Assignment on:

The influence of brand equity on consumer responses

Submitted To:

Dr. Hassan Bucha

Submitted By:

Waleed Bashir MB-14-33

Arsalan Ghauri MB-14-63

Talha Arif MB-14-26

MBA (6th Semester) (Morning)

Date 20-02-2017
 LITERATURE REVIEW
This study examines the effect of brand equity on four factors: consumers’ willingness to pay

price premiums, consumers’ attitude towards brand extensions, brand preference, and purchase

intention. The development of international brands competing in different geographical markets

has given rise to the issue of how brands should be managed in a global landscape. However,

while the consequentiality and management of brands from the viewpoint of domestic marketing

has been highly addressed in the literature, studies examining brands from an international

perspective are reserved. Brand equity is the intangible value integrated to a product by the

useful utilization of promotion and other marketing implements. On dimensions like image,

distribution and physical design, it can provide dynamic competitive advantages in product

categories where most alternatives provide the same benefits. The only serious disadvantage of

building brand equity is its cost.

Brand equity:

Brand equity is a core concept of marketing. Although wide research has been conducted on

brand equity, the literature on this subject is largely irregular and unsettled. Several definitions of

brand equity have been proposed. Most of them, from a consumer perspective, are based on the

principle that the power of brands lies in the minds of consumers (Leone et al., 2006). Others,

from a financial perspective, consider brand equity as the monetary value of a brand to the firm

(Simon and Sullivan, 1993). Brand positioning can be defined as a component of the value

proposition and brand identity (Aaker and Joachimsthaler, 2000). Thus, a company needs to

actively communicate to the target audience their brand situating strategies. One of the valuable

brand positioning strategies is to actively communicate with consumers in advertisements

(Hartmann et al., 2005). Moreover, brand positioning strategies can be key implements for brand

implementation and wealth in the competitive environment (Kotler, 2000). Branding and

customer relationship management (CRM), along with the commercialization and

professionalization of the sports industry, are factors central to the prosperity of sports teams and

their brands (Bauer et al., 2008; Ferrand et al., 2010).

Relationships among brand equity dimensions:

In order to measure brand equity, the present study is based on the three main dimensions

engaged in academic research: brand awareness, brand loyalty, and perceived quality. Brand

awareness is the ability to recall a brand, i.e. its presence in one's mind (Aaker, 1991; Berry,

2000; Berry & Seltman, 2007). Brand loyalty is one of the most studied components in the

literature (Gil-Saura et al., 2013). For Aaker (1991), it is client loyalty to a brand, which he

considered one of the main components of brand equity. Perceived quality is one of the principal

components for building a strong brand because it represents objective features as much as

subjective valuations for stakeholders (Aaker, 1996; Keller, 2003). Brand equity has many

definitions and forms, such as favorable impressions, attitudinal characters, and behavioral

preferences (Rangaswamy et al., 1993); brand loyalty, brand awareness, perceived quality, brand

association, and other proprietary brand assets (Aaker, 1991); brand knowledge such as brand

awareness and brand association (Keller, 1993); loyalty and image (Shocker and Weitz, 1988);

the integrated value donated by the brand name (Farquhar et al., 1991); incremental utility

(Kamakura and Russell, 1993); the difference between overall brand preference and multi

attributed preference established on objectively measured attribute levels (Park and

Srinivasan,1994); and overall quality and reject intention (Agarwal and Rao, 1996). Brand equity

is defined variously as the differential effect of brand knowledge on consumer response to a

brand’s marketing (Keller, 1993), as incremental utility that consumers experience relative to an

unbranded offering (Kamakura and Russell, 1993), suitable attitudinal characters (Rangaswamy

et al., 1993) and as rational, emotional and hedonic connections with an offering (de Chernatony

and Dall’Olmo-Riley, 1998). The proposed CBBE model features four dimensions, which

represent hidden variables: brand salience, brand association, brand quality and brand resonance.

Brand salience is the rock layer of the hierarchy, and is the strength of the purpose’s presence in

the mind of the target when a given peregrinate context is considered. Brand image represents

the perceptions attached to the target. Brand quality is concerned with perceptions of the quality

of a destination’s infrastructure, hospitality space and facilities such as accommodation. Brand

loyalty represents the ability of occupation to the endpoint.

Relationships among brand equity dimensions and overall brand equity:

Brand Awareness refers to the strength of a brand’s presence in consumers’ minds. Brand

awareness is a major component of brand equity (Aaker, 1991; Keller, 1993). Aaker stated

several qualities of brand awareness, ranging from simple apperception of the brand to

ascendance, which refers to the condition where the brand involved is the only brand recalled by

a consumer. Brand may develop sodalities from a range of sources, brand personality and

organizational associations are the two most principal types of brand sodalities, which influence

the brand’s equity (Aaker, 1991, 1996). Perceived quality is not the accurate quality of the

product but the consumer’s personal evaluation of the product (Zeithaml, 1988). Oliver (1997, p.

392) defined brand loyalty as: “a deeply held commitment to rebuy or support a preferred

product or service regularly in the future, despite conditional influences and marketing efforts

having potential to cause switching behaviour”. Each dimension of brand equity: awareness,

association, perceived quality and loyalty, has, in turn, a positive effect on overall brand equity.
Overall brand equity is considered as an ecumenical preference for the brand over homogeneous

alternatives, as developed in different definitions of this concept (Farquhar, 1990; Aaker, 1991).

Structural brand equity model shown in Broyles et al. (2009) which shows there are two aspects

of brand equity and its antecedents, namely: functional and experiential (Keller, 2002; Barnes,

2003; de Chernatony and Riley, 1997). The functional aspect includes the components of one’s

perception of a brand’s performance and quality, including perceived performance (one’s

judgment of a brand’s ability to complete its planned functions) (Armstrong and Kotler, 2003)

and perceived quality (one’s judgment of the overall excellence or prevailing of a brand). CBBE

is a multidimensional concept (Aaker, 1991, 1996) as it involves brand loyalty, perceived

quality, and brand association combined with brand awareness. From the firm‘s perspective,

however, brand loyalty is the substructure of brand equity (Kayaman and Arasli, 2007). Aaker

(1991) defines brand loyalty as simply a consumer‘s appropriation to a brand. Consumers with

high brand loyalty demonstrate it through repurchase commitment (Oliver, 1997) and struggle

changing to other competing brands. Research has shown that loyal consumers are more

responsible to produce favourable reproductions through utilizing a product than those who are

less loyal (Grover and Srinivasan, 1992).

Overall brand equity effects on consumers’ Responses:

Consumers’ values can be established by many different aspects of products and services

provided by the retailers, such as quality of the product/service (Venkatesh et al., 2012). For this

reason, retailers need to understand what consumers’ values are and how those values are similar

to their decision to buy (Levy, 1999; Stahl et al., 2012). To identify these values, Zeithaml

(1988) suggested two values of the brand: quality and price of the product. Consumers can assess

the overall utility of a product or services depending on their perception of what they received
from the brand versus what they gave to the brand. In 1991, over 16,000 developing product

exordia were tried in US supermarkets, drug stores and variety stores (Dornblaser, 1992). About

90% of these were line extensions involving flavour or variety modifications utilizing existing

brand values. There were, however, a number of brand extensions where existing brand values

were adapted to enter developing categories. When the initial extension is launched, consumers

evaluate it on the structure of their position toward the parent brand and the extension category.

If a consumer does not understanding the parent brand and its products at all, she will evaluate

the initial extension merely on the substratum of her experience with the extension category

(Sheinin, 1998). Keller (1993, 1998) transfers brand sodalities into three major categories:

attributes, benefits and attitude. Attributes are those descriptive features that characterize a

brand, such as what a consumer cerebrates the brand is or has and what is involved with its

purchase or consumption. Benefits are the personal value consumers attach to the brand

attributes, that is, what consumers cerebrate the brand can do for them. Brand positions are

consumers' overall evaluations of a brand. Essentially, brand equity stems from the greater

confidence that consumers place in a brand than they do in its competitors. This confidence

translates into consumers’ loyalty and their willingness to pay a premium price for the brand. As

an example, a study by McKinsey & Co. and Intelliquest Inc. found that consumers rise to buy

brands with low brand equity like Packard Bell only at a price discount when compared to brands

such as Compaq and IBM that can command a price premium (Pope, 1993).

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