit, in a combination of two of three variables, are overlooked.