The impact of customer experience on brand equity in a business-to-business services setting

Transcription

1 Original Article The impact of customer experience on brand equity in a business-to-business services setting Received (in revised form): 9 th November 2009 Galina Biedenbach is PhD candidate and lecturer at Ume å School of Business, Ume å University, Sweden. She has previously worked as a marketing manager in the telecommunication industry. She teaches principles of marketing at undergraduate level and consumer behavior and business-to-business marketing at graduate level. Her research interests include corporate branding and marketing strategy. Agneta Marell is Professor of Marketing at Ume å School of Business, Ume å University, Sweden. She is the former Dean of Ume å School of Business and a board member of the number of business companies and governmental organizations. She has previous consultancy experience with organizations such as SCA Hygiene Products, Kraft Foods, BioAlcohol Fuel Foundation. She teaches consumer behavior, marketing management, market analysis at graduate level. Her research interests include consumer decision making, marketing strategy and branding. She has published in Journal of Economic Psychology, Journal of Retailing and Consumer Services, Transportation Research, among others. Correspondence: Galina Biedenbach Ume å School of Business, Ume å University, Ume å, Sweden. galina.biedenbach@ usbe.umu.se ABSTRACT The main purpose of the study is to investigate the impact of customer experience on brand equity in a business-to-business (B2B) services setting. The conceptual model illustrates the impact of customer experience on the formation of brand equity, which is assessed through a hierarchy of effects between brand awareness, brand associations, perceived quality and brand loyalty. Structural equation modeling is used to test the proposed model in the B2B setting. The findings of the study indicate that customer experience has a positive effect on the four dimensions of brand equity. The study provides marketing managers with a clear understanding of how customer experience affects brand equity in the B2B context. The study portrays the importance of creating a positive customer experience through a direct interaction of customers with the company and its brand. The study advances the current state of knowledge by analyzing the impact of customer experience on all dimensions of brand equity and by including a hierarchy of effects between different dimensions in one conceptual model. Journal of Brand Management (2010) 17, doi: /bm ; published online 18 December 2009 Keywords: brand equity ; customer experience ; business-to-business ; brand management

2 Brand equity in a B2B services setting INTRODUCTION The formation and enhancement of brand equity are vital for company s success in the contemporary business environment. 1,2 High levels of positive brand equity acquired by strong brands result in customers willingness to pay a price premium, recommend the brand and consider offered brand extensions, which in turn create opportunities for generating higher revenues. 3 6 Brand equity is assessed through a set of dimensions including brand awareness, brand associations, perceived quality and brand loyalty. 1,7 However, little research has been conducted on the structural composition of brand equity and the potential hierarchical order of these dimensions. Being in the core of business success, brand equity and its management have acquired attention among marketing practitioners and researchers. 8 Marketing activities in the business-tobusiness (B2B) setting have traditionally focused on building a brand image through such attributes as delivery, price and technology. 4 The increasing importance of intangible attributes forces marketing managers to search for new ways of differentiating offered goods and services, and consequently creating brand equity. 9 This challenge of creating brand value is crucial for products which are similar and standardized. In a service setting, other factors such as customer-organization interaction have a strong impact on the formation of brand image. 10 The current trend in differentiating goods and services, and hence enhancing brand equity is to create engaging and lasting experiences for customers. Considering specific characteristics of services, the interaction that takes place between employees and customers plays an important role in creating the experience, which consequently enhances brand equity. 14 A limited number of studies relating the concept of experience to different outcomes of branding strategies indicate the relevance of experience for developing brand equity. Empirical evidence from previous branding research shows that customer experience created as a result of customers interaction with the brand has a direct impact on brand attitudes, brand choice for subsequent purchases, 18 and an indirect effect on overall brand equity by having an impact on brand meaning. 19 In addition, prior findings illustrate that customer experience affects overall attitudes, beliefs, judgments and behavior of customers. 20,21 Even though some studies indicate the potential role of experience for the development of brand equity, the impact of experience on brand equity has not been explicitly addressed in previous research. The assumptions that the strength of a brand lies in the consumer mind and depends on what customers have learnt about the brand as a consequence of their direct experience, 22 reveal the need to further explore the impact that customer experience has on brand equity. The main purpose of this study is to investigate the effects that customer experience has on brand equity in a B2B services setting. This study makes a theoretical contribution by addressing the gap in the branding literature, which relates to the lack of studies examining how customer experience affects brand equity. Furthermore, the study advances the current state of knowledge by including a hierarchy of effects between the brand equity dimensions in the proposed conceptual model. Despite one exploratory study, 23 previous studies conducted in the B2B and businessto-customer (B2C) contexts did not consider the potential effects that can occur between brand awareness, brand associations, perceived quality and brand loyalty. This approach makes it possible to evaluate not only the direct impact of customer experience on the specific dimensions of brand equity, but also its indirect effects, which occur in the process of brand equity 447

3 Biedenbach and Marell creation. In addition, the study contributes to current research in the B2B context by providing additional empirical evidence on brand equity of professional business services. THEORETICAL FRAMEWORK Brand equity The classical conceptualization developed by Aaker 1 determines brand equity as a set of brand assets and liabilities linked to a brand, its name and symbol, that add to or subtract from the value provided by a product or service to a firm and / or to that firm s customers. Underlining customers brand knowledge as a core of brand equity, Keller 22 specifies brand equity as the differential effect that brand knowledge has on consumer response to the marketing of that brand. Based on this customerbased brand equity conceptualization, the essential dimensions of brand equity are brand awareness, brand associations, perceived quality and brand loyalty. 1 Brand awareness indicates customer s capability to recall or recognize a brand. 1 Brand associations portray image dimensions that are positive, favorable and unique to a brand. 7,22 Perceived quality reflects upon the customer s perception of the overall quality or superiority of a product or service with respect to its intended purpose, relative to alternatives. 1 Brand loyalty indicates the customer s attachment to a particular brand. 1 The conceptual foundations of brand equity refer to the applicability of this concept across different contexts including both B2C and B2B markets. 7,22 However, branding research conducted in the B2B setting did not examine explicitly interrelationships between the initial dimensions comprised in the brand equity concept. 1 With exception of the first study of brand equity of industrial products, 23 other studies focusing on B2B goods explore the presence of brand equity, its additional sources and benefits. 4,6,24,25 The first exploratory study of B2B brand equity not only provides evidence of brand equity existence in the B2B context, but also demonstrates the evolutionary nature in the formation of brand equity dimensions. 23 Based on the studies of industrial products, the main dimensions of brand equity in the B2B market are perceived quality and brand loyalty expressed through buyer s willingness to recommend a brand. 4,6,24,25 Brand awareness and brand associations are found to be relevant in some specific industrial markets, 24,25 where brand associations in some cases are declared to be insignificant for B2B brand equity. 25 The studies focusing on B2B services provide empirical evidence supporting Keller s 2 conceptualization of brand equity. The quantitative study in the logistic services market 26 and the qualitative study in the market of electronic tracking systems for waste management 27 provide support for the initial dimensions of brand equity such as brand awareness and brand image. 2 Another study in the financial services category considers elements of both conceptual models 1,2 and one of the modified models 28 tested in the B2C context. 29 Taylor et al 29 include only some of the brand equity dimensions in the model with perceived quality having an indirect effect on overall brand equity and loyalty measured through intentions and being a consequence of overall brand equity. The recent findings of the study conducted in the professional services market indicate the applicability of the multidimensional brand equity model developed by Aaker 1 in the B2B setting. 30 The study investigates all four dimensions of brand equity included in Aaker s 1 model and examines the psychometric properties of the applied brand equity scale. 30 Based on recent findings in both B2C 31 and B2B research, 30 and the propositions 448

4 Brand equity in a B2B services setting Figure 1 : Customer Experience H5 H6 H4 H7 Conceptual framework. Brand Awareness Brand Associations Perceived Quality Brand Loyalty stated in the evolutionary model of B2B brand equity, 23 this study includes the hierarchical effects between different brand equity dimensions in the proposed model (see Figure 1 ). Based on Aaker s 1 conceptualization, brand equity is assessed through four dimensions: brand awareness, brand associations, perceived quality and brand loyalty. According to the exploratory study by Gordon et al, 23 brand equity evolves from brand awareness to brand loyalty, more specifically brand awareness makes an effect on brand associations, and consequently brand associations affect brand loyalty. The hierarchy of effects between the different dimensions of brand equity proposed by Gordon et al 23 has not been examined empirically in a complex brand equity model. However, a number of studies conducted in the B2B setting indicate the existence of causal relationships between the specific constructs representing different dimensions of brand equity. Brand awareness as being a necessary condition for establishing a brand node in memory has a positive effect on the formation of strong and unique brand associations in customers memory. 2 In the B2B context, brand awareness is important not only for differentiating between different alternatives, but also for developing a strong and positive brand image reflected in positive brand associations The overall H1 H2 H3 awareness of a service provider is found to be associated to a large extent with a positive predisposition towards the service provider. 32 The differential effects created by strong, favorable and unique associations have an effect on customer decision making by positively influencing their perceptions of firm s performance including service quality. 1,4,33 Previous studies demonstrate that perceived quality can be considered as a main brand equity generating dimension in the B2B context. 4,24 Furthermore, perceived quality is found to be the main antecedent of B2B brand loyalty. 24,25,34,35 Based on the assumed hierarchy of effects between brand equity dimensions, the current study tests the following hypotheses: Hypothesis 1: Brand awareness has a positive effect on brand associations. Hypothesis 2: Brand associations have a positive effect on perceived quality. Hypothesis 3: Perceived quality has a positive effect on brand loyalty. Customer experience With a large number of studies focusing on various types of customer experience, this concept has been thoroughly investigated in consumer research. 11,36,37 Previous studies illustrate the effect of experience on customers attitudes, feelings and purchase intentions. 17,20,38 Furthermore, researchers acknowledge the importance of direct experience for product evaluation. 39 They argue that experience influences customers attitudes and behavior through confirming beliefs, and hence guiding a subsequent behavior Previous research also indicates that direct experience has a disproportionate impact compared to indirect experience on consumer beliefs. 20,42 Findings in prior research consistently confirm that product trial is a powerful tool for the 449

5 Biedenbach and Marell formation of brand beliefs and attitudes, and that brand beliefs derived from direct experience are stronger, held with greater confidence, and are better predictors of behavior than those generated by indirect experience such as advertising. 20,42,43 Despite numerous studies investigating customer experience, a variety of definitions imply different meanings of this concept. 44 Some researchers equal experience to familiarity related to a number of exposures. 39,45 Other researchers exploring experience highlight the importance of knowledge, 21 and an engaging interaction between the customers and the experience provider. 15,46 The act of co-creation between the customers and employees generates a holistic experience that allows differentiating one brand from the other. 14,15,17 Therefore, the concept of customer experience used in this study is based on the notion that experience is the result of the customer s interpretation of his or her total interaction with the brand and perceived value of this encounter. 15,16,46 In the B2B services context, the direct interaction of decision-makers with the service provider is expected to contribute to their evaluation of the received services and the future choice of the company providing these services. The customer experience construct refers in this study to the experience of different members of a decision making unit, who are directly involved in the choice of the service provider, and had a direct experience with the company s employees providing the service. The use of the customer experience construct in different models developed by branding researchers provides limited empirical evidence of the direct effect of customer experience on some dimensions of brand equity, and the indirect effect of customer experience on overall brand equity. Previous studies portray the direct impact of experience on brand loyalty, 18 and brand associations, 19 whereas the indirect impact of customer experience on brand equity is illustrated in the model assessing brand equity through two dimensions such as brand awareness and brand association. 19 In this study, the proposed conceptual model takes into consideration the four dimensions of brand equity proposed by Aaker, 1,7 and examines the direct impact of customer experience on these dimensions of brand equity including brand awareness, brand associations, perceived quality and brand loyalty (see Figure 1 ). Brand awareness is seen as the crucial first step in a customers readiness to develop a brand preference. 47 Because of a more vivid and intentional nature, customer experience causes multiple traces in memory, which lead to higher levels of brand recall and recognition. 36 In case of repeating direct experience, increasing product familiarity and customer expertize enhance the likelihood of brand name recognition and recall. 45 Furthermore in a service setting, personal interaction between the customers and the organization resulting in positive experience creates stronger experiencebased beliefs which have a positive impact on overall brand awareness. 19 Based on these findings, the following hypothesis is proposed in this study: Hypothesis 4: Customer experience has a positive effect on brand awareness. In addition to other sources of information, direct experience is one of the most influential ways of creating strong brand attribute and benefits associations in customers memory. 22 Direct experience from the product trial results in stronger held associations, which allow building brand uniqueness through the interaction between customers and services providers. 48 Positive and favorable judgments formed by customers during their encounter with employees contribute to the formation of positive and favorable brand associations. 22 Moreover, 450

6 Brand equity in a B2B services setting customer experience created during a service encounter and product trial serves as a vital input to brand knowledge since the experiential information subsequently become the basis for product-related brand associations. 48,49 Positive and enjoyable customer experience becomes the foundation for creating positive brand associations. 1 Therefore, the study tests the subsequent hypothesis: Hypothesis 5: Customer experience has a positive effect on brand associations. Many researchers agree that surprisingly little attention has been devoted for understanding the impact of experience on customers perception of service quality. 50 However, recent studies show that perceived performance is closely related to quality perception, hence product trials and degree of experience are essential in an overall quality assessment. 17,32,41,50 In general, the product trial is seen as an important part of individuals learning since it provides evidence that affect the evaluation of product performance. Before experiencing a service or good, customers must evaluate it primarily on the basis of their perception of the brand name. However, once customers have an opportunity to try the pro duct, they receive additional information which is further integrated with their perception of quality. Mudambi et al 9 state that two products may be identical in their success rate, failure rate and performance, but one product could be still rated higher in quality than the other because of prior customer experience. Considering that service quality only exists in the eye of the customers, perceived quality is deemed to be high when high customers expectations are confirmed by subsequent service delivery. 51 When customers expectations are violated, negative experience leads to negative evaluation of perceived quality. 39 Therefore, the assumption that direct experience affects perceived quality leads to the following hypothesis: Hypothesis 6: Customer experience has a positive effect on perceived quality. Organizations aiming to increase customer loyalty and enhance their profitability acknowledge the relevance that a positive customer experience has for achieving these goals. 15 The study of the effects of satisfaction and involvement and the moderating role of experience on brand loyalty in a high risk setting shows that in some professional services, including accounting, an understanding of previous experience with a purchase decision is critical to the development of loyalty. 18 Based on the fact that the main evaluation of a service occurs after consumption, prior customer experience with a service has a substantial impact on brand choice. 52 High and lasting brand loyalty is therefore developed through positive experience with a brand over time. 13,53,54 In parallel, customers learn from their negative experience and avoid these negative interactions by discontinuing the purchasing of goods and services. 1,36 In line with these findings, the study tests the subsequent hypothesis: Hypothesis 7: Customer experience has a positive effect on brand loyalty. METHODOLOGY The professional services industry served as a context for this study. The customer database of one of the Big Four auditing companies in Sweden was used for randomly selecting the respondents. Overall, 4938 companies were included in the sample. Interviews were conducted with the CFOs or CEOs implying that all respondents were directly involved in the choice and evaluation of the auditing company and its services. The respondents had direct 451

7 Biedenbach and Marell Table 1 : Construct measures and scale reliability Construct measures Brand awareness AW1. I can quickly recall the logo of XXX ( 1-strongly disagree 5-strongly agree ) Standardized loadings* one item Brand associations ( ά =0.78; CR=0.78; VE=0.47) a AS1. XXX show empathy ( 1-strongly disagree 5-strongly agree ) 0.63 AS2. XXX are fl exible ( 1-strongly disagree 5-strongly agree ) 0.70 AS3. XXX are reliable ( 1-strongly disagree 5-strongly agree ) 0.68 AS4. XXX are pragmatic ( 1-strongly disagree 5-strongly agree ) 0.73 Perceived quality ( ά =0.71; CR=0.71; VE=0.46) PQ1. How would you evaluate overall quality of XXX services ( 1-very low 5-very high ) 0.79 PQ2. How consistent is quality of XXX services ( 1-very inconsistent 5-very consistent ) 0.67 PQ3. How would you evaluate quality of XXX services compared to quality of services 0.55 provided by their competitors ( 1-much lower 5-much better ) Brand loyalty ( ά =0.72; CR=0.74; VE=0.59) LO1. XXX would be fi rst choice if my company would need auditing services 0.67 ( 1-strongly disagree 5-strongly agree ) LO2. I would recommend XXX services to others ( 1-strongly disagree 5-strongly agree ) 0.85 Customer Experience ( ά =0.86; CR=0.86; VE=0.56) CE1. XXX are interested in learning more about customers and their business 0.70 ( 1-strongly disagree 5-strongly agree ) CE2. XXX listen to my point of view before formulating an opinion 0.70 ( 1-strongly disagree 5-strongly agree ) CE3. XXX care about me as a customer ( 1-strongly disagree 5-strongly agree ) 0.84 CE4. XXX adjust their advice and services to my needs 0.79 ( 1-strongly disagree 5-strongly agree ) CE5. XXX engage themselves with me and my organization for a long term 0.70 ( 1-strongly disagree 5-strongly agree ) a Cronbach s α, construct reliability and variance extracted. * P < experience with personnel of the auditing company. Telephone interviews led to a collection of 669 responses. Overall, 28 per cent of the respondents, who were reached on the telephone agreed to participate in the study. After excluding the questionnaires with high levels of missing data, responses were analyzed with SPSS 15.0 and AMOS 7 statistical software. In line with previous studies, the measures of four constructs representing different dimensions of brand equity were based on Aaker s 1,7 conceptualization of brand equity (see Table 1 ). Other studies employing this conceptualization were used for developing 10 items measuring the dimensions of brand equity The responses were measured on a 5-point Likert-type scale. The measures of customer experience were developed based on previous theoretical conceptualizations of customer experience expressed through the direct interaction of the customers with the brand and the notion of value co-creation through a holistic customer experience ,46 In addition, an expert group of marketing and management executives from the chosen auditing company was interviewed to access their understanding of customer experience. Taking into consideration these findings and theoretical 452

8 Brand equity in a B2B services setting Table 2 : Structural model estimates and fi t indices Effects between constructs Standardized path coeffi cients Conclusion Hypothesis 1: Brand awareness Brand associations 0.02 ( P =0.59) Not supported Hypothesis 2: Brand associations Perceived quality 0.67 ( P < 0.01) Supported Hypothesis 3: Perceived quality Brand loyalty 0.45 ( P < 0.01) Supported Hypothesis 4: Customer experience Brand awareness 0.19 ( P < 0.01) Supported Hypothesis 5: Customer experience Brand associations 0.83 ( P < 0.01) Supported Hypothesis 6: Customer experience Perceived quality 0.16 ( P < 0.10) Supported Hypothesis 7: Customer experience Brand loyalty 0.41 ( P < 0.01) Supported Fit indices χ 2 = df =84 χ 2 / df =3.06 RMSEA=0.06 GFI=0.95 AGFI=0.93 NFI=0.94 CFI=0.96 IFI=0.96 background, the authors developed specific measures reflecting on customers experience with their auditing company and its brand (see Table 1 ). Similarly to measures of brand equity, five items of customer experience were measured on a 5-point Likert-type scale. RESULTS The conceptual model and the proposed hypotheses were tested by using structural equation modeling. In line with the developed model (see Figure 1 ), the interrelationships between four constructs of brand equity dimensions and one construct of customer experience were examined by estimating seven structural paths (see Table 1 ). The reliability of measures was assessed by estimating Cronbach s reliability coefficients. The Cronbach s α coefficients calculated for each construct exceeded the threshold value of 0.7 (see Table 1 ), which indicates reliability of scales used in this study. 55 Based on the developed structural model, additional tests showed that construct reliability was exceeding the level of 0.7 and variance extracted was approximating or exceeding the critical level of 0.5 (see Table 1 ), which provide additional evidence of reliability and validity of the applied measures. 55,61 Fit indices calculated for the measurement model indicated a good fit between the structural model and data 55,61 : RMSEA = 0.06, GFI = 0.95, AGFI = 0.93, NFI = 0.94, CFI = 0.96, IFI = The hypotheses were tested by examining the significance of the standardized path coefficients (see Table 2 ). Considering the paths between the brand equity dimensions, two paths between the brand equity dimensions were statistically significant, the path between brand associations and perceived quality ( P < 0.01), and the path between perceived quality and loyalty ( P < 0.01). One path between brand awareness and brand associations ( P = 0.59) was not statistically significant. With the exception of the Hypothesis 1, the empirical findings indicate a support for the two hierarchical effects stated in the Hypotheses 2 and 3. In relation to the direct effects between the different dimensions of brand equity, the direct effect of brand associations on perceived quality ( β = 0.67, P < 0.01) was larger than the direct effect of perceived quality on brand loyalty ( β = 0.45, P < 0.01). 453

9 Biedenbach and Marell The direct effect of brand awareness on brand associations was not statistically significant ( β = 0.02, P = 0.59). Brand awareness had minor indirect effects on perceived quality ( β = 0.01) and brand loyalty ( β = 0.01). The indirect effect of brand associations on brand loyalty was the largest indirect effect ( β = 0.31). Consequently, the total effect of brand associations on perceived quality ( β = 0.67, P < 0.01) was the largest total effect identified between the brand equity dimensions. The four path coefficients between customer experience and the brand equity dimensions were statistically significant. The causal directions of the estimated path coefficients were in line with the theoretical background showing support for the proposed Hypotheses 4, 5, 6 and 7. The support for the stated hypotheses signified that customer experience had positive significant effects on all dimensions of brand equity. The direct effect of customer experience on brand associations was the largest ( β = 0.83, P < 0.01). A minor direct effect of customer experience was on perceived quality ( β = 0.16, P < 0.10), which was identified at the lower level of statistical significance ( P < 0.10). 56 Customer experience had positive direct effects on brand awareness ( β = 0.19, P < 0.01) and brand loyalty ( β = 0.41, P < 0.01). Customer experience had a minor indirect effect on brand associations ( β = 0.003). The large indirect effects of customer experience were on perceived quality ( β = 0.56) and brand loyalty ( β = 0.33). The consideration of both direct and indirect effects of customer experience on the specific dimensions of brand equity led to corresponding findings, where the largest total effect was identified between customer experience and brand associations ( β = 0.83), and the smallest total effect was found between customer experience and brand awareness ( β = 0.19). The indirect effect of customer experience on perceived quality was larger than the direct effect, whereas in case of the other three dimensions the direct effects of customer experience were larger than the indirect effects. DISCUSSION The study tests and finds a partial support for one of the alternative models 23 portraying the potential hierarchy of effects between the dimensions of brand equity. The lack of empirical support for the relations between brand awareness and brand associations could be explained by the specifics of the context chosen for this study. The recognition of the brand logotype might not be a sufficient measure for brand awareness of auditing services. Additional measures of brand awareness such as brand recall or some other measures of brand recognition might capture the brand awareness dimensions better. The lack of effect could also be caused by indirect and direct effects that customer experience has on the different dimensions of brand equity. Customer experience could modify the strength and the significance of the effects between the dimensions. The positive effect of brand associations on perceived quality corresponds to the findings of prior research. 4,33 Similarly, the positive effect of perceived quality on brand loyalty is in line with previous studies. 24,25,34,35 In contrast to previous findings, the examination of these effects was conducted simultaneously in the current study, which allowed estimating the effects occurring between the four dimensions of brand equity and comparing them to the exploratory model of B2B brand equity. 23 The findings of the study show positive effects of customer experience on the dimensions of brand equity, which complement the theoretical assumptions that brand value perceived by the customers is created as an outcome of their learning from the experience with a brand. 22 The interaction with a brand through a direct contact with the service providers and the outcome of 454

10 Brand equity in a B2B services setting this service serve as a basis for the formation of brand equity. The study follows the propositions that experiential information affects the levels of customers brand awareness and brand associations developed by the customers. 36,45,48,49 Correspondingly, the study supports the propositions from previous research stating that experiential information and learning positively affect the perceived quality of a brand 9,39 and the customers loyalty towards a brand. 1,15,18 Overall, the formation of brand equity across the different dimensions is significantly influenced by the customers evaluation of their contact with the firm, their learning about the brand and the employees representing the brand. CONCLUSIONS The purpose of the study was to investigate the effects that customer experience on brand equity in a B2B services setting. The conceptual model included the hierarchy of effects between the four dimensions, which allowed expanding the empirical analysis beyond the evaluation of the interrelationships between the dimensions. The hierarchical model of brand equity enabled the evaluation of the direct and indirect effects between the dimensions. In line with recent findings in B2C research 31 and the propositions in the B2B context, 23 a hierarchy of effects was found between brand associations, perceived quality and brand loyalty. The effect of brand awareness on brand associations was not significant. The study highlights the importance of further investigating alternative models portraying the hierarchy of effects between the dimensions of brand equity. The study contributes to B2B branding research by conducting an empirical testing of the propositions about the potential hierarchy of effects between the dimensions. 23 This research advances the current knowledge of the relationships between the brand equity dimensions by examining one alternative model of the hierarchical effects between the brand equity dimensions. The main focus of the study was the examination of the direct and indirect effects of customer experience on the four dimensions of B2B brand equity. The findings of this study indicate that customer experience has a positive effect on all dimensions of brand equity such as brand awareness, brand associations, perceived quality and brand loyalty. The study advances the findings from previous research indicating that customer experience affects brand attitudes held by the customers This study highlights the importance that a direct interaction between a customer and a service provider, and the experience formed as a result of this interaction, have on the development B2B brand equity. The study makes a contribution to the field of branding by proposing and examining a conceptual model focusing on customer experience, which was not analyzed explicitly in prior branding research, but was found to have a significant impact on the formation of brand equity in this study. Managerial implications The study provides marketing managers with new evidence demonstrating the importance of integrating the efforts aimed at creating customer experience and sustaining brand equity. In addition to traditional tools such as integrated marketing communications which affect the formation of brand image and consequently brand equity, marketing managers need to consider primary influence that the direct customer experience has on the development of brand equity. The results of this study show that positive customer experience could be an important factor affecting customers brand awareness, brand associations, perceived quality and finally their brand loyalty. Based on these findings, marketing managers should pay more attention on creating more positive customer experience, 455

11 Biedenbach and Marell which consequently could result in more favorable reactions of customers to a brand and in a higher value of this brand in the future. The formation of brand equity is a complex process which requires time and resources. However, by focusing on the important factors that significantly affect brand equity marketing managers could deal with this process in a more efficient way. As this study shows, customer experience is a factor, which affects directly and indirectly the formation of all dimensions of brand equity. Considering the hierarchy of effects between different dimensions of brand equity, marketing managers can see as immediate contribution of customer experience within the formation process of brand equity. Marketing managers would benefit by devoting more resources on creating initial customer experience, which could be considered as an indirect investment to the development of high and positive brand equity. Limitations and future research The conceptual model developed in this study investigates the significance of direct and indirect effects of only one variable, namely customer experience, which makes an impact on the formation of brand equity within the four dimensions. The conceptual model helps to explicitly address the effects that customer experience has on brand awareness, brand associations, perceived quality and brand loyalty. Future studies could expand this view by including other variables that could have a significant impact on the formation of brand equity. As a starting point, future studies could take into consideration the conceptual model developed by Berry 19 implying the effect of marketing communications on brand awareness and brand associations. The impact of marketing communications on overall brand equity and the potential role of customer experience in this inter-relationship could enlarge the current state of knowledge in branding research. The hierarchy of effects between different dimensions of brand equity was based on the exploratory study by Gordon et al. 23 The use of this hierarchy is found to be relevant for an understanding of the effects and formation of overall brand equity. However, the findings show that brand awareness has an insignificant effect on brand associations. Future studies could examine this particular inter-relationship, but also consider other alternative models illustrating the development of hierarchical effects between the dimensions of brand equity. The study was conducted in the professional services industry. The study makes a contribution to B2B research by focusing on brand equity of B2B services, which is one of the under-researched topics in the B2B context. 62,63 The study adds empirical evidence to branding research where so far most attention was given to investigating brand equity of tangible goods rather than brand equity of services. Future studies could analyze the applicability of the model in the B2C context and evaluate the robustness of the model by focusing on tangible goods and other services from both the B2B and B2C markets. REFERENCES ( 1 ) Aaker, D. A. ( 1991 ) Managing Brand Equity: Capitalizing on the Value of a Brand Name. New York: The Free Press. ( 2 ) Keller, K. L. ( 1993 ) Conceptualizing, measuring, managing customer-based brand equity. Journal of Marketing 57 (1) : ( 3 ) Ailawadi, K. L., Lehmann, D. R. and Neslin, S. A. ( 2003 ) Revenue premium as an outcome measure of brand equity. Journal of Marketing 67 (4) : ( 4 ) Bendixen, M., Bukasa, K. A. and Abratt, R. ( 2004 ) Brand equity in the business-to-business market. Industrial Marketing Management 33 (5) : ( 5 ) Cobb-Walgren, C. J., Ruble, C. A. and Donthu, N. ( 1995 ) Brand equity, brand preferences, and purchase intent. Journal of Advertising 24 (3) : ( 6 ) Hutton, J. G. ( 1997 ) A study of brand equity in an organizational-buying context. Journal of Product & Brand Management 6 (6) :

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