The Impact of Product Line Extensions and Consumer Goalson the Formation of Price Image

Abstract

How do vertical product line extensions influence a retailer’ sprice image? Conventional wisdom suggests that adding an upscale or downscale item to a product line has a directionally consistent impact on price image, such that upscale extensions increase price image and downscale extensions decrease price image. In contrast, this research argues that vertical extensions can have the opposite effect, such that upscale extensions can decrease rather than increase price image, and vice versa for downscale extensions. The authors further propose that the impact of vertical extensions on price image is a function of consumer goals and, in particular, whether consumers have the intent of browsing or buying. The authors test these predictions in a series of five empirical studies that offer converging evidence in support of the proposed theory.