The Three Main Drivers Of Customer Equity Marketing Essay

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5/12/16 Marketing Reference this

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Brand equity is a good indicator of whether the brand is powerful or not (Aaker 1996; Berry 2000; Keller 1993). Therefore, a brand with effectual brand equity could increase a consumer’s trust of intangible buying, make tangible the intangible aspects of goods, and reduce the perceived risk of the service purchase by helping customers in visualising and comprehending insubstantial features of the service product (Berry 2000). Based on literature, brand equity can be identified with two perspectives: the marketing and the financial perspective (Motameni and Shahrokhi 1998). Brand equity in the 1980s, as seen from the financial perspective, was viewed as a method that gave managers guidance in understanding brand enhancement (Myers 2003). From the financial perspective, brand equity has been measured by the financial market value of the firm such as incremental cash flow (Simon and Sullivan 1993), stock prices (Montameni and Shahrokhi 1998), brand earning weights based on historical data (Kapferer 2002), and acquisition decisions (Mahajan, Rao and Srivastava 1994).

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Later in the 1980s, brand equity in the marketing literature was seen as two distinct directions: consumer perceptions (i.e., awareness and image) and consumer behaviour (i.e., brand loyalty). From the marketing perspective, brand equity has been measured by a consumer oriented approach, which recognises brand value to both consumers and companies (Park and Srinivasan 1994; Yoo and Donthu 2001). The studies of brand equity have been shown to affect price premium, market share, firm performance, purchase intentions, brand reputation, and brand extensions (Fombrun and Van Riel 1997; Reynolds and Gutman 1984; Baldauf, Cravens and Binder 2003; Farquhar, Han and Ijiri 1991; Kim and Kim 2004; Aaker and Keller 1990).

Many researchers have studied brand’s impact and significance in marketing (Aaker and Keller 1990; Grewal, et al. 1998; Hoeffler and Keller 2003; Keller 1998; Yoo and Donthu 2001). According to Lemon, Rust and Zeithaml (2001) and Rust, Zeithaml and Lemon (2000), brand equity has three actionable sub-drivers, namely, brand awareness, attitude toward the brand, and corporate ethics. However, Yoo and Donthu (2001) proposed that brand equity has four dimensions, i.e. brand loyalty, brand awareness, perceived quality of brand, and brand associations. Keller (1998) compressed these dimensions into two broad categories; brand awareness and brand image. Brand awareness is further divided into brand recall and brand recognition, whereas, brand image into favourability, types, strength, and uniqueness of brand associations (Keller 1998). Similarly, brand association is divided into attributes, benefits, and attitudes (Keller 1998). According to Johnson, Herrmann and Huber (2006) brand equity has a direct influence on behavioural intentions and mediates the influences quality and satisfaction has on intentions. Aaker (2004) and Keller (2003) pointed out that the important attribute of brand equity is the personal identification of consumer with the brand. Keller (2003) highlights two main consumer related constructs of brand equity; brand knowledge and brand responses. Brand knowledge is defined in conditions of brand image and awareness, while brand response is identified with consumer preferences, perceptions, and behaviour arising from the marketing mix (Keller 2003). Likewise, Berry (2000) categorised brand equity into brand awareness and brand image.

A well-known theoretical model presented by Aaker (1991) incorporates five brand equity dimensions: brand loyalty, brand awareness, perceived quality, brand associations, and other proprietary assets. Yoo, Donthu and Lee (2000), Yoo and Donthu (2001), and Washburn and Plank (2002) suggest that Aaker’s brand equity frame work may work better with the following three dimensions: perceived quality, brand loyalty, and brand associations with awareness. These scholars combined Aaker’s (1991) brand associations and brand awareness, and deleted other proprietary brand assets. Finally, Yoo, Donthu and Lee (2000) proposed a three dimension model of brand equity through the employment of rigorous statistical treatments. Using a survey representing 12 different brands, exploratory factor analysis was used to identify the factors involved; confirmatory factor analysis was used to more rigorously assess the constructs; and structural equation modelling was used to estimate the parameters of the structural model with brand equity as the higher order factor and the three dimensions of brand equity (perceived quality, brand loyalty, and brand associations with awareness) as the second order factors. Washburn and Plank (2002) concluded that, “a three factor model that groups together brand awareness and brand association items provides the most parsimonious model” (p. 58). They further explain that there is a “clear distinction between brand awareness and brand associations” (p. 59), and that must be kept in mind before deciding on a three or four factor dimension of brand equity.

An emerging debate is whether brand equity can be thought of from a customer standpoint or a market viewpoint or both. If we analyse Aaker (1991, 2004) brand equity dimensions, where the main focus is on five brand properties, namely, perceived quality, brand knowledge, brand loyalty, brand associations, and other resources such as trademarks. It gives a clear impression that the main focus is on customer perspective and ignore market oriented standpoint. Even though, these five categories are the main basis of measuring brand equity (Aaker 1991, 2004). It can, however, be concluded, from the arguments in the literature, that brand equity is a consumer oriented approach that recognises both consumers and companies.

Irrespective of the standpoint (customer standpoint and market stand point), from the dimensions discussed above, the most commonly used to explore the findings of marketing and consumer behaviour research in relations to brand equity are brand awareness, brand loyalty, and brand image (Barwise 1993). However, Lemon, Rust and Zeithaml (2001) and Rust, Zeithaml and Lemon (2000) also emphasised on attitude toward the brand and corporate ethics as important actionable drivers to brand equity. It is, therefore, imperative to understand these actionable drivers of brand equity, in light of the literature.

Brand awareness is defined as, “the tools under the firm’s control that can influence and enhance brand awareness, particularly marketing communications” (Lemon, Rust and Zeithaml 2001, p. 22). It is also considered as “the ability for a buyer to recognise or recall that a brand is a member of a certain product category” (Aaker 1991, p. 61). Many studies have addressed the impact of brand awareness in different industries, for example, logistics (Davis, Golicic and Marquardt 2008), market research (Wuyts, Verhoef and Prins 2009), personal computers (Hutton 1997), and semiconductors (Yoon and Kijewski 1995). However, Johnston and Lewin (1996) and Lewin and Donthu (2005) argue that organisational behaviour depends on many situational characteristics and brand equity is influenced by many sub-drivers. Aaker (1991, p. 109) explicates brand awareness as “anything linked in memory to a brand” in the mind of customers. Some researchers proposed that brand awareness consists of brand recognition and recall, while considering it an important driver to influence brand equity (Keller 1993; Rossiter and Percy 1987). Davis, Golicic and Marquardt (2008) argue that brand awareness is likely to play an important role in driving brand equity in business markets, especially; many business firms focus their branding activities merely on the dissemination of the brand name and the logo without developing a more comprehensive brand identity (Court, et al. 1997; Kotler and Pfoertsch 2006). It is further argued by scholars (see Keller 2003; Power, Whelan and Davies 2008) that brand awareness is important in building strong brand equity. However, the creation of brand awareness i.e. the ability to recognise or recall a brand, is the key element of branding strategy (Munoz and Kumar 2004; Celi and Eagle 2008) and an important factor that impact brand equity.

Brand loyalty, another important driver of brand equity, can be defined as “the attachment that a customer has to a brand” (Aaker 1991, p. 39). It refers to the propensity to be loyal to a particular brand and the intention to give priority to that brand over others (Oliver 1997, 1999). Yoo and Donthu (2001, p. 3) further explain brand loyalty as “the tendency to be loyal to a focal brand, which is demonstrated by the intention to buy the brand as a primary choice”. Scholars used repeat purchase behaviour to measure brand loyalty which assumes that past purchase decisions will be an indicator of future purchasing decision (Knox and Walker 2001). This measure, however, is able to capture the behavioural aspects of brand loyalty; they are not able to account for the attitudinal aspects (Agrawal 1996; Raju, Srinivasan and Lal 1990).

Studies on brand loyalty as a sub-driver of brand equity range from models that assume all consumers prefer a brand (Raju, Srinivasan and Lal 1990; Agrawal 1996; Lal and Villas-Boas 1998) to other that assume market share are driven by the cheapest brand (Narasimhan 1988; Knox and Walker 2001; Jing and Wen 2008). Research conducted by Johnson, Herrmann and Huber (2006) suggest brand repurchase actions i.e. loyalty, vary with time. These researchers found that satisfaction with service quality provided by the retail experience has more influence on the repurchase intention early in the relationship, whereas satisfaction with the product itself has a larger impact later in the relationship. Opposite to the brand loyal customers are those who are disloyal and can harm the image of the brand and ultimately, the organisation. A unique approach was adopted by Slotegraaf and Inman (2004) in their research on disloyalty. Disloyal customers are considered those who do not purchase regularly, those who switch to other brands or service providers, and those who are not yet committed (Slotegraaf and Inman 2004). The purpose of their research was to describe what aggravates loyalty and disloyalty in consumers’ attitudes and behaviours. The resultant model identifies those who are neutral and uninterested (disengaged loyal), those with negative attitudes but positive repurchase behaviour (disturbed loyal), those with both negative attitude and negative behaviour (disenchanted loyal), and those with strong negative attitude and behaviours (disruptive loyal) (Slotegraaf and Inman 2004). Finally, they conclude that disloyalty can damage the brand and impacts the brand equity negatively.

Attitude toward the brand refers to “the extent to which the firm is able to create close connections or emotional ties with the consumers” (Lemon, Rust and Zeithaml 2001, p. 22). It is also an important actionable driver of brand equity and firms can build it by influencing the customer’s emotional connections to the brand, and the customer’s associations with the brand (Rust, Zeithaml and Lemon 2000). The role of media and direct marketing is undeniable in influencing the customers’ attitude toward the brand. Ajzen and Fishbein (1977), Oliver (1980, 1981), and Sheppard, Hartwick and Warshaw (1998) conducted many studies on the consumer attitude in consumer behaviour, witnessing the similarities between brand loyalty and attitude toward a brand. A firm can influence customer’s attitude towards the brand by focusing on some of the important actionable sub-drivers, which includes, a) communication message; developing an ongoing perception of the brand, b) special events; creation of special opportunities for the customer to develop brand associations, c) brand extensions; using the same name in different product categories, d) brand partners; selection of another company to share the brand, e) product placements; carefully embedding advertisement in the well known programmes, and f) celebrity endorsements; attaching a well known person figure with the brand (Rust, Zeithaml and Lemon 2000).

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The last important factor is corporate ethics that affects the brand equity. It can be defined as the specific actions a company takes such as; community sponsorships or donations, firm privacy policy, and employee relations etc, which can have a positive impact on customers’ perceptions of the firm (Lemon, Rust and Zeithaml 2001; Rust, Zeithaml and Lemon 2000). During the late 1980’s researchers in marketing examined corporate ethics codes to determine the extent of marketing content in these documents (Murphy 1995). Robin, et al. (1989) analysed the content of over 80 ethics codes and found three main clusters; be a dependable organisational citizen, don’t do anything unlawful or improper that will harm the organisation, and be good to your customers. Numerous other studies can be found in the literature on corporate ethics and its impacts, in several industries (Lagace, Dahlstrom and Gassenheimer 1991; Robertson and Anderson 1993). These scholars argue that customers are much concerned about the impact of organisations on the environment, whereas, activities like sponsorship and charity by an organisation are critical to the evaluation of the brand.

Brand, particularly those that are high in brand equity can be named as organisations’ most powerful assets (Lichtenstein, Ridgway and Netemeyer 1993). Similarly, brand equity has been identified as a valuable source of competitive advantage for many organisations (Aaker 1997; Cobb-Walgren, Ruble and Donthu 1995). High brand equity can not only lead to customer satisfaction and customer loyalty but organisations with high brand equity can create differential advantage (Ghazizadeh, Besheli and Talebi 2010). Bharadwaj, Varadarajan and Fahy (1993) further emphasise on the importance of brand equity in milieu of services industry such as airlines and banks. The literature substantiates that survival and success of organisations are highly dependent on customer satisfaction and loyalty. The more loyal the firm’s customers, the less vulnerable it is from its competitors; this in turn, allows it to implement successful strategies to generate value (Anderson and Sullivan 1993). It is also imperative to create high brand equity in order to achieve the success and survival desired (Ghazizadeh, Besheli and Talebi 2010). In other words, to satisfy the customer in the best possible way, as it a necessary condition for customer retention and it also assists in realising economic goals like sales turnover and profit revenue (Cobb-Walgren, Ruble and Donthu 1995; de Chernatony and Dall’ 1999a). Mittal, et al. (2005) also agree by stating a positive connection between customer satisfaction and long-term financial performance. Further, Cespa and Cestone (2004) conclude that if an organisation aim to improve its brand equity, marketing strategies should focus mainly on satisfying the customers.

According to Ghazizadeh, Besheli and Talebi (2010) brand equity positively influence customer satisfaction and customer loyalty, which is why, it is necessary to seriously evaluate factors that are important in creating strong brand equity. In a similar manner, Pappu and Quester (2006) empirically examined the impact of customer satisfaction on brand equity. They used four dimensions of brand equity proposed by Aaker (1991, 1996) namely, brand awareness, brand associations, perceived quality and brand loyalty, and tested their impact on customer satisfaction in retail settings. These sub-drivers (Aaker 1991, 1996) of brand equity positively influence customer satisfaction (Pappu and Quester 2006). In context of brand awareness, both high satisfaction and dissatisfaction levels can generate strong associations in consumers’ minds towards the brand because brands possess images (Chowdhury, Reardin and Srivastava 1998; Steenkamp and Wedel 1991) which itself create a set of associations in consumers’ mind (Keller 1993), ultimately satisfying or dissatisfying them. However, it is reported by Pappu and Quester (2006) that satisfaction has a positive impact on association leading towards strong brand equity.

Another sub-driver of brand equity; perceived quality is believed to have a high correlation with customer satisfaction (Bitner and Hubbert 1994; Olsen 2002). Scholars (see Sivadas and Baker-Prewitt 2000; Anderson, Fornell and Lehmann 1994; Bitner, Booms and Mohr 1994) found positive relationship between service quality and satisfaction, confirming the positive relationship between brand equity and customer satisfaction. Finally, mixed evidence can be found in extant literature in the relationship between satisfaction and loyalty. Cronin and Taylor (1992), Woodside, Frey and Daly (1989), Dabholkar, Shepherd and Thorpe (2000), and Yang and Peterson (2004) found positive relationship between satisfaction and loyalty. Whereas, Sivadas and Baker-Prewitt (2000) found no relationship and Van Looy, Dierdonck and Gemmel (1998) found weak correlations between satisfaction and loyalty. Despite this, there is a belief that satisfied customers are often loyal and that they engage in repeat business (Cronin and Taylor 1992; Homburg and Giering 2001).

Loyalty is a sophisticated construct (Taylor, Celuch and Goodwin 2004). Oliver (1999, p.33) states that, “it is time to begin the determined study of loyalty with the same fervour that researchers have devoted to a better understanding of customer satisfaction”. Loyalty can be defined as “a deeply held commitment to re-buy or re-patronize a preferred product/ service consistently in the future, thereby causing repetitive same brand or same brand set purchasing, despite situational influences and marketing efforts having the potential to cause switching behaviours” (Oliver 1997, p. 392). Further, Keller (1998) acknowledges that loyalty has historically often been measured simplistically through repeat purchase behaviours. He also argues that customer loyalty can be viewed more broadly than reflected by simply purchase behaviours. Customer loyalty is different from brand equity and can be defined as, “the differential effect that brand knowledge has on consumer response to the marketing of that brand” (Keller 1998, p. 45). A brand possesses positive customer based brand equity when customers react more favourably to a product and the way that it is marketed as compared to when it is not (Keller 1998). Brand can also possess negative customer based brand equity, expressed when customers react less favourably to the marketing activities associated with a brand, as compared to an unnamed or fictitious named version of the product (Taylor, Celuch and Goodwin 2004).

It is also evident that one of the characteristics of brands possessing strong brand equity is stronger brand loyalty (Keller 1998). Aaker (1991) illuminates that brand loyalty can be considered both as a dimension and an outcome of brand equity, confirming the impact of customer loyalty on brand equity. However, a recent research in the hotel industry conducted by Ahmad and Hashim (2010) conclude that there is no direct relationship between brand equity and customer loyalty. They further conclude that satisfaction mediates the relationship between brand equity and loyalty. Finally, Taylor, Celuch and Goodwin (2004) conclude that brand equity positively influence customer loyalty. They also state that “brand equity and trust appear the two most influential influences on both behavioural and attitudinal loyalty” (Taylor, Celuch and Goodwin 2004, p. 222). So, from the arguments of the literature, there seems to have a positive relationship between brand equity and customer loyalty.

It is obvious from the rush of publications and growing research that the linkage between brand equity with customer satisfaction and customer loyalty is of much interest to the researchers, but limited research on the relationship between brand equity and share of wallet can be found. However, it is also noticeable that only those companies can get a high share in the wallet of their customers who are successful in satisfying their customers and struggling to make them loyal to the company or/and brand (Cooil, et al. 2007). Abdullah, Al-Nasser and Husain (2000) emphasise on linking customer satisfaction and brand image, a brand equity dimension, with the measurement instrument to the ultimate loyalty criteria. They further suggest that a good measure of customer loyalty is a customer who gives a greater share of their wallets to their high-value brands or service providers, hence highlighting the impact of brand equity on share of wallet.

Keiningham, et al. (2005a) recommend that brand centric and customer centric systems should work in tandem to maximise positive outcomes. When a customer become more satisfied with the company, they are likely to spend more money with that company which means a greater share of their wallet (Keiningham, et al. 2005a, 2005b). Similarly, the stronger a customer’s preference for a brand is, the greater the customer’s share of spending allotted to that particular brand will be (Keiningham, et al. 2005a, 2005b), confirming the impact of brand equity on customer’s share of wallet. Finally, the research by Keiningham, et al. (2005a) is worth mentioning where they examined whether or not the relationship between brand preference and share of spending varies as a result of changes in satisfaction. They found that share of spending increases as satisfaction increases, likewise, as brand preference become more positive, customer share of spending (share of wallet) also goes up, but when satisfaction increases in conjunction with brand preference, the impact on share of spending (share of wallet) is twofold (Keiningham, et al. 2005a).

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