Brand Equity Dilution

604_graphBrand names are the most important asset of a product or service. One of the most valuable advantages to maintaining a strong brand name is that from that strengthened name, a brand extension can be formulated. These brand extensions can become a highly successful endeavor, or a cause for failure. Due to this risk, it is imperative that each brand have a strong strategy before releasing an extension of their brand to reduce the chance of countless hours, dollars, and valued customers lost.

Understanding brand equity dilution is essential to stabilizing perceptions of a parent brand. Research, thus, has concluded three things about product extensions in comparison to parent brand equity. First, research has failed to find any evidence of brand dilution with dissimilar extensions. Secondly, although perceptions of quality for a parent brand decreased with the hypothetical introduction of a lower quality extension in a similar product category, quality perceptions of the parent brand were unaffected when the proposed extension was in a dissimilar product category. Thirdly, dilution effects were less likely to be present with “flagship” products and occurred with line extensions, but were not always evident for more dissimilar category extensions.

The conclusion made by these research findings showed that parent brands appear to be more resistant to change, and dramatically more than was believed. Consumers are becoming familiar with brands over the years, to the point that they brand loyalty withstands the release of a failing brand extension in most cases. The knowledge they presently hold aids them in distinguishing whether the release of the extension is worthy of a negative feeling that warrants change, or if it was just a release gone wrong. The case which parent brands saw the most negative effects of their brand extensions was when consumers felt that the extension was similar, or fit, the brand strongly. In this situation, consumers tend to feel that if the two are alike, that the brand’s expertise becomes a factor and creates a sense of doubt in the brand.

Researchers have developed three occurrences in which brand dilution might occur:

Experience in Branding Strategies:

Dilution effects resulted when consumers directly experienced a poorly performing, similar brand extension and suggested that direct experience led to dilution because consumers considered it to be more diagnostic than other forms of learning about the extension.

Dilution effects associated with an extension that is family-branded disappeared when they assigned the extension a hypothetical sub-brand. Direct experience with a close extension provides consumers with experience that creates potential change in parent brand attitudes.

Sub-branding tends to send the message of an extension, which means consumers relate those only as extensions and not direct reflections of the brand. Sub-branding strategies can alter consumer thoughts on whether or not the parent brand should be held directly responsible for failed extensions.

Consumer Involvement:

Brand extension dilution depends on the amount of involvement the consumer has with the experience. When consumers were not highly involved in the experience, dilution only occurred where the extension was strongly similar to the parent brand. Less similar extensions were viewed as exceptions, thus having less impact of their views of the parent brand, although negative information is still processed and retained.

Evidence was found of greater brand dilution for consumers who had a high “need for cognition” (consumers given to analyzing and understanding a product or service) compared to those with a low need for cognition. It is the latter of the groups that processes information deeper.

Timing is a factor in measuring brand equity dilution. When consumer attitudes were measured immediately after a negative extension-trial experience, dilution occurred for both similar and dissimilar extension. When there was a delay in measurement, only unsuccessful similar extensions led to dilution.

Brand Ownership:

Consumers’ degree of familiarity with a brand impacts the level of equity dilution by extensions of a parent brand. Brand ownership and brand usage are key factors in this determination.

The authors sum a parent brand’s dilution into three factors:

Strength: Only an extension experience that is sufficiently strong has the potential to trigger brand dilution.

Diagnosicity: An extension experience is diagnostic of the parent brand only to the degree that consumers believe the extension is relevant to the parent.

Inconsistency: An extension experience consistent with the consumer’s image of the parent brand is less likely to change that consumer’s impression. However, an experience that is inconsistent with those expectations of the parent creates the potential for change — the direction and extent of change depending on the relative strength and favorability of the experience.

In all, creating a strong brand with a high degree of brand equity permits further growth opportunities and helps provide parent brands with a defense against failed brand extensions.

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