1.1 An Overview

Building retailer equity is of beneficial and strategic importance for retailers. Equity can generate numerous benefits such as the ability to power the retailers' name by launching private label brands and increase revenue and profitability by distancing them from rivals (Ailawadi and Keller, 2004). With the impact of globalization on the GCC countries and specifically Kuwait, the retailer market has opened the door for many competitors to enter this attractive market. Therefore, it is an essential task for retail brands to be identified from competitors and establish equity in their different customers' base. According to Feuer (2005) retailers have recognized the power of branding and have focused on brand building. For example Al-Ostora and Sultan Center are very well known local brands of retailers in Kuwait. In the case of Sultan Center it has started its own private label.

Regardless of the increased focus on retail branding, the existing marketing literature offers little insight about the determinant factors of retailer equity except for some recent research by Jinfeng and Zhilong (2009) and Chaudhuri and Ligas (2009). The latter looked at the effect of merchandise value on both attitudinal and repurchase loyalty on retailer equity. Hartman and Spiro (2005) indicated that retailers need to know how a company's marketing strategies might improve, modify, or negatively alter their customers' based retailer equity. Moreover, Yoo et al. (2000) confirmed with empirical evidence that marketing activities have considerable effects on the dimensions of brand equity.

Brand equity is defined as value added by a brand name to a product (Farquhar, 1989) On this basis Keller (1998) suggested that retailer brands also possess equity and this concept has been adopted by many researchers to measure retailer equity among customers (Badldauf et-al., 2009; Arentt, 2003; Pappu and Quester, 2009; Yoo and Donthu, 2001; Hartman and Spiro, 2005) and more recently at business to business levels (Espallardo and Bailón, 2008).

Retailer equity, according to Aaker (1991), consists of four dimensions: store loyalty, name awareness, service quality, and retailer associations. Arentt et al (2003) has developed the retailer equity index using the Partial Least Squares (PLS), focusing on the retailer association dimension as it is the most changing feature from one retailer to another.

Ailawadi and Keller (2004) propose that one way to conceptualize retailer equity is to think of "resource premium, distance travelled, brand or size preference compromised, or service forgone" (p.340) any of these suggestions are considered to be a measure for retailer equity.

Retailer loyalty is defined as “a deeply held commitment to re-buy or re-patronize a preferred product or service consistently in the future, despite situational influences and marketing efforts having the potential to cause switching behavior” (Oliver, 1997, p. 392).

Marketing literature has widely recognized that loyalty has two aspects, repurchase and attitudinal (Aaker, 1991; Chaudhuri and Holbrook, 2001; Dick and Basu 1994; Jacoby and Chestnut, 1978; Oliver 1999b; and Tucker, 1964). Chaudhuri and Ligas (2009, p.407) define Repurchase as "a basic level of interest in a store that is limited to an intent to re-buy from the particular store at a future date". The same authors also defined attitudinal loyalty as "a level of attitudinal interest in a store that indicates some level of an existing bond or relationship with the store" Chaudhuri and Ligas (2009, p.407).

Name awareness is the degree to which a retailer's name is familiar to consumers (Aaker, 1991). Name awareness relates to the likelihood of and the ease in which a retailer name comes to mind (Keller, 1993). Research suggests that name awareness can affect consumer decision-making.

Service quality is another dimension of retailer equity. It has a strong impact and emphasis on retailer name “service quality is the foundation of service marketing” (Berry and Parasuraman, 1991, p. 4). Research proposes that perceived service quality affects customers' behavior (Bolton, 1998) and loyalty.

Retailer Association, (i.e. perceive value and product quality), (Arentt et al., 2003), is the fourth dimension of retain equity. Examples are retailer names, store image, merchandise value, easy credit or friendly employees etc. (Ailawadi and Keller, 2004;, Chaudhuri and Ligas, 2009; and Jinfeng and Zhilong, 2009),. It is considered to be the most difficult to measure, as what customerssr view as value is constantly changing. According to Chaudhuri and Ligas (2009), marketing literature has viewed perceived value as a trade-off between quality (benefit) and price (cost). Thaler (1985) explains that value is based on the amount of the “deal'' that the consumer is getting. Such deals may represent a variety of configurations of quality and price. Further, Zeithaml (1988 p. 14) defines perceived value as “the consumer's overall assessment of the utility of a product based on perceptions of what is received and what is given”. Moreover, retailer associations are positively related to retailer loyalty because they can be an indicator of quality and loyalty and assist a customer to consider this specific retailer while selecting a store, which leads to repeat visits for that retailer.

Store Image is a dimension of association consumers make about a retailer. Each retail store poses a distinct image within customers' minds as it is supposedly to be composed of the different elements of the retail marketing mix (Bloemer and de Ruyter, 1997). The value perceived by the customer for the retailer store image may affect retailer loyalty either positively or negatively, and hence will have a significant impact on store retailer equity. In addition to store image merchandise value has the same impact on a retailer (Ailawadi and Keller, 2004; Chaudhuri and Ligas, 2009; and Jinfeng and Zhilong, 2009).

Merchandise Value. For instance, Chaudhuri and Ligas (2009) examine the consequence of merchandise value along with store effect on customer willingness to pay a price premium as an outcome of retailer equity.

In this study we have focused on merchandise value and store image as associations of retailer equity and build a model based on Chaudhuri and Ligas (2009) and Jinfeng and Zhilong (2009). This is to measure their impact on the two aspects of loyalty (repurchase and attitudinal) through the outcomes suggested by Ailawadi and Keller (2004) which are "resource premium" and "service forgone" along with price premium.

The findings of our study can be summarized as follows: ………..

1.3 Relevance of this Thesis to the Country of Kuwait

The Kuwait economy is based almost exclusively on oil. Petroleum accounts for nearly half of the country's GDP, 90% of export revenues, and 75% of government income. Other industry such as agriculture is limited due to geographical factors, although there are developments in the manufacturing and service sectors as the government is encouraging the expansion of industry by providing loans and necessary infrastructure facilities.

The Retail sector plays a significant role in providing services and good for the population of Kuwait. Also, the numbers of shopping malls have steadily increased in the last five years with the opening of the Avenues, 360 and Al-Biraq malls. BMI's Retail Report for the first quarter of the year 2010 predicts that Kuwait's retail sales will grow from US$41.59bn in 2009 to US$59.27bn by 2014. The factors behind the predicted forecasted growth in retail sales are:

1) Favorable long-term economic outlook,

2) A sophisticated consumer base and

3) High levels of disposable income.

In 2005 the United Nations (UN) stated that 73.8% of the Kuwaiti population was economically active, with 37.9% in the age range of 20 - 44 while in 2010 the forecasts are that 74.6% of the population is active, and a proportion of 39.4% will represent the age range of 20 - 44. Moreover, the GDP per capita is predicted to rise by more than 53% by 2014. All these factors favor an increase in the retail sales and share of purchase.

Property consultants Colliers International predicted that in 2010 Kuwait is expected to have the third largest supply of retail space in the Gulf. BMI data shows that consumer electronics, over the counter (OTC) pharmaceutical products and automotives are predicted to show strong growth for the forecasted period (2009-2014) with a sales rise of nearly 39%, 36%, and 15% respectively.

1.4 Problem Definition

Research has traditionally considered retailer equity as reflected in a price premium. However, there are some retailers that do not charge a price premium and still have equity.

1.5 Research Questions

Our key research question concerns the implications of customer perception of value (i.e. customer based retailer equity) for building customer retailer loyalty.

1. Does retail equity exist for retailers that do not charge a price premium?

2. What store image dimensions have a significant effect on store affect?

3. Does store affect mediate between store image and loyalty?

To answer these questions, this study examines the relationships between store image dimensions, merchandise value and the formation of retailer equity. The results offer insights into how marketing efforts may be controlled to generate and manage retailer equity.

1.6 Research Objective

The objective of our research can be summarized in the following points

· To determine if retailers that cannot be characterized by a price premium policy, can still have retailer equity in alternative forms (e.g. by forgoing services or giving up merchandise variety).

· To determine what, among several dimension of store image, results in strong store effect.

· To determine alternative models of the effects a store has on customers, as a predictor of store image and loyalty, or a direct contributor to retailer equity.

1.7 Research Methodology

With regards to the objective of this study it is considered to be deductive, quantitative, descriptive and explanatory. Survey was the method of choice used for data collection. The target sample was identified to be general to the Kuwait population which has experienced shopping in a main type of supermarket store. The questionnaires were distributed randomly to participants either by email or personal encounters.

The total number of the survey distributed was XXX, the respondents were XXX with XX being the invalid number of responses.

1.8 Data Analysis Method

This study is a quantitative research. The statistical tools used in analyzing the data collected included descriptive analysis, EFA, cross-tabulations, correlation and regression analysis. The data is a mixture of nominal (e.g. gender and nationality) and ordinal (e.g. income and age) and scale (e.g. Merchandise value, merchandise assortment, store design, store atmosphere, store service, loyalty and brand equity). The Likert7 point scale was used.

1.9 Research Limitations

A number of limitations were experienced while conducting this research

1. Research and literature covering retailer and brand equity in Kuwait and GCC is scarce and rare.

2. Lack of clarity regarding the number and nature of dimensions to measure customer based retail equity.

3. Not all the discriminate attributes of store image were examined.

4. This study is limited only to supermarket retail in Kuwait.

1.10 Thesis Structure

This thesis is divided into five main chapters. We start with Chapter One which is an introduction chapter that gives a general idea on what we will be doing. The chapter will contain a brief summary about the literature the objective and questions of the research methodology and limitations faced while conducting this research. Chapter Two will provide a literature review of the research topic. In Chapter Three we explain the model we followed as well as detailing the methodology and technique used to collect data and information, which is analyzed and discussed in Chapter Four. Finally, Chapter Five presents the main conclusions followed by recommendations and suggestions for future research.

Chapter 2

Literature Review

2.1 Introduction

In this chapter we will look at the concept of brand equity and its importance in accomplishing a competitive edge for the firms involved. Next, the different methods for measuring brand equity are addressed. Later on, the development of retailer equity concept and it different definitions will be addressed, followed by an over view about the alternative models proposed by researchers to measure customer based retailer equity. Furthermore, I discuss the different dimensions of customer based retailer equity and how customer perception of value (e.g. merchandise value, inter-personal quality and in store atmosphere/image) could affect retailer equity and how the effect of the customer value will be addressed on both levels of customer loyalty (repurchase and attitudinal loyalty). Finally we will end the chapter by looking at the consequences of the customers' perceived value and loyalty on retail equity.

2.2 Retailers in Kuwait

Kuwait has an attractive retail sector for a small country. It varies between crowded market streets in the center of Kuwait City to top class air-conditioned shopping malls both in the suburbs and the city center. Estimates are that by 2010, the gross leasable area (GLA) in Kuwait's retail sector is to reach 1.15m sq meters, compared to the 345,000 sq meters in 2006. This gives Kuwait a very high ratio of GLA to population. This means that retailers are faced with intensified, differentiated and undifferentiated competition. The retail sector varies between apparel, restaurants, grocery and general merchandise.

There are also variations in marketing strategy due to a growth in discount retailing which has increased the pressure on traditional retail and increased the competition between and within the different retail formats. From this base retailers should develop the knowledge and understand of how to position themselves in the market and how the brand they offer affects their image and value to customer and how to build their equity and benefit the most from it.

2.3 Brand Equity

As the number of advantages a company can gain from building a strong brand name has increased radically in the past decade, many organizations have placed it on top of their marketing priority. According to Aaker (1991, 1996) a strong brand name helps a firm create individuality in the market place and build competitive advantages that are based on non-price competition. Also, Keller (2003) pointed out that strong brand equity can have direct impact on a firm's ability to charge higher prices and customers' willingness to seek out new distribution channels, with effective marketing communications and this increases the opportunities of expansion and franchising. Moreover, Delgado-Ballester and Munuera-Aleman (2005) add that brand names create resistance to competitors, provide larger margins, greater intermediary co-operation and support, and brand expansion opportunities. All these are considered to be adding value to the brand because of its brand name.

According to Yasin et al ( 2007, p.39) the 1989 Marketing Science Institute defines brand equity as "the value that is added by the name and rewarded in the market with better profit margins or market shares. It can be viewed by customers and channel members as both a financial asset and as a set of favorable associations and behaviors". In more simple terms, brand equity is the value added by the brand name to the products, the retailers or/and the consumers.

Accordingly, a brand owner can view brand equity as part of the financial value added to the company. In this point of view brand equity affects acquisition and merger decision making (Schultz and Schultz, 2004). Bello and Holbrook (1995) suggested that brand equity emerges when buyers willingly pay more for the same quality level product due to the attraction added by the name. Yoo and Donthu (2000) has indicated that brand equity can be calculate approximately by taking out the product's physical attributes utility from the total utility of a brand. The need to find an appropriate measurement method to estimate the values of brand equity have lead researchers to suggest two paths - financial based and customer based methods. The next part will look at the review and criticism of both methods.

2.4 Measurement of Brand Equity

Studies regarding the measurement of brand equity can be grouped into three different perspectives: the customer-based perspective, the financial perspective, and the combined perspective.

2.4.1 Financial Base Brand Equity Perspective

The financial perspective is conceptualized on providing a financial estimate (between branded products over unbranded products) of a brand's value as an asset on the balance sheet (Simon & Sullivan, 1993). Alternatively, Feldwick (1996) propose brand equity is the total value of a brand name when it is included in the firm's balance sheet or sold as a separate asset.

Simon and Sullivan (1993) also adopt the financial market value-based technique in calculating the value of brand equity and separate it from the value of the firm's other assets. Another widely used method in brand valuation is the one used by the financial world (Ourusoff, 1993) where the net brand-related profit is calculated and a multiplier is assigned, based on the brand strength (leadership, communication support, stability, trading environment, internationality and legal protection).

This method (the financial based perception) enables the managers to approach the valuation of the firm brand in the same way they approach any other corporate assets valuation. Schultz and Schultz (2003) point out that placing financial value to brand equity can help a firm in:

1) Setting or identifying a financial value of the brand ownership.

2) Understanding the firm's progress by using brand asset value to determine the increase or the decrease in the brand equity over time.

3) Developing a financial estimation on how to generate profit from additional investment in the brand.

Despite the fact that the financial perspective focuses on providing financial estimation of a brand's value as an asset on the balance sheet (Simon and Sullivan 1993), the customer's perspective on the other hand is more involved with understanding the customer perception and decision making and recognizing the dimensions of brand equity to improve the efficiency of marketing activities (Aaker, 1991; Hartman and Spiro, 2005; Keller, 1993/2003; Pappu and Quester, 2006)

2.4.2 Customer Based Band Equity Perspective

Although financial theorists imply that the use of customer based brand equity is imperfect because of inherent subjectivity (Hsieh, 2004), the customer based brand equity theorist argues that for a brand to have value it must be valued by customers (Farquhar 1989). Keller (2003) argues that customer's positive experience with a brand as a result of what they have learned, felt and heard is the source of the brand value. On this basis he defined brand equity as “the differential effect that brand knowledge has on consumer response to the marketing of that brand” (Keller, 2003, p. 60).

The customer based brand equity includes two multi-dimensional concepts, brand strength and brand value (Srivastava and Shocker, 1991). Accordingly, brand strength is based on customer perceptions and behaviors which provide the brand with sustainable and discriminate competitive advantages. While brand value, on the other hand, is the ability to increase financial performance through management strategy to leverage brand strength.

Keller (1993) implements two basic approaches to measure customer-based brand equity (direct and indirect). He emphasized on two constructs: 1) brand awareness and 2) brand image. In the indirect approach he attempts to recognize potential sources of customer based brand equity by measuring the characteristics and relationships between brand associations and brand awareness. Furthermore, the direct approach concentrates on the customer response (behavioral) to the different marketing mix elements used by the firms (Keller, 2003).

2.4.3 Comprehensive Perspectives:

Other researchers (Dyson et al., 1996; Silverman et al., 1999) examine the relationship between customer-based and financial based brand equity measurements. Similarly, Motameni and Shahrokhi (1998) proposed global brand equity valuations that relate to both the financial and the customer based method. These approaches have appeared to compensate for the lack that may exist when only one of the two measurements is used.

The various measures of brand equity (e.g., future earnings, replacement costs, premium prices, consumer preference, attitude and behavior) used in each perspective, financial and customer based, are the reasons that there is a lack of agreement on brand equity measures (Hsieh, 2004). Brand equity is a very complex and integrated phenomena containing of multi-dimensions which are hard to measure and to be empirically tested.

In the last ten years the concept of brand equity has been adapted to be implemented to retailer equity by different marketing researchers (Arentt et-al., 2003; Badldauf et-al., 2009; Pappu and Quester, 2009; Yoo and Donthu, 2001).

2.5 Definitions and Proposed Models of Retailer Equity

Since the retailer (grocery and general merchandise store) numbers have tremendously increased in the last decade and as they compete with manufacturers for customer pull to increase their market power and share of purchase (profit), retailers have started to recognize the importance of building their own brand name (Ailawadi and Keller, 2004).

Retailer equity was conceptualized as the value added to a retailer by its brand name, and that gives a competitive advantage to the retailer through differentiation, not a price based competition (Aaker, 1991; Yoo et al., 2000). While Hartman and Spiro (2005) used the term store equity in their definition "the differential effect of store knowledge on customer response to the marketing activities of the store" (p.1113), Keller (2003) indicates that retailer's brand equity is "exhibited in consumers responding more favorably to its marketing action than they do to competing retailers" (Ailawadi and Keller, 2004, p.332). Pappu and Quester (2006, p. 319) defined retailer equity as "the value associated by the consumer with the name of a retailer, as reflected in the dimensions of retailer awareness, retailer associations, retailer perceived quality and retailer loyalty".

In measuring retailer equity, researchers have suggested that branding and brand management principles could be applicable to retailer branding (Ailawadi and Keller, 2004; Jinfeng and Zhilong, 2009). Yoo and Donthu (2001) propose a consumer-based brand equity scale. They have indicated three dimensions for consumer-based brand equity, brand name awareness/associations, brand loyalty and perceived quality. Moreover, Yoo and Donthu (2001) advise extending brand equity measurement methods to measure the equity associated with retailers.

Arnett et al. (2003) also suggests a model engaged in the development of retailer equity indexes based on the retailer equity dimensions. He proposes that retailer equity is a multi-dimensional structure that covers the following dimensions: name awareness, retailer associations (which is sub divided to include both ‘product quality' and ‘perceived value'), service quality and store loyalty.

More recently a study by Pappu and Quester (2006) pointed out that there is a possibility for improving equity measurement methods by extending the customer based equity measurement to the measurements associated with the equity of retailers. Pappu and Quester (2006) argue that before translating brand equity measurement into a retailer equity measurement, its current limitations should be addressed (lack of empirical evidence for the structural similarity between brand and retailer equity, lack of clarity regarding the number and nature of it dimensions, and lack of discriminate indicators for measuring retailer associations). Furthermore, they empirically address these limitations and demonstrate and prove the assumption that the retailer equity structure is equivalent to the brand equity structure. Pappu and Quester (2006) concluded that retailer equity is a four-dimensional structure and that perceived quality is a distinct dimension of retailer equity along with retailer awareness, retailer association and retailer loyalty.

Jinfeng and Zhilong (2009) have studied this proposal and indicated that five store image dimensions (convenience, institutional factors, physical facilities, perceived price and employee service) directly affect the three retailer equity dimensions (awareness, association and perceived quality) which in turn affect retailer loyalty. This is in contrast to what Pappu and Quester (2006) suggest that all four dimensions are directly linked to retailer equity. Alternatively, Chaudhuri and Ligas (2009) study the concept of merchandise value and store affect and how they influence retailer equity. They found that customer perception of value affect their willingness to pay a premium price through attitudinal loyalty.

In conclusion, according to various studies, equity dimension has shown great differentiation. Yoo and Donthu (2001) suggest that what they use as a measurement of brand equity (brand awareness / associations, brand loyalty and perceived quality) can be extended to measure retailer equity. Arnett et al. (2003) point out that retailer equity is a multi-dimensional concept reflected in retailer loyalty, name awareness, service quality and retailer associations. Other researchers identify similar dimensions. Pappu and Quester (2006) propose retailer awareness, retailer associations, retailer perceived quality and retailer loyalty, whereas Hartman and Spiro (2005) suggest store awareness, store loyalty and store image as dimensions of store equity.

Although there are some similarities in the models proposed to measure retailer equity; they agree that loyalty is a derivative of equity; there is a great amount of disagreement on the other discernments of retailer equity dimensions. There is also diversity on how researchers define and measure each of these dimensions.

The following will discuss the various dimensions found as predictors of retailer equity

2.6 Dimensions of Retailer Equity

The literature on brand equity contains a significant number of different approaches to conceptualize it (Aaker, 1991; Yoo and Donthu, 2000; Pappu and Quester 2005). Ailawadi and Keller (2004) agree with Keller's (1993) conceptualization of brand equity as being composed of brand awareness and brand image. They also point out that, when dealing with retail brand equity conceptualization, it is harder than that of brand equity due to its complexity and special requirements. There are many conceptualizations for the diminutions of retailer equity. Hartman and Spiro (2005) suggest store awareness, store loyalty and store image whereas Pappu and Quester (2006) proposed retailer awareness, retailer associations, retailer perceived quality and retailer loyalty.

2.7 Awareness as a Dimension of Retailer Equity

Name awareness which is also a part of store knowledge (Hartman and Spiro,2005; Keller, 1993) indicate the ability of customers to recognize and to recall the store name which will activate associations of store image in the customer's memory. Name awareness reflects the strength of a brand's presence in consumers' minds. For retailer equity to occur customers would need to have some familiarity and awareness of the retailer. Without retailer awareness, customers would not develop perceptions of quality, retailer associations or loyalty towards the retailer. Therefore, awareness is a significant part of brand equity (Aaker, 1991; Keller, 1993). Arnett et al. (2003) defined name awareness as the level to which a retailer's name is familiar to consumers and related it to the possibility and ease with which it comes to mind.

Pappu and Quester (2005) conceptualized brand awareness as both brand recognition and brand recall. On this basis retailer awareness is defined as a ‘‘consumer's ability to recognize or recall that the retailer is a member of certain retailer category'' (Pappu and Quester, 2006, p. 320). Aaker (1991) stated that brand awareness can range from simple recognition of the brand to dominancy, that is when consumer recalls a specific brand not another. Hence strong retailer awareness increases the likelihood that a retail brand will be part of the customer future retail brand choice, making it a habit to choose the retail brand (Jinfeng and Zhilong, 2009)

Although awareness is of a great importance in determining equity, it has its share of controversy. The customer based brand equity studies by Yoo et al. (2000) and Yoo and Donthu (2001) combined awareness and associations in one dimension of brand equity, as they did not find any empirical evidence to separate brand awareness from brand associations.

On the other hand, Pappu and Quester (2005/2006) separate awareness from associations and add 'brand awareness' which is similar to Arnett et al. (2003) 'name awareness', as a distinctive dimension of equity. Pappu and Quester (2005/2006), support their conceptualization of brand and retailer equity by empirical evidence where they embrace more discriminate indicators for measuring retailer awareness (awareness and recognition characteristics come to mind quickly) and consider each one of them as distinct dimensions of retailer equity. They argue that for a customer to have perceptions of quality they need to be aware of the retailer. Hence, the degree of a customer's awareness on a retail brand reflects on retailer loyalty.

Store awareness have been suggested to have an important role with retailing on the Internet (Hartman and Spiro, 2005; Rios and Riquelme, 2008). Awareness plays an important role in customer decision making. Store awareness may affect customer thoughts of a store; and also it may influence the structure and strength of a store association in store image.

2.8 Association as a Dimension of Retailer Equity:

Associations which are a part of Keller's (1993) conceptualization of store knowledge is the dimension with the most controversy, as there is no agreement on its components. Arguably, it may have the most important implications for developing a conceptualization of store equity based in regard to the store image conceptualization “as an overall impression of the store, made up of interdependent association with the store" Hartman and Spiro, 2005, p. 1115). Jinfeng and Zhilong (2009), consistent with Yoo et al. (2000), defined associations as "complicated and connected to one other, and consist of multiple ideas, episodes, instances and facts that establish a solid network of retail brand knowledge" (p.488). Pappu and Quester (2006) defined it as what is linked to the memory of a retailer. They explained that customers have associations towards a retailer which would be precise and different from one retailer category to another. Jinfeng and Zhilong (2009) agreed and added that customers' expectations of value are a main factor that influences the disagreement in the definition of association. This value of what customers expect from retailers is built, in some measure, on the retailer name and the specific associations linked to it (Aaker, 1991; Keller, 1993).

Yoo and Donthu (2001) believe that ‘associations' and ‘awareness' is a combined dimension of brand equity. Washburn and Plank (2002) agreed and both studies justified their proposal by the lack of any empirical evidence to separate associations and awareness. Arnett et al. (2003) on the other hand has separated association from awareness and sub-divided association to be composed of ‘product quality' and ‘perceived value'. He proposed that product quality reflects the perceived quality dimension suggested in the brand equity literature, while perceived value refers to value related associations. Keller (1993, p. 6) argues “the presence of strongly held, favorably evaluated associations that are unique to the brand and imply superiority over other brands is critical to a brand's success” (italics added by Arnett et al. 2003, p.163).

Pappu and Quester (2006) separate associations from awareness by including brand personality measures along with various types of consumers' associations to the brand (e.g. store atmosphere, convenience facility, variety of products, after sale services and customer service). Nevertheless, neither Yoo and Donthu (2001) nor Arnett et al. (2003) have used discriminant indicators for measuring the ‘associations' dimension as Pappu and Quester did.

Contrasting to both Yoo and Donthu (2001) and Arnett et al. (2003), Pappu and Quester (2006) argue that adding more discriminant indicators would improve the measure for retailer associations. They proposed that retailer associations dimension is better described by the addition of retailer image measures available in marketing literature (Keller, 1993; Hartman and Spiro, 2005).

2.8.1 Store Image

"The image of retailer in the minds of consumers is the basis of retailer brand equity" (Ailawadi and Keller, 2004).

Martineau (1958) defined store image as a mix of functional qualities and psychological attributes of a particular store which are responsible for characterizing the store in the shopper's mind. Alternatively, Marks (1976, p.43) stated "(store image) is not merely the sum of objective individuals associated with the stores; rather, a store's image is a composite of dimensions that consumers perceive as a store. Store image is an overall picture that is more than the sums of the parts, for the parts interact with one another in the consumer's mind". Furthermore, Thang and Tan (2003) recognized that customers' preference for a particular store is affected by the following attributes: merchandising, accessibility, reputation, in-store service and atmosphere of the stores. Osman (1993) put forward that store image as well as positive past purchase experience of a customer are determinants of customer repurchase loyalty. Hartman and Spiro (2005) suggest to further develop the concept of store image by introducing it to store equity. On this basis Jinfeng and Zhilong (2009, p. 487), consistent with Decarlo et al. (2007), concluded that "there are number of retail operational elements that can affect retail store name equity, such as pricing, merchandise variety and assortment, promotion and layout and customer service".

The store image composed of different factors or characteristics of the retailer marketing mix are what build the store image in the consumer's mind (Jinfeng and Zhiong, 2009). For that reason store image is measured by customer perceptions of the primary marketing activities offered by the store. Retailers who manage to have the ability to use these marketing mix dimensions have succeed in elevating the image of the store and enhancing its economic performance (Jinfeng and Zhiong, 2009). The store image or store attributes affect customer perception and repurchase behavior (Jinfeng and Zhilong, 2009; Chaudhuri and Ligas, 2009). Store affect is defined as "consumers' self-reported level of the intensity of the subjective experience of positive feelings towards a store in general" Chaudhuri and Ligas (2009, p. 407).

Retailers influence consumers' perceptions of the store's image with the aim of promoting purchasing behaviors. Given that customers recognize store image as a vibrant foundation, a store image is changed in the customers' minds after each encounter and experience with in-store environment. Some researchers suggested that store atmosphere is a component of store image (Lindquist, 1974; Oh et al., 2008; Zimmer and Golden, 1988) while in contrast other researchers believe that store image is a consequence of store atmosphere (Baker et al., 1994).

2.8.2 In-store Atmosphere (Music, Design, and Employee Perception)

There has been concentrated attention from researchers on store atmosphere as it is considered to be a critical strategy in competitive markets. Past research uncovered that store atmosphere has an effect on consumers' perceptions of product quality (Chebat and Michon, 2003). The atmosphere of a particular store comprises a mixture of drivers such as color, sound, scent, taste, layout and space which are important signals for buyers moods and purchase intention.

Kotler first introduced the concept of store atmosphere in 1973. He stated that customers' purchasing decisions can be encouraged by targeting their emotions through effective store design and physical environment. Belk (1975) agreed and specified that physical surroundings are one situational attribute of the store environment that motivates and promotes consumer purchasing behavior. Creating an effective and interesting store atmosphere is a strategy used by retailers to gain a competitive edge over their competitors (Marsh, 1999) and to manipulate consumer behavior which leads to an increase in sales (Chebat and Michon, 2003). "An environment richer in ambient esthetic cues enhances the holistic and hinders the analytical responses of the subject." Massara (2003, p. 33).

Baker (1986) developed a typology grouping the store environmental building blocks that trigger the in-store atmosphere perception in the customer's mind into three factors; ambient factors, design factors, and social factors. Firstly, the ambient factors which are non-visual, background settings of the store may include elements such as music or sound, lighting, scent and temperature. The second factor is the store design; it is classified into functional elements (layout of the store, display of products, comfort, and privacy) and aesthetic elements (architecture, color, material, and style). Retailers use these elements to create store individuality and to encourage a consumer's purchasing behavior. Additionally, store design is a method followed by retailers to present merchandise in the store to encourage and motivate a consumer's purchasing behavior. Therefore, store design has been called a silent salesman for the reason that it has been employed to draw and grab consumers' attention (Buttle, 1984). Finally, social factors which include the number, type and behavior of salespersons and other customers in the store and tries to describe them and how do they affect purchasing behavior of an individual.

Regardless of the huge amount of attention in studying the relationship between store image and retailer loyalty, only a little recent empirical research has addressed the effect of store image on other dimensions of retailer equity (retailer awareness, retailer associations and retailer perceived quality). Jinfeng and Zhiong, (2009) focused on a few key dimensions of store image (perceived price, convenience, institutional factors, physical facilities and employee service) to investigate the relationship between store image and retailer equity while Chaudhuri and Ligas (2009) examine the relationship between merchandise value and store affect and attitudinal loyalty and how do they lead to customer willingness to pay a premium price. Studies have found that there is a relationship between customer expectation of merchandise value and store image.

2.8.3 Merchandise Value

Retailer products are the most important element of the retailer mix as it is what customers need and what drives them to visit the retailer, while for the retailer, products are what generate profits and add value to the retailer.

Product can be defined as "anything that can be offered to a market that might satisfy a need or a want" (Cox and Brittain, 2004, p. xx). Retailers have created their own terminology. They prefer to use merchandise rather than product to describe the different elements such as variety, price/quality, branding and stock turnover (Cox and Brittain, 2004). Gordon Selfridge defined merchandise attributes as to having the "right goods at the right time in the right place in the right quantity at the right price".

When valuing merchandise, customers look at many different aspects (Lam and Mukherjee, 2005). Levy and Weitz 1998 stated that when managing a store, merchandise presentation is a critical issue for a retailer. In spite of the various methods used by retailers to organize their merchandise, placing all items of a product category in the same section is the most common method used to ease customer selection. Retailers also blend displays of complementary products in the same spot; that is, they put them side by side so that customers see them as an ensemble.

Many retailers assign special attention to the display and organization of products, emphasizing that complementary products should be matched or coherent on vital attributes such as color, style, and design. Merchandise displays that are well organized and follow these vital attributes may create or improve a store image, draw consumer attention, stimulate their feelings, shopping experience, shopping behavior and purchase intentions.

Customer expectation "is a rank or belief regarding the performance of a product or a retailer" Oh et al. (2008, p. xx) or in a more simple phrase, customers use their expectations as guidelines to evaluate the quality of the product or the retailer. Oh et al. (2008) pointed out that past research (e.g. Curry and Riesz, 1988; Mazurasky and Jacoby, 1985; Prakash, 1984) has shown that expectations and proof of expectations can influence customer decisions for future purchasing. It also has been shown that meeting customer expectations results in favorable purchasing decisions and satisfaction. In a more general aspect, research has shown that there is a positive link between store atmosphere and perception of the merchandise quality (Chaudhuri and Ligas, 2009; Darden and Schwinghammer, 1985; Olshavsky, 1985). Oh et al. (2008), based on Mazurasky and Jacoby, indicate that stores that are designed in an artistic fashion that reflect the store or merchandise identity lead to high customers perception levels of merchandise quality. On the other hand, other literature has suggested that rhythmic assortment of store design with a theme and picture-based information cues create positives feelings that associate the perception of a higher level of merchandise quality in addition to service quality (Baker et al., 1994; Gutman and Alden, 1985; Marsh, 1999; Mazurasky and Jacoby, 1985). From this point of view we will now take a look at the literature regarding store image and it dimensions and how it affects retailers.

2.9 Quality as Dimension of Retailer Equity

Quality is another dimension of retailer equity that integrates heavily with associations. Arnett et al. (2003) has argued that 'product quality' is a dimension of associations, while 'service quality' is a dimension of retailer equity. He builds his suggestion upon the idea that service quality is another important characteristic of strong retailer names and the suggestion that perceived service quality affects customers' behaviour. In contrast many other brand equity researchers (e.g., Aaker, 1991; Yoo and Donthu, 2001) have considered ‘perceived quality' in general (include both product and service) as a dimension of the brand equity structure. Pappu and Quester (2006) have adopted this consideration and extend it to the retailer equity structure and propose that 'retailer perceived quality' not ‘service quality' is a dimension of retailer equity. Pappu and Quester (2006) argue that "the retailer perceived quality is not the objective quality of the retailer; rather it is the perception of quality of the retailer according to the consumer" (p.320). They emphasized that retailer perceived quality comprises perception of the quality of the retailer in addition to perception of quality of products (goods or services) offered by retailers. Jinfeng and Zhiong, (2009), consistent with Pappu and Quester (2006) defined retailer perceived quality as a "consumer's judgment about a retailer's overall excellence or superiority on the perception of goods and services" (p. 488).

High perceived quality also provides value to customers by providing them with the intention to purchase from the retailer as a first choice, through differentiating the retailer from other competitors and thereby inducing retailer loyalty. This has been empirically proved by both Jinfeng and Zhiong (2009) and Pappu and Quester (2006) as they found a positive relationship between the indicators (e.g perceived price, product quality and employee service) they used to measure perceived quality and loyalty.

2.10 Perceived Value as a Dimension of Retailer Equity

There is high integration between the measurement of perceived quality and associations (as a dimension of retailer equity) combining that with the existence of high correlation (80 per cent according to an Equitrend study) between perceived value and perceived quality as dimensions of brand equity (Aaker, 1996). Since the way value judgments are similar to the way quality judgments are formed, therefore, Aaker (1996) suggested to combine the two constructs to form an overall summary construct of brand attitude. In view of that, Rios and Riquelme (2008) have suggested the use of the value perception as a dimension to measure equity for on line companies. In another perspective Chaudhuri and Ligas (2009) have used merchandise value perception to measure retailer equity in combination with store affect.

Value perception of retailer product, image and service has been found to be positively related to retailer loyalty (Chaudhuri and Ligas, 2009) and can be signals of commitment to a specific retailer. Moreover, high perception of value induces overall retailer quality and contributes by positively influencing customer decisions towards the retailer and choice of store, which leads to repeat visits and repurchases for the retailer.

2.11 Loyalty as a Dimension of Retailer Equity

Lately customer loyalty has been a major focus for many retailer marketing researchers due to the increasing competition in the retailer markets and the fact that maintaining customers is more cost effective than acquiring new ones Bodet (2008) referring to Reichheld (1996). According to Wong and Dean (2009), Berry (1996) identified loyalty as a vital input for retailers to attaining growth and profit. Additionally, Evanschitzky and Wunderlich (2006) in their examination of the four-stage loyalty model, further emphasized the importance of loyalty on financial outcomes.

There is a general agreement when it comes to defining loyalty as a dimension of retailer equity on the base of brand loyalty. Arnett et al. (2003, p. 163) defined ‘store loyalty', in agreement with Oliver (1997, p. 392), as ‘‘a deeply held commitment to rebuy or repatronize a preferred product or service consistently in the future, despite situational influences and marketing efforts having the potential to cause switching behavior''. Furthermore, Pappu and Quester (2006, p. 320) define retailer loyalty in accordance with Yoo and Donthu (2001, p. 3), as ‘‘the tendency to be loyal to a focal retailer as demonstrated by the intention to buy from the retailer as a primary choice''. They based their definition on customer attitudes, not behavior, although loyalty has been defined both attitudinally and behaviorally. Retailer loyalty is the customer's intention to be loyal to one particular retailer, not another.

Existing empirical research mainly focuses on effective and behavioral measures (Chaudhuri and Ligas, 2009; Mittal and Kamakura, 2001; Zeithaml et al., 1996; Zeithaml, 2000) with exceptions of some who have focused on actual purchase.

By developing a compound loyalty measure consisting of behavioral and attitudinal measures, Bowen and Chen (2001) linked customer loyalty to satisfaction and uncovered a nonlinear and asymmetric relationship between them. Bandyopadhay and Martell (2007) more recently studied the relationship between attitudinal and behavioral loyalty in a brand setting attribute and found a positive relationship between the two.

Customer loyalty is a significant measurement for evaluating the relationships between customer perception of value and its outcomes such as the likelihood of customer repurchase, making business referrals, providing strong word-of-mouth, providing references and publicity (Bowen and Shoemaker, 1998; Chen and Hu, 2009; Lai et-al, 2009; Tam, 2004) as well as willingness to pay a price premium (Chaudhuri and Ligas, 2009) and a willingness to forgo services and sacrifice variety (Ailawadi and Keller, 2004).

Loyalty was identified as an important dimension of retailer equity (Arnett et. al, 2003; Jinfeng and Zhilong, 2009). Oliver (1997, p. 392) defined brand loyalty as “a deeply held commitment to re-buy or repatronize a preferred product or service consistently in the future, despite situational influences and marketing efforts having the potential to cause switching behavior”. The definition emphasizes the two different aspects of brand loyalty - behavioral or repurchase and attitudinal, which according to Chaudhuri and Ligas (2009) has captured the attention of different marketing researchers (Aaker 1991; Chaudhuri and Holbrook 2001; Chaudhuri and Ligas, 2009; Dick and Basu 1994; Jacoby and Chestnut 1978; Oliver 1999). Additionally, Dick and Basu (1994) described loyalty as a “relative attitude” a conclusion of a behavioral choice proportional to its alternatives.

The next section will take a deeper look at these two different aspects of loyalty, behavioral and attitudinal, but first let us consider the different loyalty drivers.

2.11.1 Repurchase (Behavioral) and Attitudinal Loyalty

Day (1969) argued that when a customer has both a flattering attitude towards a product and constantly purchases it then the customer poses true effective loyalty to that product. The attitude module discriminates between true loyalty and “spurious” loyalty appointed for high switching costs or a shortage of other choices because customers are always evaluating the retailer store depending on the attitude they developed over time and this can have a lasting duration (Eagly & Chaiken 1998). In this aspect, the view of attitudinal loyalty embraces a more durable tendency that is identified across compound purchase occasions.

The first perception of customer loyalty by marketers was in the behavioral aspect. Measuring the customer's repeated purchase of a particular product or service, their purchase amount and frequency, word of mouth and recommendations and their relationships with the product or service provider and, Hallowell, Hombur and Giering, and Yi's studies (cited in Bodet ,2008) and Ehrenberg et al., Kahn et al., studies (cited in Chen and Hu, 2009). Recently Chaudhuri and Ligas (2009, p.407) defined repurchase loyalty as "a basic level of interest in a store that is limited to intent to re-buy from the particular store at a future date". From this definition we can state that repeat purchase behavior does not essentially engage in a psychological commitment to the product or service provider. According to Jacoby and Kyner (1973), repeat purchase can happen for the reason that customers have their own perceived time and energy costs, risk perception, absence of choice, probability or bias, temporary selling incentives or legal and corporate policy limitations. More recently, Bandyopadhyay and Martell (2007) found that repeat purchases can be linked to situational factors such as unavailable stock and individual or essential factors such as resistance to change, or social and cultural factors (i.e. social bonding) (Bodet ,2008).

Behavioral measurements of customer loyalty lack the ability to offer insight into the underlying cognitive and effective factors that affect loyalty since focusing on behavior alone (i.e., repeat purchases) is not enough to define the reasons behind the purchases. In other words, looking at behavior alone, we cannot state whether the repeat purchases are derived from convenience, economic incentives or whether the customer really maintains attitudinal loyalty (Berné et al., 2001; Dick and Basu, 1994; Jacoby and Kyner, 1973; Oliver, 1997). In view of this the need to include the physiological aspect (i.e. attitude) of customer behavior in measuring loyalty has increased in recent researches. The new definition of loyalty should include both the behavioral and attitudinal dimensions to it. Chaudhuri and Ligas (2009) supported Assael (1992) and Keller's (1993) definition of loyalty as a positive attitude which leads to a regular purchases and accordingly defined attitudinal loyalty as "a level of attitudinal interest in a store that indicates some level of an existing bond or relationship with the store" (Chaudhuri and Ligas, 2009, p.407).

Many other researchers have used attitudinal measures of customer loyalty. Dick and Basu (1994) and later on Lee and Cunningham (2001) both illustrated that attitudinal scales have a crucial benefit over behavior scales. They serve as a more useful method to distinguish and better understand the determinants of customer loyalty. Rundle-Thiele and Bennett (2001) also emphasized that using attitudinal loyalty as a measure would be of great benefit in service markets, in view of the fact that attitudinal measures are capable of identifying customers' optimistic feelings towards a service provider.

With this background in mind, our definition of retail loyalty is conceptualized as ‘‘the customer's attitudinal and behavioral preference for the retailer when compared with available competitive alternatives'' this definition is compatible with Wallace et al. (2004, p.251).

2.12 Retail Equity and Its Consequences

No single measure of retail equity that offers a rich insight and easy to compete and track methods has yet been established (Ailawadi and Keller 2004), as the dimensions of retail equity are highly integrated into each other. Although Pappu and Quester (2006) prove retailer equity to be parallel to brand equity, Rios and Riquelme (2008) argue that these classifications of dimensions (awareness, association, quality and loyalty) are not applicable in the online retail where trust is a more important issue than awareness. As the dimensions of brand equity are not??? hard enough to identify, measurement of retail brand equity adds a unique challenge of its own for researchers and managers. (Ailawadi and Keller 2004). Hartman and Spiro (2005, p. xx) paralleled with Keller (1993) and defined store equity as "the differential effect of store knowledge on customer response to the marketing of the store". In this definition store knowledge is conceptualized as consisting of a store name (awareness) and store associations which are mainly concerned with customer perceptions of store image (Hartman and Spiro, 2005; Keller, 1993).

While customer response to marketing activities represents their perceptions of associations from previous evaluations, preferences and behavior encounter with the store based upon the marketing mix activity, it has been found that the decision to repurchase from the same retailer store depends on customers' past experiences (Wathne et al., 2001); their perceptions of value from previous encounters (Bolton et al., 2000) and expectations of the future business relationship. Keller (2003) stated that retail brand equity is exhibited when customers react to the retailer marketing mix in a more favorable manner than the competitor's (i.e. the image of the retailer in the customer mind is the basis for this equity). Over the years researchers have studied the store image attributes that affect retailers, the major focus was variety and quality of products, services and brand sold, service quality, store atmosphere, appearance and behavior of employee, location and accessibility. These attributes of the store have been tested as a reflector of customer willingness to repurchase again and to pay a higher price and willingly recommend the store and promote it through positive word of mouth. The question that comes to mind now is why do customers make the decision to repurchase from the same retailer and why are they willing to pay premium price in some stores and not in others?

In answering these questions, many researchers have viewed this outcome as a measure of equity (Aaker, 1991 & 1996; Sethuraman, 2000; Sethuraman and Cole, 1997) and in a recent study by Chaudhuri and Ligas (2009) they pointed out that customer perceptions of value is composed of merchandise value store affect and attitudinal loyalty and have studied the link between them and customers willingness to pay a premium price. They found that "providing merchandise value that creates positive affect and leads to an emotion-based bond with their consumers" (p.417) can enable retailers to obtain higher prices over their competitors. Aliawadi and Keller (2004) stated that several of the strongest retailers today are built on low price positioning strategy. They argue that brand equity for this type of retailer must be assessed in a different way than price premium.

Aliawadi and Keller (2004) conceptualized retailer equity in a different way., They suggested a "resource premium that consumers are willing to expend in order to shop with the retailer. Resources may reflect financial considerations but also other factors such as distance traveled, brand or size preferences compromised, or service forgone" (p.340).



3.1 Chapter Introduction

This chapter deals with explaining and justifying the proposed research model and the methods used in conducting this study. The chapter starts with a problem statement followed by the research objective and methodological framework. After that, the research design will be discussed and the chapter will end with the explanation of the data analysis methods.

3.2 Problem Statement

As the number of retailers has increased and the Kuwaiti market has opened its doors to foreign competitors to enter and compete with local retailers for their customer base by offering low priced merchandise, an assessment of retailer equity other than price premium is needed.

A point is raised by Ailawadi and Keller (2004) where they witness the phenomena that “several of the strongest retailers today, e.g. Wal-Mart, Target and Aldi, are built squarely on a low price positioning” (p.340). They suggested that these retailers have brand equity that could be measured from other perspectives than customer willingness to pay a price premium by a willingness to forgo services and a willingness to sacrifice brand variety.

Since there is a lack of empirical evidence in measuring retailers' equity in other than a price premium, this study has the advantage in being the first to provide an insight about this subject in Kuwait.

3.3 Methodological Framework

3.3.1 Conceptual Model:

In building the hypotheses, I have used the theoretical framework shown in Fig.1. This framework was developed by combining the Chaudhuri and Ligas (2009) model of value consequence along with the Jinfeng and Zhilong (2009) model of impact of store image on retailer equity. Chaudhuri and Ligas (2009) proposed

(1) Merchandise value can lead to willingness to pay a price premium (a reflector of retailer equity) as a result of store affect and attitudinal loyalty

(2) Their model aims to test the consequence of customer value at both the individual and store level to justify their proposal.

Jinfeng and Zhilong (2009) proposed that:

(1) Brand equity can be replaced by retailer equity and brand equity dimensions (brand association, brand awareness, brand loyalty, brand quality) with retailer equity dimensions (retailer association, retailer awareness, retailer loyalty, retailer quality)

(2) Retailer equity dimensions were divided into two constructs (?) , that is, retailer loyalty and retailer equity.

(3) They integrated the retailer marketing mix in the contact of store image dimension assuming it to have a significant effect on retailer equity.

According to Mandler (---), stimuli that meets customer expectations are positively appraised but do not result in powerful impact. In contrast, stimuli that are rather different from customer expectations have stronger impact intensity.

In building my theoretical frame work I took into consideration that merchandise value has been related to the pleasure resulting from obtaining a good deal (Grewal, Monroe, and Krishnan 1998a) and hence it influences customer perceived value (Chaudhari and Ligas, 2009). Along with that, store image has been studied as a derivative of retailer equity (Jinfeng and Zhilong, 2009). Accordingly, I propose a model (fig.1), in which merchandise value and store image can lead through the store affect to different consequences in retailing with regard to the level of the loyalty-relationship that it generates between the customer and the store. Thus, it can lead to a transactional exchange (repurchase loyalty without commitment) but also to a more enduring committed relationship that includes some relational bond or connectedness with the store (attitudinal loyalty). The first consequence (repurchase loyalty) can exist with or without the generation of positive affect, while the second (attitudinal loyalty) type must include some level of positive affect that precedes it.

I propose, first, that store image is composed of merchandise value, merchandise assortment, store design and interpersonal quality service. Secondly, store affect will be an inter mediator between store image and repurchase and attitudinal loyalty. Thirdly, repurchase loyalty is a consequence of merchandise value, but merchandise value is not directly related to attitudinal loyalty, it is related to attitudinal loyalty through the store image (retailer associations). Fourthly, willingness to pay a price premium resource premium and service forgone are reflectors of retail equity and an expression of a committed relationship (Alawadi and Keller, 2004).

Previous researches have agreed that loyalty has a great effect on customer behavior to repurchase or to provide a positive recommendation through word of mouth or even to pay a higher price. In this study I will consider the affect of loyalty as a component of retailer equity and merchandise value along with the store image on a willingness to pay price premium, a willingness to forgo services and a willingness to substitute brands.

3.3.2 Research Objective

The objectives of our research can be summarized in the following points

* To determine if retailer equity varies according to the type of supermarket.

* To identify the perception of value customers have of supermarkets.

* To identify the consequences of the customer value, both repurchase and attitudinal loyalty

* To measure if merchandise value affects customer purchasing repurchase.

* To identify the consequences of attitudinal loyalty on customer willingness to pay a price premium, forgo some services or give up merchandise variety.

3.4 Research Questions and Hypotheses

3.4.1 Major Research Question:

- Does retail equity exist for retailers that do not charge a price premium?

3.4.2 Minor Research Questions

- Which store image dimensions have significant impact on store effect?

- Does store affect mediate between store image and loyalty?

3.4.3 Hypotheses

The following hypotheses were formulated with the purpose of answering the proposed research questions and also to reach our objective.

H1. Merchandise is positively related to repurchase loyalty.

H2 Merchandise is positively related to store affects.

H3 Merchandise assortment will be positively related to store affects.

H4 Store design will be positively related to store affect.

H5 Inter personal quality service will be positively related to store affect.

H6 Store atmosphere will be positively related to store affect.

H7.a Store affect will be positively related to repurchase loyalty.

H7.b Store affect will be positively related to attitudinal loyalty.

H8 Attitudinal loyalty will be positively related to retail equity

3.5 Research Design

The research design is the guide line to the plan in which the research questions and the objective would be answered and how the research would progress. It looks at the research approach, methods, purpose, and time horizon.

3.5.1 Research Approach

The design of our proposed research starts by identifying the approach that would be followed.

According to Saunders et al. (2007) research can be designed using one of the following two ways: either deductive or inductive. The deductive approach is where "you develop a theory and hypothesis (or hypotheses) and design a research strategy to test the hypothesis" while the inductive approach is when you "collect data and develop theory as a result of your data analysis" (Saunders et al. 2007, p 117).

This research is deductive because I start with a determine model to be empirically tested

3.5.2 Research Method

There are two widely used methods of choice used in the business or management research conducted to differentiate between data collection and analysis, either quantitative research or qualitative research (Saunders et al. 2007, p.117). The main difference between the two is the use of numeric or nun numeric data. Quantitative research is "Explaining phenomena by collecting numerical data that is analyzed using mathematically based methods" (Aliaga and Gunderson, 2002, p.1) data can be collected throughout questionnaires as an example and then analyzed using graphs or statistics (Muijs, 2004). In contrast; Brockopp (2003, p.328), referring to Morse (1986) defined qualitative research as "an inductive method that seeks to build knowledge about the meaning or relevance of a particular phenomenon or concept when little is known". This method is more useful when examining a concept that had received little research attention or exploring a new one that has yet unexplored data which can be collected by conducting interviews as an example and then use categorizations of data to do the analysis (Brockopp and Hastings-Tolsma, 2003).

Since this study has selected questionnaire as a way for data collection and it aims at theory testing then it is considered to be quantitative in nature.

3.5.3 Research Purpose

Research purpose is mostly classified as exploratory, descriptive and explanatory (Saunders et al., 2007) and as Robson (2002) pointed out the research can have more than one purpose and it may change over time.

If one wants to clarify their understanding of a problem and its nature it is recommended to follow an exploratory study. Exploratory study is defined by Robson (2002:59) as a method or a mean to find out "what is happening; to seek new insight, to ask questions and to assess phenomena in a new light". Three principles can be followed to conduct this type of study: a) search of the literature; b) interviewing experts in the subject and c) focus group interviews. On the other hand the aim of the descriptive research is "to portray an accurate profile of persons, events or situations" (Robson, 2002:59). Descriptive studies can be an extension of exploratory or explanatory research to provide description on patterns suspected. Finally; explanatory researches emphasis on explaining the relationship between variables, through data collection and analysis of a precise problem or a situation.

As this study's main strategy is to collect data throughout by questionnaire and then explain the relationship between loyalty and customer value, it is therefore considered to be a descriptive and explanatory study.

3.5.4 Research Time Horizon

Depending on the research question proposed the time horizon for the research can be determined and it may take one of the two forms: 'snapshot' cross-sectional or 'diary' longitudinal. Cross-sectional studies are preferred to studying a particular phenomenon (or phenomena) in a precise time (Saunders et al., 2007) or as Robson (2002) explains, it mainly employs surveys as the means for data collection and tries to explain how the factors are related in a given point of time. On the other hand the main strength of longitudinal studies is in its ability to study change and development over time. Even in the case of time limitation there is a massive amount of data published over time that is waiting to be re-analyised (Saunders et al., 2007). Adams and Schvaneveldt (1991) point out that this type of study enables researchers to have a measure over variables given that they are not affected by the research procedure itself.

For the purpose of this research and taking into consideration the time constraints, a cross-sectional study will be the choice of action.

3.5.5 Research Variables

A Variable in general is a characteristic that is measurable and can be analyzed dependent on the type (nominal, ordinal, and numerical) and nature dependent or independent in the survey (Fink, 2003). Independent variables or exploratory or predictor variables, are so called because of their use to explain results or responses (the dependent variable). These include:

o Dependent variables: Retailer Equity

o Independent Variables: Repurchase Loyalty, Attitudinal Loyalty, Store Affect, Merchandise Value, Assortment, Services, Design, Atmosphere.

o Control Variables: Age, Gender, Income, Nationality.

3.5.6 Target Population and Sampling Methods

In the light of the objective of this study, the target population was identified as people who shop and purchased products in different retailer supermarket stores, aged 18 years old and above from different backgrounds and occupations (students, house wives, workers, managers etc) which is general to all of Kuwait's population.

3.5.7 Data Collection Method

A questionnaire was conducted to measure customers' images of three supermarkets according to the merchandise and services they offer. Data was collected by distributing the proposed questionnaire at random throughout the internet and by hand. Respondents were screened to ensure that they shop at one of three major supermarkets in Kuwait (Sultan Center, City Center, or Local Co-Op).

The following table identifies each of the constructs used in the questionnaire and its items and source.




Merchandise Value

Fair price

Good value


Adapted from Dodds et al. (1991)

Baker et al. (2002)


Good quality of assortment

Wide assortment

One stop shopping

Product availability

Adapted from Berscheid (1983)

Adapted from Richins (1997)

Store affect

The music played in the store bothers me

The store plays appropriate music while I shop

The music in this store is pleasant

Employees are well dressed

Adapted from Berscheid (1983)

Adapted from Richins (1997)

Store atmosphere and design

The color scheme used by this store is eye pleasing

Product is well organized in the shelves

Easy to find product

Easy to find parking

Conveniently located

Adapted from Berscheid (1983)

Adapted from Richins (1997)

Adapted from Seiders et al. (2005)

Store service quality

The employees in this store are helpful

The employees in this store are friendly

The employees in this store are competent

The store provides personal attention to the shopper

The store provides a quick check out service

Adapted from Berscheid (1983)

Adapted from Richins (1997)

Baker et al. (2002)

Repurchase Loyalty

I am willing to buy from this supermarket again

I am likely to shop at this supermarket in the future

Adapted from Jacoby and Chestnut (1978)

Attitudinal Loyalty

I am willing to recommend

This store is my first choice to shop

I consider myself loyal to this store

I have a connection with this store

I have developed a sense of trust and dependence

Adapted from Jacoby & Chestnut (1978)

Price and Arnould (1999)

Zeithmal and Lemon

Brand Equity

I am willing to pay a higher price at this store over another

I am willing to shop at this store even if another store advertises a lower price

I am willing to forgo some services at this store over other stores

I am willing to shop at this store even if another store offers better services

I am willing to sacrifice brands variety and shop at this store

I am willing to shop at this store even though the numbers of brands in a product category are limited

Adapted from Chaudhuri and

Holbrook (2001)

Table 1: measurement constructs

3.6 Data Analysis Methods:

This study is quantitative research. The statistical tools used in analyzing the data collected included descriptive analysis, EFA, cross-tabulations, correlation and regression analysis. The data is a mixture of nominal (e.g. gender and nationality), ordinal (e.g. income and age) and scale (e.g. Merchandise value, merchandise assortment, store design, store atmosphere, store service, loyalty and brand equity). The Likert 7 point scale was used.