The Antecedents and Consequences of Brand Equity in Service Markets

Transcription

1 Asia Pacific Management Review 13(3) (2008) The Antecedents and Consequences of Equity in Service Markets Abstract Hsin Hsin Chang *, Che-Hao Hsu, Shu Hsia Chung Department of Business Administration, National Cheng Kung University, Taiwan Accepted 27 February 2008 equity is important due to the competitive advantages conferred by strong and successful brands. For service firms, brand equity can contribute largely to visualizing intangible service products. Since there is a lack of research, this study attempts to propose an integrated model of brand equity in service markets. For brand equity in service markets, the antecedents are considered to be brand attitude and brand image, and the consequences are considered to be brand preference and purchase intentions. This study concentrates on service brands and selects eighteen firms from three service categories. Through empirically testing, the relationships between brand attitude, brand image, brand equity as well as brand preference and purchase intentions are confirmed; in addition, the impact of brand attitude on brand equity is found to be larger than the impact of brand image. Keywords: equity, brand attitude, brand image, brand preference, purchase intentions 1. Introduction equity is the differential effect of brand knowledge on consumer response to the marketing of the brand (Keller, 1993). The higher the brand equity of a firm, the higher the brand preference that exists in the consumer s mind (Cobb-Walgren et al., 1995); and this would lead to higher market share as well as higher profits (Farquhar, 1989; de Mortanges and van Riel, 2003). As a result, brand equity is considered to have numerous advantages, (Cobb-Walgren et al., 1995; Farquhar, 1989; de Mortanges and van Riel, 2003); furthermore, how to build a high-equity brand is an important research subject for both academics and managers (Keller, 1993; Aaker, 1996). Since the seminal work of Keller (1993), brand equity has been extensively studied for physical products (e.g. Yoo, Donthu and Lee, 2000). In recent years, service marketing scholars have argued that the branding issues of service firms are essential and need to be investigated (Berry, 2000; de Chernatony et al., 2003). However, there has been comparatively little literature in service brand equity research (Krishnan and Hartline, 2001). Thus, this study attempts to fulfill this gap by proposing an integrated model that consists of antecedents and consequences of brand equity for service firms. The contribution of this study is to incorporate two important aspects of service markets into an integrated model of brand equity. The rationale was based on the value triangle, which is specific to service markets, proposed by Calonius (1986) and further developed by Bitner (1995) and Grönroos (1996). The model of value triangle consists of three aspects that capture the characteristics in service markets: external marketing, interactive marketing, and internal marketing. Among these three aspects, external marketing and interactive marketing are considered as two important sources in creating brand equity for service firms (Van Durme et al., 2003). External marketing focuses on promises made between firms and Corresponding author. easyhhc@mail.ncku.edu.tw 601

2 customers; and interactive marketing is the promises kept between service employees and customers (Bitner, 1995; Calonius, 1986; Grönroos, 1996). Based on the activities of external marketing, brand image could be established in the consumer s mind and in turn influence brand equity. By enhancing the efforts of interactive marketing, the consumer s emotional aspect would be influenced to form the brand attitude and, in turn, to have an impact on brand equity. Traditionally, for physical good markets (e.g. fast moving consumer good, durable goods), external marketing such as advertising plays an important role in creating brand equity by enhancing brand image (Yoo et al., 2000). For service markets, however, external marketing might be not enough. This is because external marketing activities only represent one element of the value triangle which mainly accounts for the value creation process in service markets. In service markets, brand equity creation must go through these two important aspects, since service is a series of processes involving interactions between customers and service employees (Van Durme et al., 2003). Among these two aspects, interactive marketing might be a more important element, because service is an experience process that is produced and consumed simultaneously (Prahalad, 2004). However, previous studies of service brand equity lack an integrated model that captures these two important aspects. As a result, based on the rationale mentioned above, the integrated model incorporating brand image and brand attitude is proposed to capture the two important aspects of service markets suggested by previous studies (Berry, 2000; Prahalad, 2004; Van Durme et al., 2003). We expect that the results of the study might help service firms to recognize the importance of brand equity in service markets, and help service firms to allocate resources in conducting marketing strategy. 2. Literature review 2.1 The importance of brand equity in service markets equity has been the focus of branding research for several years. Although the contexts these studies were conducted in were mostly embedded in packaged product settings, it is essential for researchers to investigate brand equity in service markets for the following reasons. First, brand equity can contribute to visualizing service products. Service products are intangible, hard to visualize and are often classified as experience and credence products (Zeithaml et al., 1985). Experience products are those about which an evaluation can be made after consuming (i.e. experiencing), while the judgements are difficult prior to purchase. Credence products are those that are hard to appraise both in prior and post consumption stages (Zeithaml et al., 1985). Evidence had indicated that the perceived risk is relatively high in purchasing credence and experience products (Laroche et al., 2003; Laroche, et al., 2004; Murray and Schlacter, 1990). Therefore, due to the inherent intangible nature of service products, efforts to visualize such products, such as brand equity cultivation, are important. This notion is also supported by previous works that indicated brand equity is essential for service companies in sustaining competitive advantage (Bharadwaj et al., 1993). In addition, a strong brand can reduce consumers perceived risk as well as enhance trust toward the company, especially when consumers face complicated purchasing decisions (Keller, 1993). equity cultivation will contribute to the visualization of service products, and hence will enhance favorable customer outcomes, such as reducing perceived risk or enhancing trust in the company. Second, given that service products are intangible and customers often find it difficult to gather relevant information prior to purchase, changing service brands is costly for customers who are experienced and satisfied with a particular company (Dorsch et al., 2000). This provides the opportunity in which service companies can enhance the retention rate through 602

3 establishing the brand equity perceived by customers. This notion is also consistent with previous research (Berry, 2000; de Chernatony et al., 2003). Thus, based on previous works, the present study attempts to integrate and verify the relationships of antecedents and consequences of brand equity in service markets. The following section will review the literature of each construct and expound the hypotheses as well. 2.2 Research concepts In this section, the literature on brand equity, brand attitude, brand image, brand preference, and purchase intentions is reviewed in detail equity The literature on brand equity divides into studies from two different perspectives financial and customer-based (Keller, 1993; Chaudhuri, 1995). From the financial perspective, brand equity can be viewed as the financial asset value created by brands (Lassar et al., 1995), which may be manifested as the additional cash flow created by a brand (Biel, 1992). The customer-based perspective, the focus of the present study, was initially proposed by Keller (1993), and is based on the evaluation of consumer response to a brand name. Numerous researchers consider brand equity as the value added to a product or service by a particular brand name, such as the customer-based brand equity of Chaudhuri (1995). Keller s (1993) study more explicitly considers consumer response, identifying brand equity as the differential effect of brand knowledge on consumer response to the marketing of the brand. equity can also be viewed as the result of consumer behaviors. Park and Srinivasan (1994) used a customer-based definition of brand equity the added value endowed by the brand to the product as perceived by a consumer. The central feature of these definitions of brand equity is the added attractiveness to the customer that a brand name confers on a product or service, as the operational definition of brand equity in the present study. The brand knowledge referred to in Keller s description of brand equity (Keller, 1993, see above) was defined as an associative network memory model which includes two components: brand awareness and brand image. Aaker (1991, 1992 and 1996) described brand equity as having five dimensions: brand loyalty, brand association, brand awareness, perceived quality of brand, and other proprietary brand assets. According to Lu and Xie (2000), other proprietary brand assets are market-based and are therefore beyond the scope of the present paper, which concentrates on consumer perceptions, reducing the dimensions to be considered here to four. Lassar et al. (1995) modify the five dimensions of Equity proposed by Martin and Brown (1990) (quality, perceived value, image, trustworthiness, and commitment) to give performance, perceived value, image (which is limited to social image), trustworthiness, and a feeling of commitment. Comparing the above research, it is apparent that brand equity shares similar dimensions, such as brand association, brand awareness, brand loyalty, and perceived quality attitude Attitudes may be defined as mental sets which direct an individual s response to a stimulus (Udell, 1965). The expression of a given value toward a specific object or idea is called an attitude (Lessig and Copley, 1974). Attitude is conceptualized as a person s consistently favorable or unfavorable evaluation, feelings, and tendencies toward an object or idea (Kotler and Armstrong, 1996). As they are formed over time through consumer experiences, attitudes become resistant to change (Boone and Kurtz, 2002). 603

4 Two basic conceptualizations of attitude structure have been introduced over the past few years of marketing research (Grimm, 2003). The first and classic concept is the tricomponent attitude structure, which interprets attitudes as comprising cognitive, affective, and conative components. The cognitive component refers to information and knowledge about an object or concept. The affective component deals with feelings or emotional reactions. The conative or behavioral component involves tendencies to act in a certain manner (Boone and Kurtz, 2002). The second, more recently adopted but simpler concept, reduces attitudes to a unidimensional construct representing positive or negative affect (Grimm, 2003). However, the tricomponent conceptualization seems to be more comprehensive, thus potentially providing better insights into consumer preferences. attitude has been one of the most widely examined constructs in consumer behavior (Berger and Mitchell, 1989). It is defined as the expression of an individual s evaluation of a brand, as manifested in consumer preferences. Based on the unidimensional concept of attitude, brand attitude is a person s favorable or unfavorable evaluations and feelings toward a particular brand name in the marketplace (Kotler and Armstrong, 1996). Our model, consequently, treats brand attitude as an individual s overall, either favorable or unfavorable, evaluation of a particular brand. For the simplest measurement, the present study adopted Grimm s point of view that brand attitude is a unidimensional construct representing positive or negative affect. Measurement items were further discussed in the research design section image Kotler and Armstrong (1996) define brand image as a set of beliefs held about a particular brand. This set of beliefs plays an important role in the buyer s decision process, when customers evaluate alternative brands. image has also been defined (Keller, 1993) as perceptions about a brand as reflected by the brand associations held in consumer memory, and this definition has been adopted by other authors (Faircloth et al., 2001; Romaniuk and Sharp, 2003). Campbell (1993) defined brand image as the combination of the consumer s perceptions and beliefs about a brand. Unsurprisingly, brand image is sometimes confused with brand equity. Biel (1992) suggests that Equity reflects value, while brand image is the associations the consumer has about a particular brand. In the present paper, brand image is defined as the consumer s perceptions towards a particular brand name. According to Biel (1992), brand image has three contributing sub-images that of the maker (corporate image), of the product/service, and of the users. Romaniuk and Sharp (2003) point out that brand image could come from a variety of sources, including consumer experience, marketing communications and/or word of mouth. Essentially, any information encountered in association with the brand can become linked to the brand name in memory, and thus become part of the brand s image (Keller, 1993). Other researchers, such as Gordon (1993), suggest that brand image is made up of five different facets, user image, occasion image, product image, brand personality, and salience. We consider the definitions of brand image further below. A good starting point describes brand image as that cluster of attributes and associations that consumers connect to the brand name (Biel, 1993). According to Keller (1998), attributes, either product-related or non-product-related, are those descriptive features that characterize a product or service. Qualitative and quantitative research techniques are both used to measure brand image (Keller, 1998). Qualitative research techniques are relatively unstructured measurement approaches that permit any possible approach, and are thus most usually applied as a first step in exploring consumer brand or product perceptions. Free association is an example of a qualitative research technique. 604

5 While qualitative research typically elicits some type of verbal responses from consumers, quantitative research employs various types of scale questions so that numerical representations and summaries can be made (Keller, 1998). For example, free choice, scaling, and ranking are three measures often used to reveal consumer beliefs and perceptions about different attributes of brand image. Specifically, a Likert scale, either 5 or 7-point, is frequently used. This study follows Biel (1992) in viewing brand image as the consumer s perceptions towards a particular brand name and consisting of three components, corporate image, product/service image and user image preference and purchase intentions preference is the bias a customer holds toward a particular brand. Several authors have stressed the importance of building brand equity, which brings the advantage to the firm of more consumer brand preference and consumer purchase intentions (Cobb-Walgren et al., 1995; Myers, 2003). Hellier et al. (2003) defined brand preference as the extent to which the customer favors the designated service provided by his or her present company, in comparison to the designated service provided by other companies in his or her consideration set. Purchase intention is a customer plan to buy a specific brand, and has been the focus of considerable recent attention. As this present study is concerned with service branding, we define purchase intention here as the willingness to continue using the service provided by specific suppliers. 2.3 Relationship between research concepts In our study, five relationships were selected for examination to investigate whether brand attitude and brand image were the antecedents and brand preference and purchase intentions were the consequences of brand equity. The positive relationships between brand attitude and brand equity and that between brand image and brand equity should be clarified. In addition, the positive relationship between brand equity and brand preference and therefore purchase intentions should also be clarified. Along with the antecedents and consequences of service brand equity, the relationship between brand attitude and brand image was also examined to verify the framework adopted from Cobb-Walgren et al. (1995). Therefore, the reversed relationship between brand attitude and brand image is not included in the present study. The related literature is reviewed below Impacts of brand attitude on brand image Kirmani and Zeithaml (1993) suggest that the inputs to brand image are perceived quality, brand attitudes, perceived value, feelings, brand associations, and attitude toward brand advertising. The focus of their study was the role of perceived quality in the development of brand image, and they did not investigate the impact of other variables. The relationship between brand attitude and brand image was investigated by Faircloth et al. (2001), and was found to be of high significance. We intend here to examine the hypothesis: H1: attitude has a significantly positive impact on brand image Impacts of brand attitude on brand equity Chaudhuri (1995) examines the relationship between customer-based outcomes (brand attitudes and habits) and the brand equity outcomes of market share and price. Two routes to BEO (brand equity outcomes) are proposed, a direct route from attitudes and habit to BEO, and an indirect route via the intervening variable of brand loyalty. A relationship between attitudinal and habitual components and brand equity outcomes such as market share was found, supporting the view that brand attitude helps to explain the nature of brand equity. 605

6 Similarly, Faircloth et al. (2001) propose a relationship between brand attitude and brand equity but, rather surprisingly, their research results showed no significant direct effect. In other words, the positive direct influence of brand attitude on brand equity was not supported. Nevertheless, we still consider brand attitude an essential determinant of brand equity, and testing for a direct positive impact of brand attitude on brand equity is a key focus of the present paper. Farquhar (1989) views three elements as essential in building a strong brand with the consumer: positive brand evaluation, positive brand attitude, and a consistent brand image. This implies positive attitudes are likely to promote brand purchase, an outcome of brand equity. This view is formulated below as Hypothesis 2: H2: attitude has a significantly positive impact on brand equity Impacts of brand image on brand equity Keller (1993), Kirmani and Zeithaml (1993), Biel (1993), and Na et al. (1999) form an integrated model of brand power. equity is based upon brand image, which is a body of brand-related information developed over time by consumers. Faircloth et al. (2001) proposed that brand equity can be created directly or indirectly through brand image and brand attitude. Their findings indicated that brand image has a significantly positive direct influence on brand equity. Biel (1993) views brand equity as being driven by brand image. Keller (1993) suggests that building brand equity requires creating a familiar brand name with a positive brand image that is, favorable, strong, and unique brand associations. Farquhar (1989) designates three essential elements in building a strong brand with the consumer: positive brand evaluation, positive brand attitude, and a consistent brand image. Lu and Xie (2000) consider that corporations could enhance a brand s value through brand image development, creating intangible assets by accumulating brand equity. Their findings imply a strong positive influence of brand image on brand equity. There is general agreement that brand image has a positive effect on brand equity. This relationship is formulated as Hypothesis 3: H3: image has a significantly positive impact on brand equity Impacts of brand equity on brand preference Cobb-Walgren et al. (1995) use two sets of brands, one from a service category (hotels) characterized by fairly high financial and functional risk, and one from a lower risk product category (household cleansers) to conduct two separate studies. Across categories, the brand with the higher equity in each category generated significantly greater preference and purchase intentions. Myers (2003) employs a longitudinal study to investigate the impact of brand equity on brand preference. The study, conducted on the high involvement soft drink category, showed a strong relationship between brand equity and brand preference. Other researchers, like Prasad and Dev (2000), point out that high equity is associated with high customer satisfaction, brand preference, and loyalty; high guest retention; high market share; a price premium; high profits; and, finally, high share values. To sum up, brand equity is generally believed to be an important contributor to brand preference, formulated as Hypothesis 4: H4: equity has a significantly positive impact on brand preference Impacts of brand preference on purchase intentions Cobb-Walgren et al. (1995) indicate that higher equity brands generate greater purchasing intention. As brand equity is reflected in brand preference, it could be inferred that brand preference would be reflected in purchase or usage intention. O Cass and Lim (2001) examine the preferences and purchase intentions of young South-east Asian consumers, in a study focused on the non-product brand associations proposed by Keller (1998), and test their 606

7 effects on brand preference and brand purchase intention toward fashion apparel. Data were collected in Singapore via self-administered questionnaires and showed the differential effects of brand associations on consumer brand preference and purchase intentions. However, the study did not examine the relationship between brand preferences and purchase intentions, the focus of the present discussion. Hellier et al. (2003) propose a general service sector model of repurchase intentions. The relationship between brand preference and repurchase intentions is tested through a structural equation model. The general model is applied to consumers of car insurance and personal pension services. preference is found to have a direct positive effect on customer repurchase intentions. This is formulated as Hypothesis 5 below: H5: preference has a significantly positive impact on purchase intentions. 3. Research methodology This study aims at the investigation of the antecedents and consequences of service brand equity. attitude and brand image are viewed as the antecedents of brand equity, while brand preference and purchase intentions are considered consequences of it. The study was conducted as an initial qualitative and a follow-up quantitative survey. The qualitative approach obtained first-hand information from service brand marketers, while the quantitative survey revealed consumers perceptions, ideas, and feelings toward service brands. The qualitative survey was aimed at revealing different business perspectives on the concepts, and to clarify the research framework, especially the relationships between its components constructs. Also, the validity of the research framework was investigated and no negative responses were received. The following section describes the conduct of the quantitative studies. An initial customer-oriented questionnaire was developed, pilot tested and later modified in the light of the pilot test feedback. 3.1 Conceptual framework and research hypotheses Based on the discussion in Section 2.2, the research concepts, conceptual framework, and research hypotheses are illustrated below. Figure 1 shows our conceptual framework of the antecedents and consequences of service brand equity, which is a combination of Faircloth et al. (2001) s and Cobb-Walgren et al. (1995) s models, and publications supporting the five selected research hypotheses are summarized in Table 1. attitude H1 image H2 H3 equity H4 preference H5 Purchase intentions Figure 1. Conceptual framework: The antecedents and consequences of brand equity 607

8 Table 1. A summary of supporting works for research hypotheses Hypothesis Supporting works H1: attitude image Faircloth et al. (2001); Kirmani and Zeithaml (1993); Keller (1993) H2: attitude equity Chaudhuri (1995); Faircloth et al. (2001); Farquhar (1989) H3: image equity Kirmani and Zeithaml (1993); Biel (1992, 1993); Na et al. (1999) H4: equity preference Cobb-Walgren et al. (1995); Myers (2003); Prasad and Dev (2000) H5: preference Purchase intentions Cobb-Walgren et al. (1995); O Cass and Lim (2001); Hellier et al. (2003) 3.2 Preliminary test The preliminary test consisted of a self-administered questionnaire on the brand concepts held by different service customers. The questionnaire was developed by applying scalar ranking to the measurement of every construct. Based on related literature, a final 48-item questionnaire was generated, with an attempt to verify and clarify the research instruments and constructs Measures equity - As suggested in the above literature, brand equity had been defined as the added attractiveness to the customer that a brand name confers on a product or service. The present study adapted 14 statements from Yoo et al. (2001) with slight wording changes. They were categorized into four dimensions including brand awareness, brand association, brand loyalty, and perceived quality. The scale was further examined by Washburn and Plank (2002) and found to be reliable and valid. attitude - The operational definition of brand attitude in the study is the expression of an individual s evaluation of a brand. From Grimm s research (2003), brand attitude is a unidimensional construct representing positive or negative affect. Measurement items were adopted from Keller (1998) and from Yoo et al. (2001). image - This is operationally defined as the customers perception of a specific brand (Biel, 1992). After our referring to several studies, for example, Parasuraman et al. (1988), Romaniuk and Sharp (2003), Biel (1992) and information gathered from qualitative survey, these items are generated in the form of semantic differential scales. preference - According to the research purpose, we employed the definition of Hellier et al. (2003) that brand preference is the extent to which the customer favors the designated service provided by his or her present company, in comparison to the designated service provided by other companies in his or her consideration set. Relevant statements are adopted from Cobb-Walgren et al. (1995). Purchase intentions - This is defined as the willingness to continue using the service provided by specific suppliers. Therefore, two items are also adopted from Cobb-Walgren et al. (1995). Both the qualitative survey and the literature review serve as a guide to the delineation of the research constructs that make up our research model, depicted in Figure 1, and their individual components, as discussed above. These components were then addressed in a 44-item pilot survey questionnaire, along with four other demographic questions. 608

9 3.2.2 Results The pilot test administered the prototype questionnaire to 90 consumers for a sub-set of the overall survey brand names, one brand from each category. Separate questionnaires were issued for each brand to major consumers of that brand. There were 74 responses, of which 64 were complete, a valid response rate of 71%. 22 (34.4%) of the respondents were male, 42 (65.6%) female. The pilot study used one brand from each service category in Taiwan: HiNet for ADSL services, Chunghwa Telecom for mobile telecommunication service, and Chinatrust for bank credit card services. Respondents were instructed to read all the statements carefully and record their answers by circling the answer for each item in accordance with their feelings and opinions toward the brand name. At the end of the questionnaire, the participants were asked to indicate any wording that was unclear or that they were otherwise uncomfortable with. equity attitude image preference/ Purchase intentions Table 2. Construct reliability of pilot test (modified) Construct components and items awareness & association 1. I can recognize X among other competing brands. 2. I am not aware of X. (r) 12. I can quickly recall the symbol or logo of X. 13. I have difficulty in imagining X in my mind. (r) loyalty 3. I consider myself to be loyal to X. 4. X would not be my first choice. (r) Perceived quality 6. X is of high quality. 7. The likely quality of X is extremely high. 8. The likelihood that X would be functional is very high. 11. X appears to be of very poor quality. (r) attitude 1. I am favorable to X. 2. I do not like X. (r) 4. X can satisfy my needs for (service category). 6. I have negative opinions toward X. (r) 7. I think the service of X is bad. (r) 8. I would like to continue using X. User image 2. energetic / not energetic (r) 3. smart / dull (r) 4. ordinary / unique Corporate image 1. socially responsible / socially irresponsible (r) 3. reliable / unreliable (r) 5. untrustworthy / trustworthy Service image 1. unworthy / worthy 2. consistent / inconsistent preference 1. When considering purchasing the service, I would consider X first. 2. I think X is superior to other competing brands. 3. I prefer X. Purchase intentions 1. I would consider purchasing X. 2. I will purchase X. Cronbach s alpha Item-tototal

10 The questionnaire items were all evaluated with 5-point Likert scales anchored at 1 = strongly disagree and 5 = strongly agree, except for the brand image component and part of the brand attitude component, where semantic differential scales were utilized. For the remaining responses, circling the proper answers was required. To select the items that would enter the main study, we computed the reliability of the questions for each construct, using Cronbach s alpha coefficients as indicators of reliability. In the analysis procedure, items with low item-to-total correlations across scales were deleted. For the brand equity scale, we initially found that the alpha coefficients for its sub-components of brand awareness, brand loyalty, brand association, and perceived quality were 0.55, 0.69, 0.54, and 0.79 respectively. However, according to Yoo et al. (2001), with exploratory factor analysis, they found only three distinct factors such as brand loyalty, brand awareness/association, and perceived quality due to the inseparability. Consequently, we would like to adopt Yoo et al s findings to consider that brand equity has three components. Recalculating the alpha resulted in a better reliability of As brand attitude was considered a unidimentionsl construct, its reliability was After we deleted items with low item-to-total coefficients, Cronbach s alpha coefficients for sub-components of brand image were 0.71, 0.79, and 0.76 for user image, corporate image, and service image, respectively. For brand preference and purchase intentions scales, Cronbach s alpha coefficients were found to be acceptable at 0.74 and 0.83, respectively. Detailed analysis results are shown in Table 2. We modified the survey questionnaire according to the pilot test results. Some items were deleted because of low reliability, and some were reworded because of bad wording. A number of construct validity items were added to test the validity of each scale. Ultimately, a final 37-item survey questionnaire was produced for the formal study Stimuli selection The present study selected 18 brands, six from each of the following three service categories: (a) mobile telecommunication services, (b) ADSL services, and (c) bank credit card services. Table 3 shows the stimuli selected for this research. The reasons we selected these three service brands are as follows. First, they consist of at least one of the interaction types of service encounter (Shostack, 1985). The nature of these three service brands is consistent with the definition of service proposed by Grönroos (2000), processes consisting of a series of activities where a number of different types of resources are used in direct interaction with a customer, so that a solution is found to a customer s problem. Since this study attempts to investigate service brand equity, there must be some extent to which the interactions between service employees and customers might happen. Second, these three service brands were selected since they are experience products and on the intangible side of the tangibility spectrum (Berry, 2000; de Chernatony et al., 2003; Dorsch, et al., 2000), and thus service brand equity is a valuable resource (Darby and Karni, 1973; Nelson, 1970; Shostack, 1977). Third, the three service brands were selected on the basis of familiarity to the respondents as routine parts of daily life. The grouping into distinct categories allowed inter-brand comparisons within a category, such as between the ADSL providers HiNet and Seednet. It is anticipated that service providers will be interested in their brand equity or brand preference ranking, and in possible strategies for improving it. The final list of service categories and service brand names is shown in Table

11 Service categories Mobile telecommunication Table 3. Service categories and brand names Chunghwa Telecom Taiwan Cellular Corp. (TCC) KG Telecom (KGT) ADSL service HiNet Seednet Taiwan Fixed Network (TFN) Bank credit cards Chinatrust Citibank Taishinbank 4. Results of data analysis and discussion s Far Eastone Telecom (FET) TransAsia Telecom Mobitai Communications Giga So-net EBT/APOL Fubon Bank Union Bank of Taiwan Chinfon Bank The results of the scale reliability and validity analyses are summarized below. A proposed structural equation model addressing the study objectives is evaluated using LISREL 8.52 (Jöreskog and Sorböm, 2002) and the research hypotheses are tested by t-tests of the path coefficients. Finally, a comparison of brands in every category is presented. The data were gathered over 10 days, from April 5 to April 14 in 2005, yielding 456 valid responses. The percentages of individual brand users for each service category are shown in Table 4. Demographic statistics for the respondents are presented in Table % respondents were male, 52.9% female. The 21 to 30 age group accounted for 77.6% of the respondents, of whom about 48.0% were EMBA/MBA students. Table 4. Formal data collection by service categories Bank credit card Mobile telecom. ADSL service Chinatrust 48 Chunghwa 86 So-net 9 Citibank 18 Taiwan Cellular 88 HiNet 86 s Taishinbank 18 Far Eastone 23 seednet 17 Fubon Bank 10 KGT 12 TFN 5 Union Bank 12 TransAsia 13 Giga 4 Chinfon Bank 4 Mobitai 1 EBT/APOL 2 Total Table 5. Basic demographic statistics of formal data Demographic statistics Data Demographic statistics Data Male 214 Business 57 Gender Female 241 Manufacturing 64 Missing data 1 Occupation Service industry 65 Below Military, public official, education 32 21~ Free employment 5 Age 31~40 52 EMBA /MBA student ~50 30 Construction 8 Over 50 6 IT industry 4 611

12 4.1 Scale reliability and validity The reliability of each construct is shown in Table 6. Reliability is considered acceptable when Cronbach s alpha exceeds 0.70 and item-to-total correlations are over 0.50 (Hair et al., 1992). All major constructs used in the main study achieved adequate levels of reliability, with a Cronbach s alpha between (for overall brand equity) and (for purchase intentions). The brand awareness and association component of brand equity had a Cronbach s alpha below 0.7. We based this component and its measurement on previously published work, such as Yoo et al. (2001), and it was not validated by exploratory factor analysis in our dataset, so a follow-up factor analysis, described below, was subsequently carried out. Validity is a measure of the accuracy with which the research instruments represent the variable of interest (Campbell and Fiske, 1959). Wu and Lin (2000) distinguish between content validity, criterion-related validity, and construct validity. The present study is concerned with construct validity with convergent validation, and several overall construct validity item questions were introduced into the questionnaire to check the validity of the multi-dimensional constructs, as described above. Specific procedures for each construct are outlined below. (1) equity: The four overall brand equity statements used by Yoo et al. (2001) to measure overall brand equity, adopted for the present study, were: a. It makes sense to buy X instead of any other brand, even if they are the same. b. Even if another brand has the same features as X, I would prefer to buy X. c. Even if there is another brand as good as X, I prefer to buy X. d. Even if another brand is not different from X in any way, it seems smarter to purchase X. Here, X meant the brand selected for evaluation. Overall Cronbach s alpha for the construct was , which is highly satisfactory. The Pearson correlation coefficient between the multidimensional brand equity (MBE) score and overall brand equity (OBE) score (Yoo et al. 2001) was 0.681, significant at p < We thus conclude that the brand equity construct scale used in the study has satisfactory validity. (2) attitude: Similar procedures were followed to investigate the validity of our brand attitude construct scale. Four statement items, originally using semantic differential statements (i.e. opposed pairs of adjectives) adopted from Faircloth et al. (2001) were included in the pilot test. Following negative comments from respondents, we changed this to a Likert scale. Cronbach s alpha for the overall brand attitude construct was , and the Pearson correlation between brand attitude score and overall brand attitude score was 0.759, significant at p < We conclude that the brand attitude scale used in the study has satisfactory validity. (3) image: The overall construct statement employed for brand image scale validation was The overall brand image of X is fine. The Pearson correlation between brand image component score, overall brand image score, and the response to the construct validity question are shown in Table 7. A coefficient of between the overall brand image score and the construct validity question score is significant at p < We conclude that the brand image scale used in the study has satisfactory validity. MANOVA was conducted to see if significant differences existed between customers with different levels of agreement (1, 2, 3, 4, and 5) with the construct validity question, i.e. this was used as the fixed variable. (4) preference and purchase intentions: According to Cobb-Walgren et al. (1995) and Hellier et al. (2003), brand preference and purchase intentions were highly correlated with each other, with a Pearson correlation coefficient of significant 612

13 at p < We conclude that both brand preference and purchase intention scales have satisfactory validity. Multidimensional brand equity ( ) attitude (0.8446) image (0.8641) preference /Purchase intentions (0.9214) Table 6. Construct reliability for formal data collection Constructs and items awareness & association 1. X is a comparatively recallable brand to me. 2. I am not aware of X. (r) 3. I can quickly recall the symbol or logo of X. 4. I have difficulty in imagining X in my mind. (r) loyalty 5. I consider myself to be loyal to X. 6. X would be not my first choice at all. (r) 7. I will recommend X to others. Perceived quality 8. X is of high quality. 9. The likelihood that X would be functional is very high. 10. The likely quality of X is extremely high. 11. X appears to be of very poor quality. (r) 3. I am favorable to X. 4. I do not like X. (r) 5. X can satisfy my needs. 6. I have negative opinions toward X. (r) 7. I think the service of X is bad. (r) User image 1. The user of X is unique. 2. The user of X is energetic. 3. The user of X is smart. Corporate image 4 The company of X is socially responsible. 6. The company of X is trustworthy. Service image 7. The service quality of X is inconsistent. (r) 8. The service of X is worthy. preference 4. I think X is superior to other competing brands. 5. I prefer X. 6. When considering purchasing the service, I would consider X first. 7. I am interested in trying other brands. (r) 8. I intend to replace my service provider from other brands. (r) Purchase intentions 1. I would consider purchasing X. 2. I will purchase X. Cronbach s alpha Item-Tototal

14 Table 7. Correlation analysis between dimensions and the validity question Response to construct validity question a image Dimension (8) (18) (153) (232) (45) r b User image* ** Corporate image* ** Service image* ** Overall brand image* ** Notes: a The construct validity question is measured on a 5-point scale: (1) strongly disagree to (5) strongly agree. b r = Pearson Correlation between each brand image dimension, overall brand image, and response to construct validity question. * indicates significant at the p < 0.05 level. ** indicates significant at the p < 0.01 level. (5) equity: The 11 Equity measurement items were subjected to a series of confirmatory factor analyses to test the fit of a number of alternative models with the data, using LISREL Four models of the data dimensionality were tested: (a) 11 measurement items with one first-order factor; (b) 11 measurement items with three correlated first-order factors; (c) 11 measurement items with three uncorrelated firstorder factors; (d) 11 measurement items with three first-order factors and one secondorder factor. The respective overall chi-square for the four tests of brand equity are listed in Table 8, indicating that models 2 and 4 (χ 2 =201.42, d.f.=41) obtained the best results. The Goodness of Fit Index (Bentler, 1983) is satisfactory at 0.93 in both cases. (6) image: A similar confirmatory factor analysis LISREL 8.52 was applied to the seven remaining brand image statements, testing the following four models against the data. (a) seven measurement items with one first-order factor; (b) seven measurement items with three correlated first-order factors; (c) seven measurement items with three uncorrelated first-order factors; (d) seven measurement items with three first-order factors and one second-order factor. Overall chi-square results for the brand image models are listed in Table 9. Model 2 shares the lowest chi-square value, (χ 2 =68.32, d.f.=11) with Model 4, but has a GFI of 0.96, indicating that the second order factor introduced in Model 4 did not improve fit. Overall, the measurement model provided satisfactory evidence of unidimensionality for the individual scales. Table 8. Competing models of brand equity in CFA Model χ 2 (d.f.) χ 2 /df GFI AGFI RMSEA One first-order factor (45) Three first-order factors (correlated) Three first-order factors (uncorrelated) Three first-order factors/ One second-order factor (41) (47) (41)

15 Table 9. Competing models of brand image in CFA Model χ 2 (d.f.) χ 2 /df GFI AGFI RMSEA One first-order factor (14) Three first-order factors (correlated) Three first-order factors (uncorrelated) Three first-order factors/ One second-order factor 68.32(11) (14) (11) Structural equation analysis Our model of the relationships between brand equity, its antecedents brand image and brand attitude, and its consequences brand preference and purchase intention, was implemented as a structural equation model using LISREL 8.52 (Jöreskog and Sorböm, 2002) (see Figure 1). Agreement scores were scaled to unity for each latent variable, and the maximum likelihood estimation method was applied. The resulting parameter estimates for the standardized solution are shown in Figure 2. It should be noted that the parameter estimates were all significant at the p < 0.05 level. A number of measures (see Table 10) were analyzed in order to assess the fit of the data to the theoretical model (Bagozzi and Yi, 1988). In general, chi-square, p-value of chi-square test, and chi-square: degrees of freedom ratio are employed to test fit (Qiu, 2003). Other goodness-of-fit indices, such as GFI, AGFI, NFI, NNFI, RMR, SRMR are also used. The Criteria of adequate fit for individual indices are shown in Table 10 (Faircloth et al., 2001), along with the calculated values in our study. Table 10 indicates that a chi-square of (DF=130, p < 0.01), a p-value for the chi-square test of 0.00, and a goodness of fit (GFI) index of 0.86 were calculated. These measures do not meet the tabulated threshold criteria, and therefore do not support the model. Some other indices, however, do achieve the tabulated threshold criteria. For example, the Bentler-Weeks normed fit index (NFI) for the research model was 0.97, and values greater than 0.90 are normally accepted as evidence of acceptable model fit (Brwone and Chdeck, 1993). A Root Mean Square Residual (RMR) value of less than 0.05 is offered by Bagozzi and Yi (1988) as evidence of acceptable overall model fit, and was observed for the model in this study. We thus conclude that the research model has achieved an acceptable goodness of fit by a majority (7/10) of the tests applied. The standardized parameter estimates (loadings) between the latent constructs and their observed variables were utilized as measures to assess the measurement model. All variables (see Table 11) had t-values greater than ±1.96 at a 0.05 level of significance, suggesting that the variables and latent constructs were closely related. Since the parameter estimates were all positively significant, no modification is needed. Construct (or composite) reliability, a measure of the internal consistency or unidimensionality of the dependent and independent constructs, uses measures greater than 0.60 as the rule of thumb for acceptable consistency (Bagozzi and Yi, 1988). The following results were obtained for construct reliability: brand attitude (0.84), brand image (0.73), brand equity (0.68), brand preference (0.86), and purchase intentions (0.95). 615

16 BA 1 BA 2 BA 3 BA *** 0.71*** 0.67*** 0.57*** SERV CORP 0.77*** 0.83*** BA 0.82*** BI 0.87*** 0.14* 0.73 USER PI 1 PI *** BA 5 BE 0.94*** 0.86*** BP PI 0.77*** 0.73*** *** 0.88*** 0.54*** 0.62*** QUAL LOY AWS BP 1 BP 2 BP 3 BP 4 BP 5 * Indicates significant at the p < 0.05 level. ** Indicates significant at the p < 0.01 level. *** Indicates significant at the p < level. Figure 2. Research model in LISREL Table 10. Goodness-of-fit measures Goodness-of-fit indices SEM Criterion Reference Absolute fit Chi-square DF p-value of Chi-square χ 2 /df GFI AGFI RMR SRMR RMSEA Incremental fit NFI NNFI CFI > ~ 5 > 0.90 > 0.90 < 0.05 < 0.08 < 0.10 > 0.95 > 0.95 > 0.95 Jöreskog and Sörbom (1989) Jöreskog (1969) Bagozzi and Yi (1988) Bagozzi and Yi (1988) Bagozzi and Yi (1988) Bagozzi and Yi (1988) Brwone and Cudeck (1993) Hu and Bentler (1999) Hu and Bentler (1999) Hu and Bentler (1999) 616

17 Table 11. Standardized estimates of measurement coefficients Indicator reliability (SMC) Constructs Coefficient t-value attitude (ξ 1 ) λ x11 λ x21 λ x31 λ x41 λ x51 image (η 1 ) User image (λy 11 ) Corporate image (λy 21 ) Service image (λy 31 ) equity (η 2 ) awareness & association (λy 12 ) loyalty (λy 22 ) Perceived quality (λy 32 ) preference (η 3 ) λ y13 λ y23 λ y33 λ y43 λ y53 Purchase intentions (η 4 ) λ y *** 17.33*** 16.05*** 12.84*** 16.21*** 15.32*** 8.11*** 8.24*** 22.93*** 21.45*** 11.92*** 14.27*** λy *** Notes: *** indicates significant at the p < level Construct (composite) reliability Hypotheses testing The β and γ parameter estimates (see Table 12) are significant and generally support the hypotheses presented in the study. Hypotheses 1 through 5 are tested by examining the path coefficients of the structural equation model. The analysis for each hypothesis test is summarized below. Effect of brand attitude on brand image (H1) In H1 it is proposed that brand attitude has a positively significant impact on brand image. This relationship (γ 11 ) can be assessed by examining the structural path coefficient. The measured coefficient is 0.82 with a t-value of 14.10, which is significant at the p < level, strongly suggesting the positive effect of brand attitude on brand equity. Thus, H1 is supported. This finding is consistent with those of Faircloth et al. (2001), Kirmani and Zeithaml (1993), and Keller (1993). Effect of brand attitude on brand equity (H2) In H2, it is proposed that brand attitude has a positive effect on brand equity. This relationship (γ 21 ) has a parameter estimate of 0.87 with a t-value of 7.16 (p < 0.001), so the relationship is strongly supported by the research results. Thus, H2 is supported, which is in agreement with the findings of Chaudhuri (1995), and Farquhar (1989), but not of Faircloth et 617