Brand Extensions: Does Buying a Brand in One Category Increase Propensity to Buy It in Another?
5 Pages Posted: 14 Jun 2019
Date Written: June 4, 2019
It is a common belief that users of a brand in one category are more likely to purchase brand extensions than non-users of the brand. This study examines whether extensions actually do facilitate purchase of the brand in a second category.
We analyze one year of household purchasing data for approximately 60,000 US households to understand the level of cross-category purchasing brand extensions achieve. We investigate 98 extensions across 30 CPG category pairings.
This study finds:
• Purchasing a brand in one category makes a consumer, on average, 2.4 times as likely to purchase the same brand in a second category compared to a consumer who purchased a different brand in the original category.
• Extensions in complementary categories achieve the highest levels of cross-category sharing.
• Extensions in categories which are substitutable, or have high, moderate or low levels of similarity to the original product category all achieve cross-category purchasing higher than what is expected for two unrelated brands.
The overall finding provides empirical support for the theory of brand equity, specifically that usage & familiarity with a brand name in one category facilitates purchase of that brand in other categories.
Keywords: brand loyalty, cross-category loyalty, brand purchasing, brand extensions
JEL Classification: M31
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