University of Massachusetts Amherst ScholarWorks@UMass Amherst

International CHRIE Conference-Refereed Track 2011 ICHRIE Conference

Jul 27th, 3:15 PM - 4:15 PM Roles of Brand Value Perception in the Development of Brand Credibility and Brand Prestige Chihyung Ok Kansas State University, [email protected]

Young Gin Choi Kansas State University, [email protected]

Seunghyup Seon Hyun Pusan National University

Ok, Chihyung; Choi, Young Gin; and Hyun, Seunghyup Seon, "Roles of Brand Value Perception in the Development of Brand Credibility and Brand Prestige" (2011). International CHRIE Conference-Refereed Track. 13. https://scholarworks.umass.edu/refereed/ICHRIE_2011/Wednesday/13

This Empirical Refereed Paper is brought to you for free and open access by the Hospitality & Tourism Management at ScholarWorks@UMass Amherst. It has been accepted for inclusion in International CHRIE Conference-Refereed Track by an authorized editor of ScholarWorks@UMass Amherst. For more information, please contact [email protected]. Ok et al.: Roles of Brand Value Perception in the Development of Brand Credibility and Brand Prestige

ROLES OF BRAND VALUE PERCEPTION IN THE DEVELOPMENT OF BRAND CREDIBILITY AND BRAND PRESTIGE

Chihyung Ok Hospitality Management and Dietetics Kansas State University, USA

Young Gin Choi Hospitality Management and Dietetics Kansas State University, USA

and

Seunghyup Seon, Hyun Tourism Convention Management Pusan National University, Korea

Published by ScholarWorks@UMass Amherst, 2011 1

International CHRIE Conference-Refereed Track, Event 13 [2011]

ROLES OF BRAND VALUE PERCEPTION IN THE DEVELOPMENT OF BRAND CREDIBILITY AND BRAND PRESTIGE

Abstract This study explores the functional roles of consumers’ perceived brand value on brand credibility and brand prestige and consequent positive effects on key brand relationship outcomes. The links were depicted in a conceptual model and empirically tested with structural equation modeling using 309 consumers in a coffeehouse setting. The results suggest that perceived utilitarian value shapes brand credibility, and perceived hedonic and social value enhance brand prestige. In turn, brand credibility and brand prestige had positive effects on brand trust. The effects of perceived social value on social image congruence and well-being were also confirmed. Suggestions are provided.

Key Words: perceived value, brand credibility, brand prestige, trust, commitment, loyalty, coffeehouse

Introduction Customers look for more than just reasonable price and convenient location in various consumption situations. Creating and delivering customer value is a precondition for managers to survive in today’s competitive marketplace. Therefore, customer perceived value has been accepted as one of the key concept to understand consumer purchasing behavior in service industry (Jensen, 1996; Ostrom & Iacoucci, 1995). Despite a critical role of consumers’ perceived value, limited efforts have been directed to understand three-dimensional value perception (i.e., utilitarian, hedonic, and social value) and their impact on brand relationship quality and behavioral loyalty. Further, despite important roles of brand credibility and brand prestige in shaping the consumer brand choice behavior, limited number of studies has explored the mechanism (Baek, Kim, & Yu, 2010). Given the general lack of academic examination in this area, there exists a strong need for this subject. This study first aims to understand the effects of perceived value (i.e., utilitarian, hedonic, and social value) on brand credibility and brand prestige. Further, this study tests direct and indirect effects of brand credibility and brand prestige on relationship quality dimensions (i.e., brand trust and commitment) and behavioral brand loyalty. Finally, this study explores the unique contribution of social value on social image congruence, well-being perception, brand commitment, and ultimately brand behavioral loyalty. This study tests proposed relationships in the coffeehouse industry where brand management is very critical. The findings of this study present meaningful suggestions in crafting branding strategies, and it hoped that this study contribute to further understanding of the value perceived by customers

Review of Literature Brand Value Of the numerous definitions of perceived value, the definition of Zeithmal (1998) is one of the most widely accepted one. She defined it as “the consumer’s overall assessment of the utility of a product based on perceptions of what is received and what is given (p. 14).” In the definition, value stands for an overall assessment of tradeoff between what is given and what is received. Such definition includes only the utilitarian side of value. Researchers have suggested that perceived value could be objectified as a multi-dimensional construct (Babin, Darden, & Griffin, 1994; Gronroos, 1997; Sweeney & Soutar, 2001). Value is conceptualized to include both the functional benefits of performance and non-functional benefits of performance. Sheth et al. (1991) classified perceived value in five dimensions: social, emotional, functional, epistemic, and conditional. Gronroos (1997) simplified the dimensions of value into two dimensions (i.e., cognitive and emotional value). Later, Sweeney and Soutar (2001) conceptualized perceived value in three dimensions: functional, social, and emotional. This study adopts a three-dimensional approach suggested by Rintamaki et al. (2006). According to them, utilitarian dimension origins from monetary savings and convenience; hedonic dimension origins from entertainment and exploration; and social dimension is realized through status and self-esteem enhancement.

The utilitarian value perspective puts emphasis on consumer’s perception on functional performance in the purchasing or decision-making process. When consumers’ needs are fulfilled and/or when there is balance between

https://scholarworks.umass.edu/refereed/ICHRIE_2011/Wednesday/13 2

Ok et al.: Roles of Brand Value Perception in the Development of Brand Credibility and Brand Prestige

quality and price (cost), they experience utilitarian value. Feeling the ambience that creates enjoyment (hedonic value) is a critical aspect of consumers’ consumption experience (Babin et al., 1994). This is true for visiting and drinking coffee. Social value has been regarded either as a sub-dimension contributing to utilitarian and hedonic value (Chandon, Wansink, & Laurent, 2000) or as one of several dimensions (Sweeney & Soutar, 2001).

Effect of Value on Brand Credibility and Brand Prestige Brand credibility is defined as “the believability of the product information contained in a product” (Erdem & Swait, 2004, p192). They argue that brand credibility is the most important characteristic of a brand. Consistency over time and signals of quality are important factor deciding brand credibility. Baek et al. (2010) suggests that brand credibility indicates tangible and utilitarian sides of value. Brand prestige is associated with a brand’s relatively high status positioning (Baek et al., 2010; Steenkamp et al., 2003). Baek et al. (2010) consider that brand prestige is hedonic and social aspect of value. In summary, this study proposes that consumer’s perception of functional performance built through purchase and usage of product/service will enhance brand credibility. On the other hand, hedonic value and social value will positively affect brand prestige.

Effect of Perceived Social Value on SOIC and Well-being Visiting a coffeehouse can represent a social act where symbolic meanings, social code, relationships, and the consumer’s identity and self may be produced and reproduced (Firat & Venkatesh, 1993). The act of experiencing coffee house can provide a symbolic benefit, as customers are able to express their personal values through the consumption experience (Chandon et al., 2000). Therefore, this study proposes that social value of consumption experience will enhance social image congruence. In turn, as consumers perceive the brand is congruent with them, they would consider the brand plays an important role in their well-being, measured as social well-being, leisure well-being and quality of life in this study.

Effect of Brand Credibility and Prestige on Brand Trust According to Erdem and Swait (2004), being credible requires two components: ability (i.e., expertise) and willingness (i.e., trustworthiness). That is, demonstrating consistency in meeting what have promised will build consumers’ confidence in reliability and integrity in the brand. They suggested that brand credibility and brand prestige (measured in this study as high status, up-sale, and prestigious) increase consumers’ confidence in the brand. In line with this argument, this study proposes that brand credibility and brand prestige have a positive effect on brand trust.

Effects of Brand Trust on Brand Commitment and Behavioral Brand Loyalty The importance of confidence in exchange relationship has been demonstrated in relationship marketing literature (Dwyer, Schurr, & Oh, 1987; Morgan & Hunt, 1994). Its effects on commitment -“enduring desire to maintain a valued relationship” (Moorman, Zaltman, Deshpande, 1992, p.316) have also been well supported in the literature. Therefore, it is expected that a brand that demonstrates reliability and integrity ensures consumers’ willingness to keep the relationship and encourage future purchases. Following this logic, this study proposes that brand trust positively affect brand commitment and behavioral brand loyalty.

Effects of Brand Well-being on Brand Commitment Grzeskowiak & Sirgy (2007) contended that how products deliver satisfaction in the domains of leisure, family, and leisure life affect consumers’ well-being perception; that is, overall happiness of life. Therefore, this study proposes that consumers’ well-being perception in relation to a particular product will enhance the enduring desire to maintain the relationship.

Methodology Overview of Scale Development Validated scales from established literature were adapted and modified to fit in the coffeehouse setting. Constructs were measured on seven-point Likert scales, ranging from 1 (strongly disagree) to 7 (strongly agree).

Published by ScholarWorks@UMass Amherst, 2011 3

International CHRIE Conference-Refereed Track, Event 13 [2011]

Before the questionnaire was finalized, academic professionals reviewed the questionnaire to assure content validity. Revisions were made accordingly. The instrument was pilot-tested with a convenient sample of 40 coffeehouse customers to ensure the appropriateness and to estimate the reliability of the scales. Each construct had over the conventional cutoff of .70 (Nunnally, 1978). Details on measurement items, including sources of them, are reported in Table 1.

Table 1. Confirmatory Factor Analysis: Items and Standardized Loadings

Construct and Scale Items Standardized Loading

Utilitarian Value (Babin et al., 1994) The coffee taste is enjoyable at this coffeehouse brand. .857 Service delivery at the coffeehouse of this brand is prompt. .701 I like the variety of menu choices at this coffeehouse brand. .666 I am able to make my purchases conveniently. .684 Hedonic Value (Babin et al., 1994) The interior design of this coffeehouse brand makes me feel comfortable. .838 The music played at this coffeehouse makes me relax and enjoy. .729 Visiting the coffeehouse of this brand makes me feel like that I am escaping from ordinary life. .839 The mood at the coffeehouse of this brand makes me feel exotic. .727 The layout and facilities aesthetics at the coffeehouse of this brand are appealing to me. .806 Social Value (Rintamki, Kanto, Kuusela, & Spence, 2006) Patronizing this brand fits the impression that I want to give to others. .772 I feel that I belong to the customer segment of this coffeehouse brand. .843 The service and product that the coffeehouse provides are consistent with my style. .837 I feel like I am a smart consumer because I make successful purchases at this coffeehouse .866 brand. The coffee consumption at this coffeehouse brand gives me something that is personally .855 important or pleasing for me. Brand Credibility (Erdem & Swait, 2004) This coffeehouse brand delivers (or will deliver) what it promises. .908 Product claims from this coffeehouse brand are believable. .903 Over time, my experiences with this coffeehouse brand led me to expect it to keep its promises. .859 This coffeehouse brand is committed to delivering on its claims. .930 This coffeehouse brand has a name you can trust. .902 This brand has the ability to deliver what it promises. .920 Brand Prestige (Baek et al., 2010) .914/.948/ .8 This coffeehouse brand (is very prestigious/has high status/is very upscale). 50 Brand Trust (Chiou & Droge, 2006) .886/.930/ .9 This coffeehouse brand …. 23/.928/ .902 (is very honest/is very reliable/is responsible/is dependable/acts with good intentions). Brand Commitment (Breivik & Thorbjornsen, 2008) I will stay with this coffeehouse brand through good and bad times. .850 I am willing to make small sacrifices in order to keep using this coffeehouse brand. .854 I have made a pledge of sorts to stick with this coffeehouse brand. .893 I am committed to this coffeehouse brand. .919

https://scholarworks.umass.edu/refereed/ICHRIE_2011/Wednesday/13 4

Ok et al.: Roles of Brand Value Perception in the Development of Brand Credibility and Brand Prestige

Table 1 continued …

Social Image Congruence (Sirgy et al., 1997) The typical coffee consumer at this coffeehouse has an image similar to how other people see .932 me. The typical coffee consumer at this coffeehouse has personality characteristics similar to mine .951 as perceived by others.

Well-being (Grzeskowiak & Sirgy, 2007) This coffeehouse brand plays an important role in my (social well-being/leisure well- .925/.936/.92 being/enhancing my quality of life) 5

Behavioral Loyalty (Zeithaml et al., 1996) I would recommend this coffeehouse brand to friends and relatives. .878 I intend to keep buying coffee at this coffeehouse brand. .886 If I need coffee, this coffeehouse brand would be my preferred choice. .825 I will speak positively about this coffeehouse brand. .831 I intend to encourage other people to buy coffee from this coffeehouse brand. .888

Note: All factor loadings were significant at p<.001.

Sampling and Data Collection The online survey questionnaires were distributed to a random sample of 1,475 panel members of an online market research company who described themselves as regular coffeehouse visitors. Of a total of 316 responses returned, seven responses were deleted because of missing data. Analyses were based on 309 responses, yielding a usable response rate of 20.95%. To ensure respondents’ regular visit at coffeehouse, they were asked to name one of the coffeehouse that they had visited regularly, and they were kept reminded to use that coffeehouse brand. White were most (n=198, 79.9%), and there were more female respondents (n=247, 64.1%). Age ranged from 18-84 with an average of 44.6 years old. Income was fairly evenly distributed.

Data Analysis and Results

Measurement Model The measurement model that serves to create a structural model representing the hypothesized relationship among the constructs examined first, followed by the structural model evaluation (Anderson & Gerbing, 1998). Confirmatory factor analysis was employed to validate the measurement model, which composed of 10 constructs with 43 measurement items. Except one item (i.e., perceived utilitarian value), the factor loadings, ranging from .666 to .951, were all significant at p-value of .01. Further, the average variance extracted (AVE) was greater than the threshold of .50 for all constructs, confirming convergent validity (Anderson & Gerbing, 1988; Bagozzi & Yi, 1988; Fornell & Larcker, 1981). The squared correlation between pairs of constructs was less than the AVE of respective constructs excluding perceived social value and behavioral loyalty. Following the suggestion (Bagozzi & Yi, 1988), χ2 difference test on the values obtained from the combined and uncombined models were compared and the original measurement model was kept. Lastly, composite reliability of construct exceeded the threshold of .70 (Hair et al, 1998). Table 2 presents means, standard deviation, AVE, composite reliability, correlations, and squared correlations. The goodness of fit of the measurement model were satisfactory, demonstrating that the measurement model fits the data reasonably well (RMSEA = .067, CFI = .929, IFI = .930, TLI = .920) except the Chi-square (χ2 = 1833.68 [df = 766, p < .001]. It is often reported that χ2 is sensitive to sample size (Bagozzi & Yi, 1988).

Published by ScholarWorks@UMass Amherst, 2011 5

International CHRIE Conference-Refereed Track, Event 13 [2011]

Table 2 Descriptive Statistics, AVE, Correlations, and Composite Reliabilities AVE PUV PHV PSV BCrd BPrs SIC WBng BTrt BCom BLyl PUV .53 .82 .70 .76 .87 .72 .46 .54 .81 .65 .90 PHV .62 .49 .89 .85 .65 .65 .72 .70 .66 .70 .69 PSV .69 .58 .73 .92 .71 .69 .77 .83 .69 .81 .79 BCrd .84 .76 .42 .50 .97 .67 .48 .52 .90 .65 .82 BPrs .82 .51 .42 .47 .45 .93 .52 .58 .66 .63 .68 SIC .89 .21 .52 .60 .23 .27 .94 .78 .47 .71 .57 WBng .86 .30 .50 .69 .27 .34 .61 .95 .53 .86 .71 BTrt .84 .65 .44 .48 .82 .44 .22 .28 .96 .63 .80 BCom .77 .42 .49 .66 .42 .39 .50 .73 .40 .93 .80 BLyl .74 .80 .47 .62 .68 .46 .33 .51 .63 .64 .94 Note. AVE: average variance extracted, PVU: perceived utilitarian value, PHV: perceived hedonic value, PSV: perceived social value, BCrt: brand credibility, BPrs: brand prestige, SIC: social image congruence, WBng: well- being, BTrt: brand trust, BCom: brand commitment, BLyl: brand loyalty a Composite reliabilities are along the diagonal, b Correlations are above the diagonal, and c Squared correlations are below the diagonal.

Structural Model and Hypothesis Test The proposed relationship translated into seven structural equations. The structural model adequately fitted the data. For the patrimony, the structural model was re-estimated with only significant paths and resulted with the following fit indices (RMSEA = .069, CFI = .923, IFI = .923, TLI = .916) except the Chi-square (χ2 = 1953.89 [df = 793, p < .001]). The t-values that indicate that parameter estimates are statistically significant (Fornell & Larcker, 1981) were used for hypothesis tests. Figure 1 presents standard regression coefficients and t-values (in parenthesis).

Brand Utilitarian .89(12.69)** Credibility Value .85(18.55)** Behavioral .40(7.87)** Loyalty Brand

Trust Hedonic .12(3.48)** .57(10.49)** .29(2.70)* Brand Value .35(8.27)** Prestige .44(4.12)** Brand Commitment Social Well-Being .67(14.42)** Value .90(16.62)** .92(16.45)** Social Image Congruence

Figure 1. Structural Model and Path Coefficients

Note: * p < .01; ** p < .001. Numbers in parentheses are t-values. Dotted lines indicate significant paths: When the direct paths from mediators (i.e., brand credibility, social image congruence, and brand trust) to criterion variable were constrained to zero, all paths became significant at p = .001, which demonstrating full mediation effects.

https://scholarworks.umass.edu/refereed/ICHRIE_2011/Wednesday/13 6

Ok et al.: Roles of Brand Value Perception in the Development of Brand Credibility and Brand Prestige

The perceived utilitarian value explains almost 80% of variation in brand credibility. Perceived social value along with perceived hedonic value accounted for 50.7% of variance of brand prestige. Brand credibility and brand prestige together explained 83.9% of variation in brand trust.

Conclusion and Managerial Implication Researchers suggested that perceived value plays an essential role in consumers’ attitudinal and behavioral outcomes. For example, Pura (2005) found the relationship between customer perceived value and attitudinal/behavioral components of loyalty. However, such relationships deemed to be weak. This study tried to understand the ‘why’ by adopting multi-dimensional perceived value and by adding two key variable in brand model (‘the heart of brand’, Baek et al., 2010). This study demonstrated that what a brand signals to consumers is not limited to the attribute-level functionality (i.e., taste, delivery promptness, variety, convenience, etc. in this study) and aesthetics and enjoyment (i.e., design, layout, facility, etc.) but also to the social or symbolic benefits. Therefore, hospitality entities should strive to demonstrate their expertise in products and service to make their customers trust their brand and commit to the brand. Further, businesses need to put more efforts to promote social meaning of their brands. Making them feel belong to the customer segment and providing something that is personally important would lead them to feel congruent with the brand. Then, the use or the consumption of brand would play an important role in developing customers’ perceived social and leisure well-being and in enhancing quality of life.

Limitation and Future Research The sample used in this study was from panels of an online marketing research company. Baseline characteristics of the study participants may have built in selection bias in answering the questions. This study evaluated the effects of perceived value in the coffeehouse setting; therefore, external validity of the findings in the study may limit the applicability of the findings. Therefore, future study may replicate the proposed relationship in different settings, such as to unique hotel brands.

References Anderson, J.C., & Gerbing, D.W. (1988). Structural modeling in practice: A review and recommended two-step approach. Psychological Bulletin, 103(3), 411-423. Babin, B. J., Darden, W.R., & Griffin, M. (1994). Work and/or fun: Measuring hedonic and utilitarian shopping value. Journal of Consumer Research, 20(4), 644-656. Baek, T.H., Kim, J., & Yu, J.H. (2010). The differential roles of brand credibility and brand prestige in consumer brand choice. Psychology & Marketing, 27(7), 662-678. Bagozzi, R.P., & Yi, Y. (1988). On the evaluation of structural equation models. Journal of the Academy of Marketing Science, 16, 74-94. Bettman, J. R. (1979). An Information Processing Theory of Consumer Choice, Addison-Wesley, Reading, MA. Breivik, E., & Thorbjørnsen, H. (2008). Consumer brand relationships: An investigation of two alternative models. Journal of the Academy of Marketing Science, 36, 443-472. Chandon, P., Wansink, B., & Laurent, G. (2000). A benefit congruency framework of sales promotion effectiveness. Journal of Marketing, 64(4), 65-81. Chiou, J.S., & Droge, C. (2006). Service quality, trust, specific asset investment, and expertise: Direct and indirect effects in a satisfaction-loyalty framework. Journal of the Academy of Marketing Science, 34(4), 613-627. Erdem, T., & Swait, J. (2004). Brand credibility, brand consideration, and choice. Journal of consumer research, 31(1), 191-198. Firat, F. A., & Venkatesh, A. (1993). Postmodernity: The age of marketing. International Journal of Research in Marketing, 10(3), 227-248. Fornell, C., & Larcker, D.F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39-50. Gronross, C. (1997). From marketing mix to relationship marketing towards a paradigm shift in marketing. Management Decisions, 35(3), 322-340.

Published by ScholarWorks@UMass Amherst, 2011 7

International CHRIE Conference-Refereed Track, Event 13 [2011]

Grzeskowiak, S., & M. Sirgy, J. (2007). Consumer well-being (CWB): The effects of self-image congruence, brand- community belongingness, brand loyalty, and consumption recency. Applied Research Quality Life, 2, 289- 304. Hair, J.F., Jr., Anderson, R.E., Tatham, R.L., & Black, W.C. (1998). Multivariate data analysis (8th). Upper Saddle River, NJ: Prentice-Hall, Inc. Holbrook, M.B., & Hirschman, E.C. (1982). The experiential aspects of consumption: Consumer fantasies, feelings and fun. Journal of Consumer Research, 9(2), 132-140. Jensen, H.R. (1996). The interrelationship between customer and consumer value. Asia Pacific Advances in Consumer Research, 2, 60-63. Moorman, C., Zaltman, G., & Deshpande, R. (1992). Relationships between providers and users of market research: The dynamics of trust within and between organizations. Journal of Marketing Research, 29(3), 314-328. Morgan, R.M., & Hunt, S. (1994). The commitment-trust theory of relationship marketing. Journal of Marketing, 58(3), 20-38. Nunnally, J.C. (1978). Psychometric theory. New York, NY: McGraw-Hill, Inc. Ostrom, A., & Iacobucci, D. (1995). Consumer trade-offs and the evaluation of services. Journal of Marketing, 59, 17-28. Pura, M. (2005). Linking perceived value and loyalty in location-based mobile services. Managing Service Quality, 15(6), 509-538. Rintamaki, T., Kanto, A., Kuusela, H., & Spence, M. T. (2006). Decomposing the value of department store shopping into utilitarian, hedonic and social dimensions. International Journal of Retail and Distribution Management, 34(1), 6-24. Sheth, J.N., & Barbara L. (1991). Why we buy what we buy: A theory of consumption values. Journal of Business Research, 22, 159-170. Sirgy, M.J., Grewal, D., Mangleburg, J.O., Park, K.C., Claiborne, J.S., & Berkman, H. (1997). Assessing the predictive validity of two methods of measuring self-congruity. Journal of the Academy of Marketing Science, 25, 229-241. Sweeney, J.C., & Soutar, G.N. (2001). Consumer perceived value: The development of a multiple item scale. Journal of Retailing, 77(2), 203-220. Zeithaml, V. A. (1988). Consumer perceptions of price, quality, and value: A means-end model and synthesis of evidence. Journal of Marketing, 52(3), 2-22. Zeithaml, V.A., Berry, L.L. & Parasuraman, A. (1996). The behavioral consequences of service quality. Journal of Marketing, 60, 31-46.

https://scholarworks.umass.edu/refereed/ICHRIE_2011/Wednesday/13 8