Australia: How consumers evaluate brand extensions

Under Australian law, the use and registration of a trade mark will not be permitted if its use for goods or services is likely to deceive or confuse consumers. Australian courts have accepted that deception or confusion is possible if an identical trade mark is used for goods or services that are quite different from the goods or services of the established mark. This has occurred in an environment of increased consumer awareness of what marketers term brand extensions.

Brand extension refers to the strategy of using an established brand name for new products (goods or services). This strategy has been used extensively by businesses since the 1980s. Brand extension is popular because it avoids the high cost associated with introducing new brands. Also, the new product has a greater prospect of being successful due to consumer and distributor familiarity with, and knowledge of, the established brand. This is particularly so when using an established brand to introduce a new product in a different product category.

The question of whether use of a mark by a trader could confuse or deceive consumers has traditionally been approached by looking at the reputation and distinctiveness of the established trade mark. However, Australian courts have also recognized the importance of factors external to the trade mark in cases where the brand extension concept has been raised. These factors include assessing the degree of fit between goods of the established trade mark and those of the identical mark.

Whether a brand synonymous with one product category would fit an unrelated product category, has been considered extensively by marketing academics. Empirical studies using hypothetical brand extensions have shown that congruence or fit between an established brand and a new product category is dependent on the brand's identity. The studies have also established that there are a number of different bases of fit. The findings from these studies have implications for legal advisers.

A better understanding of what constitutes a brand's identity, and of the different bases of fit as revealed by the academic research, permits a deeper understanding of when and why consumers are likely to be confused when identical trade marks are used in different product categories.

Brand identity

A brand is perceived by consumers as more than merely a name or logo. A consumer's knowledge of a brand extends beyond their level of awareness of these brand elements, and encompasses the associations that they attach to the brand. These associations can originate from characteristics that are intrinsic to the product (for example, performance characteristics) and from the marketing efforts of the brand owner (through promotional, pricing, and distribution strategies). Brands will often have a number of brand associations, and these associations can be either attribute-based or non-attribute-based.

Attribute-based brand associations

Attribute-based brand associations are associations that are directly tied to the features of the products, such as the distinctive scent of Chanel perfume or the reliability associated with the Timex brand of wristwatch.

Non-attribute-based brand associations

Non-attribute-based brand associations are abstract associations that are based on anything that is not directly tied to the features of the product. For example, consumers typically associate the Rolex brand with luxury and prestige, the Gucci brand with fashion and the Disney brand with family fun.

Bases of perceived fit

Research by leading marketing academics has shown that brand extensions are more likely to be viewed favourably by consumers when the brand associations that are linked to the established brand are seen to fit with or remain relevant to the new product category.

Recent research has established that there are many types of fit, including those based on product attribute associations and non-attribute associations.

Product category comparisons

Originally, fit was considered in terms of category similarity, or the degree of overall similarity between the parent product and the new product, based on the number of shared physical features. It was thought that, if the features of both products were similar, the associations linked to the parent brand would be seen as more relevant to the new product.

Subsequent research showed that fit perceptions could be based on more than a comparison of the shared features. For instance, in their 1990 study Aaker and Keller found that perceptions of fit might also be based on more abstract relationships between products categories. It was shown that fit based on the perceived ability of the same company to make both products (transferability) and on the likelihood of both products being used in the same situations (complementarity - for example, Rossignol skis and ski clothing) was just as important as overall similarity in product features.

Comparisons based on brand associations

Subsequent studies considered perceived fit in terms of more than just product category comparisons. Perceived fit was considered also in terms of more abstract brand associations.

For instance, in a 1991 study, Park, Milberg and Lawson showed that the presence or absence of shared product features was not the only basis upon which consumers judged fit. Different products might also hang together if they shared the same concept or abstract meaning. For example, the Rolex brand, with a dominant non-attribute-based association (prestige), extended more readily to dissimilar categories (bracelets and rings) that shared the same prestige association. It was experimentally shown that the dominant prestige association overcame the lack of product feature similarity.

Subsequent studies have shown the importance of identifying specific brand associations that dominate the parent brand's identity. A 1995 study by Broniarczyk and Alba showed that a brand-specific association, defined as the association linked to the brand that differentiates it from competing brands, could override the effect of an otherwise lack of perceived fit between two dissimilar product categories. In their study, they show that the sweet flavour association of Froot Loops cereal transferred more easily to physically dissimilar categories such as lollipops, than to physically similar categories, such as hot cereal, because the sweet association was particularly relevant to lollipops. On the other hand, Cheerios cereal, with a healthy grain brand-specific association transferred more readily to waffles and hot cereal because the association was highly relevant to those products.

In a 2000 study by Bridges, Keller and Sood, it was shown that consumers would perceive a high degree of fit when able to establish explanatory links connecting the parent brand and the new product. They show that explanatory links could be based on any parent brand association that was salient and seen as relevant to the extension context. The results again show that consumers' perceptions of fit were not always based on category similarity.

Market research has also shown that a successful extension can make more salient, or even modify, the associations of the established brand and this in turn can improve consumer evaluations of further extensions in more remote categories. Dunhill provides a good example of a brand that has been gradually extended to different product categories and changed its identity along the way. Dunhill started as a cigarette brand, extending to smoking accessories (pipes and lighters), men's accessories (wallets) and fragrances and finally to general fashion items for both men and women. It has thus moved from a cigarette brand (positioned on the basis of product features) to a fashion brand (positioned on the basis of prestige).

Understanding association transfer

Assessing a brand's reputation is more than simply looking at its sales and advertising expenditure figures. It involves enquiring what attribute-based and non-attribute-based associations contribute most to the brand's identity. Market research demonstrates that consumer perceptions of fit are influenced by the degree to which these dominant associations are seen as relevant in the extension category context and not simply the extent of the overall similarity of the product categories in terms of shared physical features.

Australian courts have recognized the importance of evaluating the reputation of an established trade mark when assessing the likelihood of confusion with the trade mark of another brand owner used on different goods or services. They have also considered the degree of fit between the goods or services. A better appreciation of what makes up a brand's reputation (that is, its identity) in terms of its salient and distinctive brand associations, as well as a broader understanding of the types of fit likely to facilitate transfer of those associations to another product type, will assist the court's consideration of this legal issue.