Contribution of Brand Relationships | Research Proposal
The Contribution of Brand Relationships to Brand Equity of Services
Background and Rationale for the Research
By 2002, the services sector accounted for about 70% of the aggregate production and employment in all OCED countries, albeit there are differences across these countries (Wolfl, 2005). Therefore, the services sector plays a significant role in determining economic growth. On average, finance, insurance and business services accounted for about 20% to 30% of the total valued added for all OECD economies in 2000, compared to between 10% and 20% in 1980 (Wolfl, 2005). We encounter various types of services everyday and services now form an integral part of our life. An interesting question is what factors contribute to the growth of services in those developed economies. The role of services in an economy is explored in the next section.
The Role of Services in an Economy
Fitzsimmons and Fitzsimmons (2004) offer three explanations for the growth of services in recent years. The first explanation is related to the interdependence of the services sector and the manufacturing sector. In a modern economy, the goods produced require a lot of service supports in order to reach the final consumers. These include market research, product research and design, logistics, wholesale and retail services, financing, insurance, advertising, to mention just a few on the long list. To attain customer satisfaction, it is necessary to increase the number and scope of service activities supplementary or complementary to the production of goods. Furthermore, there is a trend towards outsourcing such business related services as logistics, research and development, repair and maintenance etc. to specialized providers in order to shift the focus on a firm’s core competence and reduce costs. Services play the role as providing intermediate inputs to manufacturing and other services (Wolfl, 2005).
The second explanation is due to the increasing role of services in meeting the final demand throughout the economic evolution process of our society (Fitzsimmons and Fitzsimmons, 2004; Wolfl, 2005). Following the works of Bell (1973), Fitzsimmons and Fitzsimmons (2004) distinguished three stages for the economic development of a society. They are the pre-industrial stage, the industrial stage and the post-industrial stage. During the pre-industrial stage of a society, life is characterized by striving for subsistence where the labor force is mainly engaged in agriculture, mining and fishing. The industrial stage focuses on the production of goods during which labor is combined with machines and energy. The exchanges are transactional and the life quality is defined by the quantity of goods. When a society progresses to the post-industrial stage, people are looking for a quality of life in terms of health, education and recreation. This stimulates the consumption for various services that enhance life quality.
The third explanation for the growth of the services sector is attributed to the advances in technology. Wolfl (2005) notices that the productivity growth for services is only about half of that of manufacturing for all OECD countries. However, some services such as financial intermediation, transport and storage and telecommunication, they exhibit a stronger productivity growth rate than the manufacturing sector. Fixler and Siegel (1999) show that outsourcing to specialized services providers may be a factor that increases the productivity growth of services. Fitzsimmons and Fitzsimmons (2004) suggest that new technology drives the creation of new services and the improvement of the existing service processes, and call this phenomenon the push theory of innovation. The advances in information technology thus have transformed our economy into a knowledge-dependent society with knowledge as the firm’s key asset (Cetron and Davies, 2005).
The Importance of Branding for Services
It has long been realized by marketers that branding is a major marketing tool to assist a producer in differentiating its products from competing offers (e.g. Keller, 2003a). In essence, a brand is a name, term sign, symbol or design, or a combination of them that help consumers to distinguish a product from other products that satisfy the same need (Keller, 2003a, p. 3-4). The brand name may represent some rational or tangible differences that consumers relate to product performance, or some symbolic, emotional or intangible attributes that consumers perceive as important. Thus, branding is a long-term communication effort after which the consumers can use the brand name to represent a set of brand elements to help them reduce perceived risks and search costs. This effort is based on inducing two mental responses, brand judgment and brand feeling, among consumers arising from their brand awareness and brand imagery (Keller, 2003a).
McEnally and de Chernatony (1999) detailed the long-term communication process for branding in five stages: unbranded goods, brand as reference, brand as personality, brand as icon and brand as company. The initial stage of unbranded goods is mainly due to the nature of excess demand over supply. In the second stage of using brand as reference, competitive pressures force producers to differentiate their goods in terms of some tangible product attributes that provide a heuristic device for consumer in their purchase decision making. In the stage of brand as personality, differentiation among competing brands using rational or tangible attributes becomes increasingly difficult because most producers can achieve similar claims. As a result, marketers resort to some intangible and symbolic benefits for consumers by giving their brands human qualities in order to promote the emotional touch. Consumers in the stage of brand as icon are well experienced with the brand and the brand represents a set of values that match their own identity. Consumers have a unique set of associations, both primary and secondary, with the brand. During the stage of brand as company, the brand represents a complex identity that consumers have many points of contacts with the company and hence the brand cannot be detached from the company. The implication is to adopt a stakeholder perspective and an integrated communication effect on all stakeholders (e.g. employees, retailers, investors etc.) throughout the branding process. Overall speaking, the five stages of the branding process represent the degree of involvement of the consumers in the branding process. This view is consistent with the communicated-based model of marketing proposed by Duncan and Moriarty (1998). They suggested that a successful brand relationship is contingent upon a stakeholder perspective of the communication efforts directed at different levels of the company.
“Intangibility, inseparability, heterogeneity and perishability” is the set of commonly cited characteristics to differentiate services from goods (Lovelock and Wirtz, 2004). Recognizing the contributions of services to the economy and the distinct characteristics of services that may present particular problems to marketers (Zeithamal, Parasuraman and Berry, 1985), a number of research themes have emerged to cope with these challenges. To name a few on the list, these include improving service quality, matching demand with available capacity, relationship marketing, enhancing customer satisfaction in services encounters, organizing marketing functions in a service firm, managing customer portfolio, service environment and service employees (Lovelock and Wirtz, 2004).
The intangibility characteristics of services and the lack of ownership cause problems and confusion to consumers in differentiating competitive offers and thus most services industries have been characterized as commodity-like markets (McDonald and de Chernatony, 2001). However, it is ironic that branding as a strategic tool for competitive differentiation has been sparse in the past (Berry, 2000; O’Cass and Grace, 2003). One explanation is perhaps the dominance of the operations department over the marketing functions in service firms (Bateson and Hoffman, 1999). Therefore, the research and practice have been focused on operations management and quality control. A number of changes that have occurred in the recent business environment urge the resurgence of branding for services. The advances in information technology have transformed the ways how services are delivered, created new services, enhanced international trade of services and increased productivity growth (Fitzsimmons and Fitzsimmons, 2004; Wolfl, 2005). Coupled with the trends towards deregulation, globalization, intensified competition and changes in consumers’ life styles, branding as a strategic tool to achieve competitive differentiation becomes increasingly important to marketers (de Chernatony and McDonald, 2003). Berry (2000) forecasts that services branding will be the cornerstone for marketers in the twenty-first century.
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McDonald and de Chernatony (2001) observe that services branding is different from branding for fast moving consumer goods where building brand awareness is the primary emphasis. The services branding process involves many points of contact with the consumers as characterized in the final stage of “brand as company” suggested by McEnally and de Chernatony (1999). Therefore, the branding efforts include providing physical evidences for intangibles, communicating brand promise through employees and enhancing customer participation in the service process (McDonald and de Chernatony, 2001). Besides the academic viewpoint, practitioners hold similar view that branding for services is much more “tricky than the realm of the product” (Bijoor 2003). Bijoor, a business consultant, commented that services branding is tough because services are people driven and brand value depends on satisfactory customer experiences in the process. Therefore, “services branding requires brand intrusion at every stage” (Bijoor, 2003). In short, we may conclude that services branding plays a critical role in competitive differentiation and will become a management imperative in the twenty-first century.
The Need for Research on Services Branding
Vargo and Lusch (2004) posit that all economic exchanges in the twenty-first century involve services provisions rather than goods and the fundamental tenet for firm value is by managing the intangible resources. A major trend in 2000s is the increasing pressure on assessing the financial performance of various marketing activities due to the economic downturn around the world, advances in information technology and intensified global competition (Bolton, 2004). The inherent difficulty is the incapability of financial accounting to measure the intangible assets such as brands and customers that mainly constitute the firm value. Brand equity is thus advanced as the construct to measure the perceived brand value (Aaker, 1991; Keller, 1993). To achieve a balance between academic rigor and practical relevance, the Marketing Science Institute establishes a research priority list through a five-phase process involving the recommendations from both the practitioners and the academicians. The priority list will be revised every two years. In the research priority list for 2004-2006, the top tier priorities comprise six topics: growth, brand equity, metrics, managing customers and research tools (Marketing Science Institute, 2005). The list of topics essentially reflects the management needs to tackle the fast changing and turbulent environments of recent years. For example, we need research that links marketing activities with customer equity (e.g. product innovation and market performance; branding efforts and brand equity) and assesses the financial effectiveness of these marketing activities (e.g. assessing the effectiveness of new product development; assessing the branding efforts in terms of brand equity or customer equity etc.).
A need for research on services branding is justified on several grounds. First, services account for a majority of the value added in the economy and play a critical role in determining economic growth (Wolfl, 2005). However, the commodity nature of most services markets cause confusion to consumers and pose challenges to service marketers in differentiating their own products from competitors (McDonald and de Chernatony, 2001). Therefore, a research on services branding provides insights on how competitive differentiation could be achieved for services. Second, according to Vargo and Lusch (2004), we are in an economy dominated by services exchanges. A new marketing logic on managing intangible resources through relationship marketing to all stakeholders involved is emerged. A research linking services branding efforts with brand equity help us understand how an intangible resource (i.e. the perceived brand value) is managed in relation to various stakeholders such as employees and customers. Third, a research of such nature is definitely on the top research priority list recently developed by the Marketing Science Institute (2005). Fourth, there has been limited research on services branding (Berry, 2000; O’Cass and Grace, 2003) and a research on services branding provides both academic significance and practical guidance.
- The Underlying Theories
A literature review on services branding was conducted to identify the research gaps. The results are presented in Chapter Two. The literature review shows that there seems to be two classes of theories underlying the studies on services branding. The first is related to consumer learning theories while the second adopts an anthropological perspective. They are highlighted below.
Consumer Learning Theories
There are two approaches of consumer learning theory: behavioral learning vs. cognitive learning (Schiffman and Kanuk, 2000). The behavioral learning theory is rooted in the theory of conditioning developed in psychology. There have been few applications of the behavioral learning theory in marketing except a few examples (e.g. Nord and Peter, 1980). As branding is a process to capture consumers’ perception on a firm’s products by communication efforts, most studies on branding adopt a cognitive information processing perspective to examine how consumers process the messages received and retain them in their memories. A typical example may be found in the study by Keller (2003a) on modeling how a consumer processes brand knowledge and stores the knowledge in the memory. Keller (2003a) suggests that brand knowledge consists of two components: brand awareness and brand image. Brand awareness refers to the degree of familiarity with a brand while brand image comprises a set of associations in the mind of the consumers in terms of product-related attributes, non-product related attributes, user imagery and usage imagery. These two components form the basis for consumer purchase evaluation.
