Khaled Ibraheem Linking endorsement branding strategy on corporate reputation and brand equity. BBS Doctoral Symposium March 2009

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1 Khaled Ibraheem Linking endorsement branding strategy on corporate reputation and brand equity BBS Doctoral Symposium March 2009

2 Abstract Corporate reputation has attracted the attention of academics and practitioners in the last few years and it is increasingly viewed as invaluable asset (Barnett et al., 2006). It has been argued that a positive corporate reputation can result in a number of advantageous consequences that ultimately facilitate corporate performance. Branding is all about creating unique identities and positioning products and services in the minds of customers thereby distinguishing them from competitors (Ambler and Styles, 1997). Branding strategies refer to the ways firms mix and match their brand s name on their products (Laforet and Saunders, 1999). Branding strategies have two options. Firstly, is to leverage on an existing brand asset. Secondly, is to establish a new brand asset (Aaker, 2004). Different relationships can be established between brands in order to lever an existing brand asset. Endorsement is a branding strategy that capitalises on existing brand names, where each product has its own unique name. Yet the corporate name (or any other master brand) is used to bestow assurance and credibility, at the same time the endorsed brand(s) has the freedom to create their own associations (Kapferer, 1997). Although endorsement branding strategy is widely used by companies, the literature does not consider the reciprocal effects between corporate brand as endorser and endorsed brand equity. Why Previous research in branding has investigated the relationship between dual branding strategies and corporate associations. (e.g. Motion et al., 2003). However, there is no study, to the best of the author knowledge, has investigated the relationship between endorsement

3 branding strategy and corporate reputation. Studying this relationship may reveal the effects of endorsement branding strategy on corporate reputation Second, some researchers (e.g. Dacin and Smith, 1994) have undertaken research on the impact of brand extensions on corporate brand and showed a positive relationship between the number of products affiliated with a corporate brand and the dilution effect on the corporate brand. Although endorsement branding strategy is widely used by companies, the literature does not consider to what extent corporate brand could be used as endorser brand without a diluting impact on corporate reputation. Third, the reciprocal effects between corporate brand as endorser and product brand equity as endorsee is not considered in the literature. In addition, the mechanism underlying the relationship between endorser brand and endorsee brand is still unclear. The current research, in an attempt to fill the above gaps, will investigate the relationship between endorsement brand strategy and corporate reputation. Doing this will add twofold. Firstly, it will add to the marketing body of knowledge (i.e. academic field) more about endorsement strategy. Secondly, it will help marketers in different industries (especially in fast moving consumer goods) to gain more knowledge about endorsement branding strategy.

4 What Corporate reputation Until today, there is no overall agreement over the basic meaning and building blocks of corporate reputation. However, an agreement about the importance and variety of positive outcome that results from favourable reputation is evident (Helm, 2007). For the purpose of this study Fombrun s (1996:72) reputation definition will be adopted as he defined it as; A perceptual representation of a company s past actions and future prospects that describes the firm s overall appeal to all of its key constituents when compared with other leading rivals Determinants of corporate reputation Literature review has revealed that corporate reputation is determined by the following factors. Capabilities and competences Empirical studies have showed a positive relationship between capability and competence with company s reputation. The term capability is being used to describe a company's ability to deal with different combinations of competitive environments whereas competence refers to skills, knowledge, attitudes, and know-how that are central to create value to the company s stakeholders (Long and Vickers-Koch, 1995). Different kinds of capability and competence could be found in extant literature. The relative importance of every capability or competence is varied among companies, and within the same company.

5 Financial performance Firms reputation is heavily influenced by its financial performance, for example, Fombrun and Shanely (1990) showed that profitability (measured by market to book value ratio and return on invested capital (ROIC)) is positively correlated with the companies reputation across industries whereas the level of accounting risk (measured by coefficient of variation) is negatively correlated with reputation Corporate social responsibility Traditionally, the ultimate goal for business is to maximize wealth for its shareholder. Whilst this idea may still be true, company in order to achieve its short and long run goals needs to secure an acceptance and cooperative from several groups of constituents. Waddock and Grave (1997) improved empirically a positive linkage between financial and social performance. They argued that a high degree of social responsibility may there for necessitate a various range of activities. Illegal activity is found to be negatively correlated with firm s reputation, where as charitable giving could be a means by which firm may to some extent restores its reputation following committed an illegal acts (Williams and Barrett, 2000). Media presence and media relation Media presence refers to the frequency of a company appearance in mass media and how it portrays the company to the audiences whereas media relation refers to the relationship that the company nurtured with all forms of mass media. the media themselves act not only as a vehicle for advertising or as a manifestation of reality about a company s activities but also as an agent who subjectively manipulates audiences impression and information understanding (Fombrun and Abrahamson, 1988 cited in Fombrun and Shanley, 1990)

6 Product and services quality A substantial number of empirical studies have proved that product and services quality has strong impact on a company s reputation. Fombrun (1996: 62) argued that because of the intangibility nature of the product in service sector, perceived quality plays a significant role in determining the provider s reputation. Brand equity In a general sense, brand equity is defined as the marketing effects distinctively attributable to the brand. This means that a certain outcomes result from the marketing of a product under a certain brand. These outcomes will differ if the same product did not have that brand. Farquhar s (1989) defined brand equity as the value endowed by the brand to the product since then similar definitions has been introduced. For example, from a customer perspective, Keller (1993 p.2) has defined brand equity as the differential effect of brand knowledge on consumer response to the marketing of the brand. Aaker (1991, p. 15) provided the most comprehensive definition of brand equity available in the literature, defining 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. In effect, Aaker (1991) conceptualised brand equity as a set of assets (or liabilities). Brand awareness, brand associations, perceived quality, brand loyalty and other proprietary assets were the five assets of brand equity he proposed. These assets (or liabilities) are proposed as dimensions in the present study. From the consumer perspective, brand awareness, brand associations, perceived quality and brand loyalty are the four most important dimensions.

7 Endorsement branding strategy Branding strategy refers to the ways firms mix and match their brand s name on their products (Laforet and Saunders, 1999). Two basic strategies have been identified by several authors with different taxonomy. First, individual product branding; where each product has been given its own unique brand name. Second is corporate branding where the corporate name is used in all products and services. Between the above two extremes many companies have developed a complex brand portfolio structure which consists of a hybrid options (Aaker and Joachimsthaler, 2000). Endorsement branding strategy is one of these hybrid options where brands are endorsed by an established brand such as the corporate brand. Although several authors (i.e. Laforet and Saunders, 1999) have defined endorsement branding strategy as a concept. A number of studies which elaborated the variants of endorsement strategy are limited. A study by Aaker and Joachimsthaler (2000) suggested three sub strategies within endorsement branding strategy: strong endorsement, token endorser, and linked name. Strong endorsement where brands are endorsed obviously by an established brand such as the corporate brand (Aaker and Joachimsthaler, 2000). Token endorser endorsement strategy, where an established brand appears in a number of product categories but in less prominent way than the endorsed brand. Corporations can indicate the token endorser by using its logo, statement, or by another device. In any case, the token endorser will not have a centre role. The role of the token endorser is to bestow some

8 assurance and credibility while the endorsed brands still have freedom to establish their own associations (Aaker and Joachimsthaler, 2000). Linked name endorsement strategy, where a compound name of common elements is mixed to produce a family of brands with implicit endorsement. A linked name gives the benefits of a separate name without having to start a second name from scratch and connect it to a master brand (Aaker and Joachimsthaler, 2000). How and where This research is mainly quantitative but will employ both quantitative and qualitative methods to collect data and test theories. In particular, semi-structured interview and survey will be used in the data collection process respectively. In order to test the applicability of western-developed theories, this research will collect the data from non-western country. Jordan has been chosen to achieve this research objective for two reasons: First, its national culture is significantly different from the western culture. According to cultural dimensions reported by Hofstede (1980) Arabic countries are significantly different from western- countries. Jordan could be chosen as a representative for Arabic countries since no significant difference has been found among Arabic countries. Second a number of Jordanian companies (e.g., Nuqul group which is one of the Middle East s leading industrial groups in terms of the number of companies) have started using endorsement branding strategy. Accordingly to the best of the researcher s knowledge and within the non-western countries none of the previous studies have empirically investigated the relationship between endorsement branding strategy and corporate reputation. Thus conducting this research in Jordan will facilitate the assessment of applicability of theories.

9 Fast Moving Consumer Goods (FMCG) producers have been chosen as single industry to conduct the research for the following reasons: First single industry provides a better control over market and environmental issues. Second a variety of branding strategy could be found within this industry, which will enable the researcher to experiment the effect of endorsement branding strategy on corporate reputation. Nvivo software will be used to code and extract information from interview data. Exploratory factor analysis (EFA), confirmatory factor analysis (CFA), and multiple regression analysis will be used to validate measurement scales and test hypotheses. References: Aaker, D. A. (1991), Managing Brand Equity, the Free Press, New York. Aaker, D. A. (2004), Brand Portfolio Strategy, Free Press, New York. Aaker, D. A. and Joachimsthaler, E. (2000), The Brand Relationship Spectrum: The Key To The Brand Architecture Challenge, California Management Review, Vol. 42, No. 4, pp Ambler, T. and Styles, C. (1997), Brand development versus new product development: toward a process model of extension decisions, Journal of Product and Brand Management, Vol. 6, No. 4, pp Barnett, M.L., Jermier, J.M. and Lafferty, B.A. (2006), Corporate Reputation: The Definitional Landscape, Corporate Reputation Review, Vol. 9, No. 1, pp Dacin, P. A. and Smith, D. C. (1994), The Effect of Brand Portfolio Characteristics on Consumer Evaluations of Brand Extensions, Journal of Marketing Research, Vol. xxxi, May, pp Farquhar, P. (1989), Managing Brand Equity, Marketing Research, September, pp Fombrun, C. (1996), Reputation: Realizing Value from Corporate Image, Harvard Business School Press, and Boston. Fombrun, C. J. and Shanley, M. (1990), Reputation: Realizing Value from the Corporate Image, Harvard Business School Press, and Boston. Helm, S. (2007), One reputation or many? Comparing stakeholders perceptions of corporate reputation, Corporate Communications: An International Journal, Vol. 12, No. 3, pp

10 Hofstede, G. Culture's consequences: international differences in work-related values, Beverly Hills, CA: Sage, Kaperer, J. N. (1997), Strategic Brand Management, 2 nd edition, Biddles Ltd, UK. Keller, K. L. (1993), Conceptualizing, measuring, and managing customer-based brand equity, Journal of Marketing, Vol. 57, No. 1, pp Laforet, S. and Saunders, J. (1999), Managing Brand Portfolio: Why Leaders Do What They Do, Journal of advertising Research, January/February, pp Long, C. and Vickers-Koch, M. (1995), Using Core Capabilities to Create Competitive Advantage, Organizational Dynamics, Vol. 24, No. 1, pp Motion, J., Leitch, S. and Brodie, R. (2003), Equity in corporate co-branding. The case of adidas and the All Blacks, European Journal of Marketing, Vol. 37, No. 7/8, pp Waddock, S. A. and Graves, S. B. (1997), The corporate social performance-financial performance link, Strategic Management Journal, Vol. 18, No. 4, pp Williams, R. J. and Barrett, J. D. (2000), Corporate Philanthropy, Criminal activity, and Firm Reputation: Is There a Link, Journal of Business Ethics, Vol. 26, pp

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