Research on vertical line extensions shows that consumers tend to evaluate upward extensions higher than downward ones. This paper examines the opposite situation. It also investigates the process underlying consumer responses by identifying a moderator and mediators.
Two studies were conducted to assess the effect of extension direction (upward vs downward) on consumers' extension evaluations. Study 1 incorporated implicit theories of relationships (the growth belief) as a moderator and inferred motives for launching a vertical line extension as mediators in the effect. Study 2 presented a firm's rationale for undertaking the extension to examine whether it influenced evaluations.
Consumers' preferences for downward over upward extensions appeared in markets where the exclusivity of luxury brands had been reduced. However, the resistance to upward extensions was weaker when consumers endorsed stronger growth beliefs in human relationships. Consumers inferred customer- and selling-oriented motives more strongly from downward than upward extensions, enhancing the evaluations. Finally, when presenting a rationale for launching an extension in the launch announcement, customer-oriented reasoning raised the evaluations higher than selling-oriented reasoning but did not elevate the evaluations higher than the announcement showing no reason.
This study advances the literature on vertical line extensions and shows that consumers' preference for upward over downward extensions is not universal. The opposite pattern exists in markets with a lower distinction between high- and low-end brands. It supports the theoretical notion that responses are driven by the differences in growth belief and in cognitive inferences vis-à-vis motives.
