ABSTRACT
Marketing communications may provide the means for developing strong, customer-based brand equity (Keller 2003).Among marketing communication tools, advertising and price promotion have always played a pivotal role. Prior research suggests that consumer search behavior is likely to be different across product categories. Hence, this paper examines the effect of perceived advertising spending and price promotion on brand equity across search-experience goods/services.
Jean was chosen as search goods because it’s quality can be judged well before and after purchase or use it and bank was chosen as experience products due to its quality is unable to judge before use and able to judge quality after use.
According to analytic results, this study finds that advertising has significant positive relationship on brand equity for both search product and experience product. However, price promotion, for search product (jean), has significant negative impact on brand awareness and brand association and, for experience product (banking service), has positive effect on perceived quality and brand loyalty. In order to build strong brand equity effectively, managers must invest in the advertising but considering product categories when applying price promotion.
Key Word: Advertising, Price Promotion, Brand Equity, Product Category
LITERATURE REVIEW AND RESEARCH HYPOTHESES
Brand equity, a measure of the overall value of a brand (Keller, 1998), is a key concept in brand management. Brand equity has been identified as a valuable source of competitive advantage for many organizations (Aaker, 1991; Bharadwaj, Varadarajan and Fahy, 1993; Keller ,1998). Keller (1993) conceptualizes brand equity as “the differential effect of brand knowledge on consumer response to the marketing of the brand”. Furthermore, Keller (1) proposes brand knowledge as central to the definition of brand equity and contends that high levels of brand knowledge increase the probability of brand choice, and (2) defines brand knowledge in terms of brand awareness and image. Keller conceptualizes brand awareness as “the strength of the brand trace in memory that is reflected by the consumer’s ability to identify the brand under different conditions” and defines brand image as “perceptions about a brand as reflected by the brand associations held in consumer memory”. The customer-based brand equity is a set of brand-related associations held by the consumer in memory
(e.g., Keller, 1993). Under this perspective, brand equity is regarded as being largely attitudinal in nature, composed of beliefs, affect, and other subjective experiences related to the brand (i.e., brand attitude, brand image, etc.) In addition, existing research on brand equity is used to identify four cognitive “components” of customer-based brand equity. These are labeled as global brand attitude, strength of preference, brand knowledge, and brand heuristic (Girish and Clayton, 2004). Others have tried to further extend brand equity by including constructs, such as brand loyalty, brand awareness, perceived quality, in addition to brand associations (e.g., Aaker, 1991; Keller, 1993)
Brand equity is defined as a set of assets and liabilities linked to the brand, which add value to or subtract value from a product in its relationship with customers (Aaker, 1991). Aaker believed that the value of brand equity came from five brand equity assets(brand loyalty, brand awareness, perceived quality, brand associations and other proprietary brand assets), in which perceived quality and brand associations were two most important assets. All these brand equity assets could bring value for the enterprise and customer. The brand loyalty based on client can defend the attack of competitor’s marketing, and the effect of competitive manufacturer’s marketing efforts to attract the loyal customer of other brand is always unsatisfactory. Brand awareness can provide the familiarity to a brand and the signal of substantiality and promise if the customer knows the brand; while it will influence the consideration of customer to brand and further influence the selection of customer on brand when the brand is memorized. The perceived quality can influence the purchase decision and brand loyalty directly, especially when the customer has not been stimulated by inducement or can’t make detailed analysis. Brand association can assist customer to deal with or memorize information and become the base of product difference and product extension, which will provide a purchase reason for customer and arise positive feeling.
From the viewpoint of Aaker, the study can find that brand equity can bring value for both client and manufacturer, and the client value from brand equity is the base to create manufacturer value. In five assets of brand equity, brand loyalty may be influenced by other key dimensions (brand awareness, perceived quality and brand associations) of brand equity; therefore brand loyalty can be regarded as the primary base of brand equity and independent from other dimensions.
In five assets, other proprietary brand assets (patent, trademark and distributors etc.) are harder to measure the perspective of customer. In this case, this make perceived quality, brand loyalty, brand awareness and brand associations as the measure variables of brand equity based on the achievements of above scholars (e.g., Aaker, 1991; Keller, 1993).
Relationship between Advertising and Brand Equity
Advertising expenditure, as the main marketing communications tool in the consumer market, should be considered when determining the effects of marketing communications on consumers, and the perceptions that the messages are provoking among different target individuals (Angel and Manuel, 2005). Keller (2003) notes that the firm’s marketing communications contribute to brand equity. That is, effective communication enables the formations of brand awareness and a positive brand image. When consumers perceive high spending on advertising, this contributes to their perception of the level of confidence that marketing managers have in the product (Kirmani and Wright, 1989). Perceived advertising spending has positive effects, not only on brand equity as a whole, but also on each of the elements it is made up of:
loyalty, awareness, perceived quality and brand associations (Cobb-Walgren, Ruble and Donthu, 1995).
The relationship between perceived quality and spending on marketing communications was justified by different studies (Milgrom and Roberts, 1986; Kirmani and Wright, 1989; Aaker and Jacobson, 1994; Archibald, Haulman and Moody, 1983). The work shows the favorable relationship between marketing communications spending and the firm’s investment in the brand, which involves a higher perception of quality. The relationship between the investment in marketing communications and quality affects not only the perceived brand quality, but also supports the purchase decision by increasing the product value, as shown by Archibald et al. (1983) — i.e. the recipient of the advertising considers the perceived advertising spending on the brand as reaffirming the purchase decision.
From the study of former scholars, we can find that scale variables of brand equity such as “brand awareness” and “brand attitude” can use “exposure effect” to increase the evaluation of customer to the brand. Zajonc and Markus (1982) pointed out that “exposure effect” mean the effect when some marketing objective was exposed repeatedly. The masses will have more positive attitude to the marketing objective if it is exposed regularly. Anand, Holbrook and Stephens (1988) also proved that “exposure effect” was a key factor to alter the preference and attitude in the later study. Laroche, Kim and Zhou (1996) also validated the influence of “exposure effect” on “brand knowledge”, “brand attitude”, “brand familiarity” and purchase willing and confidence. Archibald et al. (1983) pointed out the relationship between the investment in marketing communications and quality affects not only the perceived brand quality, but also supports the purchase decision by increasing the product value. Hence advertising expenditures are likely to be positively related to brand equity. This research proposes the H1 hypothesis about advertising expenditures and brand equity as below.
H1: Advertising expenditures affects brand equity
H1a: Advertising expenditures is positively related to perceived quality. H1b: Advertising expenditures is positively related to brand loyalty.
H1c: Advertising expenditures is positively related to brand awareness. H1d: Advertising expenditures is positively related to brand associations.
Relationship between Price Promotion and Brand Equity
Research has traditionally posited that sales promotions erode brand equity. Usually, price adapted by the manufacturer as a direct promotion method will increase the purchase willing of customer. Most of the effect of a price cut is seen in consumers' short-term brand choices. Promotions increase the price sensitivity of non-loyal customers (Mela, Gupta and Lehman, 1997). But it does not hold when long-term effects are considered. In this regard, using price promotions means deterioration in brand equity. Lichtenstein et al. (1993) pointed out that price is regarded as indirect scale standards of product quality by the customer. It is a concept that price is positive correlation with product quality, i.e. higher the price is, better the quality is.
The use of price promotions has a negative effect on brand equity, since it is considered that the consumer perceives a negative relationship between brand equity and the need to use incentives for sales that affects the established level of prices(Aaker, 1991; Yoo, Donthu and Lee, 2000). Sales promotions in general, and especially price promotions, have been considered to weaken brand equity in spite of the short-term benefit that they provide to the consumer (Yoo, Donthu and Lee, 2000). Overall, the long-term effects of price promotions on sales are negative. Therefore,
price promotion may have negative influence on customer perceptions making differential consciousness of customer on perceived quality, and then influences the brand equity of product and purchase willing of customer. Activities based on lowering prices can place brands in danger by provoking consumer confusion, instability and variability leads to an image of unstable quality (Winer, 1986). Hence, this research proposes the research hypothesis.
H2: Price promotion affects brand equity
H2a: Price promotion is negatively related to perceived quality. H2b: Price promotion is negatively related to brand loyalty.
H2c: Price promotion is negatively related to brand awareness. H2d: Price promotion is negatively related to brand associations.
Product Category
Goods/services are specified on a continuum of search, experience, or credence (SEC) attributes, on the basis of which customers evaluate the goods/services in different ways (Brush and Artz, 1999; Ostrom and Iacobucci, 1995). Search goods/services are those dominated by attributes about which full information can be acquired before purchase, experience goods/services are those that customers can evaluate after some consumption, and credence goods/services are dominated by attributes that the customer cannot verify even after use. Attributes of goods can be analyzed in terms of three properties –search, experience and credence (Darby and Karni, 1973; Nelson, 1970). Search goods have characteristics that are identifiable through inspection and prior to purchase. Experience goods, on the other hand, have features that are revealed only through consumption. The fact that consumers can never be certain of the quality and value of credence goods, differentiate credence goods from experience and search goods. It is pertinent to note that the boundaries between these categories are fuzzy, and the categories represent regions in a continuum.
Search goods, as defined by the SEC framework, have low pre-purchase uncertainty. On the other hand, experience and credence goods are characterized by higher uncertainty, therefore advertising strategies for sellers of search goods are likely to be very different from those for sellers of experience and credence goods. Although, a positive relationship between firms’ brand quality and advertising expenditure is expected, the relationship will be different by different product. Hence, this research proposes this hypothesis H3.
H3: The impact of advertising on brand equity for search goods/services differs from that for non-search (experience and credence) goods/services.
The low variability of search goods/services also makes it feasible for consumers to acquire full knowledge of product performance prior to purchase (Darby and Karni, 1973; Klein, 1998). Prices will be the primary drivers for customers’ repatronage. For credence services, however, price may not be the most important attribute. Because the difficulty of obtaining prepurchase information and knowledge increases along the continuum from search to credence goods/services (Mitra et al. 1999), providing additional information can reduce the risk that customers encounter (Crocker, 1986; Davis, Guiltinan and Jones, 1979). Moreover, credence goods/services are highly professional and associated with a high degree of variability (Zeithaml, 1981), it is more difficult for customers to judge the quality of credence or experience goods/services, so low price may be a cue for poor quality (Ostrom and Iacobucci, 1995). This research therefore posits that impact of price promotion on brand equity for search goods/services differs from that for non-search (experience and credence) goods/services. Then the H4 hypothesis is proposed.
H4: The impact of price promotion on brand equity for search goods/services differs from that for non-search (experience and credence) goods/services.
RESEARCH METHOD
Figure 1 exhibits the research framework of this study. It demonstrates the effects of advertising expenditure and price promotion on brand equity and shift the spot light on the moderating role of product category.
Figure 1: Conceptual Framework
Definition and Measurement
This research contains three constructs including advertising, price promotion and brand equity. Advertising expenditure, as the main marketing communications tool in the consumer market, should be considered when determining the effects of marketing communications on consumers, and the perceptions that the messages are provoking among different target individuals. Therefore, advertising in this study is defined as the consumer’s subjective perception of advertising expenditures for the brand.
The measurement scale is developed with reference to Yoo et al.(2000) and Martin (2000). Price promotions mean short-term price reduction such as special sales. It is measured as consumer’s subjective perception of frequency of the price promotions used for the brand. The measurement scale is developed with reference to Yoo et al.(2000) and Martin (2000). The scale of brand equity measures four core dimensions: perceived quality, brand loyalty, brand awareness and brand associations. Perceived quality is defined as a subjective judgment made by the consumer regarding the excellence or superiority of a product (Zeithaml, 1988). The measurement scale is developed with reference to Aaker and A´ lvarez del Blanco(1995), Lassar et al.(1995) and Yoo et al.(2000). Brand loyalty plays an outstanding role in generating brand equity, not only because of its capacity to keep customers loyal (Aaker, 1991; Grover and Srinivasan, 1992), but also because that customer loyalty extends to other brands in the company’s portfolio (Cebollada, 1995). In this study, brand loyalty refers to the overall commitment of being loyal to a specific brand. The measurement scale is developed with reference to Aaker and A´ lvarez del Blanco(1995) and Yoo et al.(2000). Brand awareness measured as the consumer’s subjective perception-level of the brand. High levels of brand-name recognition are those that present the brand with a high degree of brand awareness. The measurement scale is developed with reference to Yoo et al.(2000). Brand associations are related to a series of tangible and
intangible attributes associated with the brand, which conditions a favorable attitude to choosing the brand. The measurement scale is developed with reference to Aaker and A´ lvarez del Blanco (1995), Lassar et al.(1995) and Yoo et al.(2000). All the items of construct are measured with the Likert 5-point scale.
Pretest of Product Category
This study chooses four product categories jean, fast-food restaurant, bank and KTV to be pretest by 85 students of the department/Graduate School of Business Management of Tatung University. Table 1 shows that jean, fast-food restaurant and KTV are search products, because both the ability, before purchase, to judge the performance of each good/service and the ability, after use, to judge the performance of each good/service are greater than 3.0 in the five-point scale. However, the highest score of before purchase and after purchase is Jean. It means that respondents can judge Jean’s quality well before and after purchase or use it. So Jean was chosen as search goods in this study. While the ability to judge quality before use is less than 3.0 point and the ability to judge quality after use is greater than 3.0, bank is certainly experience products after pretest. Therefore, the formal questionnaire design in this study chooses jean as search products and bank as experience products.
Table 1 Descriptive Statistics of Product Category
N
|
Minimum
|
Maximum
|
Mean
|
Std. Deviation
| ||
Jean
|
Before purchase
|
85
|
2.00
|
5.00
|
3.5059
|
0.81099
|
After use
|
85
|
3.00
|
5.00
|
4.2353
|
0.47926
| |
Fast-food restaurant
|
Before purchase
|
85
|
1.00
|
5.00
|
3.4941
|
0.88133
|
After use
|
85
|
2.00
|
5.00
|
4.1882
|
0.69854
| |
bank
|
Before purchase
|
85
|
1.00
|
5.00
|
2.9059
|
0.88133
|
After use
|
85
|
2.00
|
5.00
|
3.6824
|
0.83398
| |
KTV
|
Before purchase
|
85
|
1.00
|
5.00
|
3.3294
|
0.95604
|
After use
|
85
|
1.00
|
5.00
|
4.0000
|
0.89974
| |
Source: This research
Data Collection and Analysis
Survey by questionnaires was made during February, 2007 to April, 2007. Participants are students of Tatung University, Taiwan. Two hundreds questionnaires are usable. An effective response rate is 100.00%. The sample profile is shown as table 2.
Table 2 Sample Profile
Demographic
|
Item
|
Number of Respondents
|
Percentage (%)
|
Gender
|
Male
|
139
|
69.5
|
Female
|
61
|
30.5
| |
Age
|
Under 20
|
23
|
11.5
|
21-30
|
174
|
87.5
| |
31-40
|
3
|
1.5
| |
41-50
|
0
|
0
|
Over 50
|
0
|
0
| |
Department
|
College of science and technology
|
139
|
69.5
|
College of business
|
61
|
30.5
| |
Grade
|
Freshman
|
19
|
9.5
|
Sophomore
|
7
|
3.5
| |
Junior
|
34
|
17.0
| |
Senior
|
28
|
14.0
| |
First year of graduate school
|
27
|
13.5
| |
Second year of graduate school
|
85
|
42.5
| |
Income
|
Under5000
|
46
|
23.0
|
5001-15000
|
118
|
59.0
| |
15001-25000
|
24
|
12.0
| |
25001-35000
|
10
|
5.0
| |
35001-45000
|
1
|
0.5
| |
45001-55000
|
1
|
0.5
| |
Over 55001
|
0
|
0
|
Source: This research
Reliability and Validity Test
The exploratory factor analyses (EFA), SPSS13.0, were employed for the multi-item constructs to further purify the measurement indicators. An EFA with principal component extraction and varimax rotation was applied to each multi-item construct. The scale of marketing communications included 6 items. Responses to the 6-items scales were extracted advertising and price promotion. The test of sampling fitness by KMO (Kaiser-Meyer-Olkin) test indicating that the KMO value is 0.744 which means the fitness of factor analysis reaches the medium high level. The accumulated percentage of variance explained is equal to 86.49%, sufficient to represent the original data. Factor loading of each item is greater than 0.5 indicating convergent validity. The details are shown in table 3.
Table 3 <Jean>Factor Analysis of Marketing Communications
Items
|
Factor1
|
Factor2
|
The ad campaigns for my jean seem very expensive, compared to campaigns for competing brands.
|
0.931
| |
I think my jean brand is intensively advertised, compared to competing brands.
|
0.963
| |
The advertising campaigns for my jean are seen frequently.
|
0.948
| |
Price promotions for my jean are frequently offered.
|
0.918
| |
I think price promotions for my jean are more frequent than for competing brands.
|
0.914
| |
Price promotions for my jean are presented too many times.
|
0.895
|
Source: This research
The scale of brand equity included 12 items. Responses to the 12-items scales were extracted 4 factors-perceived quality, brand loyalty, brand awareness, and brand associations. The test of sampling fitness by KMO test indicating that the KMO value
is 0.896 which means the fitness of factor analysis reaches the medium high level. The accumulated percentage of variance explained is equal to 82.38%, sufficient to represent the original data. Factor loading of each item is greater than 0.5 indicating convergent validity. The details are shown in table 4.
Table 4 <Jean>Factor Analysis of Brand Equity
Items
|
Factor1
|
Factor2
|
Factor3
|
Factor4
|
My jean is of high quality.
|
0.839
| |||
The likelihood that my jean is reliable is very high.
|
0.865
| |||
Compared to its competitors, I appreciate my jean brand.
|
0.502
| |||
I consider myself to be loyal to my jean brand.
|
0.690
| |||
My jean would be my first choice.
|
0.823
| |||
I will not buy other brands if my jean is available at the store.
|
0.892
| |||
I can recognize my jean among other competing brands.
|
0.768
| |||
I am aware of my jean brand.
|
0.767
| |||
I know my jean brand.
|
0.734
| |||
Some characteristics of my jean come to my mind quickly.
|
0.743
| |||
I can quickly recall the symbol or logo of my jean.
|
0.793
| |||
My jean has a strong image.
|
0.838
|
Source: This research
The scale of marketing communications included 6 items. Responses to the 6-items scales were extracted advertising and price promotion. The of sampling fitness by KMO test indicating that the KMO value is 0.788 which means the fitness of factor analysis reaches the medium high level. The accumulated percentage of variance explained is equal to 87.51%, sufficient to represent the original data. Factor loading of each item is greater than 0.5 indicating convergent validity. The details are shown in table 5.
Table 5 <Bank>Factor Analysis of Marketing Communications
Items
|
Factor1
|
Factor2
|
The ad campaigns for my bank seem very expensive, compared to campaigns for competing banks.
|
0.915
| |
I think my bank brand is intensively advertised, compared to competing banks.
|
0.945
| |
The advertising campaigns for my bank are seen frequently.
|
0.904
| |
Price promotions for my bank are frequently offered.
|
0.920
| |
I think price promotions for my bank more frequent than for competing brands.
|
0.929
| |
Price promotions for my bank are presented too many times.
|
0.869
|
Source: This research
The scale of brand equity included 12 items. Responses to the 12-items scales were extracted 4 factors-perceived quality, brand loyalty, brand awareness and brand associations. The test of sampling fitness by KMO test indicating that the KMO value is 0.851 which means the fitness of factor analysis reaches the medium high level.
The accumulated percentage of variance explained is equal to 80.43%, sufficient to represent the original data. Factor loading of each item is greater than 0.5 indicating convergent validity. The details are shown in table 6.
Table 6 <Bank>Factor Analysis of Brand Equity
Items
|
Factor1
|
Factor2
|
Factor3
|
Factor4
|
My bank is of high quality.
|
0.875
| |||
The likelihood that my bank is reliable is very high
|
0.796
| |||
Compared to its competitors, I appreciate my bank.
|
0.866
| |||
I consider myself to be loyal to my bank.
|
0.500
| |||
My bank would be my first choice.
|
0.581
| |||
I will not deal with other banks if my bank is available nearby.
|
0.891
| |||
I can recognize my bank among other competing banks.
|
0.881
| |||
I am aware of my bank.
|
0.922
| |||
I know my bank.
|
0.915
| |||
Some characteristics of my bank come to my mind quickly.
|
0.881
| |||
I can quickly recall the symbol or logo of my bank.
|
0.871
| |||
My bank has a strong image.
|
0.799
|
Source: This research
Cronbach’s α was measured the consistence of each item under the same construct. All scales have greater than the suggested value of 0.7－advertising α=0.943, price promotion α=0.895, perceived quality α=0.832, brand loyalty α=0.840, brand
awareness α=0.906 and brand associations α=0.916. The alpha value for each construct demonstrates adequate internal consistency. Table 7 shows the result of reliabilities analysis of constructs.
Table 7 <Jean> Cronbach's α Value of Each Construct
Construct
|
Dimension
|
Items
|
Cronbach’s α
|
Marketing Communications
|
Advertising
|
3
|
0.943
|
Price Promotion
|
3
|
0.895
| |
Brand Equity
|
perceived quality
|
3
|
0.832
|
brand loyalty
|
3
|
0.840
| |
brand awareness
|
3
|
0.906
| |
brand associations
|
3
|
0.916
|
Source: This research
Cronbach’s α was measured the consistence of each item under the same construct. All scales have greater than the suggested value of 0.7－advertising α=0.937, price promotion α=0.917, perceived quality α=0.866, brand loyalty α=0.747, brand
awareness α=0.908 and brand associations α=0.891. The alpha value for each construct demonstrates adequate internal consistency. Table 8 shows the result of reliabilities analysis of constructs.
Table 8 <Bank> Cronbach's α Value of Each Construct
Construct
|
Dimension
|
Items
|
Cronbach’s α
|
Marketing Communications
|
Advertising
|
3
|
0.937
|
Price Promotion
|
3
|
0.917
| |
Brand Equity
|
perceived quality
|
3
|
0.866
|
brand loyalty
|
3
|
0.747
| |
brand awareness
|
3
|
0.908
| |
brand associations
|
3
|
0.891
|
Source: This research
Pearson Correlation Analyses
The Pearson Correlation Analyses were employed among variables. Table 9 shows the correlation analyses among advertising, price promotion and brand equity for jeans product. The result reveals that there is significant positive correlation between advertising and perceived quality (r=0.350, p<0.01), brand loyalty (r=0.231, p<0.01), brand awareness (r=0.581, p<0.01) and brand associations (r=0.491, p<0.01). There is significant negative correlation between price promotions and brand awareness (r=-0.229, p<0.01) and brand associations (r=-0.150, p<0.05). It means that price promotions of search product may result in negative effect on brand equity, especially on brand awareness and brand associations.
Table 9 <Jean> Pearson Correlation Analysis
advertising
|
price promotion
|
perceived quality
|
brand loyalty
|
brand awareness
|
brand associations
| |
advertising
|
1
| |||||
price promotion
|
-0.086
|
1
| ||||
perceived quality
|
0.350**
|
-0.107
|
1
| |||
brand loyalty
|
0.231**
|
-0.007
|
0.561**
|
1
| ||
brand awareness
|
0.581**
|
-0.229**
|
0.598**
|
0.441**
|
1
| |
brand associations
|
0.491**
|
-0.150*
|
0.601**
|
0.525**
|
0.766**
|
1
|
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
Source: This research
The Pearson Correlation Analyses were employed among variables. Table 10 shows the correlation analyses among advertising, price promotion and brand equity of banks. The result reveals that there is significant positive correlation between advertising and perceived quality (r=0.385, p<0.01), brand loyalty (r=0.236, p<0.01), brand awareness (r=0.158, p<0.05) and brand associations (r=0.360, p<0.01). There is significant positive correlation between price promotions and perceived quality (r=0.337, p<0.01), brand loyalty (r=0.271, p<0.01) and brand associations (r=0.211, p<0.01). It means that price promotion of bank may have positive effect on brand equity, especially on perceived quality, brand loyalty and brand associations. It is obviously different from tangible product claimed by past scholars.
Table 10 <Bank> Pearson Correlation Analysis
advertising
|
price promotion
|
perceived quality
|
brand loyalty
|
brand awareness
|
brand associations
| |
advertising
|
1
| |||||
price promotion
|
0.419**
|
1
| ||||
perceived quality
|
0.385**
|
0.337**
|
1
| |||
brand loyalty
|
0.236**
|
0.271**
|
0.545**
|
1
| ||
brand awareness
|
0.158*
|
0.035
|
0.319**
|
0.402**
|
1
| |
brand associations
|
0.360**
|
0.211**
|
0.427**
|
0.504**
|
0.459**
|
1
|
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
Source: This research
Regression Analysis
Table 11 reveals that advertising has significant positive effect on perceived quality (β=0.343, t>1.645), brand loyalty (β=0.232, t>1.645), brand awareness (β=0.566, t>1.645) and brand associations (β=0.481, t>1.645). Price promotion has significant negative effect on brand awareness (β=-0.180, t<-1.645) and brand associations (β=-0.108, t<-1.645) while the negative effect on perceived quality (β=-0.078, t>-1.645) is not significant. In addition, price promotion has no significant effect on brand loyalty (β=0.013, t<1.645).
Table 11 <Jean>The Results of Regression Analysis
Y
 X |
perceived quality
|
brand loyalty
|
brand awareness
|
brand associations
|
Advertising
|
0.343*** t=5.138
|
0.232*** t=3.336
|
0.566*** t=9.972
|
0.481*** t=7.780
|
Price Promotion
|
-0.078 t=-1.162
|
0.013 t=0.182
|
-0.180*** t=-3.172
|
-0.108* t=-1.751
|
R Square
|
0.128
|
0.054
|
0.370
|
0.252
|
Adjusted R Square
|
0.119
|
0.044
|
0.364
|
0.245
|
F
|
14.499***
|
5.570***
|
57.920***
|
33.227***
|
***P value<0.01; **P value<0.05; *P value<0.1
Source: This research
Table12 reveals that advertising has significant positive effect on perceived quality (β=0.296, t>1.645), brand loyalty (β=0.149, t>1.645), brand awareness (β=0.174, t>1.645) and brand associations (β=0.329，t>1.645). Price promotion has significant positive effect on perceived quality (β=0.231), brand loyalty (β=0.209). Price
promotion has no significant effect on brand awareness (β=-0.038) and brand associations (β=0.073). The correlation analyses illustrates that there is a significant relationship between advertising expenditures and price promotion. To avoid the impact of collinearity among independent variables, this study adopts collinearity diagnostics. The result demonstrates that VIF (Variance Inflation Factor) is less than
10. That is, the level of the collinearity does not significantly affect the estimation of
the regression model (Huberty, 1989).
Table 12 <Bank>The Results of Regression Analysis
Y
 X |
perceived quality
|
brand loyalty
|
brand awareness
|
brand associations
|
Advertising
|
0.296*** t=4.180
|
0.149** t=1.991
|
0.174** t=2.244
|
0.329*** t=4.503
|
Price Promotion
|
0.213*** t=3.011
|
0.209*** t=2.791
|
-0.038
t=-0.488
|
0.073 t=1.002
|
R Square
|
0.186
|
0.092
|
0.026
|
0.134
|
Adjusted R Square
|
0.178
|
0.083
|
0.016
|
0.125
|
F
|
22.491***
|
9.951***
|
2.642*
|
15.203***
|
***P value<0.01; **P value<0.05; *P value<0.1
Source：This study
This study have tried to extend brand equity by using constructs, such as brand loyalty, brand awareness, perceived quality and brand associations. Such a specification can be conceptually problematic because the same construct then appears to play multiple roles. For instance, brand loyalty has been regarded as both a dimension and an outcome of brand equity (Morgan, 2000). Therefore, this study further examines the relationship among brand loyalty, brand awareness, perceived quality, and brand associations by treating brand loyalty as an outcome variable. Table 13 reveals that, for jean, perceived quality has significant positive effect on brand loyalty (β=0.392, t>1.645) and brand associations has significant positive effect on brand loyalty (β=0.317, t>1.645). In addition, brand awareness has no significant effect on brand loyalty (β=-0.037, t>-1.645). For bank, perceived quality, brand awareness and brand associations all have significant positive effect on brand loyalty (β=0.380，t>1.645),
(β=0.158, t>1.645), (β=0.269, t>1.645).
Table 13 <Jean>The Results of Regression Analysis
Brand loyalty
| ||
Jean
|
Bank
| |
Perceived quality
|
0.392*** t=5.325
|
0.380*** t=6.168
|
Brand awareness
|
-0.037 t=-0.401
|
0.158** t=2.514
|
Brand associations
|
0.317*** t=3.461
|
0.269*** t=4.091
|
R Square
|
0.370
|
0.406
|
Adjusted R Square
|
0.361
|
0.397
|
F
|
38.441***
|
44.657***
|
DISCUSSION OF EMPIRICAL RESULTS
According to above analytic results, this study finds that advertising has significant positive relationship on brand equity of search product and experience product. The
finding in this study consists with results of previous researches. Furthermore, the results of regression analysis found that price promotion has no significant effect on brand loyalty of jean brand. This is because consumers are momentarily attracted to the brand by the transaction utility that the price promotions provide, and when promotions end, they lose interest in the brand. Thus, change in brand loyalty after the end of promotions may not occur unless the brand is perceived to be superior to and meet consumers’ needs better than its competing brands. Although the price promotion does not have significant impact on perceived quality, the direction and expectation remain a negative value. When viewing the explanatory power of the regression model, adjusted R², there is a great difference between the explanatory power of the advertising expenditures and price promotion to the dimensions of brand equity. These two independent variables explain brand awareness (adjusted R²=0.364) and brand association (adjusted R²=0.245) better than perceive quality (adjusted R²=0.119) and brand loyalty (adjusted R²=0.044). This proves that there should consider more other important factors when investigating brand loyalty.
Besides, It can be found that price promotion has significantly positive effect on perceived quality and brand loyalty of bank. This is because bank is a large-scale service industry. When Bank has short-term price promotions, consumers would not question the bank’s service quality. Or the pricing such as interest rates and service fees may be one of key factors how customers judge the bank quality. This study also finds that there is no significant relationship between price promotion and brand awareness or brand associations, because both low and high prices can be equally strongly linked to the brand in memory for the benefits that brings to consumers.
This study shows that advertising has significant positive effect on brand equity of whatever search product as jean or experience product as bank. However, the degree of impact is not the same. Comparing the result, it can be known that advertising has much impact on four dimensions of brand equity of search product (jean) (standardized coefficients) than on that of experience product(bank).
But price promotion has different moderate effect on brand equity due to the difference of product category, it means that it make complete contrary influence on tangible product or intangible service. Price promotion in jean brand awareness and brand association has significant negative impact. However, it has positive effect on perceived quality and brand loyalty in banking industry. In regard of the explanatory power of advertising expenditures and price promotion on brand equity (adjusted R²), advertising expenditures and price promotion have better explanatory power on jean’s brand awareness and brand association than on banking service. In the banking service, the adjusted R² value of the explanatory power of advertising expenditures and price promotion shows 0.178 on perceived quality, 0.083 on brand loyalty, 0.016 on brand awareness, and 0.125 on brand association. In other words, the adjusted R² values of the explanatory power of advertising expenditures and price promotion in the banking service are all less than 15%. This concludes that the effect of moderator variables on brand equity of search and non-search products is different.
Finally, it found that brand loyalty of consumers on search product can be increased, if the integral identification on product quality and good brand association can be enhanced. Brand loyalty was significantly influenced by other three dimensions of brand equity of experience product. Consistent with previous research, brand loyalty has been regarded as both a dimension and an outcome of brand equity (Morgan, 2000).
CONCLUSIONS AND SUGGESTIONS
Conclusions
This research investigates advertising across search and experience product categories. Across both categories, the brand with the higher advertising budget yielded substantially higher levels of brand equity. This study notes that the firm’s advertising contributes to brand equity and increases loyalty. Perceived advertising spending showed a favorable causal relationship for three of the four dimensions of brand equity. The higher the spending on advertising for the brand, the better the quality of the product as perceived by the consumer, the higher the level of brand awareness and the more associations linked to the product, forming its brand loyalty. That is, effective advertising activities enable the formations of brand awareness and a positive perceived quality, brand loyalty and brand associations. To summarize, advertising has a positive effect on brand equity. Hence, hypothesis H1a, H1b, H1c and H1d are supported. The research question that concerns this study is whether price promotions can contribute to building brand equity. Price promotions have a negative effect on brand equity in the long term. Price promotions as incentives to increase sales have been shown to have a negative effect on brand equity. Although they can cause a short-term benefit to the consumer, from a strategic perspective they showed negative effects. These effects can affect the perceived quality of the product adversely, since benefits gained through price promotion are not enduring, and do not transmit the security or the confidence that a brand should inspire with regard to its expected utility. However, adopting a consumer-based brand knowledge perspective of brand equity, this study shows that price promotions of bank are useful to create brand equity because of their positive effect on perceived quality, brand loyalty and brand associations. Nevertheless, the statistics of the search product proves that price promotion has significant negative impact on brand awareness and brand association. Hence, H2 is partially supported.
This paper seeks to systematically examine the possible drivers of differences across product categories and the implications of our preliminary findings. The result proves that the product category does have moderate effect in between price promotion and brand equity. The result shows that product categories moderated the relationship between advertising, price promotion and brand equity. The influence of advertising and price promotion on brand equity is different from search goods/services and non-search (experience and credence) goods/services. Compare to non-search goods/services, search goods/services is positively more effective in advertising on brand equity. The impact direction and dimension of price promotion on brand equity in various product categories are different. In search products (jean), it has significant negative impact on brand awareness and brand association. In non-search products (bank), it has significant positive impact on perceived quality and brand loyalty. The product category exerts a moderator effect on the relationship between brand equity and advertising or price promotion. Hypotheses H3 and H4 are supported.
Managerial Implication
Many large corporations spend several billion dollars on marketing communication, such as advertising and price promotion. Do advertising and price promotion amplify or attenuate brand equity? How should managers allocate resources to advertising and price promotion? Why are businesses and consumers alike willing to pay so much for brand names? Stated simply, brand names add value. In order to build strong brand equity efficiently, managers must invest in the advertising but considering product categories when applying price promotion. Since price promotion could imply low quality of search products, it may not boost the brand equity. Although it has benefit
in short-run by price promotion, it may be not accord with high-quality impression, and will reduce brand equity in the long- run. Managers should not use the price promotion as far as possible. Managers must apply marketing mix accurately to operate and manage brand. Thus they can increase customer’s loyalty and raise firms’ profit. For non-search products, price promotion can enhance perceived quality and brand loyalty.
In dynamic competitive markets, managers should recognize the importance of marketing communication to the whole of brands. To this end, managers should incorporate strategic foresight in their planning by looking forward and reasoning backward in making optimal decisions. By looking forward, each brand manager forecasts his own future plans and anticipates the decisions to be made by other competing brands; by reasoning backward, they must deduce their own optimal decisions in response to the best strategies of all other brands. Therefore, regardless search or non-search products, customers perception in advertising expenditures has positive impact on brand equity. From the result of our surveyor shows that the advertising expenditures perceived by customers is near point 3 for jeans industry and the banking category in 5-point scale. Therefore, how to promote the advertising expenditures perceived by customers is a future effort for manufactures, especially for banking industry.
Research limitation and suggestions
There are some limitations of the study. To reduce the complexity, this study concentrates in the effects of advertising expenditures and price promotion. The integrated marketing communication is not included. The interaction of other
marketing efforts needs to be studied, such as pricing, distribution strength and the image of the store. Second, this study only emphasizes on the comparison of search and non-search products. Any comparison of search, experience and credence is not covered. According to SEC framework, it is suggested that future research can involve more in the analysis and comparison of the three types of product and should propose to test this measurement model on a sample of consumers of another category of products, i.e. credence product. Third, the subject of this study is student. It is suggested that future research can expand its participants to general consumers. Finally, this study is conducted through cross-sectional data collection. The future research can enhance cause and effect relationship when using longitudinal analysis.
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