Product-Category Dynamics and Corporate Identity in Brand Extensions: A Comparison of Hong Kong and U.S. Consumers

Abstract

Should the focus of a brand-extension strategy be on product-category related factors (e.g., the fit between the extension and the core product) or should consumers’ attention be drawn to characteristics of the company providing the extension (e.g., company size)? Examining this issue experimentally in Hong Kong and in the United States with samples of students and working professionals, we find that for U.S. consumers, perceived fit is much more important than company size; for Hong Kong consumers, company size does not matter for high fit extensions, but does matter for low fit extensions. We suggest the value of collectivism may explain the relative higher importance of corporate identity for East Asian consumers. East Asian consumers rely on companies as interdependent, collective societal entities to reduce the risk of a low fit extension, whereas U.S. consumers—as individualists—place higher importance on their own judgment regarding the product fit rather than cues such as company size.