Even-related potentials correlated with the evaluation of service-to-service brand extension

Abstract

Brand extension refers to the introduction of new service or goods to the market by exploiting an established brand. Brand extension can reduce advertising costs and market entry barrier, whereas it can also jeopardize brand equity by weakening a positive association with the original brand. Therefore, understanding how consumers evaluate brand extension is important to development of brain extension strategy. Many studies have investigated neural mechanisms underlying consumer’s evaluation of brand extension. Yet, the previous studies have focused only on goods-to-goods brand extension to date. Since it is more difficult to categorize services rather than goods, the same neural mechanism may or may not be involved in service-to-service brand extension. In the present study, we investigated whether neural process for evaluating service-to-service is similar to that for goods-to-goods brand extension via an event-related potential (ERP) analysis. We used a prime-probe paradigm in which participants were given a series of stimuli. A popular service brand name in one of the four service categories (e.g., airline, hotel, internet shopping mall service, and bank) was presented as a prime stimulus (S1), followed by one of the seven extension service names (e.g., online travel information service, travel agency service, legal counseling service, etc.) as a probe stimulus (S2). Participants were asked to evaluate the suggested brand extension without explicit response. After the experiment, Participants assessed each S1-S2 combination using the 7-point Likert scale (e.g., similarity between the service of S1 brand and S2 service). Based on the survey result, every S1-S2 combination was divided into three groups: high-, moderate- and low- similarity groups. EEG signals were measured during the experiment. The ERP analysis revealed the modulation of N400 components over the right frontal region with the S1-S2 similarity. The N400 amplitude was significantly increased in the order of moderate, high, and low similarity (p < 0.05). However, we did not observe P2 at frontal areas that was shown in the previous studies on goods-to-goods brand extension evaluation. Our results indicate that consumers may use a different cognitive process during evaluating service-to-service brand extension compared to goods-to-goods brand extension. To the best of our knowledge, this is the first study to explore neural activity associated with service-to-service brand extension.