The Impact of Brand Familiarity, Branding and Distribution Strategy on Luxury Brand Dilution

Abstract

From the consumer point of view, step-down line extension is the launch of a new product, which is perceived as lower quality than the other products a brand currently sells, in the category of the pre-existing brand (Magnoni and Roux, 2008). Although step-down line extension is not a new business practice, it has greatly increased in recent years to meet new market trends. Today, the purchasing power crisis and the democratization of the luxury sector attract more price-sensitive customers with lower-end products (Lipovetsky and Roux, 2003; Kapferer and Bastien, 2008). Analysts have even invented a new category called Masstige, which stresses that the prestige brand targets a mass market (Silverstein and Fiske, 2003; Danziger, 2005). Accordingly, more and more fashion designers are launching lines, between 30 and 50% cheaper than the original lines, under their brand names. Ralph Lauren’s downward stretch from the exclusive “Purple Label” to the casual “Polo line” is a good example of this phenomenon. Likewise, Armani has six different lines that range from his couture collection, “Giorgio Armani-Privé”, to the everyday sportswear line, “Armani jeans” and even “Armani Exchange” in some foreign markets. If Saint Laurent was a pioneer with Saint Laurent Rive Gauche, then today fashion designers are increasingly stretching their brands down (e.g., Galliano by John Galliano, Paul & Joe Sister, Marc by Marc Jacobs, See by Chloé). Although step-down line extensions can use brand equity to increase the brand’s sales, it may also be a dangerous strategy (Aaker, 1997) that dilutes brand equity, especially for luxury brands (Kim and Lavack, 1996; Kirmani, Sood and Bridges, 1999; Kim, Lavack and Smith, 2001). In comparison to brand extension, step-down line extension is a new research area where studies are relatively limited (Randall, Ulrich and Reibstein 1998; Tafani Michel and Rosa 2009; Hamilton and Chernev, 2010; Jevons and Pontes, 2010). Little is known about the feedback effects of this strategy on core brand equity from a consumer’s perspective. This article aims to evaluate the impact of a luxury brand’s step-down line extension on consumer attitudes toward the core brand, taking into account brand familiarity, branding and distribution strategy as explanatory variables for the possible dilution effects.