Asymmetric price range effects on vertical extensions

Pontes, Nicolas, Palmeira, Mauricio, & Jevons, Colin (2012) Asymmetric price range effects on vertical extensions. In Bharadwaj, Sundar & Hulland, John (Eds.) 2012 AMA Winter Educators’ Conference Proceedings, American Marketing Association, Tampa, FL.

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Abstract

Vertical line extensions, both step-up and step-down, are common occurrence in consumer products. For example, Timex recently launched its luxury high-end Valentino line. On the other hand, many companies use downscale extensions to increase the overall sales volume. For instance, a number of luxury watch brands recently introduced watch collections with lower price points, like TAG Heur’s affordable watch the Aquaracer Calibre 5. Previous literature on vertical extensions has investigated how number of products in the line (Dacin and Smith 1994), the direction of the extension, brand concept (Kim, Lavack, and Smith 2001), and perceived risk (Lei, de Ruyter, and Wetzels 2008) affect extensions’ evaluation. Common to this literature is the use of models based on adaptation-level theory, which states that all relevant price information is integrated into a single prototype value and used in consumer judgments of price (Helson 1947; Mazumdar, Raj, and Sinha 2005). In the current research we argue that, while adaptation-level theory can be viewed as a useful simplification to understanding consumers’ evaluations, it misses out important contextual influences caused by a brand’s price range. Drawing on research on range-frequency theory (Mellers and Cooke 1994; Parducci 1965) we investigate the effects of price point distance and parent brand’s price range on evaluations of vertical extensions. Our reasoning leads to two important predictions that we test in a series of three experiments...

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ID Code: 75780
Item Type: Conference Paper
Refereed: Yes
ISBN: 0877573484
ISSN: 1054-0806
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Advertising, Marketing & Public Relations
Deposited On: 05 Jan 2015 23:50
Last Modified: 14 Jan 2015 03:29

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