Reciprocal Spillover Effects: A Strategic Benefit of Brand Extensions

Abstract

A commonly advanced rationale for the proliferation of brand extensions is companies’ motivation to leverage the equity in established brands, thereby developing profitable products relatively easily. A more interesting strategic argument for brand extensions that has been advanced is that extensions would favorably affect the image of the parent brand and thereby influence its choice. In this research, the authors investigate the existence of such reciprocal spillover effects emanating from the advertising of a brand extension. The authors use scanner panel data and study spillover effects of advertising on brand choice. They develop implications for brand and product line management.