Brand Extensions: Does Buying a Brand in One Category Increase Propensity to Buy It in Another?

Abstract

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