Project 3

The Effect of Brand Equity Components on

Purchase Intention:

An Application of Aaker's Model on the brand Chumbak

Submitted to: Dr. Kaushik Mukerjee

Submitted by:

Shreyansh Chauhan, Marketing A, 35146 Palak Mustazar, Marketing B, 35239 Aditya Roy, Marketing A, 35104

1. INTRODUCTION

Small and medium-sized companies often struggle in having their brand management in place. The reason forthis could be they do not see the importance of branding in their business or they simply do not have theresources to work on the brand management. The case company, Chumbak, has not spent considerable resourceson creating its brand so far and primarily operates on word of mouth. The objective of the researcher is to defineand facilitate the creation of a brand identity for Chumbak.The objective of the study is to examine the branding of Chumbak. The idea is to investigate what the currentbrand image is internally and externally and whether any elements of a brand exist? The outcome of the study isto help the company to define and create its brand identity.The theoretical framework was based on David Aaker’s Brand Equity model which has been discussed below.Further, the four attributes of Aeker’s model were tested to determine their relationship with purchase intention.With limited resources Chumbak it becomes crucial to understand which attributes translate to purchaseintention, so they can efficiently allocate their resource.

2. LITERATURE REVIEW

The present research employs brand equity based on Aaker's model. Aaker built his model on four dimensions.Each is briefly reviewed below, together with the related hypotheses which have been separately tested in thesucceeding sections of this study.

Diagram 1: Aeker’s Model and Benefits of using such a model

(I) Brand Awareness

Brand awareness refers to the strength of a brand's presence in consumers' minds and is an important componentof brand equity. Aaker mentioned several levels of brand awareness, ranging from mere recognition of the brandto dominance, which refers to the condition where the brand involved is the only brand recalled by a consumer.Aaker defines brand awareness as "the ability of the potential buyer to recognize and recall that a brand is amember of a certain product category". According to Keller, brand recall refers to consumers' ability to retrievethe brand from memory, for example, when the product category or the needs fulfilled by the category arementioned. Keller argued that "brand recognition may be more important to the extent that product decisions aremade in the store". Customer-based brand equity occurs when the consumer has a high level of awareness andfamiliarity with the brand and holds some strong, favourable, and unique brand associations in memory.

(II) Brand Association

A brand association is "anything linked in memory to a brand" Aaker argued that a brand association has a levelof strength, and that the link to a brand (from the association) will be stronger when it is based on manyexperiences or exposures to communications, and when a network of other links supports it. Brand associationsmay reflect characteristics of the product. Product associations and organizational associations are taken as thetwo mostly referred categories according to Chen's brand association typology. Further, Aaker suggested thatbrand associations could provide value to the consumer by providing a reason for consumers to buy the brand,and by creating positive attitudes/feelings among consumers. Rio proposes that brand associations are a keyelement in brand equity formation and management. In this respect, high brand equity implies that consumershave strong positive associations with respect to the brand.

(III) Perceived Quality

Perceived quality is another important dimension of brand equity. Perceived quality is not the actual quality ofthe product but the consumer's subjective evaluation of the product. It is a competitive necessity and manycompanies today have turned customer-driven quality into a potent strategic weapon. They create customersatisfaction and value by consistently and profitably meeting customer's needs and preferences for quality.Kotler draws attention to the intimate connection among product and service quality, customer satisfaction, andcompany profitability.

(IV) Brand Loyalty

Brand loyalty is a major component of brand equity. Aaker defines brand loyalty as a situation which reflectshow likely a customer will be to switch to another brand, especially when that brand makes a change, either inprice or in product features. Javalgi and Moberg defined brand loyalty according to behavioural, attitudinal, andchoice perspectives. While behavioural perspective is based on the amount of purchases for a particular brand,attitudinal perspective incorporates consumer preferences and dispositions towards brands. Definitionsregarding the choice perspective focus on the reasons for purchases or the factors that may influence choices.These brand loyalty definitions were empirically researched under three major categories: multi domainapproach, behavioural approach, and attitudinal approach. Oliver defines brand loyalty as a deeply heldcommitment to rebuy or re-patronise a preferred product or service consistently in the future, despite situationalinfluences and marketing efforts having potential to cause switching behaviour. Oliver's definition emphasizesthe behavioural dimension of brand loyalty, whereas Rossiter and Percy argued that brand loyalty is oftencharacterized by a favourable attitude towards a brand and repeated purchases of the same brand over time.Brand loyalty is also conceptualized based on an attitudinal perspective. Chaudhuri and Holbrook argued that"attitudinal brand loyalty includes a degree of dispositional commitment in terms of some unique valueassociated with the brand". From an attitudinal perspective, brand loyalty was defined as "the tendency to beloyal to a focal brand, which is demonstrated by the intention to buy the brand as a primary choice"

(V) The Relationship between Brand Equity and Purchase Intention

Although empirical evidence indicated that brand equity can affect purchase intention in various contexts, thenumber of studies which apply Aaker's brand equity model to measure the effect of its dimensions on purchaseintention is limited. According to Keller, brand awareness plays an important role in consumer decision makingby bringing three advantages; these are learning advantages, consideration advantages, and choice advantages.Brand associations represent basis for purchase decisions and also create value to the firm and its customers.Aaker has listed benefits of brand associations as follows: helping to process/retrieve information,differentiating the brand, generating a reason to buy, creating positive attitudes/feelings, and providing a basisfor extensions. Similar to brand associations, perceived quality also provides value to consumers by providingthem with a reason to buy and by differentiating the brand from competing brands. According to the literature,while the definitions of brand loyalty based on the attitudinal perspective emphasized consumer intentions to beloyal to the brand, the definitions based on a behavioural perspective accentuated consumer's actual loyalty tothe brand as reflected in purchase intention. Thus, we conceptualize brand loyalty based on a behaviouralperspective. In sum, this study investigates whether consumers' purchase intention is associated with brandawareness, brand associations, perception of quality and brand loyalty.

Methodology

H1. Perceived quality has a significant direct effect on purchase intention.H2. Brand awareness has a significant direct effect on purchase intention.H3. Brand association has a significant direct effect on purchase intention.H4. Brand loyalty has a significant positive direct effect on purchase intention.

The framework embraces information on four dimensions, including brand awareness (three items), brandassociations (four items), perceived quality (three items) and brand loyalty (three items) all measured by using aseven-point Likert-type scale. Purchase intention, with three elements, considers respondents' likelihood ofpurchasing the brand in question by using a seven-point Likert-type scale. Respondents were asked to rate Thebrand Chumbak on a seven-point scale of agreement-disagreement, indicating how well Chumbak performs onthat attribute.

Data analysis involves descriptive statistics and structural equation modelling using AMOS structural equationprogram. AMOS is designed to estimate and test structural equation models (SEMs). SEMs are statisticalmodels of linear relationships among latent (unobserved) variables and manifest (observed) variables. It is alsoused for exploratory and confirmatory factor analysis, as well as path analysis. Its purpose is estimating thecoefficients in a set of structural equations. For this research AMOS is used to investigate the causalrelationships, where the path coefficients are tested for significance and goodness-of-fit.

SEM is a model analysis technique encompassing methods such as covariance structural analysis, latentvariable analysis, confirmatory factor analysis, path analysis and linear structural relation analysis SEM isparticularly useful in this paper because it can estimate "a series of separate, but interdependent, multipleregression equations simultaneously" in a specified structural model Therefore, SEM is the most suitableanalysis to estimate the strength of causal relationship between brand equity components and purchase intention.All variables were correlated at the level of (p<0.001).

An online survey was floated online to which 116 responses were collected. Refer to table 1 below.

Diagram 2: Hypothesis to be tested

Table 1: Elements of Brand Equity

(I)Perceived QualityPQ1 Products from this brand would be of

very good quality.PQ2 Products from this brand offer excellent

features and varietyPQ3 I trust the service and delivery of this

brand(II)Brand Awareness:BAW1 Some Characteristics of this brand

come to my mind very quickly.BAW2 I am familiar with this brand.BAW3 I can recognize this brand quickly

among other competing brands.(III) Brand AssociationBAS1 This brand has very unique brand

image, compared to competing brands.BAS2 I respect and admire people who use

this brand.BAS3 I like the brand image of this company.BAS4 I like and trust this brand.(IV) Brand Loyalty:BAL1 I consider myself to be loyal to this

brand.BAL2 This brand is one of the preferred

brands I want to buyBAL3 I will buy this brand even if it increases

the price.(A) Purchase IntentionPUI1 I would love to recommend this brand

to my friends.PUI2 I would buy products from this brand

rather than any other available brandsPUI3 I am willing to purchase products from

this brand in the future.

PurchaseIntention(PUI)

PercievedQuality(PQ)H1

BrandAssociation(BSA)H3

BrandLoyalty(BAL)H4

BrandAwareness(BWA)H2

FINDINGS

The significance tests for the structural model parameters are the basis for accepting or rejecting the proposedrelationships between exogenous and endogenous constructs. The four exogenous constructs (perceived quality,brand loyalty, brand associations, and brand awareness) were proposed to be the antecedents of purchaseintention. The estimated model results provided support for only one hypothesis, H4 (Table 2). HI,H2, H3 were not found to be significant. This underlined the positive and direct role of brand loyalty, inaffecting purchase intention.

Table 2: Hypothesis results for the structural model

Estimate S.E. C.R. P LabelPUI <--- PQ .110 .047 2.333 .020 H1PUI <--- BAW .087 .040 2.158 .031 H2PUI <--- BAS .091 .037 2.439 .015 H3PUI <--- BAL .348 .100 3.476 *** H4PQ1 <--- PQ .834 .142 5.873 *** PerceivedPQ2 <--- PQ .755 .136 5.537 *** QualityPQ3 <--- PQ 1.000 SignificanceBAW1 <--- BAW .788 .122 6.476 *** BrandBAW2 <--- BAW 1.316 .202 6.498 *** AwarenessBAW3 <--- BAW 1.000 SignificanceBAS1 <--- BAS .829 .141 5.881 *** BrandBAS2 <--- BAS .488 .133 3.679 *** AssociationBAS3 <--- BAS .841 .090 9.367 *** SignificanceBAS4 <--- BAS 1.000BAL1 <--- BAL 1.359 .171 7.943 *** BrandBAL2 <--- BAL 1.000 LoyaltyBAL3 <--- BAL 1.177 .165 7.132 *** SignificancePUI1 <--- PUI 1.856 .545 3.405 *** PurchasePUI2 <--- PUI 3.094 .858 3.604 *** IntentionPUI3 <--- PUI 1.000 Significance

Note: *** represents significance at 99%

Diagram 3: Standardized Path Coefficients for Research Variables

The statistical test in this data supports a causal relationship between brand loyalty and purchase intention. Asdiscussed earlier for a small size firm like Chumbak it becomes crucial to allocate its resources wisely. Thisstudy shows that managers should concentrate their efforts on building brand loyalty which, if increased, willcontribute positively to the firms brand equity and as a result increased intention to purchase a Chumbakproduct.

Since Chumbak is a niche brand, brand awareness will be spread through loyal customers who can associatewith the brand. Perceived quality is not an important criterion, since the kinds of products sold by Chumbak aremore or less standard, and customers primarily gain value through innovations in design. Loyal customers willspread brand awareness by the means of WoM.