BUILDING BRAND RELATIONSHIPS THROUGH DIALOGUE COMMUNICATIONS AN EMPIRICAL STUDY (DISSERTATION PROJECT IN PROGESS)

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1 BUILDING BRAND RELATIONSHIPS THROUGH DIALOGUE COMMUNICATIONS AN EMPIRICAL STUDY (DISSERTATION PROJECT IN PROGESS) Anke Hoffmann 1 Doctoral Student at the Institute of Marketing (Director: Manfred Krafft, Professor of Marketing) University of Muenster, Germany Submission for the 19 th EMAC Doctoral Colloquium Track: Consumer Behaviour (intermediate/advanced) ABSTRACT Due to the decrease of brand loyalty and in line with the diffusion of relationship marketing since the early nineties, brand companies meanwhile have strengthened their efforts on their existing consumers to keep them committed and loyal to the brand. They have strived to overcome the anonymity of consumer markets and tried to treat their consumers as individuals by addressing them directly and providing possibilities of two-way interaction. Thus, companies aimed at enhancing brand loyalty by establishing long-term consumer-brand relationships. Although the importance of direct and interactive marketing communications for building brand relationships has been recognized over the last years, this area has hardly been considered in marketing science, especially in quantitative empirical research approaches. In the following, a framework is developed to analyze the advertising effectiveness of dialogue communications in a brand management context from a consumer perspective. The purpose of this study is to conceptualize and empirically analyze the impact of dialogue communications on building consumer-brand relationships. Keywords: Brand Loyalty; Brand Relationships; Dialogue Communications; One-to-One- Marketing 1 Correspondence: Anke Hoffmann, University of Muenster, Marketing Centre Muenster, Institute of Marketing, Am Stadtgraben 13-15, D Muenster, GERMANY; Tel , Fax , ahoffmann@uni-muenster.de 1

2 INTRODUCTION Brands and brand equity as intangible assets are one of the most valuable assets that companies have. In this context, brand equity is essentially driven by the customer and her/his loyalty to the brand (Keller, 1993; Srivastava, Shervani, & Fahey, 1998). With the intensified fragmentation, sophistication and competition of markets, traditional manufacturers of brands are forced to be more concerned with the development and maintenance of long-term relationships with their consumers and therefore seeking to adopt relationship marketing (Sheth, & Parvatiyar, 1995; Rust, Zeithaml, & Lemon, 2004). However, the concentration on mass marketing activities is poorly suited for relationship management approaches because of its impersonal nature. An important way to build relationships with consumers is to interact and to establish a dialogue (Pine II., Peppers, & Rogers, 1995; Berthon, Hulbert, & Pitt, 1999; Bhattachary, & Bolton, 2000). Therefore, companies should strive to begin an on-going dialogue with their consumers, address them directly and treat them individually (Peppers, Rogers, & Dorf, 1999; Grönroos, 2000; Winer, 2001). As a measurable consequence of the increasing importance of relationship marketing and decreasing effectiveness of mass marketing activities, particularly mass advertising, in 2003 direct marketing expenditures in Germany exceeded the expenditures for classic advertising for the first time (Krafft, & Peters, 2005). Dialogue communications in this research context include direct as well as interactive communication tools such as personalized direct mail, web site interactions, , and other machine-intermediated interactions (Ball, Coelho, & Machás, 2003). The dialogue between the brand (manufacturer) and the consumer can hereby proceed real-time or asynchronously. Dialogue-oriented brand communications should aim to enhance true brand loyalty by making the consumer more attached to the brand in order to strengthen the consumer s brand relationship over time (Pearson, 1996; Duncan, & Moriarty, 1998; Sealey, 1999; Shugan, 2005). LITERATURE REVIEW A review of the literature has to consider the interfaces of brand management, relationship marketing and dialogue communications: Relationship Marketing and Dialogue Communications: Morgan and Hunt (1994) note that communication is an antecedent of trust. In many frameworks of relationship marketing research, customer dialogue and direct marketing activities either are integrated as single aspects to measure the CRM process (Reinartz, Krafft, & Hoyer, 2004) or are viewed as antecedents of CRM success. There is evidence for a positive effect of direct as well as twoway communication on relationship strength and outcomes (De Wulf; Odekerken-Schröder; & Iacobucci, 2001; Verhoef, 2003; Ball, Coelho, & Machás, 2004; Grönroos, & Lindberg- Repo, 2004). Nonetheless, relationship marketing literature often fails to include the communication process as a critical dimension in relationship building, focusing instead on elements such as trust and commitment, which are products of communication (Duncan, & Moriarty, 1998). Relationship Marketing and Brand Management (Brand Relationships): The common framework for conceptualizing long-term consumer-brand relationships has been brand loyalty (Dick, & Basu, 1994; Oliver, 1999). The consumer-brand relationship approach can also be considered as an extension of the brand personality approach (Aaker, 1997; Blackston, 2000). Fournier (1998) developed a framework for understanding consumer-brand relationships, conceptualizing the brand and the consumer as being partners in a dyadic relationship and thereby placed emphasis on emotional and affect-laden aspects of consumer- 2

3 brand relationships. However, previous research that integrates relationship marketing and brand management perspectives predominantly is of conceptual nature (Ambler et al. 2002; Rust, Zeithaml, & Lemon 2004) or is based on exploratory studies (Fournier, & Yao, 1997; Fournier, 1998; Ji, 2002). Brand Management and Dialogue Communications: Many contributions that considered dialogue and direct marketing activities so far deal with measuring response rates, optimizing direct marketing and multi channel campaigns or analysing incremental sales (e.g. Bawa, & Shoemaker, 1987; Briggs, Krishnan, & Borin, 2005). Krafft and Peters (2005) give an extensive overview on the development of direct marketing research. Some empirical research has focussed on interactive media such as the internet or mobile services and its impact on single brand success variables. Nysveen, Pedersen, Thorbjørnsen, & Berthon, (2005) find direct and positive effects of Short Message Services (SMS) on a brand s main channel use. Merisavo and Raulas (2004) report a positive impact of regular contact with consumers by on brand loyalty. Muniz and O Guinn (2001) as well as McAlexander, Schouten and Koenig (2002) find indication for a positive long-term impact of relationship building efforts via internet-based brand communities. These findings are confirmed by Algesheimer, Dholakia, and Herrmann (2005). Bowman and Narayandas (2001) note that most customers who initiate contact with a manufacturer are highly loyal and tend to spend more than others. Nevertheless, there is still a lack on studies that investigate the long-term relational effects of several dialogue communication activities for consumer product brands. RESEARCH QUESTIONS AND CONCEPTUAL FRAMEWORK So far there is no substantial survey-based empirical research that takes a broader focus and merges the perspectives of brand management, relationship marketing and direct marketing at the same time. Furthermore, no existing study compares the effectiveness of mass advertising and direct-to-consumer advertising with respect to its effectiveness on building consumerbrand relationships. As a consequence, there is still a need for further research into the outcome effects and determinants of dialogue communications in consumer relationships with brands. The aim of this study is to conceptualize, measure and analyze consumer perceptions and both their attitudinal and behavioural responses to dialogue communications for brands. In this research approach, dialogue communication instruments are considered as exogenous variables. In order to provide marketing science and brand management with knowledge about the impact of dialogue communications on building brand relationships we investigate the impact of the four principles of dialogue communications information, individualization, interactivity, integration on brand success variables on the consumer side. Individualization, interactivity and integration are viewed as constitutional elements of consumer dialogue which are able to enhance trust, loyalty and other relationship outcomes (Blattberg, & Deighton, 1991; Morgan, & Hunt, 1994; Oliver, 1999; Peppers, Rogers, & Dorf, 1999; Bhattacharya, & Bolton, 2000; Bhattacharya, & Sen, 2003; Shankar, Smith, & Rangaswamy, 2003; Lindberg-Repo, & Grönroos, 2004). To measure long-term, committed consumer-brand relationships, dialogue communication s influence on relational behaviours has to be analyzed via mediating constructs, i.e. brand trust, brand familiarity, brand commitment (Morgan, & Hunt, 1994; Chaudhuri, & Holbrook, 2001; Sirdeshmukh, Sing, & Sabol, 2002; Bart, Shankar, Sultan, & Urban, 2005). In this context, the following research questions shall be examined: What effects, as compared to mass advertising activities, do dialogue-oriented brand communications have on mediating brand success variables? 3

4 Do the four so-called principles of dialogue communications (information, interactivity, individualisation, integration) have significant impact on constructs such as brand trust, brand familiarity and brand affect? Which customer- and media-related moderators influence the effects of dialogue communications (i.e. product involvement, relationship proneness, opinion leadership)? In the end, is it possible to increase consumer s brand loyalty by establishing dialogue communication programs? RESEARCH DESIGN AND CURRENT STATUS OF THE PROJECT In order to examine the importance of dialogue communications for brands exploratory qualitative interviews with marketing and brand managers were conducted during August to October The results confirmed increasing relevance of direct marketing activities for brand management and brand communications. Brand managers tend to initiate two-way interactions with consumers as a complementary tool to mass advertising instruments. Based on these findings and a comprehensive literature review a conceptual framework has been developed. An illustration of the proposed conceptual framework is presented in figure 1. Consumer-related and media-related moderators Brand Communication Instruments Mass Advertising (TV) Communication Constructs Information Quality Relationship Constructs Brand Familiarity Behavioural Constructs Direct Mailing Individualization (Behavioural) Brand Loyalty Integration Brand Trust Brand Commitment Future Communication Behaviour Internet Brand Affect Interaction Figure 1: Conceptual Framework The conceptual framework and the hypotheses are broadly founded on economic theories (e.g. transaction costs economics and agency theory) as well as behavioural theories (e.g. learning theories, risk theory, information processing theories, equity and social exchange theory). The first data collection is already finished and has been conducted as an experimental prestudy. The aim of this research stage was to develop and validate measurement scales, especially newly developed scales for the principles of dialogue communications from a consumer perspective (perceived information quality, perceived individualisation, perceived interaction and perceived integration). 4

5 A second data collection will be held in the second quarter of 2006 in cooperation with a leading market research company. The empirical analyses will be based on media panel survey data. Model constructs will be refined and hypotheses will be tested with structural equation modelling. The conclusion of all the data analyses is expected by the end of the year 2006 when the most important research results and hypotheses, as well as their managerial implications, can be presented. REFERENCES Aaker, J. L. (1997). Dimensions of Brand Personality. Journal of Consumer Research, 34 (3), Algesheimer, R.; Dholakia, U. M., & Herrmann, A. (2005). The Social Influence of Brand Community: Evidence from European Car Clubs. Journal of Marketing, 69 (3), Ambler, T., Bhattacharya, C. B., Edell, J., Keller, K. L., Lemon, K. N., & Mittal, V. (2002). Relating Brand and Customer Perspectives on Marketing Management. Journal of Service Research, 5 (1), Ball, D., Coelho, P. S., & Machás, A. (2004). The Role of Communication and Trust in Explaining Customer Loyalty An Extension to the ECSI Model. European Journal of Marketing, 38 (9/10), Bart, Y., Shankar, V., Sultan, & Urban, G. L. (2005). Are the Drivers and Role of Online Trust the Same for alle Web Sites and Consumers? A Large-Scale Exploratory Empirical Study. Journal of Marketing, 69 (4), Bawa, K., & Shoemaker, R.W. (1987). The Effects of a Direct Mail Coupon on Brand Choice Behavior. Journal of Marketing Research, 14 (9), Berthon, P., Hulbert, J. M., & Pitt, L. F. (1999). Brand Management Prognostications. Sloan Management Review, 40 (2), Bhattacharya, C. B., & Bolton, R. N. (2000). Relationship Marketing in Mass Markets. In Sheth, J. N., Parvatiyar, A. (Eds.). Handbook of Relationship Marketing (pp ). Thousand Oaks, CA: Sage Publications,. Bhattacharya, C. B., Sen, S. (2003). Consumer-Company Identification: A Framework for Understanding Consumers Relationships with Companies. Journal of Marketing, 67 (2), Blackston, M. (2000). Observations. Building Brand Equity by Managing the Brand s Relationships. Journal of Advertising Research, 40 (6), Blattberg, R. C., & Deighton, J. (1991). Interactive Marketing: Exploiting the Age of Addressability. Sloan Management Review, 33 (1), Bowman, D., & Narayandas, D. (2001). Managing Customer-Initiated Contacts with Manufacturers: The Impact on Share of Category Requirements and Word-of-Mouth Behavior. Journal of Marketing Research, 36 (3), Briggs, R., Krishnan, R., & Borin, N. (2005). Integrated Multichannel Communications Strategies. Evaluating the Return on Marketing Objectives the Case of the 2004 Ford F-150 Launch. Journal of Interactive Marketing, 19 (3), Chaudhuri, A., & Holbrook, M.B. (2001). The Chain Effects from Brand Trust and Brand Affect to Brand Performance. The Role of Brand Loyalty. Journal of Marketing, 65 (April), De Wulf, K., Odekerken-Schröder, G., & Iacobucci, D. (2001). Investments in Consumer Relationships. A Cross-Country and Cross-Industry Exploration. Journal of Marketing, 65 (10),

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