Z PaginationTFUKRJMMRJMM27(3 4)FinalsRJMM A 545676 dvi Journal of Marketing Management Vol 27, Nos 3–4, March 2011, 243–268 Value marketing through corporate reputation An empirical investigat.
Journal of Marketing Management Vol 27, Nos 3–4, March 2011, 243–268 Value marketing through corporate reputation: An empirical investigation of Thai hospitals Nopporn Srivoravilai, Dhurakij Pundit University, Thailand T.C Melewar, Brunel University, UK Martin J Liu, University of Nottingham, China Natalia Yannopoulou, Nottingham University Business School, UK Abstract This study examines the value proposition through corporate reputation, as corporate reputation best communicates to consumers and the public the company’s value orientation The research setting for the study was the Thai private hospital industry A quantitative methodology was employed, using Confirmatory Factor Analysis (CFA) to purify our measurement items and then using regression analysis to test our hypothesis A model of corporate reputation is proposed, based primarily on a combination of institutional theory, impression management theory, and signalling theory The study contrasts with most previous studies on this subject, which employ a single approach in researching corporate reputation Lastly, it explores the implications of corporate reputation with regards to value offering for practitioners and policy makers Keywords value marketing; corporate reputation; health industry; institutional theory; impression management; Thailand Introduction Current changes and challenges in the marketplace call upon marketing management to create better product and service offerings, while convincing customers about their corporate and product credibility According to Davidow and Malone (1992), this shift is considered to be a move towards value marketing; a process that begins by guaranteeing customer satisfaction and, through continuous monitoring, ensures that value is delivered (Walters & Lancaster, 1999) More specifically, and in the case of services, service value has been widely described as a cognitive trade-off between perceptions of quality and sacrifice (Dodds, Monroe, & Grewal, 1991) Research to date has mainly concentrated on either the value of buyer–seller relationships (Lindgreen & Wynstra, 2005), or identifying the value criteria, drivers, and key success factors in consumer decision making, in an effort to make the case for the importance of value-based marketing to customers (Grant, 1995; ISSN 0267-257X print/ISSN 1472-1376 online © 2011 Westburn Publishers Ltd DOI: 10.1080/0267257X.2011.545676 http://www.informaworld.com 244 Journal of Marketing Management, Volume 27 McTaggart, Kontes, & Mankins, 1994; Rappaport, 1986; Reimann, 1987; Webster, 1994; Wikstrom, 1996) Nevertheless, it has neglected to address how value is communicated to customers Thus, in this study, we attempt to examine value marketing through corporate reputation This is because corporate reputation best communicates to consumers and the public the company’s commitment to value offering (Fombrun, 1996) For the first time, therefore, a model of corporate reputation is examined based primarily on the combination of the most influential theories with regards to reputation – namely, institutional theory, impression management theory, and signalling theory – in contrast to most existing studies, which employ a single approach in researching corporate reputation Hence, the proposed conceptual model of this study aims to capture the effects of institutional factors on corporate reputation and to examine the potential outcome of the reputation-building process and value creation The private hospital industry was chosen as the research setting because it has a strong institutional environment (Arndt & Bigelow, 2000) that makes the departure from an institutionalised structure unsafe Furthermore, private hospitals are service companies whose products are largely, though not exclusively, intangible, and thus have to rely heavily on corporate reputation to attract customers (Fombrun, 1996) In addition, the Thai private hospital industry was selected because its national culture is considered different from that of Western countries, where most previous studies about corporate reputation have taken place As a result, our study gives us the opportunity to test empirically existing models in a non-Western setting, and thus helps us to examine the applicability of theories in other contexts In the following section, we discuss the key characteristics of health care services and the distinctiveness of the Thai private hospitals, contrasting them with Western service designs We then examine the relevant literature with regards to the antecedent of corporate reputation, organisational legitimacy, and impression management tactics, and explore its outcome Relevant hypotheses are presented after the discussion of each component of the framework These are first tested using CFA, in order to access and purify the measurement items of each component, and then subjected to regression analysis Lastly, we present the study’s implications for theoreticians and practitioners Health care and our selected research context Even though the value concept has long been considered as fundamental for all marketing activity (Holbrook, 1994), examining marketing towards value creation has recently been proposed as the contemporary focus for marketing (Sheth & Uslay, 2007) An emerging paradigm shift towards a Service-Dominant (S-D) Logic as the foundation for marketing theory and practice also seems to have attracted considerable attention within the marketing literature (Vargo & Lusch, 2004) It has been argued that all marketing exchange incorporates an actual service, which results in intangible outcomes (Lusch, Vargo, & O’Brien, 2007) Furthermore, according to Holbrook (2006), all products are services, since products perform services that will provide the relevant value-creating experiences Health care services, however, present certain peculiarities compared to product offerings and other service industries They are mainly viewed as high-involvement Srivoravilai et al Value marketing through corporate reputation services (Hogg, Laing, & Newholm, 2004), with a high degree of emotional vulnerability and risk (Jadad, 1998) They are also characterised as asymmetrical in information and power distribution, taking a domineering approach to alternatives (Laing, Hogg, & Winkelman, 2005) As a result, they are seen as knowledge-based services (Mills & Moshavi, 1999) and an archetypal professional service (Wilson, 1994) Despite recent changes within the health care sector towards a more consumeroriented health system, as well as the emergence of post-modernist consumer cultures (Laing, Lewis, Fowall, & Hogg, 2002), consumers are still largely considered as passive (Ham & Alberti, 2002) and dependent on professionals’ ‘rational scientific rhetoric of reliability’ (Laing, Newholm, & Hogg, 2005, p 514) Perhaps more surprisingly, recent findings based on cases in the West also suggest that consumers remain somewhat reluctant about expressing consumerist expectations and behaviours in respect to health care services (Laing & Hogg, 2002) It has therefore been noted that, although Western service designs have long been established, they continue to face fundamental challenges due to organisational complexities and conflict, which has been intensified by the various key actors involved (Smith & Fischbacher, 2002) Government attempts to move in a more market-driven direction have largely been unsuccessful in the UK (Laing & Cotton, 1996; Laing & Hogg, 2002), whilst recent US attempts to create a more regulated heath service has encountered considerable opposition and obstacles Hence, while the West seems currently to be debating the merits of the consumerisation of health care, our paper examines value marketing within health care in a context that differs in the following main ways First, Thai private hospitals present a case of applied commercially driven marketing concepts Second, their focus is on competing in the international health care sphere Third, within Thai private hospitals, producer dominance has been significantly reduced Fourth, the domineering approach to alternatives is not as high as in other cases A final interesting characteristic of Thai private hospitals is that they position themselves within the medical tourism sector and aspire to gain a strong international presence within this market sector Their main target audience comprises Thai nationals and foreigners in search of affordable medical treatment Currently, Thai nationals account for 60% of their customer base and foreigners from 136 countries, mainly from the Middle East and Southern and Eastern African countries, for 40% Moreover, it has been projected that foreign patients’ contribution to the revenue of Thai private hospitals will reach 60% over the next five years (IMTJ, 2009) In sum, our research examines value marketing within health care by studying private hospitals, in a collectivistic society, that operate with applied marketing concepts and whose main target audience is patients from other counties The relationship between organisational legitimacy and corporate reputation Corporate reputation has been defined in a number of different ways (Bick, Jacobson, & Abratt, 2003) based on the different research areas that theoreticians use for its examination, as shown in Table Nevertheless, studies on corporate reputation have emphasised two traditional assumptions about rationality and objectivity They have paid less attention, 245 246 Journal of Marketing Management, Volume 27 Table Definitions of corporate reputation Research area Economics Sociology Strategic management Strategic management Strategic management Marketing Marketing Marketing Definition A customer’s expectation and belief about a firm’s products’ quality A prevailing collective agreement about an actor’s attributes or achievement based on what the relevant public knows about the actor An attribute or a set of attributes ascribed to a firm, inferred from the firm’s past actions Public’s cumulative judgements of firms over time Stakeholder’s knowledge and emotional reactions (e.g affect, esteem) towards a firm The estimation of the consistency over time of an attribute of an entity Public esteem judged by others A value judgement about a company’s attributes and evolves over time as a result of consistent performance, reinforced by effective communication Related references Shapiro (1982, 1983) Camic (1992) Weigelt and Camerer (1988) Roberts and Dowling (2002) Hall (1992); Fombrun (1996) Herbig and Milewicz (1995) Weiss et al (1999) Gray and Balmer (1998) (Adapted from Bennett and Kottasz, 2000, p 224) however, to relevant social assumptions (Fombrun & Van Riel, 1997) According to institutional theory, it can be argued that corporate reputation is an outcome of institutional processes by which a company comes to accept, correspond to, and transmit the social norms that are taken for granted as defining the way things are or should be done Such processes are multiple, but past investigations mainly address the normative process (Rao, 1994; Staw & Epstein, 2000) Besides, corporate reputation, especially in the case of Thai private hospitals that apply commercially driven marketing concepts, can be viewed as a resource, based on the comparative advantage theory (Hunt & Morgan, 1995) In this view, hospitals’ market orientation through corporate reputation could represent an intangible entity that enables them to produce efficiently market offerings that offer value to the consumers of the medical tourism sector Moreover, a company is more likely to attract support and resources from its constituents if it appears to be proper, understandable, and desirable than if it does not seem so (Staw & Epstein, 2000) Organisational legitimacy has been conceptualised with different levels of specificity and emphasis (Pfeffer & Salancik, 2003; Suchman, 1995) Organisational legitimacy expresses the importance of the congruence between the social values associated with the activities of organisations and the external (societal) norms or expectations (Ashforth & Gibbs, 1990; DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Suchman, 1995) Furthermore, legitimacy can also be viewed as a type of resource that is essential for the acquisition of other resources such as high-quality employees, financial resources, and governmental support (Ashforth & Gibbs, 1990; Zimmerman & Zeitz, 2002) Hence, the relationship between corporate reputation and organisational legitimacy is not a simple one On the one hand, corporate reputation and Srivoravilai et al Value marketing through corporate reputation organisational legitimacy share several characteristics Both of them, for example, are socially constructed and subject to evaluations by internal as well as external constituents (Ashforth & Gibbs, 1990; Deephouse & Carter, 2005; Fombrun & Shanley, 1990) Moreover, both connect to similar antecedents (e.g financial performance) and consequences (e.g social support) (Deephouse, 1997; Deephouse & Carter, 2005; Fombrun & Shanley, 1990) On the other hand, they are different from each other to the extent that a deterioration in corporate reputation has less dreadful consequences than that of a deterioration in legitimacy In linking organisational legitimacy with corporate reputation, this research concentrates on the evaluative aspect (Suchman, 1995) of organisational legitimacy, consisting of sociopolitical and pragmatic legitimacy Sociopolitical legitimacy is composed of regulative and normative legitimacy, both of which are generally referred to as the result of the legitimation process whereby a company conforms to the rules, standards, and norms set by governments, professional bodies, and society as a whole (Aldrich & Fiol, 1994) Pragmatic legitimacy is usually referred to as the outcome of the legitimation process by which a company responds to the expectation of its constituents at both individual and wider society levels (Suchman, 1995) Acquiring both types of legitimacy can help a company to influence stakeholders’ assessments of its corporate reputation positively On the one hand, the company that obtains regulative legitimacy signals to its stakeholders that it possesses sufficient transparency, defined as the timely disclosure of adequate information regarding the company’s operating and financial condition and its corporate governance practices (Fombrun & Van Riel, 2004) By being transparent, the company signals to the public that it is comprehensible, relevant, and ready to be further evaluated by its constituents, referring us to the value of relationships In addition to the effects of sociopolitical legitimacy, achieving pragmatic legitimacy can lead stakeholders to perceive the company as authentic, especially with regards to its claim for value creation for its customers (Tzokas & Saren, 1999) A company is considered to possess common characteristics of both pragmatic legitimacy and authenticity when it shows honesty, trustworthiness, and wisdom (Fombrun & Van Riel, 2004), all of which are similar to the characteristics of a person In other words, the personification of companies arising from institutional pressure suggests that a stakeholder will consistently look for the appropriate qualifications of a company as if it were a person and will evaluate its activities accordingly Alternatively, it can be stated that the more honest and trustworthy a person believes a company to be, the more favourable reputation that person will ascribe to the company H1: Overall organisational legitimacy is positively associated with corporate reputation H2: Sociopolitical legitimacy is positively associated with corporate reputation H3: Pragmatic legitimacy is positively associated with corporate reputation Corporate reputation and impression-management tactics Impression-management tactics refer to the methods employed by organisations or people to influence or manipulate the impression formed of them by their stakeholders Corporate reputation is potentially a consequence of both verbal and non-verbal impression-management activities Verbal impression management refers 247 248 Journal of Marketing Management, Volume 27 to the tactics that are directly involved with verbal communication (e.g excuses, explanation), whereas non-verbal impression management refers to the tactics that are mainly involved with other non-verbal actions (e.g providing a free snack and drink, offering a free newspaper) Impression-management techniques can affect corporate reputation in at least two ways First, impression management tactics can enhance a company’s reputation by increasing the company’s positive visibility and distinctiveness (Fombrun, 1996) In fact, impression management tactics can influence corporate reputation by improving the following characteristics of the company: visibility, distinctiveness, transparency, consistency, and authenticity (Fombrun & Van Riel, 2004) However, since impression-management theory is principally concerned with the management of appearance or impression in the mind of constituents, the visibility and distinctiveness of a company will be the dimensions that are most effectively and directly manipulated A company can thus enhance its reputation by actively employing tactics such as self-promotion and self-presentation to boost the aforementioned characteristics Companies that engage in impression-management activities can also enhance their reputation through the identification of stakeholders with the companies Staw and Epstein (2000) found that the corporate reputation of US industrial corporations in the Fortune 500 database is positively and statistically associated with the adoption of popular management techniques for value creation, such as total quality management (TQM) and empowerment The latest refers us to S-D Logic, which points out that value is perceived, defined, and co-created by consumers (Vargo & Lusch, 2004, 2008) Lamertz, Heugens, and Calmet (2005) have shown, in addition, that Canadian brewing companies can represent themselves positively and distinctively in their external environment through self-categorisation, a tactic that refers to the assignment of companies to groups of similar characteristics, such as age and size (Chatman & Spataro, 2005) Taking into account these two reasons mentioned above, it is suggested that: H4: Overall impression-management tactics are positively associated with corporate reputation H5: Verbal impression-management tactics are positively associated with corporate reputation H6: Non-verbal impression-management tactics are positively associated with corporate reputation Other than the direct effect of impression-management tactics on corporate reputation, an indirect effect may also exist In particular, the relationship between impression management and corporate reputation can be mediated by a third variable: organisational legitimacy Overall organisational legitimacy is assumed to be a generative mechanism (Baron & Kenny, 1986) through which impression management tactics influence corporate reputation According to institutional theorists, a company can gain organisational legitimacy not only via isomorphic actions (e.g conformity with acceptable norms, rules, standards) but also via the decoupling – that is the adoption of practices that cohere with institutional demands but are intentionally different from how work is actually done Decoupling, as a form of impression management, can help a company to defend successfully Srivoravilai et al Value marketing through corporate reputation its social suitability from outside threats Ashforth and Gibbs (1990) argue that organisations can employ tactics such as rejection and concealment, apology offering, and explanation offering to make themselves appear consistent with social values and expectations H7: The relationship between overall impression-management tactics and corporate reputation is mediated by organisational legitimacy Customer support: A consequence of corporate reputation Empirical research reveals that corporate reputation is positively correlated with organisational as well as marketing variables, such as financial performance indicators (Carmeli & Tishler, 2004; Deephouse, 2000), perceived credibility (Ganesan, 1994), perceived quality (Wheatley & Chiu, 1977), and purchase intention (Yoon, Guffey, & Kijewski, 1993) All of these variables appear to be essential for customer retention, which has been seen as the main objective of value marketing (Bolton & Drew, 1991) It has been shown that the concept of customer value has a strong relationship to customer satisfaction (Spiteri & Dion, 2004), which in turn derives from customer support (P Anderson, 1982) Moreover, it has been proposed that customer support, along with innovation and effective operational processes, forms the basis for building core capabilities that enhance value marketing (Doyle, 1995) Conceptually, a company with a favourable reputation is argued to be able to attract support from employees, customers, investors, and other stakeholders (Fombrun, 1996) Nevertheless, empirical research has not investigated the relationship between corporate reputation and support as a construct Support from customers is of particular interest because it represents social endorsement from virtually the most important stakeholder of any company, and has usually been referred to as an outcome of institutional processes (Suchman, 1995; Zucker, 1987) In line with past research (Albrecht & Adelman, 1987; Cobb, 1976; Handelman & Arnold, 1999), this study defines customer support as actions by customers that reduce uncertainty for a company that lead the company to believe that it is cared for and loved and that make the company belong to a network of communication and mutual obligation The social identification concept and the signalling theory can be used to explain the proposed relationship between corporate reputation and customer support Social identification generally refers to the perception of oneness with or belongingness to a group of persons (Ashforth & Mael, 1989; Dutton, Dukerich, & Harquail, 1994) Identification with a group can lead to socially and physically supportive actions by an individual (Ashforth & Mael, 1989; Bhattacharya & Sen, 2003) Lichtenstein, Drumwright, and Braig (2004) found that customers’ identification with companies was positively related to their purchasing behaviour More recently, Cornwell and Coote (2005) found a positive relationship between the willingness to purchase, sponsoring a firm’s products, and consumers’ identification with a not-for-profit organisation to which the sponsoring firm provides support In the context of the customer–corporation relationship, when a potential customer is presented with a choice of companies from which he can buy some services, all things being equal, the customer tends to identify him/herself with a more reputable company in order to enhance his/her self-esteem He/she then 249 250 Journal of Marketing Management, Volume 27 and returns his/her support in various forms (e.g word-of-mouth references, pay premium prices) Alternatively, according to signalling theorists (Fombrun & Shanley, 1990; Weigelt & Camerer, 1988), corporate reputation can be viewed as a cue that reflects a company’s characteristics, service quality, reliability, and credibility to its customers, especially when there is information asymmetry in the market Consumers use wellknown brands in order to reduce risks (Ring, Schriber, & Horton, 1980), as branding provides guarantees about quality and security (Aaker, 1991) Hence, a strong brand with a positive corporate reputation is a safe place for consumers because it enables them to visualise and understand better the offer and face up to the uncertainty and perceived risk associated with buying and consuming a product or service In other words, strong corporate reputation can be used as a mechanism through which a customer attempts to minimise his/her risk and bolsters his/hers confidence and trust (Bearden & Shimp, 1982; Roselius, 1971), which is seen as key for value marketing (Fornell, 1992) Taking together, the explanations based on the social identification concept and signalling theory, it is proposed that: H8: The relationship between corporate reputation and customer support is positive Yet the relationship between corporate reputation and customer support is not always straightforward Corporate reputation itself can be a generative mechanism through which organisational legitimacy influences customer support In other words, corporate reputation can mediate the relationship between organisational legitimacy and customer support Based on the reasoning above, this study proposes that: H9: The relationship between organisational legitimacy and customer support is mediated by corporate reputation H10: The relationship between sociopolitical legitimacy and customer support is mediated by corporate reputation H11: The relationship between pragmatic legitimacy and customer support is mediated by corporate reputation The conceptual model (see Figure 1) and its hypothesis are designed to capture the effects of institutional factors on corporate reputation and to examine a potential outcome of the reputation building process Methods Main survey A main questionnaire survey was conducted in Thai private hospitals The targeted participants of the main survey were a group of customers and managers of all 346 private hospitals, of which a complete directory was obtained from the Medical Registration Division, Department of Health Service Support, Ministry of Public Health (MPH) Methodologically, all private hospitals were included for two reasons: the requirement for the sample size imposed by the chosen analysis techniques (EFA and CFA) and the historical response rates recorded in past research (Powpaka, Srivoravilai et al Value marketing through corporate reputation Figure An operational model of the antecedents and consequence of corporate reputation Consequence Antecedents H4, H5, H6 Impression Management H7 + + Corporate Reputation H8 + Customer Support H1, H2, H3 + Organisational Legitimacy + H9, H10, H11 1998) Customers answered questions regarding corporate reputation, organisational legitimacy, impression-management tactics, and customer support, whilst managers answered questions about demographic characteristics and other control variables of hospitals in separate sets of questionnaires Measurements In this study, the domains of corporate reputation are multidimensional and are based mainly on the 20-item reputation quotient scale (Fombrun, Gardberg, & Sever, 2000) To measure organisation legitimacy, this research follows Handelman and Arnold (1999) by identifying two domains of the eight-item organisational legitimacy scale: sociopolitical and pragmatic legitimacy Based on individual impression management scales (Bolino & Turnley, 2003; Wayne & Ferris, 1990; Wayne & Liden, 1995), the study classifies the concept into two broad domains: verbal and nonverbal impression management, which was measured by a 22-item scale adopted from Bolino and Turnley (2003) Since this study identified one domain for the construct and focused on general rather than specific forms of support, the customer support construct was measured by the nine-item scale formulated by Long-Tolbert (2000) Control variables Three control variables (marketing capabilities, operating performance, and size) known to affect corporate reputation were incorporated into this study’s model Marketing capability (the development of products and services, marketing innovation, customer relationship management, etc.) is found to be a driver of corporate reputation (Blazevic & Lievens, 2004; Dowling, 2004) A measurement scale was adapted from Vorhies and Morgan’s (2003) scale and measured in the questionnaires to control for the marketing capability effect A number of studies (Carmeli & Tishler, 2005; Fombrun & Shanley, 1990; Roberts & Dowling, 2002) have also reported a positive relationship between performance outcomes (both financial and non-financial) and corporate reputation of a company The existing literature (Black, Carnes, & Richardson, 2000; Shrum & Wuthnow, 1988) posits a significant and positive relationship between the size of a company and its reputation 251 252 Journal of Marketing Management, Volume 27 To control for variables such as marketing capabilities and operating performance, we identified a general dimension for marketing capabilities and measures operating performance with few self-reported items (E Anderson, Fornell, & Lehmann, 1994; Homburg & Pflesser, 2000; Noble, Sinha, & Kumar, 2002) Note that these proxies are in line with several studies in marketing and strategic management whose focal setting is in the hospital industry (Dranove & Shanley, 1995; King & Zeithaml, 2001) However, constraints imposed by many hospitals prohibit us from accessing their actual operating performance figures Subjective performance indicators are consequently employed at the expense of objective indicators (Covin & Slevin, 1989; Dess & Robinson, 1984) Existing literature (Black et al., 2000; Dunbar & Schwalbach, 2000; Shrum & Wuthnow, 1988) has found a significant and positive relationship between size and reputation of a company In this study, the number of beds (provided by the Ministry of Public Health) was used as an indicator of size Data-collection procedure In line with previous studies (Algesheimer, Dholakia, & Herrmann, 2005; Hartline & Ferrell, 1996; Hartline, Maxham, & McKee, 2000), this study employed a nonprobability sampling technique and relied on managers to distribute questionnaires to their customers Questionnaire packets, each comprising one manager survey, five customer surveys, postage-paid return envelopes, an instruction page, and a covering letter (Hartline et al., 2000), were sent to hospitals approximately two weeks after first contact was made Instead of having managers freely choose respondents, they were instructed to follow a system in which only one customer was surveyed each day at a fixed cashier point and at a certain time for five consecutive days While this method is by no means perfect, it does represent an attempt to reduce potential biases that might arise from purposively ignoring some types of respondent The instructed method is similar to systematic sampling, in that a system is employed to recruit respondents (Denscombe, 2002) It differs from systematic sampling, however, in that the sampling unit cannot be identified in advance and the probability of each sampling unit (customer) being selected is not known (Baker, 2002) Data analysis The analysis of data for this study consists of three major parts: (1) purification of measurement scales using exploratory factor analysis (EFA) and reliability analysis (Cronbach’s α); (2) validation of measurement scales using confirmatory factor analysis (CFA); and (3) hypotheses testing using multiple regression analysis (MRA) MRA was employed at the expense of structural equation modelling (SEM) because our sample size was