The effects of brand equity towards customer loyalty

4950 words (20 pages) Essay

1st Jan 1970 Marketing Reference this

Tags:

Disclaimer: This work has been submitted by a university student. This is not an example of the work produced by our Essay Writing Service. You can view samples of our professional work here.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com.

Purpose – Given the rising number of brands available in the country, there may be a corresponding rise in customer loyalty towards their preferred brand. There are many reasons why customers remain loyal to their favorite brand. One reason is brand equity. The purpose of this research is to examine the relationship between brand equity and customer loyalty towards a well-known sportswear brand among students attending one of the public universities in Malaysia.

Methodology – In order to carry out this research, a quantitative research approach was used. A questionnaire was developed and randomly distributed to 300 respondents. Reliability analysis, Person correlation analysis and multiple regression analysis were used to analyze the data.

Findings – The result of this research suggests that satisfaction, resistance to change and affect are consistently the most important dimensions that influence customer loyalty. However, based on this research, it shows that trust and value have no significant relationship with customer loyalty.

Future Research – One of the limitations in this research is that some respondents were not serious in answering the questionnaire. In addition, the population of this research was only among students in the university. As a result, the analysis may not be generally applied. Therefore, it is recommended that future researchers conduct similar research in a larger population in order to get a more reliable and accurate result.

Originality/value – This research provides a valuable insight into a well-known sportswear brand, or even the sportswear industry, and contributes to a greater understanding of the success factors manufacturers need to focus on in order achieve a high level of customer loyalty.

Keywords – Brand equity, customer loyalty, sportswear, Malaysia

1.0 INTRODUCTION

In Malaysia, sportswear brands such as Nike have become more and more popular among Malaysian citizens, especially teenagers. According to Corporate Knights Inc. and Innovest Strategic Value Advisors, Nike was listed in the Global Top 100 most sustainable cooperations in the world in 2009. The Global 100 includes companies from 15 countries encompassing all sectors of the economy which were evaluated according to how effectively they manage environmental, social and governance risks and opportunities, relative to their industry peers.

Given the situation, the same categories of products that Nike offers are beginning to increase all over the market, especially products from China. Therefore, Nike may face huge competition from the Chinese market. In addition, more and more people are changing their existing brand to Chinese brands because they offer very low prices compared with other brands. In order to cope with this situation, Nike must identify the relationship between brand equity and customer loyalty so that their products will not be affected by the Chinese products.

The remainder of this study is divided into four different sections. In the first section, we will present our research objective, the research model and identify the hypotheses. Second, we will present the method we used in this research. Third, we will present the results and the statistical analysis of this research. Finally, we will discuss the research implications and limitations of our study.

Based on the literature review, we strongly believe that satisfaction, resistance to change, affect, trust and value will affect customer loyalty. This belief led to the research question “What is the relationship between satisfaction, resistance to change, affect, trust and value towards customer loyalty?”

The findings of this research can contribute in the following manner: if satisfaction, resistance to change, affect, trust and value were significant in affecting customer loyalty, these findings could help Malaysia’s Nike retail shops sharpen their focus on how best to maintain customer loyalty.

2.0 LITERATURE REVIEW

2.1 Brand Equity

One of the most common marketing concepts arise in the 1980s was brand equity. Today, marketers are aware the importances of brand asset management, particularly as organizations move toward attempts to communicate ever complex and intangible messages as part of brand management strategy. (Davis, 2000; Goodchild and Callow, 2001). Brand equity has increased the importance of branding in the marketing strategy and always focuses of management and research activities (Keller, 2008, p.37). Very strong brand equity can make a brand nearly impervious to competition.

Customer value-based brand has been defined as the differential effect of brand knowledge on consumer response to marketing the brand (Kamakura and Russell, 1991). Thus brand equity is conceptualized from the perspective of the individual consumer and the brand equity based client happens when consumers are familiar with the brand and has some favorable brand associations, strong and unique in their memory (Kamakura and Russell, 1991). Brand equity is an essential lever of profitability because it represents the value of the brand in the marketplace.

2.2 Customer Loyalty

Customer loyalty can be defined as a behavior or attitude of a client buys a product or brand in front of others that are available on the market. Loyalty is a concept that goes beyond a simple repeat purchase behavior as it is a variable that is essentially a performance-related dimension and the second on the attitude of that commitment is the essential characteristic (Day, 1969; Jacoby and Kyner, 1973).

Based on previous research by Jacoby and Chestnut (1978), Solomon (1992) and Dick and Basu (1994), the combination of these two components allows us to distinguish two types of customer loyalty concepts:

(1) Loyalty based on inertia, when you buy a brand out of habit simply because it takes less effort and the consumer will not hesitate to switch to another brand if there is any reason it should; and

(2) True brand loyalty, which is a form of repeat purchasing behavior reflecting a conscious decision to continue buying the same brand and must be accompanied by an underlying positive attitude and a high degree of commitment to the brand.

Inertia means the consumer is not buying the same brand because of brand loyalty is true, but it’s not worth the time and trouble to find an alternative. A competitor who is trying to change a pattern of buying on the basis of inertia can often do quite easily, because very little resistance to brand switching is found, if any reason for this is obvious (Solomon, 1992). Moreover, in low involvement, brand loyalty may reflect only the convenience inherent in repetitive behavior rather than commitment to the brand purchased. Relatively unaffected consumers are less likely to be brand loyal and more likely to switch brand. (Traylor, 1981). In connection with the true brand loyalty, based on the traditional consumer attitude structure, considers all three phases of decision making should target a brand preference for coordination if the true brand loyalty (Oliver, 1999).

2.3 Dimension of Brand Equity

One of the interesting questions facing today’s brand managers concerning how to develop a better understanding of the proper relationship between the constructs such as brand equity and customer loyalty, especially in relation to the large number of history known to customers loyalty in marketing literature  (Taylor, Celuch and Goodwin, 2004). Furthermore, satisfaction, value, resistance to change, trust and affect are very important known antecedents that affect customer loyalty. (Taylor, Celuch and Goodwin, 2004).

2.3.1 Satisfaction

Research conducted by Taylor, Celuch and Goodwin (2004) found that satisfaction has a direct influence on customer loyalty. Mittal & Lassar (1998) discussed how satisfaction has been proven to directly affect loyalty. They further analyzed this impact by discussing the importance of looking at satisfaction and service quality together as they related to customer loyalty and likeliness to return. They stated “satisfaction” alone only tells whether the customer is satisfied or not.

Wong and Yahyah (2008) conducted research on the influence of brand loyalty on consumer sportswear. This research set out to investigate how the respondents are influenced by factors of brand loyalty towards sportswear brands. The analysis was conducted using ANOVA and Pearson Correlation to test the hypothesis and the results show that there was a significant, positive relationship between customer satisfaction and customer loyalty.

2.3.2 Value

According to Foster (2006) value is created through seeking to understand the needs of your customer and how cross-functionally your company can fulfill those needs. Although the value is often seen from a financial perspective, there are many other ways to demonstrate the value, such as higher quality, higher speed and greater productivity. Real value is established by repeatedly delivering what your customer expects regardless of who in the organization is providing the service. By providing a great experience with the right customers companies can, over time, experience improved financial performance and more loyal customers.

Oliver (1999) conducted an analysis on value as excellence in the consumption experience. He proposes a numerological net model depicting satisfaction and value as existing both prior to consumption as well as post-consumption. It is expected that these structures coexist and influence each other, as well as the outcome variables such as loyalty, as consumers make judgments of consumption over time. The result shows that there was a significant relationship between value and customer loyalty.

2.3.3 Resistance to Change

Furthermore, market research should be used to monitor consumers, competition, and changes in the environment that may affect a company’s brand (O’Malley, 1991). This gives the company the advantage of knowing how their brand compares with the competition and how it fits into the big picture. It also helps to prevent brand switching. The extant literature in resistance to change generally accepts that commitment is central to relationship marketing (Morgan and Hunt, 1994). Pritchard et al. (1999, p. 334) define commitment as “. . . the emotional or psychological attachment to a brand”. The authors extend the considerations of commitment to the argument that the resistance to change is the trend following the commitment and the primary evidence of commitment. The authors further evidence that resistance to change is a key antecedent for loyalty.

Taylor, Celuch and Goodwin (2004) examined the importance of brand equity to customer loyalty. In this research, product value is one of the known antecedents used to test the relationship between customer loyalty and resistance to change in the heavy equipment industry. The analysis was carried out with structural equation analysis using LISREL. The results show that there was a strong relationship between resistance to change and customer loyalty.

2.3.4 Trust

Trust and commitment are considered as the center of the constructions of relationship marketing. Commitment influence the choice of the buyer, seller, and trust is a key factor in this process (Ganesan 1994). In fact, commitment and trust are fundamental to any discussion of business relationships, and encourage the exchange of partners working to preserve the relationship and achieve mutual benefits (Morgan and Hunt 1994). Once a relationship is established, a high level of commitment and trust in the sales representative may impact brand loyalty (Garver and Flint 1995).

Deepak, Jagdip and Barry (2002) tested consumer trust, value and loyalty in relational exchange. The authors developed a framework for understanding the behaviors and practices of service providers that build or deplete consumer trust and the mechanisms that convert consumer trust into value and loyalty in relational exchanges. In this research, they used descriptive analysis, restricted factor analysis (RFA) and multiple equations to test the relationship and the result shows that there was a significant relationship between trust and customer loyalty.

2.3.5 Affect

In addition, different approaches and explanations have been proposed by a few scholars who have attempted to enlighten us on the effects of a corporate brand on consumer perception. Most of these studies have, however, focused on the way companies set their branding strategies (Nizar, Norizan and Heung, 2006). In simple terms, a brand is an entity that offers to customers and other relevant parties of added value based on factors beyond their functional performance. These added values, or values of the brand, differentiate the offer and provide the basis for preference and customer loyalty.

Taylor, Celuch and Goodwin (2004) examined the important of brand equity to customer loyalty. In this research, trust is one of the known antecedents used to test the relationship between customer loyalty and affect in the heavy equipment industry. The analysis was carried out with structural equation analysis using LISREL. The result shows that there was a significant relationship between affect and customer loyalty.

2.4 HYPOTHESES

This article focuses on the effect of brand equity towards customer loyalty. Based on the dimension of brand equity, the hypothesis below has been derived:

H1. Satisfaction has a significant and positive relationship with customer loyalty.

H2. Value has a significant and positive relationship with customer loyalty.

H3. Resistance to change has a significant and positive relationship with customer loyalty.

H4. Affect has a significant and positive relationship with customer loyalty.

H5. Trust has a significant and positive relationship with customer loyalty.

3.0 METHODOLOGY

3.1 The Research Model

Figure 1 shows the research model and the connection between the brand equity dimension (consisting of satisfaction, value, resistance to change, trust and affect) and customer loyalty. This research model was suggested by Wong and Yahyah, (2008); Taylor, Celuch and Goodwin, (2004) and Mittal and Lassar, (1998)

Figure 1: Research Model on the Effect of Brand Equity towards Customer Loyalty.

3.2 The Sample

Sample size was determined based on Krejcie and Morgan (1970). Primary data was collected by using the random distribution method to all FPPSM undergraduates. The structure of the questionnaire is clear, easy to understand, and straightforward to ensure that the respondents could answer the questions with ease. The population in FPPSM is about 1300 undergraduates. Out of this sample population 300 undergraduates in FPPSM, University Technology Malaysia will be randomly chosen to help conduct this research. The respondents may come from 5 different courses, which include Management of Marketing, Management of Technology, Management of Human Resource, Psychology and Accounting.

Table 1: Profile of the respondents

Demographic Variables

Frequency

Percentage (%)

Age

17 and below years old

18-20 years old

21-23 years old

24 years old and above

0

57

219

24

0

19.0

73.0

8.0

Gender

Male

Female

83

217

27.7

72.3

Race

Malay

Chinese

Indian

Others

101

177

11

11

33.7

59.0

3.7

3.7

Academic Program

Management of Marketing

Management of Human Resources

Management of Technology

Psychology

Accounting

110

56

88

22

24

36.7

28.7

29.3

7.3

8.0

Year of Study

Year 1

Year 2

Year 3

Year 4 and above

68

109

121

2

22.7

36.3

40.3

0.7

Remarks: Total sample size N=300

3.3 Research Instrument

A set of questionnaires was developed to gather the data for this research. The questionnaire was divided into 3 different sections. In section A, respondents are required to fill in some demographic details consisting of gender, age, academic program, year of study and race.

However, in section B, respondents are required to answer questions related to brand equity, which is divided into satisfaction, value, resistance to change, trust and affect towards customer loyalty. In this section, respondents were asked questions regarding their satisfaction after purchasing Nike products, the value they gain after the purchases, their willingness to change to other products, how Nike affects the respondents to stay loyal, and their degree of trust towards Nike. All the known antecedents will be asked in this section towards the respondents loyalty towards Nike.

Lastly, section C required respondents to answer questions based on customer loyalty to Nike. Based on Figure 2, it summarizes the purpose of each section. In this section, respondents were asked regarding their degree of intention to keep purchasing product from Nike as well as their commitment towards Nike.

Figure: Summary of all three questions

Section

Content

Section A

Demographic information about the respondent.

Section B

Identify relationship between brand equity and customer loyalty

Section C

Identify the customer loyalty towards Nike products.

All the dependent and independent variables in section B and C will be measured using five-point Likert scale ranging from (1 = strongly disagree, 2 = disagree, 3 = neither agree nor disagree, 4 = agree and 5 = strongly agree).

3.4 Data Analysis

A number of statistical analysis methods were employed in this study by using the SPSS 16.0 software package. For example, reliability analysis was used to indicate the measurements for each construct in the observed operational model. In addition, descriptive analysis was employed in this study to access and analyze the respondent’s background and profile. Furthermore, mean and standard deviation were employed in this study whereby mean was used to measure the central tendency of distribution and standard deviations were used to help the researcher understand how clustered or spread the distribution is around the mean value.

Another statistical method used was Pearson correlation to examine the relationship between the factors that influence customer loyalty. Finally, multiple regressions were employed in this study to develop a mathematical relationship between two or more independent variables and an interval-scaled dependent variable.

4.0 RESULTS

Cronbach alpha was derived to evaluate the consistency and stability of measurements across time and various items in the instrument. According to Nunanally (1978), only an alpha of 0.7 and above is acceptable. In this research, the reliability test was conducted to measure the five independent variables which consist of value, trust, satisfaction, resistance to change and brand affect together with one dependant variable, customer loyalty. Table 2 shows the Cronbach alpha for all variables.

Table 2: Summary of Cronbach alpha for all variables

No.

Variables

No. of Item

Cronbach’s Alpha

1

Value

3

0.851

2

Trust

7

0.889

3

Satisfaction

8

0.916

4

Resistance to Change

3

0.873

5

Affect

4

0.880

6

Customer Loyalty

8

0.922

Table 3 shows the five independent variables inside the questionnaire and the result from the respondents. Five point Likert scale has been used to test the independent variables. Based on the result, trust appears to be the highest value in brand equity dimension followed by value. However, according to Lau et al. (2006), in a different environment or country, factors that affect customer loyalty tend to be different.

In Table 4, the result obtained was in the range of 0.596 to 0.777 for the Pearson’s Correlation analysis. The result shows that brand equity (value, trust, satisfaction, resistance to change and affect) has a strong positive relationship with customer loyalty. Based on the result, we can define that satisfaction has the highest relationship with customer loyalty with value of 0.777 followed by affect with a value of 0.742. The third highest value is that of resistance to change with a value of 0.721 followed by trust with a value of 0.675. Lastly, the score for value is 0.596. As a conclusion, we can say that brand equity has a positive relationship with customer loyalty.

Table 3: Ranking Dimension of Brand Equity

Dimension of Brand Equity

Rank

Mean

Value

Nike offers good value for the price I paid.

Nike provides the customer with a good deal.

I consider Nike to be a bargain for the benefit I am receiving.

2

Mean average

3.41

3.52

3.38

3.44

Trust

I trust Nike products.

I rely on Nike products.

The Nike product is dependable.

Nike is honest towards the customers.

Nike is a safe company to conduct business with.

Nike is trustworthy.

I believe Nike does not take advantage of its customers.

1

Mean average

3.75

3.25

3.47

3.49

3.58

3.53

3.21

3.47

Satisfaction

Nike offers products that exceed my highest expectation.

Nike products are among the best I could have bought.

The products offered by Nike are exactly what I need.

My choice to buy this Nike product was wise one.

I am satisfied with my decision to buy Nike product.

I am sure that it was the right thing to do to buy the Nike product.

Using this Nike product has been a good experience.

I have been delighted with the Nike products.

3

Mean average

3.32

3.28

3.26

3.29

3.41

3.39

3.36

3.43

3.36

Resistance to Change

I am not willing to change Nike to other brands.

It would be difficult to change my belief towards Nike.

Even if others recommended another product, I would not change my preference on Nike that I am evaluating.

5

Mean average

2.87

2.97

2.87

2.90

Affect

When I think about Nike, I feel good about it.

When I think about it, I am happy knowing that I made the decision to purchase Nike products.

When I think about it, it gives me pleasure knowing that I made the decision to purchase the Nike product.

When I use Nike products, I feel like I want to repurchase other Nike products.

4

Mean average

3.40

3.38

3.28

3.23

3.32

Table 4: The Pearson Correlation Coefficient Result

V

T

S

RC

A

CL

Value (V)

1

Trust (T)

.681**

.000

1

Satisfaction (S)

.673**

.000

.759**

.000

1

Resistance to Change (CL)

.478**

.000

.541**

.000

.630**

.000

1

Affect(A)

.655**

.000

.714**

.000

.801**

.000

.633**

.000

1

Customer Loyalty(CL)

.596**

.000

.675**

.000

.777**

.000

.721**

.000

.742**

.000

1

Multiple regressions is a method that is used to test the relationship between the dependent variable and the independent variables. It also used to identify the hypothesis of the research. Table 4.14 shows the regression result on the effect of brand equity towards customer loyalty which consists of the relationship between value, trust, satisfaction, resistance to change, and affect. There will be a relationship between value, trust, satisfaction, resistance to change and affect if the p-value is less than 0.01.

Based on the result, we can define that value and trust demonstrated no significant positive relationship with customer loyalty. However, resistance to change, satisfaction, and affect shows a significant positive relationship with customer loyalty. From Table 4.14, the beta value for resistance to change (0.334) shows the strongest relationship with customer loyalty, followed by satisfaction (0.332). Lastly, affect also shows a significant relationship with customer loyalty with beta value of 0.176.

Table 5: Linear Regression Result on the Effect of Brand Equity towards Customer Loyalty.

Brand Equity

Customer Loyalty

Beta (β)

Significant

Value

Trust

Satisfaction

Resistance to Change

Affect

Adjusted R2

0.035

0.093

0.332**

0.334**

0.176**

0.708

0.447

0.077

0.000

0.000

0.002

F Statistic

Sig. F

145.894

0.000

**P-value < 0.01

** Correlation is significant at the 0.01 level (2-tailed).

5.0 CONCLUSION

Based on the result, satisfaction, resistance to change and affect demonstrate a relationship with customer loyalty. This result is supported by previous research done by other researchers. Wong and Yahyah (2008) conducted research on the influence of brand loyalty on consumer sportswear which also showed that there was a significant relationship between satisfaction and customer loyalty. In addition, Taylor, Celuch and Goodwin (2004) examined the importance of brand equity to customer loyalty. The result also supports that there was a significant relationship with resistance to change and customer loyalty. Furthermore, the result on relationship between affect and customer loyalty is also supported by the research done by Taylor, Celuch and Goodwin (2004) on brand equity to customer loyalty. As a result, three hypotheses were supported by previous research.

However, the hypothesis on value towards customer loyalty was rejected based on the result of this research. This result was supported by the research conducted by Taylor, Celuch and Goodwin (2004) on brand equity to customer loyalty. The result also showed that there was no significant relationship between value and customer attitudinal loyalty. In addition, customer loyalty can be divided into behavioral and attitudinal loyalty. But in this research, customer loyalty was being tested in general. Therefore, the result shows that value has no significant relationship with customer loyalty even though many other research efforts have shown that there was a relationship between value and customer loyalty. In addition, all respondents were from FPPSM, UTM. Therefore, the result may not as accurate as other previous research which was conducted in a larger population.

Moreover, the hypothesis on trust and customer loyalty was also rejected. This is because some of the respondents knew and had heard about Nike, but they had not purchased or used Nike products before. Therefore, they did not have any experience with Nike. In addition, all the respondents are undergrads in FPPSM, UTM. Therefore, they may not have the ability to buy Nike products due to the price. As a result, trust has no significant relationship with customer loyalty.

In addition, based on the result of multiple regressions, the adjusted R square is 0.708 or 70.8 percent. Therefore, it implies that the research model being used was sufficient enough to test the relationship between brand equity and customer loyalty. As a result, future research on brand equity towards customer loyalty can be conducted using the same model.

6.0 RESEARCH LIMITATION AND FUTURE RESEARCH

A potential limiting factor in this study could be the respondents of this research because most respondents were taken from FPPSM and the result can only be applied among UTM students. In addition, all findings which are described in this study are only applicable to NIKE. So, the findings might not be applied to other brands such as Adidas, Joma, etc. Furthermore, the small sample size in FPPSM may not be representative of the whole population in Malaysia. Therefore, the findings cannot be applied to other locations.

Further research can be conducted using a larger sample to enhance the quality of response that the research questions generate. In addition, future study is recommended to extend the studies in other industries such as food and beverage, heavy equipment, and automobile/automotives. In addition, future researchers are recommended to include more independent variables to test the result in order to get a higher value on adjusted R square.

Cite This Work

To export a reference to this article please select a referencing stye below:

Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.

Related Services

View all

DMCA / Removal Request

If you are the original writer of this essay and no longer wish to have your work published on the UKDiss.com website then please: