OnlineISSN2345-0037. ORGANIZATIONS AND MARKETS IN EMERGING ECONOMIES, 2018, VOL. 9, No.

1(17) DOI: https://doi.org/10.15388/omee.2018.10.00008

STRATEGIC BRAND MANAGEMENT IN

EMERGING MARKETS: CONSUMER
PERCEPTIONS OF BRAND EXTENSIONS
Durdana Ozretic-Dosen, Ph.D.*
ORCID: https://orcid.org/0000-0001-5976-5866
University of Zagreb, Faculty of Economics & Business, Marketing Department, Zagreb, Croatia

Marta Brlic, mag. oec.

Alumni of the University of Zagreb, Faculty of Economics & Business, Zagreb, Croatia

Tanja Komarac, univ. spec. oec.

ORCID: https://orcid.org/0000-0001-6282-3887
University of Zagreb, Faculty of Economics & Business, Marketing Department, Zagreb, Croatia

Abstract. The purpose of this paper is to examine consumers’ perceptions of the parent brand and their
attitudes towards the brand extensions by exploratory researching the topic in the new context of one
emerging European market. Theoretical part gives a comprehensive description and analysis of the
main features of the brand extension strategy. The purpose of the primary research is to explore and
understand Croatian consumers’ perceptions about the global parent brand (Coca-Cola) and their
attitudes towards its extensions on the Croatian market. Research results support the assumption that
managers should introduce brand extension when they are sure of the position of the parent brand and
its former extensions in the consumers’ mind. As such, results corroborate previous findings, showing
how it is necessary to know the existing level of brand affect, brand loyalty, and brand trust since they
have different impacts on consumers’ perceptions of the brand extension. The main contribution of the
paper stems from the replication and extension of the previous research in the new context (in terms of
the level of the market development and consumer culture). Research findings add to the existing
knowledge with insights and results from the new market (Croatia), and as such might help in increas-
ing understanding of the brand extension phenomena in the field of the strategic brand management in
emerging markets.
Key words: brand extension, brand affect, brand loyalty, brand trust, emerging market

* Corresponding author: Full Professor, University of Zagreb, Faculty of Economics & Business, Marketing
Department, Zagreb, Croatia; e-mail: [email protected]

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Introduction
Considerable evidence in marketing supports the assumption that the brand extension
strategy allows the company to expand its business in the new areas, primarily thanks to
the security that a well-known parent brand brings. According to Nielsen’s global
research (2015, p. 14), brand extensions are “approximately three to four times more
common than new manufacturer and new brand launches combined.” However, this
strategy should be used with caution – it cannot be applied to all products, and it can
happen that consumers do not accept the brand extension.
Despite existing numerous research dedicated to the brand extension strategy in the
developed markets, the knowledge about consumers’ attitudes toward the brand exten-sions
in the emerging markets is still limited, insufficient and based mainly on research findings
from the context of large Asian markets. For example, Fu et al. (2009) empiri-cally tested
the extended model of Aaker and Keller brand extensions evaluation frame-work in China
and have found additional significant factors for consumers’ evaluation of brand extensions
in that particular emerging market. In researching the specificities of the model of the brand
extension impact on parent brand-equity in India, Dwivedi
& Merrilees (2013) findings have corroborated previous ones from developed markets
showing that brand extension attitude significantly influences change in brand-equity of the
parent brand. In addition, Joshi and Jadav (2017) have examined the effects of brand
extension strategy on parent brand equity in Indian FMCG industry and have proved that
brand extensions affect parent brand equity. In the context of other emerging mar-kets, this
research area is still neglected. To the best of the authors’ knowledge, there are no empirical
contributions on the consumers’ perceptions of brand extensions from Eu-ropean emerging
and developing markets, i.e., from Central and Eastern Europe, South Eastern Europe and/or
Baltic countries. Therefore, researching consumers’ attitudes to-ward the brand extensions
in the emerging markets within European context presents an actual and timely topic which
has not been sufficiently researched so far.
Furthermore, Bottomley & Holden (2001) warn the professionals about the im-portance
of familiarizing global brands’ managers with different approaches that cus-tomers may have
in evaluating the same brand extensions in different markets, and they conclude that (2001,
p. 499) “…the impact of cross-cultural influences on consumer evaluations of brand
extensions cannot be entirely ruled out.” In addition, according to Park et al. (1991), brand
extensions are more demanding for function-based rather than the prestige-based brands.
Finally, data (Nielsen’s global research, 2015) show that there are differences in brand
extension acceptance between emerging and developed markets – e.g., 22% of consumers
from emerging markets would purchase a new prod-uct because it is related to the brand they
like, versus 17% of consumers from developed markets. In line with the aforementioned,
researching consumers’ perceptions of and attitudes towards the parent brand and its
extension(s) in emerging markets, especially when it comes to FMCG brands, is very
important and must not be ignored.

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 Like other emerging European markets, the Croatian market began to face strong
competition from companies with well-known international and global brands in the
1990s, which has been accompanied by numerous and rapid changes in value
system, attitudes and behavior of Croatian consumers (Ozretic-Dosen, 2005). The
use of the brand extension strategy in Croatia is growing continuously, but little is
known about Croatian consumers’ reactions to and attitudes toward the brand
extensions regardless the global or local character of the parent brand, and regardless
the parent brand type (function or prestige-based). In Croatian economy, imports in
2017 are estimated at 21.2 billion USD (CIA, The World Factbook, 2018), and
foodstuffs are among the five most imported products. Global FMCG (parent brands
and their extensions) have been present on the Croatian market for decades, and are
constantly trying to keep, even strengthen their leading positions in many categories.
Therefore, the Croatian market can serve as an appropriate context for the
exploration of brand extensions in emerging European markets.
The aim of the paper is twofold. The theoretical part gives a summary of the specific
characteristics of brand extension strategy as a usual marketing practice of companies with
strong and well-positioned brands. It is followed by detailed results of primary research, i.e.,
of preliminary, exploratory efforts to examine and understand Croatian consumers’
perceptions of and attitudes toward a global parent brand (Coca-Cola) and its extension
strategy on the Croatian market. Research results are summarized and analyzed; the effects
of certain variables on consumers’ perceptions of brand extension are discussed.
Conclusions, theoretical and practical implications, research limitations and possible future
research streams are presented in the last section.

1. Literature review
1.1. Characteristics of the brand extension strategy
The company that decides to use the brand extension strategy must be a good judge of
its decision. It must thoroughly investigate whether there is a positive opinion among
consumers about the existing, core, primary or parent brand, and in which area to set its
extension. The parent brand plays an important, a pivotal role in the brand extension
strategy. It provides security to the success of expansion, as well as the greater probabili-
ty of trial because consumers of the parent brand will probably try the brand extension.
However, it does not guarantee the success of a brand extension. Evidence shows that a
large number of extensions fail – even seventy percent of them do not achieve the
expected success, with the most common argument and explanation how the extension
is too much away from the main, parent brand (Kotler & Keller, 2008). When managed
well, brand extension represents a new source of revenue and improves the image and
meaning of the parent brand (Shahrokh et al., 2012).
Previous research (e.g., Hem et al., 2003; Meyvis & Janiszewski, 2004) confirmed
that the greater similarity between the parent brand and its extension leads to the larger

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transfer of positive (or negative) effects on the brand extension. Powerful brands
pro-vide greater benefits for extensions in comparison with the weak brands. When
the compatibility between the parent brand and its extension is small, the
consequences for the brand image are more negative. If the compatibility is minimal,
the extension should be seen as a product subcategory which is distant from the
parent brand, so that the effect of dilution of the associations will be smaller than
expected, or it will not exist at all (Martinez & Pina, 2003).
Consumers significantly affect the success of the strategy of brand extension.
Their positive assessments of parent brand and its extensions lead to the
development of brand equity (Grime et al., 2002). Different consumers think
differently about brand extension, i.e., their methods of processing information vary
depending on their fa-miliarity with the parent brand. In the case of a low familiarity
with the brand, in-formation processing occurs at the level of a product category,
while in the case of a high level of familiarity with the brand, information processing
is related to the char-acteristics of the product itself (Thorbjørnsen, 2005).
Consumers’ attitudes about the parent brand and its extension are influenced by
marketing communications, too. According to Kim (2003) and Martinez & de
Chernatony (2004), the emphasis of communication campaigns should be more on
the parent brand name than on the characteristics of the extension itself, in order to
ensure consumers’ positive percep-tions about the extension.
The company may follow the steps for the successful introduction of brand exten-
sion and pay attention to the components of success, but success is never guaranteed.
Seltene & Brunel (2008) argue that the brand extension’s success depends on two com-
ponents: the distance between the brand extension and the parent brand regarding con-
sumption and the distance that separates the brand extension of the parent brand re-
garding brand associations. Five strategic components for the brand extension’s success,
according to Athanasopoulou et al. (2015), are quality of distribution strategy, quality of
positioning, quality of product development strategy, the extent of promotional in-
vestment and extent of market research. In international marketing, brand extension’s
success is strongly influenced by the brand origin – extension fit, while perceived brand
globalness and brand origin image affect brand extension’s success to a lesser extent
(Sichtmann & Diamantopoulos, 2013).

1.2. Advantages and disadvantages of the strategy of brand extension

The knowledge on how to expand the brand helps to maximize the advantages and
minimize the disadvantages of the strategy of brand extension. The success (or failure)
depends on market research conducted by the company, nature of the extension itself
and consumers’ attitudes towards extension (Völkner & Sattler, 2006; d’Astous et al.,
2007). An advantage may easily turn into a disadvantage because much depends on
consumers’ perceptions about the parent brand and its extension.

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 The brand extension strategy may bring many advantages to a company. Aaker
(1990) in his seminal article stated that consistent brand extensions could reinforce
the brand image, which results in the higher visibility of brands. Well-known parent
brand eliminates risk and increases the chances for the product’s trial. When the
well-known parent brand expands in the product category, that is considered risky,
it can serve as an important tool to minimize or eliminate the risk, to signal an
acceptable level of quality and therefore to increase the likelihood of extension’s
acceptance by consumers (Hem et al., 2003). Also, brand extensions of well-known
brands can have easier access to distribution channels. The successful brand
extension may increase the brand equity, and contribute to the development of
meaning and importance of brand to consumers (Spiggle et al., 2012).
Although different gains of exploitation of the parent brand seem attractive,
the per-centage of failure of brand extensions is high and may be more than 80%
(Shahrokh et al., 2012). Precisely because of the high rate of failure, it is
necessary to study thorough-ly possible disadvantages related to the brand
extension strategy. According to Sharp (1993, p. 12), disadvantages are:
1. Spillover: brand extension exposes a greater range of brands to the possible
spill-over of negative publicity. For example, Balachander & Ghose (2003,
p. 5) point out that “if a low-quality product is offered with an umbrella
brand name, it leads consumers to conclude that all other products with the
same brand name are also of low quality.”
2. Cannibalization: the brand extension, when set too close to the parent
brand, could cannibalize existing product(s) of the parent brand.
According to Taylor (2004, p. 25) “this is the risk of an extension eating
up other family members. The biggest risk occurs with range extensions
that are ‘brand clones’ lacking dif-ferentiation.”
If the brand extension fails, this will have a significant impact on the image, sales,
and consumers’ perceptions about the parent brand. One of the major negative
impacts of unsuccessful brand extension is a dilution of the parent brand’s image
(Martinez & de Chernatony, 2004). Dilution appears in the cases where the parent
brand name is no longer associated with a specific product or some similar products,
so it fades in the minds of consumers (Kotler & Keller, 2008). The strength of the
dilution depends on how the existing consumers’ beliefs change under the influence
of the information about the brand extension which is not consistent with the
perceptions of parent brand (Loken & John, 1993).
Brand managers use different approaches to minimize risk and maximize potential
rewards of brand extension strategy. They may perform brand extension pre-testing in a
laboratory environment in order to avoid possible undesirable, negative effects. If such pre-
testing is not possible, then it is advisable to introduce extension on the market where the
familiarity with the parent brand is weak, because the negative feedback ef-fects, if they
happen, will be less pronounced. If it turns out that the brand extension

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strategy is successful in the markets of low familiarity with the parent brand, it is almost
certain that it will be successful and provide positive feedback effects on markets with high
brand awareness and strong image of a parent brand (Thorbjørnsen, 2005).

1.3. Types of brand extension strategy

A company should carefully choose the type of brand extension strategy which will
enable maximization of advantages and minimization of disadvantages. Brand
exten-sions can be broadly classified into one of two types – horizontal and vertical
brand extensions (Sheinin & Schmitt, 1994 cited in Chen & Liu, 2004). Another
possible cat-egorization is line extensions – where a new product is offered within
an existing brand category; and category extension where a new product is
introduced in a different, new product category (Keller, 1998, cited in Kim, 2003).
In the vertical brand extension, the new brand is in the same product category as
the parent brand but differs in price and quality (Chen & Liu, 2004). Research
evidence shows that vertical step-up extensions increase price and brand image of
the parent brand, while vertical extensions step-down have reducing effects on price
and image of the parent brand (Chen & Yang, 2013). Consumers may see the
significant difference in price and quality as inconsistency, which may lead them to
re-evaluate their initial opinion on the price and quality of parent brand (Kim et al.,
2001). The second or descriptive brand name is usually added to the parent brand
name, to reflect the link between extension and the parent brand (Chen & Liu, 2004),
aiming to create a con-nection in the minds of consumers who buy the parent brand
and to motivate them to buy the brand extension.
When introducing the horizontal brand extension, the existing brand name is given
to new products in the related or the new category of products (Chen & Liu, 2004). The
company may use the strategy of horizontal brand extension to position new products as
close as possible to the parent brand, taking the advantages of its brand equity. The
horizontal brand extension does not provoke consumers’ negative attitudes because this
type of extension means the same level of prestige, status or quality as the parent brand
(Kim et al., 2001). Consumers do not have to re-evaluate the parent brand. There are two
types of horizontal brand extension: line extensions and franchise extensions. Line
extensions involve “a current brand name to enter a new market segment in its product
class” (Pitta & Katsanis, 1995, p. 60). However, if extension develops too far, the brand
can lose its meaning in the minds of consum-ers, who become confused. In the franchise
extension strategy, the company uses the well-known brand name for the products in the
category that is new for the compa-ny (Tauber, 1981) . Doing so, the company can
minimize the costs and maximize the sales of the parent brand due to almost the same
brand name. Minimum investment in marketing communication is required because
consumers are already familiar with the brand. Through franchise extension strategy, the
company may take advantage of

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all the positive aspects of the parent brand and increase its brand equity.
Successful product extension may reap benefits, but management should not
forget the risk of extension’s failure (Pitta & Katsanis, 1995).

2. Research Hypotheses
The purpose of the primary research is to explore and understand Croatian
consumers’ perceptions about the global parent brand (Coca-Cola) and their
attitudes towards its brand extensions.

2.1. Hypotheses
The reviewed literature suggests that consumers’ perceptions of the parent brand and
its extensions may boost the company for further expansion or may influence the
compa-ny’s decision to stop using this strategy. Understanding consumers’
perceptions about the parent brand and how the associations about the parent brand
are transferred to its extensions is crucial to the success of brand extensions.
Accurate tools are needed to determine which brand extensions are consistent with
the parent brand (Viot, 2011). Brand affect is often operationalized as consumer’s over-
all favorable or unfavorable evaluation of the brand (Keller, 1993). Furthermore, brand
affect concept, as defined by Chaudhuri & Holbrook (2001), refers to “brand’s poten-
tial to elicit a positive emotional response in the average consumer as a result of its use”
(Chaudhuri & Holbrook, 2001, p. 82). As stated by Taylor (2004), a strong parent brand
creates brand affect and brand awareness more easily; therefore an extension will benefit
from the familiarity and confidence related to the well-known parent brand in the process
of value creation. Since every company wants its brand and brand extension to be
accepted by the target market, it is necessary to develop brand trust. Consumers will
support brand extension upon having brand trust in the parent brand. Further-more,
gaining consumer confidence in the brand, as well as his/her loyalty to the brand is very
important for the positive assessment of brand extension. Loyalty to the brand is formed
from the positive perceptions and feelings towards the brand (Shahrokh et al., 2012).
Chaudhuri & Holbrook (2001, p. 83) suggest that “brand trust and brand affect are each
related to both purchase and attitudinal loyalty.” On the basis of these observations, we
posit that:
H1: Brand affect (BA), brand trust (BT) and brand loyalty (BL) positively influence
consumers’ attitude towards brand extension (BE).
H1a: Brand affect (BA) positively influences consumers’ attitude towards brand extension (BE).
H1b: Brand trust (BT) positively influences consumers’ attitude towards brand extension (BE).
H1c: Brand loyalty (BA) positively influences consumers’ attitude towards brand extension (BE).

According to Reast (2005), trust is a part of the brand’s credibility in the process of
the acceptance of its extension, it is crucial for the development of loyalty, critical

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for maintaining a successful relationship between the company and its customers, and
influences brand equity. Therefore, we propose the following research hypothesis:
H2: The relationship between the brand affect (BA) and the brand loyalty (BL) is
mediated by the brand trust (BT).
Delgado-Ballester & Manuera-Aleman (2001) were among the first who empirically
tested and analyzed the relationship between concepts of brand trust (BT), satisfaction
and brand loyalty (BL), and have found that brand trust (BT) is a key variable for gen-
erating consumers’ brand commitment and subsequent future intentions. According to
Matzler et al. (2008), brand loyalty (BL) is an important consequence of brand trust. In
line with the research reviewed here, we propose that:
H3: The relationship between the brand trust (BT) and the consumers’ attitude
towards brand extension (BE) is mediated by the brand loyalty (BL).
Variables brand affect (BA), brand trust (BT) and brand loyalty (BL) represent
consumers’ perceptions of the parent brand (Coca-Cola), while brand extension (BE)
refers to the consumers’ perceptions of the brand extensions of Coca-Cola.

3. Methodology
3.1. Data collection and research instrument
In order to collect data, a convenience sample was used. The research
respondents were students of business at the Faculty of Economics & Business,
University of Za-greb in Croatia. Student sample was chosen because of the
accessibility, convenience, and low cost (Hakala et al., 2012). Furthermore,
university students, in general, are frequent users of Coca-Cola and its
extensions. They represent a population of interest for this particular research;
therefore, as suggested by Peterson & Merunka (2014), they are the appropriate
research subjects. Questionnaire data were collected from 242 respondents.
“Considered by many to be the quintessential international brand, Coca-Cola tran-
scends ethnicity, gender, age, education and social class.” (Slater, 2000, p. 202). The
decision to focus on a soft drink as a specific category of FMCG, specifically on Co-ca-
Cola brand as appropriate for this research was made after reviewing publications
dedicated to brand management and brand extensions in refereed scientific market-ing
journals, where a significant number of papers reported about examining different
aspects of brand management using Coca-Cola brand. Since the research aimed to bridge
the gap of deficiency in contextual contribution (European emerging markets), Coca-
Cola was chosen as an adequate brand.
A self-reported structured questionnaire was used. The questionnaire consisted of 34
questions. Eight questions were dedicated to collecting data about the status of the user
of Coca-Cola, the frequency of its use, the associations which respondents have

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about Coca-Cola brand, the awareness of the latest Coca-Cola extension (Coca-Cola
Cherry) and demographics. All the remaining questions (26) were the statements re-
garding variables brand affect (BA), brand trust (BT), brand loyalty (BL) and brand
extension (BE), and were measured by using a five-point Likert-type scale (indicating 1
= strongly agree to 5 =strongly disagree) for the level of the agreement with a par-ticular
statement. The scales used to measure the variables brand affect (BA), brand trust (BT),
brand loyalty (BL) and brand extension (BE) were already used and tested in the
marketing literature. Brand affect (BA) was measured through the 3-item scale employed
in research of Joji (2011), where it showed good reliability (Cronbach al-pha coefficient
0.889). Brand trust (BT) was assessed through a 9-item scale; the items were extracted
from the previous research of Delgado-Ballester (2004) and Joji (2011), adapted and
combined. The original scales of Delgado-Ballester (2004) and Joji (2011) for brand
trust (BT) showed Cronbach alpha coefficient greater than 0.7 and 0.886, respectively.
Measurement of brand loyalty (BL) was performed by a combined 6-item scale,
consisting of 4 items from Joji’s research (2011) and 2 items from Brand Loyalty (Soft
Drink) Scale in Bruner & Hansel (1992); with the Cronbach alpha coefficients 0.755 and
0.75, respectively. Finally, brand extension (BE) was assessed through an 8-item scale,
3 of which were adapted and composed of Brand Extensions Fit scales proposed in
Bruner et al. (2005), with original reliability coefficients alpha of 0.90 and 0.95, three
were adapted form Joji (2011), and the two remaining dimensions were proposed by the
authors. The questionnaire was pre-tested on fifteen respondents, who were not included
in the main research. Table 1 shows scale dimensions and items as well as their
respective source.

TABLE 1: Scale dimensions and items

Dimensions and items Source
BRAND AFFECT (BA)
I feel good when I use Coca-Cola brand. Joji (2011)
Coca-Cola brand makes me happy. Joji (2011)
Coca-Cola brand gives me pleasure. Joji (2011)
BRAND TRUST (BT)
Coca-Cola is a brand that meets my expectations. Adapted from Delgado-Ballester (2004)
I feel confident with Coca-Cola brand. Adapted from Delgado-Ballester (2004)
Coca-Cola brand guarantees satisfaction. Adapted from Delgado-Ballester (2004)
I could rely on Coca-Cola brand to solve the
Adapted from Delgado-Ballester (2004)
problem.
Coca-Cola brand would make any necessary effort Adapted from Delgado-Ballester (2004)
to satisfy me.
I trust Coca-Cola brand. Joji (2011)
I rely on Coca-Cola brand. Joji (2011)
Coca-Cola is an honest brand. Joji (2011)
Coca-Cola brand is safe. Joji (2011)

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TABLE 1 continued
BRAND LOYALTY (BL)
I consider myself to be loyal to Coca-Cola brand. Adapted from Bruner & Hansel (1992)
If Coca-Cola were not available, I would choose
Adapted from Bruner & Hansel (1992)
another brand.
I will buy the new version of Coca-Cola the next
Joji (2011)
time I buy a soft drink.
I intend to keep purchasing Coca-Cola brand. Joji (2011)
I am committed to Coca-Cola brand. Joji (2011)
I would be willing to pay a higher price for Coca-
Joji (2011)
Cola over other brands.
BRAND EXTENSION (BE)
I think there are differences between Coca-Cola,
Adapted from Bruner et al. (2005)
Coca-Cola light and Coca-Cola Zero.
I think there are differences between Coca-Cola
Adapted from Bruner et al. (2005)
light and Coca-Cola Zero.
I think the fit between Coca-Cola and its exten-
Adapted from Bruner et al. (2005)
sions is good.
I think the idea of Coca-Cola brand extensions is
Adapted from Joji (2011)
good.
I like Coca-Cola brand extensions. Adapted from Joji (2011)
I feel pleased with Coca-Cola brand extensions. Adapted from Joji (2011)
I consume Coca-Cola brand extensions just be-
Authors
cause of the brand name.
I believe all Coca-Cola brands are of consistent
Authors
quality.
Source: authors

3.2. Results
A total of 242 respondents participated in a survey, of which 218 (90.08%)
correctly filled in the questionnaire. Respondents’ main demographic
characteristics are shown in Table 2. Fifty-four (24.77%) were men and 164
(75.23%) women. The largest num-ber of respondents, 152 (69.72%), was 22 or
23 years old, followed by respondents aged 20–21 (52 of them, or 23.85%), then
those aged 24–25 (12, or 5.50%). The small-est cohort of respondents included
those who were 26 years old and/or older (2 re-spondents, or 0.92%).
Of the 218 respondents, 26, or 11.93%, stated that they do not drink Coca-Cola. They
were asked to skip other questions and answer only those related to demographic
characteristics. The remaining 192 respondents (88.07%) filled in the questionnaire
completely and their answers were taken for further testing and analysis. Most of them,
82 respondents, or 42.71%, consume Coca-Cola products only on occasion, followed by
71 respondents, or 36.98%, who drink Coca-Cola once a week. The smallest number of
respondents, 7, or 3.65%, drink Coca-Cola every day.
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TABLE 2: Gender and age distribution of the respondents
Gender Number of respondents Percentage
Male 54 24.77%
Female 164 75.23%
Total 218

Age Number of respondents Percentage

18-19 0 0.00%
20-21 52 23.85%
22-23 152 69.72%
24-25 12 5.50%
26 and more 2 0.92%
Total 218
Source: authors’ calculation

Interestingly, respondents reported 272 associations about Coca-Cola. Most of them

mentioned the associations connected with a special shape of the Coca-Cola bottle, the
main characteristics regarding the taste of the beverage, food related to Co-ca-Cola
consumption, followed by the various associations of Christmas holidays. A high
number of respondents, 181 (or 94.27%), heard of Coca-Cola Cherry, which was the
latest (introduced in 2013) brand extension of Coca-Cola on the Croatian mar-ket, while
the remaining 11, or 5.73%, never heard of this brand extension. Of those who heard of
Coca-Cola Cherry, the majority learned about the extension through ad-vertising (75
respondents, or 39.06%), followed by WOM – i.e., friends as a source of information
(57 respondents, or 29.69%). However, only 102, or 53.13% of all the respondents, tried
the extended product, while 90, or 46.88%, did not. Of these 90 re-spondents, 32, or
16.67% of all the respondents (or 17.68% of those respondents who heard of Coca-Cola
Cherry), do not even want to try a brand extension. The remaining 58, or 30.21% of all
the respondents (or 32.04% of those respondents who heard about the extension), had
not tried it but wanted to.
A factor analysis of 26 items, grouped into four variables (BA – 3 items, BT – 9 items,
BL – 6 items and BE – 8 items) was conducted. Kaiser-Meyer-Olkin measure of sampling
adequacy was used for measuring the appropriateness of applying factor anal-ysis. Also,
Bartlett’s Test of Sphericity was used to test the assumption of homogeneity of variance.
Table 3 shows the data for both tests. The KMO index of .886 and p-value

TABLE 3: KMO and Bartlett’s test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy .886
Approx. Chi-Square 2925.285
Bartlett’s Test of Sphericity Df 325
Sig. .000
Source: authors’ research (IBM SPSS, version 19)

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of Bartlett’s test of .000 confirm the appropriateness of using factor analysis to
test the collected data. Regarding the reliability statistics of the scales used,
Cronbach alpha coefficients are greater than 0.7 for all the variables, i.e., they
are: 0.908 for BA, 0.879 for BT, 0.893 for BL and 0.769 for BE.
Data presented in Table 4 show the average agreement with the statements in the
questionnaire. There is a certain level of brand trust BT (mean 2.43), which shows that
respondents, on average, agree with statements that describe the confidence in the Coca-
Cola brand. Brand affect BA also reveals the agreement with the statements, de-picting
positive feelings of respondents when using Coca-Cola (mean 2.78). Likewise, brand
loyalty BL shows agreement with the statements (mean 2.79), thus showing that
respondents, on average, are loyal to Coca-Cola. The mean for the statements indicat-
ing the brand extension BE is 2.90, showing the reluctance regarding those statements,
i.e., respondents are unsure about the brand extensions of Coca-Cola.

TABLE 4: Descriptive statistics

N Mean Std. Deviation
BA 192 2.7813 0.99074
BT 192 2.4288 0.64223
BL 192 2.7865 0.91739
BE 192 2.9010 0.65558
Source: authors’ research (IBM SPSS, version 19)

Table 5 shows the correlation coefficients for the relationships between individual
variables: brand trust BT, brand affect BA, brand loyalty BL and brand extension BE.
They reveal whether there is a correlation between variables and how strong the rela-
tionship is. As presented in Table 5, all correlation coefficient values for variables BT,

TABLE 5: Correlations coefficients

BT BA BL BE
Pearson Correlation 1
BT Sig. (2-tailed)
N 192
Pearson Correlation .613 1
BA Sig. (2-tailed) .000
N 192 192
Pearson Correlation .664 .681 1
BL Sig. (2-tailed) .000 .000
N 192 192 192
Pearson Correlation .285 .281 .163 1
BE Sig. (2-tailed) .000 .000 .024
N 192 192 192 192
Source: authors’ research (IBM SPSS, version 19)

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BA, BL and BE are greater than zero (meaning that connection between the
variables exists) and are less than one (meaning the connection is not complete
but has a posi-tive direction).

3.3. Testing hypotheses and discussion

Table 6 presents the results of the regression analysis for variables: brand trust BT, brand
affect BA, and brand loyalty BL, conducted for the purpose of testing hypotheses H1a,
H1b, and H1c. Results show that brand affect (BA) and brand trust (BT) posi-tively
influence consumers’ attitude towards brand extension (BE), which allows con-firming
hypotheses H1a and H1b. Brand affect (BA), with the unstandardized β coeffi-cient
(.430), has a positive and greastest influence on the perceptions of the Coca-Cola brand
extension. Consumers have positive feelings towards Coca-Cola, because it is a well-
known global brand, with long presence and tradition on the Croatian market. The
unstandardized β coefficient for the variable brand trust BT is low, (.224). Never-theless,
this variable has positive, very little effect on the consumers’ perceptions about the brand
extension BE. H1c is rejected; the unstandardized β coefficient for brand loyalty BL (-
.159), with the significance .110, shows that brand loyalty BL diminishes consumers’
perception on brand extension and as such does not influence positively the consumers’
attitude towards brand extension.

TABLE 6: Regression analysis (BT, BA, BL, dependent variable BE) – testing hypothesis H1
Unstandardized Standardized
Model Coefficients Coefficients T Sig.
Β Std. Error Βeta
(Constant) 17.388 1.438 12.095 .000
BT .224 .087 .246 2.562 .011
1
BA .430 .173 .244 2.481 .014
BL –.159 .099 –.167 –1.606 .110
* Dependent variable: BE
Source: authors’ research (IBM SPSS, version 19)

Regression analysis was also used for the purpose of testing hypothesis H2. Since this
hypothesis aims to find out the influence, i.e. significance of the mediation effect of the
variable brand trust BT in the relationship between the variables brand affect BA and brand
loyalty BL, the Sobel test was used. In order to get the necessary information to implement
the Sobel test, two regression analyses (depicted in Table 7 and Table 8) were conducted.
Data on the relationship between the variables brand affect BA and brand trust BT, and data
on the relationship of the variables brand loyalty BL and brand affect BA with the variable
brand trust BT, which has the intermediary role in hypothesis H2, were obtained. The Sobel
test was conducted, the level of significance was α = 0.05, and the range of acceptance of the
hypothesis was: │z│< zα/2 , │z│< z0,025 , │z│< 1.96.

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 The Sobel test results for hypothesis H2 are: z = 5.723, standard error = 0.785
and p-value = 0.000. Since “z” is greater than 1.96, hypothesis H2 is rejected.
The relation-ship between the variables brand affect BA and brand loyalty BL is
strong (.613), but according to the results obtained, brand trust BT does not have
influence (has no me-diation effect) on this relationship.

TABLE 7: Regression analysis (BA, dependent variable BT) – testing hypothesis H2

Unstandardized Standardized
Model Coefficients Coefficients T Sig.
Β Std. Error Βeta
(Constant) 11.914 .987 12.070 .000
1
BA 1.192 .111 .613 10.693 .000
* Dependent variable: BT
Source: authors’ research (IBM SPSS, version 19)

TABLE 8: Regression analysis (BA, BT, Dependent variable BL) – testing hypothesis H2
Unstandardized Standardized
Model Coefficients Coefficients T Sig.
B Std. Error Βeta
(Constant) 1.711 1.050 1.629 .105
1 BA .812 .113 .438 7.190 .000
BT .377 .058 .395 6.485 .000
* Dependent variable: BL
Source: authors’ research (IBM SPSS, version 19)

Hypothesis H3 testing was done through regression analysis and the Sobel test, too.
Data were obtained by regression analysis of the variables brand loyalty BL and brand
trust BT (Table 9), and regression analysis of variables brand extension BE, brand trust
BT and brand loyalty BL (Table 10). Sobel test’s values for hypothesis H3 are: z = –
0.495, standard error = 0.263 and p-value = 0.620. Hypothesis H3 is confirmed (“z”
value is lower than 1.96). The relationship between the variables brand trust BT and
brand extension BE, which according to the correlation coefficient is slightly lower
(0.285) than other correlations, is affected, i.e., is mediated by brand loyalty BL.

TABLE 9: Regression analysis (BT, Dependent variable BL) – testing hypothesis H3

Unstandardized Standardized
Model Coefficients Coefficients T Sig.
Β Std. Error Βeta
(Constant) 2.892 1.167 2.477 .014
1
BT .633 .052 .664 12.248 .000
* Dependent variable: BL
Source: authors’ research (IBM SPSS, version 19)

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TABLE 10: Regression analysis (BT, BL, Dependent variable BE) – testing hypothesis H3
Unstandardized Standardized
Model Coefficients Coefficients T Sig.
Β Std. Error Βeta
(Constant) 17.684 1.452 12.179 .000
1 BT .287 .085 .317 3.396 .001
BL –.045 .089 –.047 –.508 .612
* Dependent variable: BE
Source: authors’ research (IBM SPSS, version 19)

Research results of this study point to the conclusion that, for Croatian
consumers, brand affect (BA) may be taken into consideration as a primary variable
that positively influences their attitudes towards brand extension. Brand trust (BT)
does not mediate the relationship between brand affect (BA) and brand loyalty (BL).
However, brand loyalty (BL) mediates the relationship between brand trust (BT) and
consumers’ atti-tude towards brand extension (BE).
As such, research results confirm that managers should introduce brand extension
only when they are sure of the position of the parent brand and its previous
extensions in the consumers’ mind, corroborating the findings of Joji (2011).
Furthermore, re-sults are in line with the research findings of Chaudhuri & Holbrook
(2002), showing how it is necessary to know the existing level of brand affect and
brand trust since they have a different influence on brand-customer relationships.
The research reveals that brand loyalty has an important role in the determination of
consumers’ attitude to-wards brand extension (BE), which is in line with Chaudhuri
& Holbrook (2001), who found the potential importance of brand loyalty as a link in
the determination of brand performance outcomes. Also, results support to a certain
degree the conclusion of Joshi and Yadav (2017), implying that brand extension
strategy should help to strengthen the parent brand.

4. Conclusion
Brand managers invest many efforts in positioning their brand extensions on the mar-
ket. In spite of different risks that might occur when the company introduces the exten-
sion, there are also many possible advantages related to the brand extension strategy.
Marketing research should help minimize the risk or disadvantages and maximize the
benefits or advantages of brand extension strategy.
This research extends the examination of variables affecting brand extensions in
emerging markets and confirms previous findings on how consumers significantly
influence whether a brand and its extension(s) will be successful in the future or will
collapse. Since brand extension’s destiny depends heavily on consumers’ perceptions
about the parent brand, it is necessary to conduct continuous research about con-

149
sumers’ perceptions and explore how certain perceptions affect the company’s
busi-ness and how they are interconnected.

4.1. Theoretical implications

More than 80% of the world’s consumers live in emerging markets and transitional
economies (Steenkamp & Burgess, 2002). Emerging markets are rather
heterogeneous, and their classification, which is based dominantly on economic
factors, does not reveal sufficiently the differences that exist among them (Schlager
& Maas, 2013). Burgess and Steenkamp (2006) call for more academic research
regarding theory development, acquisition of meaningful data, analysis of the data
to test one’s theories and learning, through which research in emerging markets can
contribute to the advancement of marketing science and practice.
Therefore, in terms of theoretical implications, this research adds to the existing
knowledge about brand extension strategy with insights and results from the new re-
search context of the emerging European market (Croatia), where companies (glob-
al, international and local), especially from different FMCG industries, often use the
brand extension strategy. As such, and in spite of the fact that empirical results
confirm the outcomes that exist in studies conducted previously in developed
markets, this re-search contributes to enriching the knowledge from the wider area
of consumer behav-ior in emerging markets.

4.2. Managerial implications

In terms of managerial implications, research findings might be useful for
marketing professionals either being in the field of the strategic brand
management on the emerg-ing markets already or planning to internationalize
their future business activities in those markets.
The results also imply that it is of particular importance to find out the perceptions of
consumers about the parent brand in order to implement the new brand extension
successfully or improve its performance if it is already on the market. This kind of mar-
ket research helps the company to find out both its advantages and drawbacks on the
market, and to plan its future activities strategically. Knowledge about the parent brand
and its extension(s) is valuable for making decisions about, e.g., desirable integrated
marketing communications, marketing channels choice, etc. Finally, the results suggest
that brand managers operating on the Croatian market need to devote their resources to
developing and maintaining brand affect since brand affect was found to be the most
important variable that positively influences consumers’ attitudes towards brand exten-
sion(s). To achieve this goal, brand managers have to constantly search for innovative
ways to attract the attention of the target segments by using traditional and new media
in the frame of the integrated marketing communications.

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4.3. Research limitations and future research
Several research limitations should be taken into account. The first is related to the
fact that the convenience sample was used (with predominantly female respondents),
i.e., the research respondents were only students of one university institution.
University students’ perceptions cannot be considered as the general ones of all
consumers of Co-ca-Cola and its extensions on the Croatian market. Also, it cannot
be said with certainty that all the respondents understood the questions completely
and replied honestly and truthfully. Moreover, the research is limited to only one
brand, and it cannot be argued that the results would be the same when exploring
some other brand(s) of soft drinks or FMCG.
Due to the exploratory nature of this research, future studies should re-evaluate the
strength of these findings. Also, future studies should approach a greater number of
respondents (non- student samples) and brands (and other products categories, too) to
obtain results that are more representative. The replication of the research with other
emerging (European or other) markets and their consumer cultures may reveal new
insights, too. Other field research methods, such as interviews and/or experiments,
would be appropriate to provide further explanations of the topic. All this will enable a
better understanding of brand extension strategy and explain its role in different indus-
tries on the emerging, developing markets.

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