Brand extension of online technology products: Evidence from search engine to virtual communities and online news

Abstract

Brand extension has been a subject of increasing interest and scholarly investigation for researchers in over a decade; however, little research has been directed toward understanding brand extension in the online context. The current study examines brand extension of online products and tries to find the key factors that determine the popularity of extended products in the online channels. Drawing upon the categorization theory, we propose a research model and validate it in the context of a search engine's brand extension to a virtual community service and an online news service. The findings indicate that perceived quality of a parent brand can be transferred to its extensions. Moreover, the perceived fit between the parent brand and a new product positively influences perceived quality of the extension. This study also finds that, in the online environment, the perceived tie between the existing product and the extension positively influences perceived quality of the extension. This research advances our understanding of the usage behavior between technology products sharing the same brand and provides insights into the marketing promotion strategies for IT products in electronic markets.

Introduction

After achieving success in one market, online firms often launch new products to capture new markets. To avoid the high risk of failure associated with the new product introduction, firms often exploit consumers' recognition of previously introduced brands to facilitate the entrance of the new products. For example, following its great success in the search engine market, Google launched the email and instant messenger service; while after its success in its web portal service, Yahoo launched the instant messenger service. Table 1 illustrates additional examples of such online brand extensions. This phenomenon poses an interesting question for online information technology (IT) product providers: How do consumers evaluate the brand extension of online technology products?

A brand is a name and/or symbol that uniquely identifies the products or services of the seller and differentiates them from those of its competitors [1]. The widespread acceptance of the Internet and electronic commerce has given rise to popular IT brand names such as eBay, Google, and Yahoo. As pure Internet firms, they have risen to become the top 100 global brands according to the Interbrand report [10]. Brand is a precious asset to such firms because the consumers' experiences with the established product, which provide consumers with the relevant information about the new product, could help reduce the uncertainties and perceived risks associated with the newly launched products. Therefore, when IT is not just a technology but also a product and when technology users are also consumers, the brand image of a technology product could be a salient determinant for technology acceptance.

Brand extension is the use of established brand names to enter new product categories or classes [42]. Indeed, brand extension is of particular relevance to online IT service products. The key asset and indicator of the success of an online IT product is its traffic. Firms are investing more money into online advertising to attract traffic. For example, according to the Interactive Advertising Bureau, expenses on online advertisements in 2008 had risen to $23.4 billion in the US [71]. Another study, conducted by the European Interactive Advertising Association, found 70% of advertisers claim their allocated online ad spend is set to rise in 2009 [48]. Therefore, taking advantage of the existing traffic to introduce a new product represents a critical opportunity for firms. The understanding of how consumers' attitudes towards one IT product influence their usage of the extension helps managers to better achieve the synergy of their online products.

Brand extension has been a subject of increasing interest and scholarly investigation for marketing researchers in over a decade; however, little research has been directed toward understanding brand extension in the online context. Kling and Smith [44] have warned about the limitations of current research on consumer attitudes regarding brand extension, stating that “in this area, concerns about external validity have taken a back seat to those about internal validity” [44]. Most previous studies have failed to take into account important background factors that could significantly impact the generalizability of their findings. As a marketing channel, the Internet has unique characteristics that are different from traditional marketing channels. For example, because of its extremely rapid transmission speed, the Internet is capable of delivering information products in minutes or even seconds. Such an efficient delivery scheme is almost impossible with traditional channels [54]. The hyperlink is another distinguishing feature for online channels. The worldwide web enables vendors to easily associate one online service with another by creating hyperlinks. However, in traditional channels, the connectivity between products is relatively low. As is well documented, the online channel's unique characteristics have implications for developing and managing online brands [20], [36]. Experience with this interactive medium also has shown that simply replicating traditional marketing efforts online is at least inadequate [49]. Thus, the current study is a response to the call of Kling and Smith [44] for more studies on the background factors and to make observations on online brand extension, as well as tries to find the key factors that determine the popularity of extended products in the online channels.

Besides the introduction of the brand extension effect, this study also tries to bridge the gap in the study of the usage behavior between different systems, which has not yet been explored in the information systems (IS) literature. The notion of system usage has played a central role in IS research since the 1970s [9], [14], [47]. Many researchers have studied the antecedents of usage [16], [25], [26], [67]. Over time, the field has gradually progressed toward a general model of these antecedents [69]. Unfortunately, most research has examined usage behavior of different products in isolation. Rogers [57] pointed out that people should not view innovation in isolation. Instead, innovation can be considered as a bundle of interrelated technologies. The acceptance of one technology product may depend on the acceptance or usage of other related technology products. Although researchers have examined the relationships of system usage between different time periods [43], [68] and different tasks [3], empirical research on the relationship of usage between different systems is scarce. Thus, an empirical study in this area complements the current understanding.

The remainder of this paper proceeds as follows. The next section introduces the theoretical background and the research hypotheses, drawing on the categorization theory as the primary theoretical underpinning to explain the IT brand extension effect. The third section describes the research methodology used to test the research model. The fourth section presents the results of data analyses. The paper closes with a discussion of the findings and implications, their limitations, and directions for future research.