Abstract

Introduction

One of the most valuable assets that companies have are the brands that they have

created, invested in, and nurtured. Gone are the days when firms believed that their

factories and other physical assets like land and machinery were their most valuable

assets. Brands are rising in the value hierarchy of assets. Whilst the physical assets of

Hindustan Lever Limited (HLL) are worth around Rs 2370 crores, hs market value is

much higher at approximately Rs 115000 crores (as on 20"̂ September 2012) owing

mainly to the value contributed by hs strong brands like Wheel, Lux, Lifebuoy, Surf

Excel, Kissan, Lipton, Liril, Fair & Lovely, Close Up, Pepsodent, Sunsilk, Denim,

Axe and Rin. The same is the case with companies like Cadburys, Parle Industries,

Pepsico, Marico Industries, ITC and Coca Cola. This is very evident as companies

are paying much larger sums to buy brands than to buy physical assets. HLL paid Rs

130 crores for Lakme's brands and only Rs 32.5 crores for their 2 manufacturing

plants. Philip Morris bought the Kraft brand for $ 12.9 billion and Nestle acquired

Rowntree for $ 4.5 billion. Companies are in essence buying the valuable brand

equity of these brands, built painstakingly over many decades. Creating (or buying)

and developing this brand equity over a period of time is invaluable due to the

enormous returns that it provides a business.

What is Brand Equity?

Brand equity is regarded as a very important concept in business as well as academic

circles owing to the competitive advantage marketers can gain from it. High equity

brands benefit companies by providing them opportunhies for successful extensions,

an ability to withstand competitor's promotional pressures and erection of barriers to

entry of competition.

A review of literature on brand equity shows that an agreement of some sort exists

amongst practitioners and researchers at a conceptual level so to what is brand equity.

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Several authors have defined brand equity in a way similar to that by David Aaker as

"a set of assets and liabilities linked to a brand, its name and symbol that adds to or

subtracts from the value provided by a product or service to a firm and / or to that

firms customers." Basically brand equity stems from the confidence that consumers

place in a brand than they do on competing brands, this confidence translating into

their brand preference, loyalty and willingness to pay a premium price.

Brand equity has also been the subject of the research attention of many over the last

couple of decades (Aaker 1991, Keller 1993, Farquhar 1989, Srivastava & Shocker

1991, Park & Srinivasan 1994). Researchers have examined brand equity from each

of the two different perspectives - a customer-based and a financial or firm-based

perspective. The latter perspective deals with the financial asset value that the equity

of a brand has for a business and is also known as brand value. A number of methods

of assessing the financial value of the brand have been tested and are currently widely

used.

Customer-based brand equity occurs when the consumer is aware of the brand and

holds some favorable, strong, and unique brand associations in the memory. Unlike

the firm-based approach to brand equity, which provides very little usable information

for brand managers, the customer-based approach provides insights that are

convertible into actionable strategies. This study focused only on customer based

brand equity.

Need for the study

The conceptualization of CBBE by Keller (1993), and Srivastava & Shocker (1991)

concur in that they view it as consisting of the awareness of the brand by the

consumer and the associations that the consumers hold in their minds of the brand

(known as brand image or brand strength). For example, a consumer may associate

Surf with detergent powder, Lalitaji, the colour blue and lightning. However, these

conceptualizations hold good only for product brands and are not equally applicable

to service and corporate brands. Even though there is an agreement on what

consumer-based brand equity (CBBE) is and the realization of its importance to

business, there is no consensus on the dimensions of CBBE (Christodoulides & de

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Chematony 2010). Moreover, though there are several studies that have attempted to

measure CBBE, there is no universally accepted measurement approach. Also, new

developments in marketing and branding such as seminal work in brand relationships

by Foumier (1998), emotions in branding (Ahuvia 2005) and consumer experiences of

brands (Schmitt 1999); are facets that have not been included in any of the previous

brand equity conceptualizations and measurement approaches.

Practical Utility of the Study

This study will be able to create a holistic, all-encompassing conceptualization of

brand equity that will enable brand marketers to better understand the various facets

of the equity of their brand, measure the impact of every action/ strategy they execute

for the brand on its equity (like manipulations of the marketing mix, positioning and

re-positioning, extension of the brand).

Objectives

The objectives of this study are:

1. to improve upon previous conceptualization of consumer based brand equity

(CBBE) by including new facets of CBBE by incorporating elements from recent

developments in marketing and branding such as the relationships that consumers

have with their brands (including love/ hate for some brands) and the experiences

they have shared with their brands.

2. Development and validation of a scale for measurement of brand equity as

conceptualized by this study (as per objective 1). These will empirical test the

model of CBBE that we would develop. We planned to develop a reliable, valid

and parsimonious CBBE measurement scale.

Hypothesis

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• Existing frameworks on brand equity have focused on product brands and are not

suitable for use to understand the structure of brand equity of service, corporate, and

virtual brands.

HI: Brand equity is contextual in nature - the context (category to which the brand is

extended to, the cultural context & the situational context) will influence the degree to

which individual components of the brands equity will be an asset or a liability.

H2: Dimensions of brand equity for a product, a service, and a corporate brand need

not be the same.

• Consumers make their decisions of the basis of cognition (rationality) and affect

(feelings/ emotions). None of the conceptualizations of brand equity include

feelings/ emotions aspect of brand equity. In recent years some efforts have been

made to understand the relationship a consumer shares with the brand (Foumier

1998).

H3: Brand equity is also composed of affective dimensions and not merely cognitive

dimensions.

• In addition to awareness, knowledge, perception and relationships (emotions) that

customers have of brands, their exposure and consumption to and of brands also

results in an experiential association with the brand that adds or subtracts value of

the brand, i.e contributes to its brand equity. These experiences can be our 5 types

- Sense, Feel, Act, Think, & Relate (Schmitt 1999) and would contribute to the

brands equity.

H4: Consumer experiences (sensory, emotional, cognitive, relational and action-

related) with respect to the brand will have an impact on brand equity and will form

an important component of brands equity.

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Research Methodology used

Scale development:

Step 1: Literature Survey

An exhaustive survey of literature was undertaken. The literature survey comprised of

3 broad areas:

Brand equity: Literature review comprised of an exhaustive study of papers published

on understanding brands, brand equity, the difference between consumer based and

firm based brand equity, and understanding the various measurement approaches.

New developments affecting brand equity: Literature survey was done in 4 domains:

brand relationships, brand love and emotional attachment to brands, experiential

marketing, and customer equity. All these 4 areas are today widely acknowledged as

being important to understanding and managing brands and their equity.

Scale development methodology: Various books, journal articles and website were

used in understanding scale development, procedures for item generation, selection of

brands and pre-testing of brands for inclusion in the study, content validation,

construct validation, criterion validation, testing of questionnaire validity, sampling

design and implementation, data reduction (factor analysis) and hypothesis testing.

A large inventory of measurement items were generated from variety of previous

scales for measuring brand equity. New items were generated from literature on

experiential marketing, brand relationships, and emotions in branding (like brand love

and brand loyalty) and customer equity.

Step 2: Scale development & Testing

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Focus Groups & Depth Interviews were used to generate an exhaustive Hst of

measurement items that constitute the equity of a brand - this was added to the list

generated from literature survey.

Step 3: Classification of measurement items & Content Validation of scale

Content validity: As expected, the list of measurement items was very large (76) and

also there was an overlap amongst many measurement items. In consultation with my

guide and also other academic experts the overlap amongst measurement items was

reduced/ eliminated and the items will be broadly classified into categories. This step

took care of content validity of the scale. The final scale consisted of 34 measurement

items.

Step 4: Designing for Construct validity

To ensure convergent validity (i.e. whether the scale developed by us measures brand

equity or not), we chose Yoo & Donthu's (2001) Overall Brand Equity (OBE) scale

which is comprised of 4 measurement items and 2 'attitude to brand' measurement

items, both of which are accepted measures of brand equity. This brought the total no.

of items/ questions to which the consumer had to give a response to 38 items.

Step 5: Selection of brands across categories for the study

It was decided to select a total of 4 brands for the study. These would consist of one

diversified corporate brand, one service brand, one utility product brand and one

lifestyle product brand. In order to select one brand in each category, a 2 step method

was used:

a) We administered a short questionnaire consisting of one table and few

demographic details to 228 respondents. Each respondent was asked to list

down the top 4 brands that came to their mind for a total of 10 products/

services (the 10 categories were washing powder, clothes, shoes, car,

cellphone service provider, diversified corporate group, bank, courier,

watch and electronics). Brands that had the highest recall were selected. Of

these 6 brands were selected for the second step of brand screening/

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selection. These 6 brands were Surf Excel (washing powder - utility

product), Titan (watch - lifestyle product), Maruti (car - lifestyle product),

SBI (bank - service), Blue Dart (courier - service), and Tata (diversified

corporate - corporate brand). We decided to include Maggi (noodles -

utility product) and Reliance (diversified corporate) as additions to the list

of 6 brands we got from the brand selection study since we wanted to

include at least 2 brands from each of the 4 brand categories we wanted to

study (utility product brand, lifestyle product brand, service brand,

diversified corporate brand). We tested the brand awareness of these

brands amongst a total of 114 MBA students at the Goa Institute of

management and found 100% brand awareness/ recognition for these 2

brands. Our objective in stage 2 was to narrow down our final choice to

one brand per category.

b) The brands to be selected for the final study would be brands that had high

brand equity (we had already shortlisted brands based on high brand

awareness). Each of our original 228 respondents were once again

contacted to respond to 4 identical statements for each of the 8 brands -

these 4 statements comprised the Overall Brand equity scale developed

and validated by Yoo & Donthu (2001). The response recorded was vide a

5 point Likert scale (from strongly disagree to strongly agree). Based on

the results of this survey, the brand having higher overall brand equity was

chosen from each of the 4 categories was chosen. The chosen brands were

SURF EXCEL, SBI (State Bank of India), TITAN and TATA.

Step 6: Data collection and scale reliability

The questionnaire was pilot tested and finalized. Four separate versions of the

questionnaire were made (each questionnaire incorporating 2 brands - i.e. each

respondent responded to all 38 items for 2 out of the 4 brands). The respondent would

have to respond to each of the 34 scale items (plus 4 OBE scale items): these items

were presented to the respondent in the form of a statement, for example: "I trust this

brand"; to which the will respond on a 5 point Likert scale from strongly disagree (to

the statement) to strongly agree. In the first phase of data collection, data was

collected from a total of 210 MBA students from the Goa Institute of Management.

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Each student was asked to respond to the 38 item questionnaire (plus some basic

demographic data) for 2 brands (106 students responded to Tata and Surf Excel and

104 students responded to Titan and State bank of India). This data was factor

analysed using exploratory factor analysis to find an initial solution. The item

ThinkCreative was dropped after analysing the factor analysis output. Moreover, it

was realized (and confirmed by doing further literature review) that responses to the

brand awareness and brand associafion items (a total of five items) were like that of

categorical variables resulting in a yes/ no (rated 5 for aware and 1 for not aware)

kind of response. Hence it was decided after discussion with experts to reduce these

items from 5 to only one categorical item (that would not be used in subsequent factor

analysis). This resulted in the scale shrinking from 34 to 29 items. We also decided

(after discussion with other researchers) to include additional items to measure

concurrent validity. We added one item measuring purchase intention (an outcome of

brand equity). Since sample sizes required would be large for each brand, we decided

to drop one brand (Surf Excel) from the study at this stage.

In the next stage, further data collection of non-student samples across the country

was done through 228 MBA students (from 22 states). The number of complete

responses received was (including responses from phase 1): Titan - 285 responses,

SBI - 258 responses, and Tata- 263 responses.

Step 7: Factor analysis - data reduction, development and testing of the scale

The collected data was entered into SPSS and exploratory factor analysis was run.

The results were analyzed and interpreted.

Sample size adequacy: In the case of each of our 3 brands, the sample size was in

excess of 145 (and a rafio of approximately 9 respondents per factor). The sample

adequacy ratios (KMO test) also showed sample size adequacy in each of the 3

brands.

The questionnaires were tested for reliability (the Cronbach's alpha for Tata, Titan

and SBI questionnaires were 0.940, 0.945 and 0.965; which were all higher than the

required 0.70 (Nunally 1978)). A Cronbach's alpha value of over 0.90 shows

excellent internal consistency of the instrument/ questionnaire.

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In all the three factor analysis solutions (one for each of the three brands: Tata, Titan

and SBI), the goodness of fit of the model was found.

Findings

Since we had removed Brand awareness and Brand Association items from the scale -

the factor analysis was run with a total of 28 variables/ items. Exploratory factor

analysis (principal component analysis using varimax rotation with Kaiser

normalization) resulted in the 4-factor model for each of the 3 brands used in the

study (Tata, Titan & SBI). The four factors identified in addition to brand awareness

& Brand associations were brand loyalty, perceived quality, brand relationships and

brand experiences.

Thus, factor analysis confirmed empirically our proposed model of CBBE as

consisting of 6 dimensions: Brand Awareness, Brand Associations, Perceived Quality,

Brand Loyalty, Brand Relationship & Brand Experiences. The first four components

of this model (Brand awareness, brand associations, brand loyalty and perceived

quality) have long been established by a variety of researchers (Srivastava &Shocker

1991, Lassar et al. 1995, Vazquez et al. 2002, Yoo & Donthu 2001, Pappu et al. 2005,

Washburn & Plank 2002, Rajasekhar & Nalina 2008). Our contribution has been the

addifion of 2 new dimensions to CBBE: brand relationships & brand experiences.

Hypothesis testing

In this study it was hypothesized that brand equity is also composed of affective/

emotional/ feelings dimensions (Hypothesis 3). This has been observed and proved in

the case of all the 3 brands (Titan and State Bank of India). Hence, we accepted

hypothesis 3.

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We also hypothesized that the experiences consumers have experienced with or of

their brands adds to the brands equity (Hypothesis 4). This has been also been

observed and proved in all the 3 brands. Hence, we also accept hypothesis 4.

It was hypothesized that the dimensions of brand equity for a product, a service and a

corporate brand need not be the same (Hypothesis 2). This is quite clear from the

differences in the importance of the 4 factors (measured by % of variance explained

by the factor) in the case of the diversified corporate (Tata), product (Titan) and

service (SBI) brands. Moreover, the items that have loaded onto each of the factors

are different for each of the 3 brands. Hence, we also accept hypothesis 2.

We have not been able to test hypothesis 1. It was realized during execution of the

study that the number of variables to be tested in hypothesis 1 (product category

extension, culture and situation) are too exhaustive and would involve multiple

country, multiple category and multiple extensions scope and thus would be difficult

to accomplish.

Construct Validity

Convergent Validity

Does this model actually measure Brand Equity (i.e convergent validity)? To measure

convergent validity we had introduced various measures in our questionnaire. These

were:

• Overall Brand Equity - using the 4 item scale developed and tested by Yoo &

Donthu(2001).

• Attitude to Brand - a single measure of the overall attitude towards the brand.

The correlation was done between measures of brand equity (Overall Brand Equity

and Attitude towards the Brand) with a weighted score calculated for each factor/

component of brand equity scale. The impact of the components of our brand equity

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scale on levels of brand equity was found to be (using Pearson's coefficient of

correlation).

We were able to establish convergent validity for each sub-dimension for each of the

3 brands in our study.

Discriminant Validity

We were also able to demonstrate discriminant validity (i.e. all the dimensions/

constructs are distinct from each other) by comparing average intra-dimension

correlation with inter-item correlations.

By establishing both convergent and discriminant validity, we have demonstrated

construct validity.

Criterion Validity - Concurrent Validity

Criterion validity tests whether the measure from our scale (brand equity) is able to

predict expected outcomes of equity such as sales, purchase intention, purchase

intention etc. In our study we had collected consumer purchase intentions for the 3

brands.

A regression between the purchase intention (dependent variable) and the four

dimensions (independent variables) from our scale revealed that the four dimensions

(brand loyalty, perceived quality, brand relationship & brand experiences) are

predictors of purchase intention. Thus, we were also able to establish concurrent/

criterion validity.

Recommendations

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This study adds to the existing body of knowledge in understanding and measuring

Consumer-Based Brand Equity (CBBE). Moreover, this is also the first study to be

developing a conceptual model for CBBE that is applicable not only to products, but

also to services. Both of our contributions have many implications for marketing

managers and academic researchers which we have highlighted in the following

recommendations section.

• Brand Awareness - Improving Brand salience

Brand awareness is an integral dimension of our model of brand equity. The

implications for marketing managers are in terms of increasing the salience of the

brand through choice of memorable brand names and also by increasing the visibility

of the brand.

• Role of Brand Associations

The recall of the brand logo and other brand characteristics emerged as important sub-

dimensions of this construct. The implications of this for marketers are the focus they

need to put on brand elements such as the logo, color, packaging elements, and font

style.

• Perceived Quality - beyond products to services

This has been established and understood by industry as being the backbone of any

product brand. However our study included not only a lifestyle durable (and tangible)

brand such as Titan watches but also a diversified corporate brand like Tata and a

service brand like State Bank of India. Interestingly, while in the case of both Titan

and Tata 3 perceived quality items/ sub-dimensions loaded onto the perceived quality

factor, in the case of the service (SBI) all the 5 items loaded onto the factor. This

means that perceived quality is much more important in services than even in tangible

products. Thus, marketers must concentrate on convincing consumer about quality,

the consistency of quality, the functional performance of their brand, and the superior

features.

• Brand Relationships - Implications for Brand Positioning

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•

The benefits of strong consumer-brand relationship for brands (and firms that own

these brands) is increased brand loyalty, better perceived brand experiences,

positively biased consumer reactions to the brand including the brands ability to

endure crisis. While brand managers have desired to build good relations with their

consumers, they haven't been able to see a connect between brand relationships and

brand equity (owing to the research in the area of consumer equity). The

recommendations arising out of the incorporation of brand relationships (and its sub-

dimensions) is that now brand managers can identify the individual drivers of brand

equity such as familiarity with the brand, feel comfortable with the brand, and trust

and try and incorporate these in the brands positioning and advertising.

• Brand Loyalty - Brand that consumers love

Brand love literature goes one step further to suggest that strong brand relationships

such as brand love result in high brand loyal consumers. Brand love is built on

intimacy, commitment to the brand, and passion. Brands can enjoy high levels of

loyalty from their consumers if they can incorporate these elements in their brand

architecture and communication. Brand relationships if managed well will mature into

brand love and this will lead to brand loyalty and its resultant rewards.

Staging Brand Experiences

Products are made & sold, whereas services are delivered. Brand experiences go

beyond delivery, they are staged. The experience economy has been thriving in some

industries, particularly the hospitality industry. Theme restaurants earn substantial

premiums, preference and consumer loyalty over other restaurants that serve similar

food minus the accompanying experience. This also is the case with hotels like the

experience at the Ritz Carlton & the best in the experience business have been theme

parks such as Disneyland which market experiences. These same practices can be and

have been extended to regular products and services. The more the unique positive

experiences brands can build for their consumers, the higher are the rewards they

stand to gain. Thus we recommend that marketers make their consumers associate

their brands with as many senses (sight, sound, smell, touch, & taste) to build the

sense experience (and differentiate from competition). They should also stage

cognitive, action, emotional and self-identity connect experiences for their consumers.

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• Using the CBBE measurement scale

Marketing managers, brand managers & sales managers usually have annual sales

(and profit) targets which they strive to achieve. It is important for these managers to

be able to achieve these sales targets without eroding the brands equity (or better,

while increasing the brands equity). This is what they attempt to do but they are in the

blind as to whether they have been able to achieve the objective of managing the

brands equity well. This is primarily because they are unable to easily measure brand

equity since it is a relatively complex affair that involves an external agency (brand

consultancy like Millward Brown, Landor Associates, or WPP) and complex

statistical calculations. Our scale being a reliable, valid and simple to use scale to

measure CBBE (we have mentioned earlier that it is a simple paper-and-pencil scale).

This scale would be invaluable for these managers to study the impact of their various

marketing actions on the brands equity and will significantly improve their ability to

manage their brands.

• Academic research implications

Our study has been a pioneer in converging 3 important research areas in marketing -

consumer-based brand equity, brand relationships and experiential marketing. We

have empirically proven that these 3 constructs are closely related. So far these three

streams have been independent areas of research (there have been a couple of studies

looking at the relationship between brand experiences and relationships; some other

studies studying the interrelationship between brand relationships and love and brand

loyalty) and we recommend & expect researchers to study in depth the various

interrelationships between these 3 constructs.

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