CHAPTER 2 THEORITICAL FOUNDATION

Transcription

1 CHAPTER 2 THEORITICAL FOUNDATION 2.1 Conceptual Framework of Brand Equity The framework of this research is based on the conceptual framework of brand equity presented by Yoo, et al., (2000) that appears in figure 2.1 by incorporating the relationship between country-of-origin image and brand equity. The independent variable in this model is country-of-origin image, while the mediating variable is the dimension of brand equity, and the dependent variable is brand equity. A conceptual framework of brand equity Figure 2.1- Conceptual framework of brand equity 15

2 16 Figure 2.2- Mediating effects of dimensions of brand equity on brand s country-of-origin image brand equity relationship Brand equity s Figure 2.2 shows how individual dimensions of brand equity are related to the brand equity. The antecedent of brand equity is related to brand equity through the mediation of the dimensions of brand equity. According to Aaker (1991), brand equity formation consists of four dimensions as can be seen in figure 2.2 such as brand awareness, brand loyalty, perceived quality, and brand associations. Therefore, in order to analyze the brand equity, the relationship between the formation of brand equity and brand equity, and the relationship between the antecedents and brand equity dimension, the researcher should to examine all the factors. 2.2 Brand Equity Brand equity refers to the differential consequences that brand knowledge has on customer response to the brand marketing. Brand has positive brand equity when the

3 17 customers of that brand react more favorably to a product or service. Additionally, customers might be more pleasurable to a new brand extension, less sensitive to price increase or decrease, withdrawal of advertising support, and have more willingness to find the brand in a new distribution channel. Otherwise, the brand has negative brand equity if the customers react less favorably to marketing activity for the brand compared with unnamed version of the product (Keller, 2008). According to Bello and Holdbrook (1995), brand equity can appears when the customer is willing to pay more expensive for the same quality level of the product based on the attractiveness of the product s name. According to Keller (2008), brand specialist, brand equity can be developed if the customer has a high level of awareness with the brand and holds some strong, positive impressions and unique brand associations in their mind. Brand equity was formed by four elements such as brand-name awareness, brand loyalty, perceived brand quality, brand associations and other brand assets (competitive advantage) (Aaker, 1991). Furthermore, the original definition of brand equity refers to the value that added to the brand endowed by its name. Recent writings about brand equity have expanded its definition to include a broad set of attributes that drive customer choice (Yoo et al., 2000). Regardless from its definitions, brand equity lies in the minds of customers or consumers that already experienced and learned about the brand of products and services. Brands that have strong brand equity will give many advantages to the company. In addition, consumers have willingness to a brand when they are loyal to one brand of product or service. They will do a free promotion of the brand by spreading the

4 18 performance of that brand to their relatives and friends through worth of mouth. Marketing Science Institute defined brand equity as the value that added by the name in the market with better profit margins. Customers and the channel members can view the brand equity as both a financial asset and a set of favorable association and behavior. Consumer behavior is the processes involved when individuals or groups of people choose, buy, use, or dispose of products, services, ideas, or experiences to fulfill their needs and wants (Solomon, 2007). Nowadays, country-of-origin becomes one of important factors in purchasing process. Generally, people usually rate their own country s products or services more favorably that do people who live elsewhere, in addition they rank product or services from developed country better that the one from developing country (Solomon, 2007). However this theory does not really illustrate the Indonesian market. In several service industries such as bank, Indonesian people prefer the foreign bank rather than Indonesian bank; it is supported by the many foreign bank rather than local bank in Indonesia. For instance, when they want apply credit card or open the saving account, they would consider the foreign banks more than local banks. This happens because foreign banks have more variety of products and special offers such as low rate of credits, and discount in using their credit card. In brief, the researcher can conclude that brand equity is additional value that the brand has because of the customer perception of the brand.

5 Brand Equity Dimensions and Brand Equity Based on Aaker s dimension of brand equity (see Figure 2.3), there are four formations of brand equity such as brand loyalty, brand awareness, perceived quality, and brand associations. Thus, this research contains empirical study on the relationship between each of the dimensions of brand equity (brand loyalty, brand awareness/associations, perceived quality, and brand distinctiveness) and brand equity. The stronger these dimensions are the higher in resulting brand equity (Agarwal and Rao, 1996). According to Aaker (1996) brand loyalty is an important consideration when placing the value on a brand that is to be sold, because high number of loyal customer will generate high sales and margin for the company. Then, brand equity establishes big value on brand equity. In the literature brand loyalty has two categories which are behavioral loyalty and attitudinal loyalty (Mellens, Dekimpe and Steenkamp, 1996 and Aaker, 1991). Figure 2.3 Aaker s dimension of brand equity Source: Building strong brand (Aaker 1991, 1996) Value of the firm Marketing efforts Dimensions of brand equity Brand equity Value of customer The second asset of brand equity is brand awareness. Aaker (1996) defines brand awareness as the power of a brand s presence in the consumer s thought. In addition, awareness is measured based on the various ways in which customers

6 20 remember and recall a brand of products or services. The more dominant the brand the higher the level of awareness, it will increase the probability of the brand being considered in many purchase decisions. According to Aaker (1991), brand awareness may result in brand equity in four (4) ways such as creating brand node in customer s memory, providing impressions of familiarity of the brand in customer s mind, acting as a signal of trust in the brand and being enough reason for the customer to consider the brand in his/her consideration set. Then, brand awareness arises from customer s exposure to a brand. Brand associations. Aaker (1991) defined brand associations as anything linked in the memory to a brand ; the same author said that brand associations might include products attributes, a celebrity endorser, or a particular symbol. In addition, Keller (1993) classified brand associations in three (3) categories such as attributes, benefits, and attitudes. Thus, each experience with the brand establishes and modifies the individual s association (Keller, 2003), and there are different classifications in relation to its relationship to product features, both tangible and intangible, type of customer, lifestyle, and so on The third asset of brand equity is perceived quality. Consumers expect quality today more than ever before. To offer quality is a demand on company to satisfy their customers. For companies offering good quality means differentiating from competitors, in other words, quality is important things as company s competitive advantage (Parasunaman et al., (1985). The best way for a brand to increase perceived quality is to invest in improving its real objective quality. Perceived quality is a brand associations that is elevated to the status of a brand asset for several reasons such as only perceived

7 21 quality has been shown to drive financial performance, perceived quality is associated to and often drives other aspects of how a brand is perceived, and perceived quality is often a major strategic thrust of a business (Aaker, 1996). In the case of brand association, there are several factors to contemplate in order to analyze and to measure perceived quality, such as durability, reliability, appearance, performance, serviceability, and so on (Parasuraman, et al., 1985). Unlike the quality of customer goods, which can be measured by tangible indicators as durability and number of defects (Garvin, 1983), service quality is an abstract and elusive construct because of its typical characteristics. Therefore, an appropriate approach for assessing the quality of a service is to measure consumer s perceptions of quality. According to Gronroos (2001), there are several criteria of good service quality such as; Professionalism means that customers should realize that service provider; the employees also have the knowledge and skills to solve their problem in a professional way. Reliability show that customers can trust to the service provider, its employees and systems. Service provides the physical surrounding and other aspects of the environment to support a positive experience of the service process. Reputation and credibility mean that the service provider s business can be trusted and gives adequate value for money. Brand distinctiveness as the last aspect of brand equity is defined as cues stored in memory that a brand identifiable (Gaillard, et al., 2005). Distinctive cues, or brand

8 22 elements as labelled by Keller (2005), consist of logos, colour, graphics, taglines, typeface, packaging, celebrities and music. 2.4 Brand s Country-of-origin image and brand equity Country of origin effects incorporate to the reputation, the image, and the formula that marketers and customers attach to products of a specific country, this image may result from representative products or services, national characteristics, economic and political background, history and traditions (Nagashima, 1970). Then, according to Cateora, Gilly, and Graham (2009), the country-of-origin effect can be defined as any influences that the country of manufacture, assembly, or design has on a consumer s positive or negative perceptions of a products or services. In addition, there are four subdimensions of country-of-origin such as country-of parts, country-of-assembly, countryof-design, and country-manufacture (Chao, 1993). National reputation for its products or services is different from one country to another. Customer tends to generalize their way of thinking and judgment across products from a given country, based on their familiarity and background with the country and their personal experiences of product attribute such as technological superiority, product quality, design, and value for money, status and esteem, and credibility of country of origin of a brand (Kinra, 2005). Many countries have become famous for expertise in certain product categories or for conveying a particular type of image. The customers have broad though about specific countries and specific product or service categories that they judge best such as English tea, Italian suit, German car, or Thai massage (Cateora, Gilly, and Graham

9 ). Stereotyping of this nature is typically product specific and may not extend to other categories of products from other countries. From these studies, marketers and consumer behavior researchers generally accept that a product s or brand s country-of-origin is an important influencing factor in consumer decision-making (Khachaturian and Morganosky, 1990). Most of the previous studies suggest that country-of-origin information which is demonstrated by the Made in... label serves several purposes in consumer decision making. It acts as an outstanding attribute in consumer product evaluation (Johansson, 1989), activates consumer s interest in the product (Hong and Wyer, 1989), influences behavioral intentions through social norms (Fishbein and Ajzen, 1975) and buyer behavior through affective processes as in the case of consumer s patriotic feelings about their own country (Han and Terpstra, 1988). The overall evaluation of products is influenced by country stereotyping, that is, the image that consumers have about a certain country will influence their perceptions of products from that country (Bilkey and Nes, 1982). Since consumers perception of a particular country-of-origin influence their evaluation of products from that country, this will influence their preference, purchase intention and choice of a particular brand. Obviously, this has implications on the brand s equity. 2.5 Services Services were classified into two categories, first mere services which are very little or not linked to goods and second in services which are connected with the product (Harms, 2002). Services differ from goods in many ways. The fundamental difference is intangibility. Service cannot be seen, felt, tasted or touched in the same manner in which goods can be sensed. Therefore services are an experience many services industries such

10 24 as financial services or telecommunication are facing increasing competition, so they try to establish strong brands not only in the market, but also in the head of customer. 2.6 Country-of-origin in a service context Although there are many researches about services, most of that research was conducted in a local context ( Fisk et all. 2008). In addition, an experiential service is the service that individuals can evaluate based on what they feel and get from experienced the service, on the other hand credence service is the service that individuals was difficult to evaluate after experiencing the service. In this study, the researcher support the Yasin, Noor, & Mohammad s findings that there country-oforigin image has a positive impact on brand equity dimensions and brand equity. While this paper focused on consumer product such as electronic appliances, the researcher of this study will be using a banking service for evaluation. In addition, there are several proposed hypothesis of this study such as; H1. (a) Brand distinctiveness (b) Brand loyalty (c) Service Perceived Quality, (d) Brand awareness / Associations will have a positive relationship with brand equity. H2. Brand s country-of-origin image will have a positive relationship with (a) Brand distinctiveness (b) Brand loyalty (c) Service Perceived Quality, (d) Brand awareness / Associations. H3. Brand country-of-origin image will have a positive relationship with brand equity through the mediating effects of (a) Brand distinctiveness (b) Brand loyalty (c) Service Perceived Quality, (d) Brand awareness / Association