You are judged by the allies you keep:
The role of borrowed brand equity
1.
Introduction
While the benefits that using an existing brand name to introduce a product extension or a
co-brand have been widely discussed and documented (e.g., Smith & Park, 1992; Keller &
Aaker, 1992; Ueltschy & Laroche, 2011), the backlash effect of this type of actions on the
focal brand equity evaluation has received less attention and is a subject of greater speculation
(Lane & Jacobson, 1997, Lee & Wu, 2011). It is established that due to a spillover of
associations all the brands involved in a successful brand alliance gain in terms of awareness
and image (Simonin & Ruth 1998). It had been argued that this is a consequence of a more
complicated process - the creation of mental linkages between brands in the consumers mind
(Keller, 1993). Because the positive outcomes of evoking these linkages appear gradually as
consumers learn more about the alliance, they tend to be considered along other associations
as an undistinguished part of the knowledge that consumer has about the brand (e.g., Keller,
1993; 2003). However, various scholars argue that the extent to which a brand is connected to
other brands is in itself a source of consumer value (Henneberg & Mouzas, 2004; Arvidsson,
2006). Hence, we suggest that brand associations of ally brands spilled over to the focal brand
via co-branding should be treated differently, than those created independently and that there
is a need to update existing measurements so to include the consumer value of products with
cross-brand linkages.
In this research, we make a step towards re-interpreting K. L. Keller’s Customer-based
brand equity model (1993) as we consider consumer-to-consumer value networks and how
they affect brand knowledge. By emphasizing the CBBE’s distinguishing of secondary and
primary brand associations we define co-branding (i.e., brand alliance engagement) as the
process of borrowing brand equity by building secondary brand associations, as opposed to
building primary brand associations (building brand equity) or attaching them through
acquisition or licensing (buying brand equity). With that, the study aims to contribute to
further exploring of the rationale behind co-branding and brand leveraging strategies.
2.
Theoretical Background
It is established that brand equity plays an important role in explaining the nature of brand
extensions in general and in determining the effects of the name transfer from the parent
brand to the extension (Swait, et al., 1993; Besharat, 2010). Although numerous studies exist,
which investigate how different characteristics of brand allies (like their equity and perceived
fit) impact spillover effects, brand alliance perceptions and post-alliance attitudes, little is
known about the cognitive mechanisms by which brand alliance strategies affect brand equity
evaluations. Therefore, the role of a brand ally's equity in explaining consumer evaluations of
the focal brand remains mostly undefined.
2.1 Consumer-to-consumer value networks
It is well recognized that a brand is only appreciated when it provides value to its
customers (Anderson & Narus, 2004). Customer value could be defined as the customers’
perception of what they want to have happen in a specific use situation with the help of a
product or service offering in order to accomplish a desired purpose or goal (Woodruff &
Gardial, 1996). Nowadays, customer value increasingly arises through a relationship with a
supplier for a stream of products and services, rather than individual products and services.
The consumers’ needs are increasingly met through alliances of companies as more customers
buy multi-branded solutions (Maklan & Knox, 2007). Therefore, to create a clear
conceptualization of how customers evaluate brands it is crucial to achieve a common
understanding of the complex chain of participant interactions as part of shared consumer-toconsumer value networks.
Recent literature implies that customers’ sense-making concepts about the value of offers
are embedded in a network that incorporates social ‘contingencies’ or ‘contextualities’ (Holt,
2004; Ravald & Grönroos, 1996; Christodoulides, 2009). When brands get woven into the
fabric of social life consumers use them as symbols to interact: to forge affiliations, to claim
status, and to socialize. That is, for the consumer the brand is useful as long as it can enter
into an assemblage where it, together with other brands, achieves something (an expression, a
relation, an emotion) (Arvidsson, 2006). Therefore, Henneberg and Mouzas (2004) suggest
that in order to assess the overall customer value it is important also to take into account the
social aspects of realizing the personal customer value of the offering in the context of the
consumer’s relationships with other people and objects. Hence, the “linking value” of a brand
can be understood as the capacity to mediate and cement the social relations that make up the
context of consumption (Arvidsson, 2006).
2.2 The customer-based brand equity
Brand equity explains the extent of consumer attachment to a brand (Aaker, 1991).
According to the Customer-based brand equity (CBBE) model it could be understood as the
differential effect that consumers knowledge about a brand has on their response to the
marketing of that brand (Keller, 1993). Drawing from the associative network memory model,
Keller conceptualizes brand knowledge as consisting of a brand node in memory to which a
variety of associations are linked. Its sources are the customer’s associations with the brand
elements and the overall level of familiarity with that brand (Keller, 1993). Brand associations
are understood as anything "linked" in memory to a brand (Aaker, 1991) and they can reflect
product-related aspects (primary brand associations) as well as aspects independent of the
product itself (secondary associations) (Chen, 2001).
Yet, the CBBE model does not distinguish between the sources of brand associations - that
is, whether they are created by the marketer or by some other source of influence. All brand
associations that are linked to other information in memory that is not directly related to the
product or service of the brand are referred to as secondary associations (Keller, 1993). We
argue that be it a company, a country of origin, distribution channels, a celebrity
spokesperson, endorser of the product or service, or an event – as long as those entities
possess a brand name and are characterized by awareness and associations it is possible by
definition to treat them as brands. Consequently, these entities would constitute brand allies
for those brands, with which they are associated in some sort of a brand alliance.
Hence, consumer evaluation of a brand can be considered an inferential process by which
consumers formulate their evaluation on the basis of what they already know about the brand
and the information about other brands it is associated with. As the associated brands are
managed by someone else, the control over these secondary brand associations is largely out
of the hands of the brand manager. At the same time, given the link between brand attitude
and consumer response, any impact of a brand ally on brand attitude can have large financial
consequences (Simonin & Ruth 1998). Therefore, such an instrument is required that would
allow both distinguishing this “borrowed” brand associations and include them into the equity
metric of the brand.
3.
Theoretical development
To refer to such practices where linking of associations of one brand to those of another
occurs we propose to use the term borrowing brand equity, which can be related to the
literature on leveraging brand equity (Farquhar, 1990). We define the borrowed equity of a
brand as the differential effect that knowledge about other brands associated with it has on
consumer response on the marketing of that brand. Following the logic of the CBBE model,
this brand knowledge would consist of a brand node in memory to which a variety of
secondary associations are linked.
Consequently, borrowed brand equity occurs when a brand becomes identified with
another entity characterized with own brand attributes and associations (e.g., a company, a
country of origin, distribution channels, a celebrity spokesperson, an event). As any brand is
constantly intertwined in an associative network of other brands (John et al. 2006), it should
always possess some level of borrowed brand equity. Hence, together with the brand’s own
equity, the borrowed equity represents the total brand equity of a brand.
Figure 1: The process of borrowing brand equity
In this scenario, the brand’s linking value would determine the extent to which primary
brand associations linked to other brands become secondary associations for the focal brand
and, hence, a stronger brand would be the one with more links to other entities, i.e., more
borrowed brand equity. Stronger connections to other brands should provide the mechanism
whereby brand associations, including attitudes, transfer to and benefit the brand (see Figure
1). Moreover, we argue that the mental linkages between concepts created by borrowing
brand equity not only facilitate the transfer of evaluative judgments (Lane & Jacobson, 1997)
bust also create additional consumer value, which is different from that created by building a
brand’s own equity.
4. Research Design and Method
Based on the theoretical development part of the study we formulated the following
preliminary hypotheses:
H1: The overall consumers’ evaluations of the focal brand’s allies have a positive impact
on their overall evaluation of the focal brand.
H2: The favorability of consumers’ perceived image of the focal brand’s allies has a
positive impact on their overall evaluation of the focal brand.
H3: Consumers’ awareness of the focal brand’s allies has a positive impact on their overall
evaluation of the focal brand.
The survey for measuring brand equity and consumer response is designed according to
existing measurements. To measure brand awareness we used brand recognition scale from
previous research (i.e., Alba & Hutchinson, 1987) and measures of brand recall as
recommended by Keller (1993). Brand image measures were based on those recommended in
Keller (1993) and included the favorability, uniqueness and strength of brand associations.
Yoo and Donthu's (1997) scale was the basis for the attitudinal brand equity measure used in
this research to measure overall brand evaluations.
Based on an exploratory study of top-rated international alliances of brands with high
awareness among students, we selected product categories and respective brands that
represent different types of co-branding: product-ingredient, product-retailer and productproduct. Through a series of pretests, we narrowed the selection to those three brands that had
the most consistent associations with the brand ally and the three brands they were associated
with: Coca-Cola (associated with McDonald’s); iPod (associated with iTunes) and Windows
(associated with Intel). As Yoo, Donthu, and Lee (2000) indicated, only if respondents know
about and have experienced particular services can they provide reliable and valid responses
about the services in the questionnaire, we used primary screening questions to ensure the
respondents were familiar with at the mentioned brands. Data shows that a significant number
of the participants had experienced the product categories, which indicates that the
participants might have developed strong attitudes toward the brands (Smith & Swinyard,
1983).
We conducted a study among 312 Russian undergraduate university students. The average
age of the respondents was twenty-one years and 68 percent of them were female. In the first
part of the questionnaire, students were asked to list the brands that came to their mind in the
order recalled for each of the 6 product categories. On the average, six brands were recalled
with a standard deviation of 2.5. Next, the questionnaire included items to measure the
dimensions of brand equity, as well as demographic questions. Brand equity items were
evaluated with five-point Likert scales anchored at 1 = “strongly disagree” and 7 = “strongly
agree.” Brand and product category experiences were measured with “yes” or “no” items.
5. Analysis and Results
We tested the hypothesized relationships in the model using structural equation modeling
(SEM). To test the effects of the type of borrowed brand equity sources (product-ingredient,
product-retailer and product-product) three alternative models have been tested (respectively,
1 – iPod and iTunes, 2 - Coca-Cola and McDonald’s, 3 – Windows and Intel). In particular,
we estimated the structural models using PASW Statistics version 18.0.3.
5.1 Measurement model testing and results
The joint confirmatory factor analysis (CFA; with all constructs included simultaneously)
reveals that the chi-square divided on the degrees of freedom for the overall models is (1)
1,438 (0.000), (2) 1,238 (0.000) and (3) 1,441 (0.000). Other fit indices, including the
comparative fit index (CFI1 = .933; CFI2 = .905; CFI3 = .923), root mean square error of
approximation (RMSEA1=.046; RMSEA2 = .034; RMSEA3 = .039), and the goodness of fit
index (GFI1 = 0.967, GFI1 = .967; GFI2= .906; GFI3 = .912), are satisfactory because they
are equal to or better than recommended values. Thus, the proposed model provides a
reasonable explanation of the observed covariance among the constructs.
In addition, we assessed the validity, reliability, and discriminant validity of the measures.
The CFA results lend strong support to the convergent validity of all measures, because all
estimated loadings of the indicators for the underlying constructs are greater than the
recommended .6 cutoff and are statistically significant at the .05 level (Bagozzi & Yi, 1988).
The Cronbach’s alpha (α) values of all constructs are higher than the .7 threshold (Nunnally &
Bernstein, 1994), and the minimum reliability (α) of the measures is .77.
To examine the internal validity of the measurement model, we calculated the composite
reliability (CR) and average variance extracted (AVE; Fornell & Larcker, 1981). All the CRs
are above the recommended .7 level (Nunnally & Bernstein, 1994). The AVEs of all
constructs, which represent the amount of variance captured by the construct’s measures
relative to measurement error and the correlations among the latent variables, are higher than
the .5 cutoff recommended by Fornell and Larcker (1981) for each construct. The internal
validity of the measurement model appears adequate.
Furthermore, we conducted Fornell and Larcker’s (1981) test for discriminant validity by
comparing the AVE estimate for each construct with the squared correlation between any two
constructs. The AVEs are higher than the squared correlations, confirming the discriminant
validity of the constructs.
Therefore, all the three models meet all psychometric property requirements.
5.2 Future steps of the research
Currently the thesis is on the preliminary data analysis stage. The differences between the
three mentioned models are investigated and additional correlations are looked at and
analyzed in order to see if consumers evaluate differently various types of brand alliances. An
important goal of the research was also to explore the role of the brand’s linking value and
how it influences the relationship between brand equity evaluations and consumer attitudes
towards ally brands. To assess these questions we employ a multi-group SEM analysis. As a
result, a final model will be developed that would explicate the process of borrowing brand
equity.
6. Conclusions
Reintroducing borrowing brand equity as a brand leveraging strategy brings the missing
theoretical basis that is necessary for explaining the effect of brand alliance engagement on
consumers’ evaluations of the brand. Extending the CBBE model by including co-branding
related constructs may serve as an important step for creating a unified framework, which
would allow classifying and comparing co-branding strategies. This paper aims to contribute
to the current stream of studies on customer-based equity in order to help to create more
efficient measures of brand equity and co-branding effectiveness in the future.
As choosing and managing the customer value that the brand should provide to customers
is an integral part of every branding strategy, it is crucial to understand how that choice
affects brand equity. Hence, this work offers to reconsider Keller’s classical CBBE model by
taking into account the role of cross-brand interactions and the brand’s linking value in order
to provide marketers with an important insight into brand-customer relationships when
deciding upon a branding strategy.
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