Brand Counterextensions: The Impact of Brand Extension Success versus Failure

In this article, the author investigates the impact of a brand extension's success versus failure on customer evaluation of brand counter-extensions. A counterextension is a brand extension that is launched into Category A by Brand 2 that belongs to Category B in a reciprocal direction to a launch of a previous extension into Category B by Brand 1 that belongs to Category A. The results from five studies show that customers evaluate a counterextension more favorably when the preceding extension is a success rather than a failure. Furthermore, the evaluation of the counterextension is superior if it is launched by a major brand, especially if the previous successful extension was also launched by a major brand. Finally, a successful extension indirectly dilutes a brand and results in a greater loss in choice share to a counterextension than does a failed extension. The key findings generalize to a sequence of extensions across more than one intercategory boundary.