Chapter 1
Introduction
Technology provides the means to enhance the production system enabling producers to provide closely resembled products physically such as quality or packaging or in the manufacturing process itself. However, technology has not led to the creation of differentiated products in the market today.
This is contrary to the propositions that brands need to be differentiated in order to be bought for two basic reasons. First, in differentiation strategy, a firm seeks to be unique. It selects one or two attributes that many buyers in an industry perceive as important (Porter, 1985). Second, differentiation is the first step in building brands (Agres, 1995). Differentiation can take many forms: from the clear-cut physical or functional (, through the less distinguishable, the barely noticeable, the emotional, to the "distinguishing but irrelevant" (blue packaging, or stripes in dentifrice) (Barnard, Ehremberg and Scriven, 1997). The objective, of course, is to gain competitive advantage by building sustained customer loyalty with products or services meeting quite precisely the demands of closely-defined markets. (Marshall, 1995).
Developing and managing a brand image is an important part of a firm's marketing program (Roth, 1992). Both advertising practitioners (Oglivy, 1963) and marketing researchers (Gardner and Levy 1955) have long advocated the use of a clearly defined brand image as a basis for market success. A well-communicated brand image enables consumers to identify the needs satisfied by the brand (Park, Jaworski and MacInnis 1986) and thereby differentiate the brand from its competitors (DiMingo 1988; Reynolds and Gutman 1984). In fact, developing a brand image strategy has been prescribed as the first and most vital step in positioning a brand in the marketplace (Park, Jaworski and MacInnis 1986; Young 1972). As a long-term strategy, a consistent and effective brand image helps build and maintain brand equity. In addition, brand images can provide a foundation for extending existing brands (Park, Milberg and Lawson 1991).
Consequently, the creation of Product Brands that as well as consumer perception promotes product differentiates or product advantages. Thus, marketing professionals and organizations focuses on branding by positioning their Product Brands into the consumers. Thereby, establishing Brand Equity (Keller, 1998).
Brand Equity creates brand loyalty which socializes the consumers in terms of product perception, increased and repeated buying behavior and sales elevation of a company’s other products. The locus of brand loyalty lies in the perception that the consumers will patronize all the products created by the company. In the crisis economy, consumers normally choose products from the best brand so as to avoid mistakes in their product expectations. Product Branding in the industry creates what we will term as the strong brand or the brand that dominates in the market. The establishment of a strong brand creates vast opportunities for the company as it can peg their prices above the competition. For instance, the preserved fruit can from “Malee” can set its price 20% higher than others without damaging the sales and profitability of the of product and still gain the a wider market share than UFC preserved fruit cans.
The study conducted by the Marketing Science Institute showed that all successful organizations pay attention with Brand Equity and prefers to support the budget for the efficient management of the existing Brand Equity. These organizations also realize that their brand equity eliminates the chance of using price strategy to maintain or enhance their market share. The price strategy is disadvantageous in the long run because it may decrease the existing value of the brand equity as well as the management of brand equity. Thus, organizations attempt to gain marketing strategies for creating their product differentiation (Keller, 1998).
Moreover, brand equity can be translated to monetary value. The value of dominant brands are estimated more than the real asset value in the company’s balance sheet. For instance, Interbrand and Citigroup in the USA arranged the companies value stated that Coca-Cola earned the highest market brand value as 80 billion dollars in 1999 (see in table 1.1 below).
Table 1.1 Top Ten Brand Values in the World
Number Brand
Market Brand Value
(Billion Dollars)
1
Coca-Cola
83.8
2
Microsoft
56.7
3
IBM
43.8
4
GE
33.5
5
Ford
32.2
6
Disney
32.3
7
Intel
30.0
8
McDonald’s
26.2
9
AT&T
24.2
10
Marlboro
21.0
Source: Narong Jiwangkul (1998), Brand is really about the customer relationship. BrandAge Magazine, Dec 7: p. 69-70.
Furthermore, the establishment of strong brands offers the benefit of instituting the company in such a manner that during brand extensions, the company does not have to spend so much in marketing. This spillover can be characterized by Unilever which employed the brand extension strategy from its existing successful brand. Lux Super Rich Shampoo of Unilever extended from Lux Soap which benefited from the success of the earlier product. In addition, new products as well as Sunsilk Extra Mild Shampoo with Almond Milk for all hair types or Sunsilk Hair Oil Treatment for root treatment and Sunsilk Blackshine Shampoo for black hair extended from the Parent Sunsilk Brand that is the strong brand in the shampoo market. Aside from the savings in marketing the new brand, the opportunity of success is higher because customers experienced in the product quality (Unilever-P&G, High Competition from Skin to Hair, 1998).
In the electronic industry, brand extension can be seen in Sony’s electronic products. Sony is a household word in the electronic market whose market strengths lie in the manufacturing of audio and video equipments. Sony extended to cover the Digital Camera market that gained customer’s favors for the past few years earning the same successful level of other existing strong brands in digital camera market such as Fuji, Kodak and Canon (Digital Camera War, 1998) which had been in the market for a long time.
Several indicators determines the success of brand extensions in consumer evaluation of brand extension which consists of several components such as Brand Attribute Association, Attitude toward the Original Brand, Fit between the Original and Extension Product Class comprising with Complement Fit, Substitute Fit and Transfer from the parent brand including Perceived Difficulty of Making the Extension (Keller, 1993). Consequently, customers may evaluate between the existing parent brand and the brand extension that affects their buying decision.
After outlining the benefits and the advantages of brand equity in consumer buying behavior, the researcher shall investigate the different levels in the relationship of the brand equity that may have the involvement between the components of the Consumer Evaluation of Brand Extension such as Brand Attribute Association, Attitude toward the Original Brand, Fit between the Original and Extension Product Class comprising with Complement Fit, Substitute Fit and Transfer from the parent brand including Perceived Difficulty of Making the Extension.
Research Objectives
This study aimed to:
1. determine the factors affecting consumer behavior and to what extent they consider brand names in their purchasing behavior
2. examine customers’ perception on different levels of brand equity on the selected product
3. analyze the customers’ perception on the differences in brand equity among products in different levels of involvement
4. evaluate the relationship between consumers’ perceived brand equity and its effect on consumer’s product evaluation based on brand extension.
Research Problem
This study will investigate the effects of brand equity and brand extension in consumers’ purchasing behavior.
Specifically, this study will endeavor to answer the following questions:
1. What are the factors affecting consumer behavior and how do they relate to issues concerning brand consciousness?
2. How do the different levels of involvement relate to customers’ perceived brand equity?
3. How does customers’ perceived brand equity relate to brand extension evaluation?
Scope of the Study
This research paper shall utilize selected brands in Thailand. The study selected a certain brand of yoghurt to represent a low-involvement product, extending its brand to a certain line of pasteurized milk. For this low involvement product, a substitute product was used. The other brand utilized for the purpose of this study was a certain vehicle product line that represented the high involvement product, extending its brand to an all-purpose vehicle line. Further, the study sample consisted of males and females with ages between 18-45, all of whom were residents of Bangkok, Thailand.
Definition of Terms
Customer-based brand equity refers to customers’ knowledge of a certain brand. Specifically, it consists of the following components: 1) brand awareness, indicating recognition and recall;, and 2) brand image, as indicators of strength, favorability, and uniqueness.
Product involvement refers to the levels of product involvement between consumers and products. The involvement can be categorized into two types:
1. High involvement product, (e.g., a computer notebook brand extending its brand to a personal computer product line).
2. Low involvement product, (e.g., an air condition brand extending it brand to an electric fan product line.
Brand Extension, as defined earlier, refers to any product line that takes advantage of a successful brand name to launch a new or modified product in a new market. The new product is called extending brand, while the existing brand is called the parent brand.
Consumer evaluation of brand extension refers to the process of assessing and associating an extending brand with its parent brand, and involves the following: 1) brand attribute association; 2) perceived attitude toward the original brand; 3) fit between the original and extension product class, comprising of complement fit, substitute, and transfer of the parent brand; and 4) perceived difficulty of making the extension.
Expected Benefits
1. Professional marketers may consider the several components of this study in evaluating or improving their product’s brand equity ;
2. Manufacturers and marketing professionals may utilize the research results as basic guides on consumer behavior, as well as for the evaluation of the brand extension and;
3. Research results may be used as basic information on determining long-term marketing strategies
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