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INTRODUCTION
Reputation and credibility are familiar concepts. Examples include whether to believe the product claims made by a manufacturer's advertising, credit check/verification for a new account, or whether to believe delivery dates or claims made by a vendor. A firm with a good overall reputation owns a valuable asset -- "goodwill": brand names, corporate logos and customer loyalty. Brand names can often be repositories for a firm's reputation: high quality performance on one product can often be transferred to another product by the brand name alone (Moorthy, 1985; Wernerfelt, 1988). What is the relationship between reputation of the firm, the brand, and the potential of a brand extension success? This article discusses the concept of reputation, presents two models, one of reputation building and destruction and one extending the reputation concept to the brand extension evaluation process, and portrays how the model can assist the brand or product manager with the brand extension decision.
REPUTATION AND BRAND MANAGEMENT
The primary purpose of brands and brand names is to provide to the user a symbolic meaning which assists the user in the recognition and decision-making process. Often brands develop a "personality" of their own that has an effect on whether users decide the product's image is consistent with their needs. With this "personality" often goes a reputation as well. Brand names can often be repositories for a firm's reputation: high quality performance on one product can often be transferred to another product via the brand name (Moorthy, 1985).
For a firm expanding its product line, a well-known brand name can be advantageous in facilitating user acceptance of the new product because of its existing brand reputation. Family branding, that is a company placing the same brand name on all products in a product line, enjoys the distinct advantage of instant recognition, benefitting from the "halo effect" of the brand's established reputation. A new entry using the family brand name gains instant credibility and visibility from the brand's established reputation. This leveraging effect has led some firms to enter new fields under the same name--brand franchise extension.
The advantages of such an approach are the facilitation of the adoption process and acceptance of new products, since users assume new products have the same quality level as existing...