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1. Introduction
Brand extension is a widely adopted strategy that enables firms to take advantage of existing brand equity and enter a new product category ([40] Aaker, 1991; [19] Martínez et al. , 2009). With the increased financial risk and promotion cost of introducing new products, firms have renewed their efforts to capitalize on the goodwill associated with existing brand names by launching extensions. However, the possibility of negative impacts on the parent brand is a concern for marketers during this process ([10] Gibson, 1990; [31] Sheinin, 2000). Despite this fact, more and more firms are utilizing extensions and counter-extensions across different product categories to enhance their market share, and/or to preserve it. This practice has been applied in domestic and international package delivery, pitcher-based and faucet-mounted water filtration, consumer electronics and computer hardware. A counter-extension is a brand extension that is launched into category A based on Brand II, which belongs to category B. Unlike traditional brand extensions, a counter-extension is in a direction that is reciprocal to the launch of a previous extension into category B by Brand I, which belongs to category A ([15] Kumar, 2005).
Previous research on the reciprocal effect of brand extensions focuses on the factors related to success or failure, product quality, or the fact that the extension could have adverse effects on the parent brand. For a firm facing intense competition and the brand extensions of its competitors, how to take advantage of the competitors' situation and the firm's own strong points to fight back in the market is an issue of obvious interest. This study employs experimental methods to explore the effects on customers' degrees of support and intention to purchase based on the following factors:
- the market position of the firm (major versus minor);
- the outcome of previous brand extensions (success versus failure); and
- the technological capability of the firm itself (leading or lagging).
The results of this study can help firms to plan marketing strategies that are more appealing to consumers.
2. Literature review and hypotheses
2.1 Brand extension
The evaluation of brand extensions has attracted an increasing amount of research over the last decade ([42] Keller, 2000), and in this strategy marketing managers use their company's existing brand names to...