International Research Journal of Applied and Basic Sciences © 2013 Available online at www.irjabs.com ISSN 2251-838X / Vol, 5 (6): 789-800 Science Explorer Publications The Impact of Brand Extension on New Product from Customers’ Perspective Tajzadeh NaminAidin1, MoghaddarAkbar2 1. Ph.DCandidate ofMarketing, University of Texas at Dallas 2. Graduate Student, MBA, AllamehTabataba’i University Corresponding Author email:[email protected] ABSTRACT: Today, most manufacturers distribute their new products under the brands of previous successful products since one of the most valuable properties of each organization is its background and how it is perceived as a reputable organization by its customers. While extending brands to new products, organizations should take into account a variety of factors (e.g. how new products fit into the previous classes of products, consumers’ attitudetoward the original brand, and how difficult it would be to make this extension acceptable to consumers) which may play a significant role in success or failure of a new product in the market. A question faced by sales and marketing managers is, therefore, how this new product (or a group of products) distributed into the market under the previous brand (brand extension) will be received by consumers. In other words, how does brand extension to cover new products affect consumers’ perspectives? The present case study focuses on consumers of detergents and cleaning products produced by Behdad Company under the brand TAJ, to identify impacts of extension of the existing brand into a new product category and markets (brand extension) on consumers’ attitudes using six hypotheses. Regarding its objective, the present study is an applied one; with respect to data collection and analysis, this is a correlation-based survey; and in terms of time period covered by the study, the present study is a cross-sectional study which gathers required data within a limited period from Shahrvand Chain Stores in Tehran. The statistical population is composed of TAJ products and the required data were gathered through random sampling from a sample consisting of 384 individuals using researcher-constructed questionnaire based on a model developed by Aakerand Keller (1990). Formal validity along with expert opinions was used to confirm validity of the measurement tool while reliability of the questionnaire was assessed by computing Cronbach’s alpha (0.911). The study, conducted on 278 women and 106 men, revealed that 48.7 percent of respondents were decision maker, buyer, and consumer of products while 25.3 percent were only consumers. Path analysis was employed to identify the impact of TAJ brand extension strategy on consumers’ attitudes toward the new product(s). The results indicated that the brand extension strategy affects consumers’ attitudestoward the new product(s), and the largest value for beta (0.398), in terms of predicting consumers’ evaluation of brand extension, was obtained for perceived quality of the original product while the smallest value (0.146) was found for perceived ability to transfer skills and manufacturing equipment from the original product into the spin-off. Keywords: Brand Extension; Spin-Off Products; TAJ; Attitude; Consumer INTRODUCTION A valuable property of any organization is its background and customer’s evaluation. Background and credibility of any organization depend on the performance of that organization and how the market perceives this performance. A product distributed under a successful brand is often sold at higher prices, attracts higher levels of customer loyalty, and makes it easier for consumers to select a product (Doyle, 1990). Some studies show that 82 percents of new products employ extended brands (Rangaswamy, Bruke, &Oliva, 1993). Firms rely on brand extension strategy to reduce financial risks. Brand extension is a strategy for firms to name their products, and eight out of every ten products are marketed through this strategy (Chen & Chen, 2000). Today, firms make extensive investments on extending those brands which communicate proper images to consumers. Among factors affecting brand extension, positive image of a brand is the most helpful one in business development (Keller &Aaker, 1992). Intl. Res. J. Appl. Basic. Sci. Vol., 5 (6), 789-800, 2013 Despite reductions in costs and probable success in using brand extension as an approach for marketing new products, this success is not always guaranteed; that is, a brand may not be extended to a new category without taking into account consumer behavior. Behdad Company is a well-established firm in cleaning product industry in Iran and is considered a major producer of detergents and cleaning products in the Middle East. Behdadowns TAJ, a well-known brand in this industry. TAJ has achieved a high level of success in producing cloth softeners. Behdad has used TAJ for other product categories as well (brand extension strategy). The present study attempts to examine effects of brand extension on (in this case TAJ) to spin-off products on consumer’s attitude. Problem Definition: Significance and Objectives When marketing a new product, a firm has to answer several questions. The most important question to answer by a supplier is how and based on what position this new product should be introduced to the market in order to create sufficient demand or, in other word, how to make this product appealing to the market. In selecting a position and supporting its products, a firm must take into account a variety of features, including quality, type of packaging, brand, and type of advertisements. A common mistake made by entrepreneurs in the business world is that a product is introduced into the market based on the assumption that simply ensuring the product quality will guarantee its sales across the market. Brown argues that many managers are mistaken when they assume that features of products and services offered to customer determine success in the competitive environment in markets. These managers ignore the fact that this is the brand, and not the product or service itself, thatcompetes opponents in the market (Brown, 2007). Today, most manufacturers distribute their new products under the brands of previous successful products since one of the most valuable properties of each organization is its background and how it is perceived as a reputable organization by its customers. Background and credibility of any organization depend on the performance of that organization and how the market perceives this performance. A good brand provides the firm with leverage to launch other successful products. A product marketed under a well-developed brand usually sells at a higher price, faces more loyalty from customers, and facilitates the process of selection for customers (Doyle, 1990). Today, firms make extensive investments on extending those brands which communicate proper images to consumers. Among factors affecting brand extension, positive image of a brand is the most helpful one in business development (Keller &Aaker, 1992). Therefore, marketing a new product under a well-known brand not only helps increasing income from a brand, but also enhances brand awareness among customers. Given the smaller amount of expenses and more probable success, over 80 percent of firms today employ brand extension as a strategy to introduce new products into the market. For example, the brand GOLRANG is no longer limited to baby shampoos and includes dish washing liquid, bleach, and facial tissue as well. The success of this approach, however, cannot always be guaranteed; that is, a brand may not be extended to a new category without taking into account consumer behavior. Behdad is known as a well-established manufacturer in detergent industry and, on the other hand, it owns a well-known brand (TAJ) in this industry and employs the state-of-the-art technologies, experienced employees and experts, and advanced formulation laboratories and controls together with research and development department which have led this company to becoming one of the largest manufacturers of detergents and cleaning products in the Middle East. Based on its previous success in developing TAJ as a well-recognized brand in cloth softener category, Behdad considered adding new products to its basket under the same brand (brand extension strategy). The findings of the present research will enable Behdad directors to verify the correctness of their strategies for extending TAJ into the existing products and, if necessary, consider new products which are more similar to the original products covered by TAJ. They may also reach the conclusion that brand extension has failed to attract consumer’s attention and, therefore, the company must create new brands. The findings presented here not only provide measures for cutting financial expenses at macro level but also prevents wasting of other resources such as time, human resources, etc., and by showing the directors how extension of TAJ to new product categories may desirably affect images as perceived by consumers direct them to either modify the policies adopted in this regard or eliminate these new categories. As mentioned earlier, the present study mainly focuses on the effects of using the existing brand TAJ in new products and markets (brand extension) on consumer’s attitude. The study also examines the following: Impacts of perceived quality of original TAJ products on consumer’s more desirable attitude toward new product(s); Impacts of perceived ability