Product-to-Service Extension: The Impact of Brand Equity on Upscaled Service

Abstract

A recent trend in the luxury industry shows many companies using brand extension strategies to leverage their assets among competitors. Despite the popularity of brand extensions, limited research has been conducted to determine its effectiveness when using parent product brands in order to introduce new service brands. Thus, the primary purpose of this study is to propose the framework to increase the understanding of luxury brand extensions by focusing on the horizontal category brand extension from product to service. The impact of perceived quality, brand association and brand loyalty of the luxury car brand on consumers’ perception and attitude toward the rental car service brand was observed to differentiate from other research that focuses on brand extension within product categories. A total of 324 samples were collected and analyzed using structural equation modeling with AMOS. The brand association of the parent brand showed a significant impact on the evaluation of the extended service brand. In addition, a high level of the brand association was also found to influence the final purchase decision of the extended service brand. However, this study could not find any significant effect of perceived quality and brand loyalty for the parent product brand on the extended service brand. The framework proposed in this study has merit to increase the understanding of service brand extensions by exploring luxury car brands and luxury rental car brands. In the service brand extension, there was a gap in consumer perception between the product brand and the extended service brand. In order to maximize the positive impact of the parent brand, marketers and retailers should investigate the different roles of the brand equity items.

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