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Brand-Added Value

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Brand-Added Value BRAND-ADDED VALUE BRAND-ADDED VALUE theory and empirical research about the value of brands to consumers (Merkmeerwaarde: theorie en empirisch onderzoek naar de waarde van merken voor consumenten) PROEFSCHRIFT TER VERKRIJGING VAN DE GRAAD VAN DOCTOR AAN DE ERASMUS UNIVERSITEIT ROTTERDAM OP GEZAG VAN DE RECTOR MAGNIFICUS PROF.DR. P.W.C. AKKERMANS M.LIT. EN VOLGENS BESLUIT VAN HET COLLEGE VAN DEKANEN. DE OPENBARE VERGADERING ZAL PLAATSVINDEN OP DONDERDAG 20 JANUARI 1994 OM 16.00 UUR DOOR HENDRIK JAN RIEZEBOS GEBOREN TE SORONG (IRIAN-JAYA) PROMOTIECOMMISSIE Promotor: prof.dr.ir. B. Wierenga Co-promotor: dr. A.Th.H. Pruyn Overige leden: prof.dr. Th.B.C. Poiesz prof.dr. W.F. van Raaij Copyright © 1994 by H.J. Riezebos, Rotterdam Eburon Publishers P.O. Box 2867 2601 CW Delft The Netherlands Cover design: Floor Peters No part of this book may be reproduced in any form, by print, photo-print, microfilm or any other means without written permission from the publisher. Most of the brand and corporate names mentioned in this thesis are claimed or registered as trade marks. A list of brand and corporate names commences on page 255. The brand scores, the blind scores and the brand-added value scores reported on in this thesis are based on non- representative samples of the Dutch population. These scores are meant to test theoretical propositions; therefore no conclusions may be drawn from these scores for the performance of a brand in general. ISBN 90-5166-367-6 ABSTRACT The research reported on in this thesis focuses on four aspects of brand-added value (BAV): 1. A theoretical framework for BAV which includes a definition of the BAV- construct, the development of a theoretical framework to show how BAV functions and an elaboration upon factors that may contribute to BAV. 2. The development of an instrument for measuring BAV. 3. The determination and explanation of differences in the magnitude of BAV between product classes. 4. An investigation of the influence of advertising on BAV in an experi- mental setting. The BAV-construct is defined and elaborated upon theoretically by using Brunswik's Lens model. In this model, BAV is positioned as the consumer's perceived value of the brand name and its related connotations. The brand name (an extrinsic cue) is thought to be of more influence in the consumer decision-making process when a brand's intrinsic cues are hidden (as is the case for products with predominantly experience cues) than when a brand's intrinsic cues are revealed (as is the case for products with predominantly search cues). It is furthermore hypothesized that for products with predomi- nantly search cues, only information on extrinsic cues may add value to the brand. For products with predominantly experience cues (intrinsic cues are hidden) it is assumed that information on intrinsic cues adds more value to the brand than information on extrinsic cues. In elaborating upon factors that may contribute to BAV, three elements of BAV are distinguished: perceived quality, (immaterial) brand associations and brand name awareness. Whereas intrinsic cues may only contribute to the perceived quality of the brand, ex- trinsic cues may contribute to the perceived quality of the brand, add associa- tions to the brand and / or increase the brand name awareness of the brand. BAV is operationalized by determining the difference in a consumer's prefer- ence between the brand with, and the brand without its brand name (i.e. BAV = BRAND - BLIND). To determine the reliability and validity of this measure- ment instrument for BAV, BAV-scores were measured for eight brands of beers and eight brands of computers. Consistency and stability (both aspects of reliability), proved to be satisfactory except for blind scores of beers. An al- v ternative computation for BAV is given in cases where the blind scores appear not to be reliable. As far as the brand scores are concerned, checks on con- vergent, content, and concurrent validity proved to be satisfactory. Checks on convergent, concurrent, and face validity of the BAV-scores also proved to be satisfactory. In determining differences in the magnitude of BAV between product classes, BAV-scores were assessed for six brands in twelve different product classes. The degree to which BAV emerged (positive or negative) was taken as a measure for the magnitude of BAV. The results of this study show that the factor search vs experience cues is of most influence on the magnitude of BAV. This magnitude is higher for products with predominantly experience cues than for products with predominantly search cues. In the second place, the factor functional vs expressive cues influences the magnitude of BAV: the magnitude of BAV is higher for products with predominantly expressive cues than for products with predominantly functional cues. As far as influencing BAV through advertising is concerned, the results of an experiment showed, that for a search product, information on extrinsic cues (i.e. transformational advertising) contributed more to BAV than information on intrinsic cues (i.e. informational advertising). For an experience product, there were empirical indications that informational advertising contributes more to BAV than transformational advertising. However, further research is needed to corroborate this finding for products with predominantly experi- ence cues. In the conclusions of this thesis, it is made clear that from the perspective of branding, the BAV-construct is to be preferred over the constructs 'perceived quality of the brand' and 'attitude towards the brand'. In contrasting BAV with brand equity, it is concluded that BAV is a synonym for brand equity, if, in using the brand equity construct it is looked at from the perspective of the value of a brand to consumers. In concluding on the measurement instrument for BAV, it is acknowledged that this instrument has several advantages over other instruments. In discussing the managerial implications, it is concluded that longitudinal tracking of BAV-scores may serve several managerial pur- poses and that BAV may possibly serve as a major factor in the marketing track-record to be used in brand valuation. Finally, major areas for future research on brand-added value are given. vi CONTENTS Preface . 1 PART I - THEORETICAL FRAMEWORK 1 - Branding as a marketing strategy . 7 1.1 Competition through branding . 7 1.2 Benefits of branding and advertising for the supplier . 13 1.3 Branding and consumers . 21 2 - The construct 'brand-added value' . 27 2.1 Characteristics of a branded article . 27 2.2 Definition of brand-added value . 37 2.3 Constructs that overlap with brand-added value . 43 3 - Factors that may contribute to brand-added value . 57 3.1 Factors that may explain the magnitude of brand-added value within product classes . 58 3.2 The contribution of intrinsic cues to brand-added value . 64 3.3 The contribution of extrinsic cues to brand-added value . 68 3.3.1 The role of the brand name . 68 3.3.2 Product-related cues . 72 3.3.3 Price . 78 3.3.4 Distribution . 81 3.3.5 Advertising . 82 3.4 Line and brand extensions . 87 3.5 A recapitulation and the formulation of research questions . 89 PART II - EMPIRICAL STUDIES 4 - Developing and testing a method for measuring brand-added value . 95 4.1 The operationalization and the measurement method of brand- added value . 95 4.2 Method employed in the empirical study . 100 4.3 Results of the empirical study . 107 4.3.1 The order of presentation . 107 4.3.2 Reliability . 109 4.3.3 Validity . 114 4.3.3.1 Validity of the brand scores . 114 4.3.3.2 Validity of the BAV-scores . 119 4.4 Concluding remarks on how to measure brand-added value . 124 5 - Differences in the magnitude of brand-added value between product classes . 129 5.1 The operationalization of the magnitude of brand-added value . 129 5.2 Method of the empirical study . 133 5.3 Results of the empirical study . 138 5.3.1 Reliability and validity . 139 5.3.2 The order of the product classes . 140 5.3.3 Testing hypotheses on the magnitude of brand-added value . 142 5.4 Discussion on the differences in the magnitude of brand-added value . 152 6 - Influencing brand-added value through advertising . 159 6.1 Theory concerning the influence of advertising on brand-added value . 159 6.2 Method used in the experiment . 164 6.3 Results . 171 6.4 Discussion and conclusions . 177 PART III - CONCLUSIONS AND IMPLICATIONS 7 - Conclusions and managerial implications on brand-added value . 185 7.1 Contribution to the body of knowledge on brand-added value . 185 7.2 Managerial implications . 193 7.3 Major areas for future research . 201 Appendix 1: Additional tables chapter 4 . 205 Appendix 2: Additional tables chapter 5 . 215 Appendix 3: Additional tables chapter 6 . 223 References . 237 Author index . 251 Brand and corporate name index . 255 Subject index . 257 Samenvatting (summary in Dutch) . 263 Curriculum vitae . 271 PREFACE In 1955, Gardner and Levy published the article 'The product and the brand' in which for the first time an attempt was made at distinguishing between a product and a brand. Probably one of the first authors who described market- ing insights from the perspective of brands was Stephen King. The opening line of his book 'Developing new brands', clearly stressed the importance of differentiating between a product and a brand: 'What makes companies suc- ceed is not products, but brands' (King, 1973 p.v). In his book, King pointed out that one of the differences between a product and a brand is that values may be added to brands.
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