Increment Strategy of Brand Equity of Time-honored SMEs

Increment Strategy of Brand Equity of Time-honored SMEs ZHANG Ying 1,2, SUN Minggui 1 1 School of Business and Management, Donghua University, Shanghai P.R.China, 200051 2 School of Business, Anhui Finance and Economics University, Bengbu, P.R.China, 233030 zyaift@126.com Abstract: Brand equity increment is urgent and necessary at present because most Chinese timehonored small and medium enterprises (SMEs) decay and brand equity drained ceaselessly. This research focuses on the increment strategy of time-honored SMEs brand equity using empirical method. This research establishes the primary obvious and recessive factors of brand equity increment according to literature and results of expert-consulting, and makes certain actual situation of these factors based on consumer survey and expert-consulting, and proposes concrete strategies of innovation and nostalgia such as enterprise system innovation, marketing innovation and some nostalgia tactics. The findings support that, for time-honored SMEs, combination of innovation and nostalgia should be the sensible choice to enhance brand equity. Keywords: brand equity, time-honored SMEs, innovation, nostalgia 1 Introduction Chinese time-honored small and medium enterprises (SMEs) have long history and famous products or technique passed down among generations, and their brands are full of traditional cultures, but their production and operation are small and medium-sized. They have some characteristics of SMEs such as small scale, lack of funds, the lower management level, the relative lack of talent, as well as high operating flexibility, business with specialty and feature [1]. However, these time-honored SMEs are different from other SMEs which are in the stage of OEM or start-up brand, they have possess their own product brands or business brands, and have long history of brand management, and have good reputation at least in regional market. In addition, they are the most important part of time-honored enterprises. The vast majority of 430 time-honored enterprises recognized by China Ministry of Commerce are SMEs, moreover, there are many old SMEs have not been certified, which their brands have the typical characteristics of time-honored ones. However, these time-honored SMEs decay manifestly because of the change of environment and bad operation, some of them have exited the market gradually, for example, Wang Mazi scissors founded in 1651 declared bankruptcy in 2003; And many time-honored SMEs are operating in market hardly with brand assets draining ceaselessly. From the brand value, the results brand values assessed by Chinese Academy of Brand showed brand value of most time-honored SMEs was below 10 million, and even some of them devalued. Thus, it is urgent and necessary to enhance time-honored brand equity. Based on domestic and overseas scholars research, innovation and nostalgia are the right choices to revitalize time-honored brands [2]-[5]. Although rejuvenation of old brands is paid more attention at present, theoretical research of time-honored SMEs is still relatively weak. This study focuses on concrete increment strategy of brand equity based on the characteristics of these companies and consumers response. 2 Literature Review on Increment Approaches of Brand Equity of Old Brands The recession of time-honored SMEs essentially derives from the decrement or drain of its brand equity. The key to revive old brand is to activate its brand equity. Literature of revitalizing Brand equity also stresses that innovation and nostalgia play an important role in rejuvenating old brands. The scholars of cognitive psychology, Keller as the typical representative, argued that activation of brand equity should search sources from brand awareness and brand image, then construct them to 571

improve brand awareness and image [2]. In effect, it is a usage of innovative strategy which is to reform the existent elements or introduce new elements in the structure of brand equity. Innovation has become the permanent drive to develop enterprises, and is wildly applied to various aspects of enterprise development since Schumpeter put forward innovation in 1912. Michael Porter also argued that innovation was technological improvement or better methods to work. According to the definition, innovation could be done by updating product and technology, changing marketing mixture, applying new selling method, developing new market, and so on [6].For Chinese time-honored SMEs, purpose of innovation is to seek new elements of brand equity into company development. Specifically, there are many innovative manners to choose, such as marketing innovation, management innovation, technology innovation, market innovation, and so on. The scholars of social psychology, Brown, Kozinet and Sherry as the typical representatives, argued that brand revitalization should be based on brand affection, and old brands could be revitalized by emphasizing to awake the nostalgia connection of consumers and old brands in order to rejuvenate brand meaning [3]. This is the use of nostalgia strategy through excavating existing elements of brand equity. Nostalgia is a kind of normal human affection, and consumer nostalgia is defined as a preference towards experiences associated with objects that were more common when one was younger [7]. In modern commercial times, nostalgia is not only seen as culture, social and psychology phenomenon. It is already penetrated into various aspects of personal consuming and corporation marketing. Domestic scholars also think that nostalgia is useful and effective marketing strategy to revitalize old brand, and Chinese old brands can apply consumer nostalgia to practice long-term brand management. Facing declination of old brands, enterprises can make use of consumers nostalgic preference and maintain some classical and unchangeable elements of old brands to recall consumers to positive feelings, so that enterprises can awake unique brand equity of time-honored brand and revive brand [3]-[4]. Both innovation and nostalgia can be used to enhance brand equity at the same time. Cognitive scholars argue that enterprises should retain the brand soul when introducing new elements into brand equity. The scholars of social psychology also propose that enterprises should renew products to meet consumer demands when using nostalgia. However, for time-honored SMEs, how to enhance brand equity through innovation with nostalgia? Enterprises should choose key factors of brand equity increment, and make decisions depending on market survey and considering these enterprises actual conditions. 3 Factors of Influencing Brand Equity Increment of Time-honored SMEs We determine primary factors of brand equity increment of time-honored SMEs based on literature and expert-consulting in this study. We invite five experts who have engaged in teaching and research of marketing to identify the key factors of influencing brand equity increment of time-honored SMEs. Brand equity is popular in the marketing research in recent years, but no consensus has been achieved on primary factors of forming brand equity, and brand equity model proposed by Keller is a typical viewpoint generally accepted. According to Keller s theory, brand equity refers to the differential reactions on company marketing efforts caused by brand knowledge in customers brains, consisting of brand awareness and brand image. Brand awareness reflects that how well brand mark exerts its effect. It refers to customers abilities to identify brands under different situations, including brand cognition and brand memory. Brand image reflects consumers brand association arisen from enterprises marketing mix, which consist of function, emotion and symbol association [8]. Fan Xiucheng and Chen Jie summarized various research about brand image, and proposed an comprehensive model of brand image, including product dimension, enterprise dimension, personality dimension and symbol dimension [9].Based on the suggestions of keller and Fan Xiuchen, this study integrates the main index of brand awareness and brand image into brand name and logo, brand affection, brand personality and brand attitude, and so on. These factors are analyzed from the perspective of consumers reaction, which can be seen as obvious factors of brand equity increment of time- honored SMEs. 572

Because brand equity in essence is a kind of response in consumers mind arisen from enterprises marketing efforts, many factors in the enterprise level also can influence brand equity increment of these companies. Based on analyzing relevant information of time-honored SMEs and integrating opinions from five experts, we propose primary factors of influencing brand equity increment in enterprise level: enterprise technology level, marketing channel, marketing communication, enterprise system. They are factors of influencing brand equity increment in the deep-seated level, can be seen as recessive factors of brand equity increment. Although brand culture is one of brand equity elements, it makes impact on consumers brand awareness in deep-seated level and is regarded as recessive factor. As a result, primary factors of brand equity increment of time-honored SMEs are established, shown in Table 1. Table 1 Primary factors of brand equity increment of time-honoured SMEs Factors Concrete Indexes Obvious factors brand name, brand sign, product perceived quality, brand popularity, brand love degree, brand trust, brand loyalty Recessive factors technical level of the enterprise, modern marketing concept of the enterprise, marketing channel, marketing communication, enterprise system, brand culture, brand personality 4 Empirical Analysis on Brand Equity Increment of Time-honored SMEs 4.1 Research design We choose Xinghualou, Nuts Zhang, Wangzhihe and Zhangxiaoquan which comparatively are familiar to consumers as research object. In terms of questionnaire designing, we used most items from Xiucheng and ChenJie [10], in the meanwhile, we also designed some items based on results of expert interview. The scale is composed of 15 items. All items were measured by Likert seven-point which higher scores indicated better performance. We sent 87 questionnaires to graduate students in a university and some consumers in a store, and recycle effective 82 questionnaires. In addition, because the two indexes of enterprise system and technological level are not suitable for consumer surveys, we determine their actual performance through carrying out expert interview above-mentioned. 4.2 Data analysis We use SPSS13.0 to test every index of the scale. The results from the statistical analysis show that there are 6 indexes more than 4 score with total 7 score, mainly focusing on brand name and brand culture, perceived quality and brand trust, etc., while some indexes such as brand communications, marketing channel, modern marketing concept, brand personality, etc. are given less than 4 score (shown in table 2). The results from expert-consulting reveal enterprise system and technical level of these time-honored SMEs are obviously not conducive to the enterprises development and need to reform. Table 2 Data analysis on indexes of brand equity increment Item Mean Std. Deviation Item Mean Std. Deviation familiarity with the brand name 5.026 0.961 modern marketing concept 3.532 1.065 high product perceived quality 4.879 0.866 using modern media 2.962 0.942 rich brand culture 4.346 0.898 brand popularity degree 3.962 1.025 knowing brand story 3.172 1.125 brand love degree 4.232 1.077 Brand s fashion and modernity 3.042 0.925 brand trust degree 4.454 0.892 Brand loyalty degree 3.017 1.225 profound impression on the 2.954 1.103 product features 4.213 1.126 brand sign think of the brand when buy the kind of product 3.827 1.012 Convenience of buying the product 2.877 0.866 4.3 Approach of Brand equity increment 4.3.1 Improving brand equity by innovation First, innovating enterprise system. Enterprise system whose core is property rights structure and 573

property rights relationship is most basic factor affected these time-honored SMEs development. Experts who take part in the interview agreed that these enterprises have old enterprise system and backward management and need to set up modern enterprise system. These companies can build appropriate structure of property rights and arrange rationally the control right, usufruct and disposal right of corporate assets through reforming enterprise system. In particular, for most time-honored SMEs, the key of enterprise system innovation is to solve principal-agent problem, namely to clear property rights and establish effective incentive mechanism for operators. For some private time-honored SMEs, they need to introduce modern enterprise elements such as introducing outsiders with technology and management capacity, absorbing social capital and other social resources, etc. Second, having marketing innovation. The results of market survey indicate consumers do not believe the enterprises have completely set up modern marketing concept, and consumers can not easily buy products of these time-honored SMEs, and these enterprises are used to communicate by word of mouth and use little in modern media, too. Therefore, enterprises should carry out marketing innovation including marketing concept, marketing channel, communication and brand personality to ensure brand equity increment, as follows: These enterprises should establish customer-orientated concept and regard consumers as the core of operation, and bring consumers suggestion into company. They need to consider consumer long-term interest in product design and manufacturing, and combine the old brand with modern consumers psychology and demands; These enterprises can choose the medium and content of advertising that can promote brand association, use internet and other modern media, attempt to establish brand community which strengthens interactive communication between consumers and enterprises or among consumers, and so on; Because products of these enterprises mainly meet the demands of daily life, these enterprises should establish long and broad marketing channels, Moreover, the types of sales channels can be abundant, for example, some wholesale and retail stores can be developed gradually into their sales network; these enterprises also try to establish new sales channels such as internet, and so on; In addition, these enterprises should innovate brand culture and enhance brand personality to promote brand loyalty. Despite their brands have already contained plentiful traditional culture, products must adapt themselves to modern consumption ideas, brands should continue to enrich its culture on the basis of passing down its traditional cultural, for example, some new elements such as fashion and modern can be introduced into brand personality. Third, innovating enterprise technology and products. The results of expert consulting show that products of these enterprises are low technology, and enterprise technology level needs to be improved. Thus, these enterprises should update products and technology in the situation of maintaining product quality and features, as follows: Time-honored SMEs should try to establish effective management mechanism of attracting, motivating technical talents; They can set up technology development centers to engage in product development; They should realize the standardization of production process, for example, using ISO9002 international quality control system certification standards to ensure the product quality, and so on. 4.3.2 Passing down time-honored SMEs unique brand equity by nostalgia First, considering nostalgia value of brand name and history. Results of market survey shows that consumers are very familiar with brand names of these enterprises, moreover, these brand names often contain the "hall", "blessing", "room" "moral", "benevolence" and so on, they can indicate a mental state of good luck, wealth and security, and also reflects value orientation in pursue of stability and peace. All these are easily accepted by consumers. From the perspective of brand history, these old brands own splendid business culture during long-term brand management, which form advantage unmatched by modern brand. Moreover, the unique process technics and product features of time-honored SMEs support the development of the brand. Thus, it is necessary to excavate and spread history and culture of old brands, cause consumer strong psychological resonance, and to awake consumers nostalgic bonding with brands to promote brand rejuvenation. Second, passing down the good brand reputation and excellent perceived quality of products. The result of the market survey indicates that the consumers give high evaluation on the brand reputation and 574

perceived quality, and also have profound impression on product features. These are the essence of these brands and core elements of their brand equity. Additionally, from the perspective of brand affect, time-honored enterprises often own extra intimacy because they possess good reputation and high social recognition during the long operation. All these effectively create consumers intimacy and brand association to time-honored SMEs which are worthy to be passes down. Third, Using brand story to deepen consumer brand awareness. Brand story is often characterized by symbolic content. It could be the personal legend of the brand founder, and moving story during the brand development, as well as the relation with the historical events and social celebrities. Most time-honored brands possess many brand stories during long-term operation. For example, Wanglaoji develop its brand story of the TV series Medicine Man in Lingnan ; Grand Mansion Gate --brand story of Tongrentang is well known; former Cambodian state prince Norodom Sihanouk came to Tianjin and tasted the Guifaxiang serratula, and appreciated the Guifaxiang serratula very much. These stories are widely spread and have already become affection bonding between old brand and consumers, and also deepen consumers brand awareness and memory. They are worth to excavate. 5 Conclusion and Discussion This research focuses on the increment strategy of time-honored SMEs brand equity based on theory of innovation and nostalgia. For time-honored SMEs, the combination of innovation and nostalgia should be the sensible choice to increase brand equity. When these enterprises only seek innovation and not mind history and tradition, they will waste brand equity and lead to high cost. If they are confined to tradition and not innovation, they feel hard to meet the market demands. The key is to identify what elements of brand equity should be innovated and adopted nostalgia. According to literature and results of expert-consulting, this research establishes the primary obvious and recessive factors of brand equity increment respectively from consumer level and enterprise level, and makes certain actual situation of these factors based on consumer survey and expert-consulting, and finally proposes concrete strategies of innovation and nostalgia. In this study, we analyze time-honored SMEs, however, different types of enterprises have different characteristics and situations, future research can be carried out at different types of time-honored SMEs in order to better serve the development of these enterprises. References [1]. YAO Jie, GONG Zizhu. Research on Small-Medium Enterprise Marketing Innovation, Journal of Northeast Dianli University, 2007,27 (5): 17~20(in Chinese) [2]. Keller, Kevin Lane. Managing Brands for Long Run: Brand Reinforcement and Brand Revitalization Strategies, California Management Review, 1999, 41(3): 102~124. [3]. Brown Stephen, Rovert V Kozinets, John F. Sherry Jr. Teaching Old Brands New Tricks: Retro Branding and the Revival Brand Meaning, Journal of Marketing, 2003, 67(3):19~33. [4]. LU Taihong, GAO Hui. Review of Brand Aging and Brand Revitalization, Foreign Economics & Management, 2007, 29(2):17~23(in Chinese) [5]. HE Jiaxun, QIN Xiyan, YANG Qingyun, WANG Ying, Innovation or Nostalgia? The Paradoxes Reflected in Managing Brands over Time and the Segmentation Orientation of Old Brands -An Empirical Study from Three Cities in China, Management World, 2007,(11) :96~108(in Chinese) [6]. Mi. Porter,The Competitive Advantage of Nations, New York: The Free Press, 1990. [7]. Morris B.Holbrook, Robert M. Schindler. Nostalgic Bonding: Exploring the Role of Nostalgia in the Consumption Experience, Journal of Consumer Research,2003,3(2) :107~127 [8]. Keller, Kevin Lane. Conceptualizing Measuring and Managing Customer- Based Brand Equity, Journal of marketing, 1993, 57(1): 1~22. [9]. FAN Xiucheng. CHEN Jie. Measurement of Brand Image: A Brand Identity Based Integrated Model and Empirical Study. Journal of Nankai University (Social Science), 2002,(3):55~71(in Chinese) 575