Testing a model of customer-based brand equity in the Vietnamese banking servic

Testing a model of customer-based brand equity in the Vietnamese banking servic

Supervisor

Dr Trần Hà Minh Quân

Acknowledgement

This research project would not have been possible without the support of many people Firstly I wish to express my deep sincere gratitude to my supervisor, Dr Tran Ha Minh Quan for his invaluable advices and helps Without him, this thesis could not have been completed

Special thanks to all instructors without whose knowledge and assistance this study would not have been successful My debt is also acknowledged to Dr Barry Clough from Dragon-Mekong-CTU for his kindness and help in English editing

I would like to express my deepest gratitude and honor to my dear parents for not only the love they devote to me but also for the time I took from them which should have been my devotion to them in their aged time

My thanks would also go to all of my classmates, my colleagues, especially my “old pals”, Nguyen Thanh Trung and Ms Dang Hai Yen for all of their friendship and encouragement

I also wish to thank my friends in Vietcombank, VPBank, Navibank and Tien Phong bank for their great support My thanks would also go to the respondents, without them, my thesis could not have been done

Finally, my greatest thanks would go to my dear wife, Vu Thi Thuy Duong and my two sons, Vu and Phuc who are my whole life and are the greatest inspiration and encouragement for me to overcome all difficulties through the duration of my study

Abstract

This study reports on the research results by testing the model of based brand equity proposed by Martensen & Grønholdt (2004) into banking industry of Vietnam A study of 295 respondents from two bank brands was conducted in Can Tho city Multiple linear regression technique was used to test the hypotheses and research model According to the results, the original model was applicable in Vietnamese retail banking service with some adaptation Service quality and price were confirmed to have positive impacts on both rational and emotional evaluations However, the other associations such as brand differentiation, brand promise and trust and credibility were found significant in relation with only either rational evaluation or emotional evaluation The different weights of the relationships between brand associations and brand evaluations, and between brand evaluations and customer-brand relationships, have some implications for bank managers who might use them as a source of reference for CRM strategy The study also provided a modified model of customer-based brand equity that could be used as a point of departure for those who would like to conduct a further research into brand equity in banking industry in Vietnam

customer-Key word: banking, customer-based brand equity, customer-brand relationship

1.5 Scope and methodology of the study 4

1.5.1 Scope of the study 4

1.5.2 Research Method 5

1.6 Structure of the study 5

Chapter 2: LITERATURE REVIEW 7

3.4.1 Scale to measure rational associations 29

Scale to measure price .31

3.4.2 Scale to measure rational and emotional associations 32

Scale to measure brand promise .32

3.4.3 Scale to measure brand evaluations 32

3.4.4 Scale to measure customer- brand relationship 33

3.5 Pilot test 33

3.6 Main survey 34

3.6.1 Brand selection 35

4.3.2 Exploratory factor analysis 42

4.4 Testing the research model and the hypotheses 46

4.4.1 Testing correlations between all constructs 46

4.4.2 Testing research model 46

4.5 Findings and conclusion 56

5.2 Conclusions of the study 59

5.2.1 Summary of all hypotheses 59

5.2.2 Conclusions of the study 60

5.3 Implications of the study 61

5.3.1 Theoretical implications 61

5.3.2 Practical implications 62

5.4 Limitations and recommendations for further research 63

List of References 65

Appendix 1 – Questionnaire (Vietnamese version) 68

Appendix 2 – Observed variables 71

Appendix 3 - Descriptive Statistics of variables 73

LIST OF FIGURES

FIGURE 1.1.OUTLINE OF CHAPTER 1 1

FIGURE 1.2.STRUCTURE OF THE STUDY 6

FIGURE 2.1.THE STRUCTURE OF CHAPTER 2 7

FIGURE 2.2.A BRAND VERSUS A PRODUCT 9

FIGURE 2.3ORIGINAL MODEL OF CUSTOMER–BASED BRAND EQUITY 14

FIGURE 2.4. RESEARCH MODEL OF CUSTOMER-BASED BRAND EQUITY 26

FIGURE 3.1.OUTLINE OF CHAPTER 3 27

FIGURE 3.2.RESEARCH PROCESS 30

FIGURE 4.1.OUTLINE OF CHAPTER 3 38

FIGURE 4.2. AGE GROUPS OF RESPONDENTS 39

FIGURE 4.3 FREQUENCY OF TRANSACTIONS 40

FIGURE 4.4.RELATIONSHIPS BETWEEN RATIONAL EVALUATION

AND THE BRAND ASSOCIATIONS 47

FIGURE 4.5.RESULTS OF MODEL I 50

FIGURE 4.6.RELATIONSHIPS BETWEEN EMOTIONAL EVALUATION

AND THE BRAND ASSOCIATIONS 51

FIGURE 4.7. RESULTS OF MODEL II 53

FIGURE 4.8A –HYPOTHESIS 11TESTING RESULT 54

FIGURE 4.8B.RESULTS OF MODEL III B 55

FIGURE 4.9. ADJUSTED MODEL OF CBBE IN BANKING SERVICE 58

FIGURE 5.1–OUTLINE OF CHAPTER 5 59

LISTOFTABLES

TABLE 4.1–SAMPLE CHARACTERISTICS 39

TABLE 4.2–RELIABILITY OF THE MEASUREMENT INSTRUMENT 41

TABLE 4.3–ROTATED COMPONENT MATRIX 44

TABLE 4.4–EFA RESULT FOR INDIVIDUAL MEASUREMENT SCALES 45

TABLE 4.5–CORRELATION MATRIX 48

TABLE 4.5A.MODEL SUMMARY 49

TABLE 4.5B –COEFFICIENTS A 49

TABLE 4.6–SUMMARY OF HYPOTHESES TESTING RESULTS (MODEL I) 50

TABLE 4.6A - MODEL IISUMMARY 51

TABLE 4.6B -COEFFICIENTSA 52

TABLE 4.7–SUMMARY OF HYPOTHESES TESTING RESULTS (MODEL II) 52

TABLE 4.7A - MODEL III A SUMMARY 53

TABLE 4.7B -COEFFICIENTSA 54

TABLE 4.8A - MODEL III B SUMMARY 55

TABLE 4.8B –COEFFICIENTS A 55

TABLE 4.9–SUMMARY OF HYPOTHESES TESTING RESULTS (MODEL IIIA,B) 56

TABLE 5.1.SUMMARY OF HYPOTHESES 60

Chapter 1: INTRODUCTION

1.1 Introduction

This chapter portrays general introduction for the current study with which research problem, research objectives and research questions are provided as the rationale for this study An introduction to the methodology to be used and the scope of the study is also addressed in this chapter At the end of the chapter, the structure of this study is provided The Outline of this chapter is shown in figure 1.1

Figure 1.1 Outline of chapter 1

1.2 Research background

In a more globalized and integrated economy with increasing deregulation, competition in the banking industry become significantly fiercer Research into less successful financial brands shows that inadequate support for the brand and, confusion and lack of understanding of branding are two important factors that constrain the success of these brands (Chernatony and Cottam, 2006)

For banks today, the strength and marketing power of an institution’s brand is

1.1 Introduction

1.2 Research background

1.3 Problem statement

1.4 Research objectives

1.5 Scope and Methodology

1.6 Structure of the study

rapidly becoming one of the critical levers for differentiation and hence competitive advantages Without doubt, a good brand increases value for a particular product or service, and thus it is called brand equity

In marketing literature, brand equity is defined and measured differently Brand equity is either conceptualized or measured, or both Despite the fact that there are different conceptions about brand equity, however, there are two major viewpoints from which to consider brand equity: the financial perspective and customer-based perspective Financial perspectives focus on the financial outcome for the firm (Taylor et al, 2005), for example, by using certain techniques to extract the brand equity’s value from the intangible value of the firm The other perspective focuses largely on the knowledge and relations that customers have with the brand (Aaker, 1991; Keller, 1993, 2001) Compared to the former perspective, the later is more fruitful in marketing literature

Despite the important role of brand equity, however, much attention and efforts are devoted to the brand equity in goods marketing, while research into its contribution to service, especially in banking industry, is very limited

Recent years have seen a significant and rapid growth of the banking industry in Vietnam, especially in the growth of the Vietnamese commercial join stock banks This trend opens up abundant choices for the customer, but also banks with fierce competition, so banks now face the crucial problem of customer switch

In this circumstance, the disadvantage of Vietnamese banks is apparently not only weakness in financial strength, technology, diversification of products and services, but also insufficient attention in branding Branding strategy is one of the most critical weaknesses of Vietnamese banks (Tap Chi Ke Toan, 2007)

1.3 Problem statement

Building a strong brand with significant (brand) equity is seen as providing a host of

possible benefits to a firm, including greater customer loyalty (Keller, 2001) Brand equity is one of the most important marketing concepts and has been an area of interest for marketing academics and practitioners as well There are a numbers of models of brand equity in common marketing settings (Farquhar,1989; David A Aaker, 1991; Kevin L Keller, 1993, 2001; Ambler et al, 2002; Netemeyer et al, 2004; Martesen and Grønholdt, 2004) or in financial service perspectives (Taylor et al, 2005) However, to

my best knowledge, there is no model of brand equity that particularly focuses on banking service

It might be worthwhile and necessary to build a brand equity model in banking service Brand equity in banking service deserves elaboration in some regards “ First and foremost, unlike other financial firms, banks act as intermediaries between borrowers and lenders and, in so doing, they offer a unique form of asset transformation” (Shelagh Heffernan, 2005) Bank transactions usually involve a large sum of money and hence, trust and price (in terms of interest rates…) appear to be critical matters in the industry Second, bank transactions, especially lending, are more complicated than transactions for other products and services For example, before a loan is approved, it takes time and effort to get through an assessment process that is strictly regulated (by the State bank and/or by laws) Finally, most of the brand equity models are conceptualized by Western authors and validated in developed countries This poses the question of whether or not these models work well in a developing country like Vietnam

1.4 Research objective

As noted above, in a highly competitive banking sector, a strong brand is likely to sustain competitive advantage for the bank that holds the brand It is widely agreed in the literature that strong brand increases customers’ trust of the invisible purchase Strong brands enable customers to better visualize and understand intangible products They reduce customers’ perceived monetary, social, or safety risk in buying services

(Berry 2000) and a good brand name is a first step that will draw consumers to buy (or foster intent to buy), and can make a substantial contribution to brand equity (Aaker, 1991)

This research aims to apply the model of brand equity developed by Martensen and Grønholdt (2004) and test this model in the banking sector of Vietnam as an emerging economy

To confirm the applicability of the model, this study will determine the contribution of each of the brand associations to the customer’s brand evaluations and ultimately to the loyalty that customers have with the brand from the perspective of customer- brand relationships in the Vietnamese banking industry

To serve this task, two questions need to be answered:

Q1 Is the CBBE model developed by Martensen and Grønholdt (2004) applicable

in the Vietnamese banking service?

Q2 What factors nurture customer-based brand equity in Vietnamese banking

The model of customer-based brand equity in this thesis is intentionally applied in the context of the Vietnamese commercial joint stock banks Only this type of banks is targeted because in the course of globalization and economic integration, all state-owned commercial banks are planned to be equitized, i.e sooner or later they will

become commercial joint stock banks Second, foreign banks are ignored because the model is intended to be tested with banks in an emerging economy In addition, customer information from foreign banks is usually confidential and hard to obtain Finally, banks for special purposes owned by the State are not taken into account due to their special characteristic For example, credit is rationed by the government for some social purposes

1.5.2 Research Method

This study was conducted in Can Tho city with two phases: a pilot test and the main study In the first phase, a qualitative approach was employed in order to explore whether the scale for measuring the constructs of brand equity were suitable in Vietnamese culture and the Vietnamese banking service Some amendments have been made where needed This step was carried out by using group discussion techniques

A quantitative approach was then used in the second phase Data were collected by interviewing bank’s customers The purpose of this phase was to re-assess the reliability of the measurement scales using Cronbach alpha coefficient and Exploratory Factor Analysis (EFA) Multiple Linear Regression analysis (MLR) was employed to test the research model and hypotheses SPSS software version 16 was used for data analysis Chapter 3 will discuss the methodology for this study in more detail

1.6 Structure of the study

The structure of this study is shown in figure 1.2

Figure 1.2 Structure of the study

Chapter 1 Introduction

Chapter 2 Literature Review

Chapter 3 Methodology

Chapter 4 Data Analysis and Findings

Chapter 5 Conclusion and implications

Chapter 2: LITERATURE REVIEW

2.1 Introduction

The previous chapter introduces an overview of the study background, the rationale of the study, the research objective and the research questions This chapter searches and reviews relevant theories in the literature The aim of this review is to propose a research model of customer-based brand equity and to generate hypotheses that will be tested in the Vietnamese banking service to answer the research questions and to confirm the research model

Figure 2.1 The structure of Chapter 2

2.2 A brand versus a product

Today, every organization wants to have a brand (Kapferer, 2008) Kapferer (2008) argues that while companies focus on CRM, customer equity, relationship marketing, customer database management… as useful techniques to serve the most profitable customers , these tools will soon loose their potential to create a lasting competitive advantage because the more they are diffused and shared the faster they become standard and used by competitors Managers learn that a brand is among very few

strategic assets of their organizations that can provide long lasting competitive advantage

In the ever-demanding global business climate of the twenty-first century, it is critical that we continue to protect and enhance GE’s unique competitive advantage - our name and reputation

Robert C Wright Vice Chairman & Executive Officer of GE

There is significant difference between a “product” and a “brand”, although most consumers use them interchangeably But a product is something that tends to offer a functional benefit, whereas a brand is much more than this (Myers, 2003) Gregory (2001) sees a brand as “the sum total of all that is known, thought, felt and perceived about a company, service or product A ’brand’ is not a thing, a product, a company or an organization A brand does not exist in the physical world – it is a mental construct” (Cited in Martensen & Grønholdt, 2004)

The American Marketing Association defines a brand as "a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors” Each of these elements is individually called brand identity and totally a brand (Keller, 1993) But is it all about the brand? Of course not “Today's understanding of brand takes it far beyond the somewhat simplistic view of brand that prevailed a decade ago” (Leiser, 2004) A brand is not just merely the name, symbol…or simple combination of those elements of a product or service In addition, it is believed that beyond those intrinsic elements, a brand also means all the experience and feelings that customers associate with it or even the reputation about the brand echoed either by words of mouth or appears on articles (Philip Kotler & Waldemar Pfoertsch, 2007) “Ultimately, a brand is the things people say about you when you’re not there”, says Jeff Bezos, the CEO of Amazon.com This statement, of course, implies both positive and negative meaning about the brand

Aaker illustrates the distinctions between a brand and a product as shown in the figure below

Figure 2.2 A brand versus a product

What makes a brand such powerful tool? Brands have become a major player in modern society and in fact they show up everywhere (Kapferer, 2008) According to Keller (1998), brands benefit both the consumers and manufacturers For consumers, a brand is a signal of quality; it helps identify products and services and assign responsibility to manufacturers or service providers; a brand is also the risk and search cost reducer; it is even can be used as a symbolic device…(Aaker,1996; Keller, 1998)

Brands also help manufacturers to identify and simplify handling or tracing products Brands legally protect unique features of a product or service that bears the name A brand is also a manufacturer or service provider’s promise of quality and

Organizational Associations

Brand Personality

Country of Origin

Symbols

Relationships

Expressive Benefits

Self-Emotional Benefits

PRODUCT

Scope Attributes Quality Uses

BRAND

Source: David A Aaker (1996a)

especially those functional benefits that the consumer expects; the unique associations endowed to the brand which might provide competitive advantage for the firm; and, maybe the benefit of most concern to shareholders, that it is a source of financial returns

Banks are special institutions First and foremost, they are the intermediaries between lenders and borrowers and thus their operation involves a process of asset transformation Second, liquidity is an important service offered to customers who participate in the payments system (Heffernan, 2005) In so doing, on the one hand, banks serve different types of customer with differing needs, which in turn makes it difficult to build a brand that is relevant to all groups ( Stephen Root, 2003; Kapferer, 2008); on the other, by nature, different banks offer similar products and services As a result, this similarity makes it critically difficult to create product differentiation With banks the question is: is it necessary to build a strong brand? The answer is twofold First, in terms of brand as the institution, a bank’s brand is extremely important As intermediaries, banks usually deal with a large sum of money and therefore “banks rely heavily on their reputation”, and “banking only works if the customer is willing to trust the bank”, argues Uan Percy of Brighten Consultant This argument is also partly in line with the argument of Lam et tal (2005) that trust plays an important role in developing relationships A good brand is a source of trust as trust is formed and originates from the result of past experience with the brand (Elena and Josel, 2005)

Second, as mentioned above, the similarity of products between banks and their short life cycle makes it very difficult or even impossible to brand an individual bank product Thus, building a strong institutional brand (the bank’s brand) helps banks increase their competitive advantage and gain more customer loyalty This is also consistent with the suggestion of Berry et al (1988) that “service brands should be the firm’s name and should not be individualized”

2.3 Brand equity

Building a strong brand involves creating brand equity In a common sense, brand equity is defined as the added value endowed by the brand to the product (Farquhar, 1989) In the last two decades, brand equity has become the most interesting research topic in marketing for both academics and practitioners Despite the fact that brand equity is a potentially important marketing concept, it is not without controversy (Taylor et al., 2005) It is because brand equity is defined in different ways for different purposes (Keller, 1998) However, in a general sense, the literature suggests that there have been two primary perspectives relating to studying brand equity (Keller, 1993; Taylor et al, 2005; Kapferer, 2008) The first approach is motivated by financial outcome for the firms With this perspective, the brand is evaluated financially for accounting purpose and is usually manifested in the balance sheet The second approach is based on the customer-brand relationship This study adopts the later approach, customer-based brand equity (hereinafter referred to as CBBE)

There have been also debates on the importance of brand equity for products and services Some researchers argue that branding (and thereby brand equity) is more important for services due to the intangible nature and the so-called ‘credence’ attributes of services, which makes it difficult for customers to examine the content and quality of a service before, during and even after the consumption of the service (Darby and Karni,1973; Nelson, 1970 - cited in Krishnan and Hartline, 2001) However, the findings of Krishnan & Hartline (2001) do not support the contention that brand equity is more important in services than for products

Aaker (1996a) defines brand equity as “a set of assets and liabilities linked to a brand’s name and symbol that adds to or subtracts from the value provided by a product or service to a firm and/or that firm’s customers” Aaker conceptualizes a model of brand equity consisting of 4 main components: 1) brand loyalty, 2) brand awareness, 3) perceived quality, 4) brand associations (which are driven by brand

identity: the brand as a product, the brand as an organization, the brand as a person and the band as a symbol) The fifth component is other proprietary brand assets such as patents, trademarks and channel relationships

Keller (1993) generalized the concept of brand equity by the CBBE model He

defines CBBE “as the differential effect that brand knowledge has on consumer response to the marketing of that brand”

According to Keller (1993), a brand is said to have positive CBBE if the consumer reacts more favorably to the marketing of the brand than they do to an unknown or fictitious version of the product or service in the same context On the other side, a brand is said to have negative CBBE if the consumer reacts less favorably to the marketing of the brand under the same situation This effect differs based on how favorable, strong and unique brand associations are evoked in the customer’s mind

Recently, Steven A Taylor, Gary L Hunter and Deborah L Lindberg (2005) proposed a model of brand equity (customer-based) for financial services According to this model, brand equity is derived from the customer’s perception of the quality and thereby the brand value Other components of their brand equity construct are hedonic brand attitude, utilitarian brand attitude and brand uniqueness According to the model, brand satisfaction and loyalty intention are the consequences, and positively relate to the brand equity

However, the current study adopts the CBBE model developed by Martensen and Grønholdt (2004) This model captures aspects closely related to banking services Martensen and Grønholdt (2004) categorize brand associations into two types: 1) rational association and 2) rational and emotional association

The rational associations are in connection with the customers’ perceptions about the functional benefits, tangible aspects or the cost-value evaluation These associations are very important in banking services For example, price is a key factor

that affects a customer’s decision to stay with a bank (Lam et al, 2005; Colgate and Hedge, 2001; Keaveney, 1995; Bogomolova and Romaniuk, 2005) In other research, Spiros et al (2003) suggest that, “with regard to financial services, consumers tend to become more involved, they develop the habit of ‘shopping around' to find the best bargain”

The emotional associations related to either the intangible or tangible aspect For example, a customer may feel confident or recognized (social approval) when she or he deals with a great bank’s brand (emotional) This emotion, in turn, is the result of consuming excellent service offered by the bank (performance of the product and service) These associations will be discussed in details in the below

2.3.1 Brand associations 2.3.1.1 Rational associations

Though the product quality is a component of the original model of CBBE; however, banking is a service-dominat industry and all banking products, as termed in the industry, are actually services or packages of service Therefore, it is argued here that

the product quality suggested by Martensen and Grønholdt (2004) is not necessarily to

be included in the research model which is soly intended to apply in the banking service Instead, this study focus on service quality as a component that speaks for the quality aspect of the model

Service quality

Service quality has become an increasingly important factor for success and survival in the banking sector (Cui, Lewis and Park, 2003) It’s a critical factor that affects an organization’s competitiveness and an essential determinant that enable a company to differentiate itself from competitors (Spiros et al, 2003)

Figure 2.3 Original Model of Customer–Based Brand Equity

Without doubt, service quality is a key driver of customer satisfaction and thereby loyalty Olsen and Johnson (2003) view service quality as “a key psychological reaction to the value that a service company provides” Same as with physical products, customers perceive service quality differently This results from the difference between perceived quality and objective quality and can be expressed by an equation of performance and expectations, service quality = [performance – expectations] (Cronin and Taylor, 1992; Parasuraman et al, 1988)

Rational associations Brand evaluations

Customer-Brand Relationship

Rational Evaluation

Emotional Evaluation

Differentiation

Rational and emotional associations

Source: Martensen & Grønholdt (2004)

Martensen & Grønholdt (2004) measure the service quality by three criteria: assurance, responsiveness and empathy However, with a service-dominant industry like banking, it seems that service quality should be examined from a broader perspective Thus, to have an insight into the consumer’s perception about service quality in banking, the current study adapted the construct of Spiros et al (2003) for measuring service quality in banking services

Price

Price is one of the elements of the traditional marketing mix, and price is often stressed as a driver in customer satisfaction and loyalty models (Johnson & Gustafsson, 2000; Johnson et al., 2001 – cited in Martensen & Grønholdt, 2004) Keller (1993) views price as a non-product-related attribute because it does not speak much for the product performance or service function However, price is an important attribute association In most cases, it is considered an important criterion for purchase

In their model of CBBE, Netemeyer et al (2004) suggest that willingness to pay a price premium is a core/primary facet of CBBE By testing and extending the Netemeyer et al (2004) CBBE model, Taylor et al (2005) confirm that willingness to

pay a price premium is positively related to the brand value They also argue that brand

loyalty intention is positively related to the willingness to pay a price premium

There is another approach to consider price premium According to Aaker (1996b), price premium may be negative Customers might expect a certain level of price advantage in a brand (for example 10% lower) compared to other higher-priced brands, and be willing to buy this brand if the advantage was greater 15% for instance This negative price premium could reflect substantial brand equity for the lower-priced brand

In banking service, price is indicated in terms of loan interest rate, credit interest rate and other charges and fees that customers pay to use the bank facilities Price in

banking service is a sensitive factor Research into the small and medium sized businesses indicates that “pricing of a loan facility (e.g an overdraft) has a strong impact on customer loyalty…” (Lam et al, 2005) This is in line with Keaveney (1995) that one of the three major factors for switching is a pricing problem, including non-competitiveness of the fee and interest rates, which capture 17% among other reasons However, dissatisfied with this result, Colgate and Hedge suggest further research into the role of pricing Responding to this call, Bogomolova and Romaniuk (2005) carried out a study of the business banking industry and found that the top two reasons for switching to another bank are getting “better deal with the other bank” and the fees are too high

2.3.1.2 Rational and emotional associations

Brand promise

A brand is essentially a marketer's promise to deliver a predictable product or service performance (Kotler and Keller, 2006) Ambler (1992) defines a brand as “the promise of the bundle of attributes that someone buys which provides satisfaction.… The attributes that make up a brand may be real or illusory, rational or emotional, tangible or invisible” This is in line with Kapferer (2008) who argues that “consumers don’t just buy the brand name; they buy branded products that promise tangible and intangible benefits created by the efforts of the company”

Why is brand promise important? It is widely agreed in the literature that one determinant of customer satisfaction is the gap between customers’ experiences and their expectations (Oliver, 1980; Parasuraman, 1988; Kapferer, 2008) and brand promise sets up this benchmark

Brands thus become credible only through the persistence and repetition of their value proposition (Kapferer, 2008) In other words, brand promise should be credible and deliverable This is in line with Martensen and Grønholdt (2004) that “promise

should be the hub of value creation for the customer The unique values should mirror meaningful promises to the consumer – promises that are credible and that the brand can fulfill”

Take FedEx as an example

Federal Express burst on the scene in the early eighties What was it that made Fred Smith’s new company such a sensation? The answer: It got packages where they were going by 10:30 am the next day, no ifs, ands, or buts That was Federal Express’s come-on to a world that previously knew only the Post Office It was FedEx’s measurable brand promise

Source: Harnish V, (2006)

Also according to Martensen and Grønholdt (2004), “the brand should merge with the company and appear in a consistent and credible manner… that creates positive and warm feelings with the consumer”

Brand trust and credibility

Marketing literature has shown that “an essential and very important part of a brand is the trust consumers have in the brand living up to their expectations” (Martensen and Grønholdt, 2004) Trust is a key variable in the development of a stable desire to maintain a long term relationship (Nadim J et al, 2009) There are different definitions about brand trust, for example, brand trust can be defined as “the confidence a consumer develops in the brand’s reliability and integrity” (Chatterjee and Chaudhuri - cited in Filo and Funk, 2008) In this perspective, Delgado and Munera (2001) believe that brand trust is uni-dimensional and driven by a consumer’s overall satisfaction with the product and confident expectations of the brand's reliability and intentions in situations entailing risk to the consumer (Delgado, 2004) Trust is also viewed as a group of beliefs held by a person derived from his perceptions about certain attributes” (Cruz, Laukkanen and Munoz, 2005) In other words, trust implies that the customers believe that the brand can deliver both functional and emotional benefits

Consumer trust is also important and sometimes is considered a prerequisite for the development of an attitude-based relation between the consumer and the company From a consumer perspective, trust helps to reduce the perceived risk linked to the purchase or use of a company’s products (Feldwick, 1999) According to Martensen and Grønholdt (2004), trust also provides assurance of quality, reliability, etc and is thus a factor in providing the consumer with an experience of dealing with a credible and reliable company – a factor that is important in connection with the consumer’s decision process Hence the company should be aware of communicating values that they cannot deliver

In the modern banking industry, internet banking is an indispensable and critically important part Some studies have analyzed the importance of trust in internet relationships and suggested trust is habitually related to security and risk avoidance (Ganesan, 1994; Anderson and Weitz 1989, Pavlou, 2001; Stewart et al., 2001- cited in Cruz et al, 2005) In internet banking, trust captures two different aspects: the customer’s belief in banker goodwill and the reliability of the internet infrastructure

Another dimension of this aspect is credibility As mentioned previously, together with trust, credibility is especially important in the banking industry, as the bank brand is in fact the institution Thus it is important for the bank to have high credibility Empirical studies suggest that the consumers’ perception of a company’s credibility plays a central role in their perception of and attitude to the company, its products and communication, including ads (MacKenzie & Lutz, 1989; Goldberg & Hartwick, 1990; LaBarbera, 1982 - cited in Martensen and Grønholdt, 2004)

In conclusion, an empirical studyinto the impact of trust on brand equity pointed out that “brand equity is best explained when brand trust is taken into account reinforces the idea that brand equity is a relational market-based asset” (Elena and José, 2005) Martensen and Grønholdt (2004) argue “that being a credible company has a considerabe influence on the consumer attitudes towards the brand and its ads, and

eventually the consumers’ intention to buy the company’s products Therefore, the company should make a real effort to find out what they need to do to create high credibility among the consumers”

Brand differentiation

The brand should differentiate itself from its competitors and offer the market something unique “Uniqueness is defined as the degree to which customers feel the brand is different from competing brands—how distinct it is relative to competitors” (Netemeyer et al, 2004) However, the differences should be perceived as meaningful to the consumer (Martensen and Grønholdt, 2004) Creating unique brand associations is in line with creating points of difference when positioning the brand Besides addressing the distinctive benefits a brand will deliver to its consumers, target consumers must also find these benefits personally relevant and important (Kotler and Keller, 2006)

Having a bank brand viewed as a corporate brand makes it possible for a bank to position itself in the minds of the consumers with a broader and more varied image than it does through a particular product or service Keller (2000) argues: “a corporate brand is distinct from a product brand in that it can encompass a much wider range of associations A corporate brand thus is a powerful means for firms to express themselves in a way that is not tied into their specific products or services”

2.3.2 Brand evaluations 2.3.2.1 Rational evaluations

Brand value

Brands should create value (Martensen and Grønholdt , 2004) This value is perceived by comparing the benefit that the consumer expects to receive to their experience with a particular brand This benefit is either functional or emotional (Keller, 1993) If the benefit is less than expected, the consumer will be dissatisfied In

other words, the customer compares the quality that they perceived with their actual experience with the brand to evaluate the value they receive by consuming the brand

Another way that value is created is based on the relationship between quality and perceived price (Martensen and Grønholdt, 2004) In this regard, Zeithaml (1988) describes four consumers’ perceptions about value: (1) value is low price, (2) value is the quality I get for the price , (3) value is what I get for what I give and (4) value is whatever I want in a product (this is in line with the previous perspective of value)

Regardless of what perspective is taken into account, value is a subjective term that totally depends on the perception of the customer “[I]t is the individual customer’s preferences that determine whether the value is low or high” (Martensen and Grønholdt, 2004)

This evaluation is rational as the customer subjectively judges the value of a brand based on the benefit that they intentionally expected or the trade-off that they receive for what they give According to Martensen and Grønholdt (2004) there exists a strong relationship between perceived value and customer loyalty They argue that, before buying a product or service, a customer usually seeks for possibilities and considers alternatives that live up to his/her requirements The one with highest value will possibly be chosen

Customer satisfaction

Satisfaction does not always lead to loyalty; however, it is widely agreed in the literature that satisfaction is the key precursor to customer loyalty According to Oliver (1999), “satisfaction is defined as pleasurable fulfillment That is, the consumer senses that consumption fulfills some need, desire, goal, or so forth and that this fulfillment is pleasurable”

The above-mentioned definition is in line with Tse & Wilton, 1988; Parasuraman et al, 1988; Kotler, 2000 that satisfaction results from the difference between prior

expectations and the actual performance of the product or service as perceived after the consumption.1

However, in banking services, with a variety of products and services, it is hard to evaluate the influence of satisfaction on the customer-brand relationship just through a single product or service Thus, for satisfaction to have an affect on loyalty, individual satisfaction episodes should become aggregated or blended (Oliver 1999) Therefore, satisfaction mentioned in this study is “overall satisfaction”.2

2.3.2.2 Emotional evaluations

In most cases, customers buy a brand for not only functional benefits but also emotional and self-expressive benefit (Aaker, 1996) Martensen and Grønholdt (2004) argue that “Brands should provoke excitement and evoke a higher experience than simply product-function Brands should create positive feelings with us – we need to feel touched emotionally” According to these authors, a brand should also create intensive and fantastic experience to the customer This feeling helps to consolidate the customer-brand relationship to “a point of connectedness that it is a rare experience for

that customer to purchase anyplace else” (feeling evaluation)

In the CBBE model, Martensen and Grønholdt (2004) also include

“self-expressive benefits and social approval” as a sub component of brand evaluation

They argue that a brand can help a person to recognize himself or herself (or to be recognized) within a group that he or she thinks that he or she belongs to, and to show personal values and attitudes through the brands that that person buy and use

However, unlike in physical products and other services, the similarity of

There is difference between satisfaction and perceived service quality According to Parasuraman (1988), “perceived service quality is a global judgment, or attitude, relating to the superiority of the service, whereas satisfaction is related to a specific transaction”

2Satisfaction with product, interpersonal relation, price, service provider performance (Gregory and Michael , 2004)

products and services between banks may mean that self-expressive benefits are seen as less important than social approval The argument is that, as mentioned previously, the customer may find it important to deal with a great bank brand in order to be recognized in a certain social status or to generate trust to their partners With this perspective, the customer may wants to maintain their relation with the great bank as they can not find this kind of benefit with less well known brands

2.3.3 Customer-brand relationship

Research on brand equity generally agrees that the final brand-building step is developing customer brand relationships or bonding, and that an important element in this connection is loyalty (Martensen and Grønholdt, 2004)

Aaker (1991) views brand loyalty as a dimension of brand equity In the CBBE pyramid developed by Keller (2001), brand loyalty is at the top of the building blocks and is characterized in term of intensive relationship

Despite its apparent benefits to any firm, loyalty is viewed quite differently from different perspectives This might result from the variety of the customer’s perceptions about the value that a brand delivers Jacoby & Chestnut (1978) define brand loyalty as a result of two components: “1) A favorable attitude toward the brand, and 2) Repurchase of the brand over time.” (Cited in Martensen and Grønholdt, 2004)

One of the broadest definitions of loyalty is of Oliver (1999) which describes loyalty as “a deeply help commitment to re-buy or re-patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or

same brand set purchasing, despite situational influences and marketing efforts having

the potential to cause switching behavior”

According to Oliver (1999), customers become loyal in four phases At the

shallowest level, called cognitive loyalty, loyalty might result from the belief of the

customer in the brand The brand information is either retrieved from vicarious

knowledge about the brand (from communication, word of mouth…) or current experience-based information At this stage, if the satisfaction does not involve then the depth of loyalty is merely the brand performance

Loyalty shifts to the next phase if satisfaction steps in At this phase, attitudes toward the brand are formed basing on satisfaction, or pleasure accumulated through

the consumption of the brand Commitment at this episode is referred as affective loyalty Though loyalty in this stage is at deeper level than cognitive loyalty is and not as easily dislodged, it’s still venerable to switching

It is desirable if loyalty moves to a deeper level, the conative loyalty (behavioral

intention) The development of loyalty at this phase is based on repetitive positive experience with the brand It reflects the customer favorable intention toward the brand such as deeply commitment to buy However, Oliver argues that this desire is rather the repurchase intention and motivation, and may be “anticipated but unrealized”

The ultimate phase of loyalty proposed by Oliver is action loyalty (other authors refer to as behavioral loyalty – Dick and Basu, 1994; Keller, 2001) At this phase, not

only the intention to re-buy is shifted to the action of re-buying (and “repeat purchases”, Keller 2001) but also that desire engages in “overcoming obstacles”

Martensen and Grønholdt (2004) adapt a more operational point of view: ”Customer loyalty has two sides to it, which on the one hand results in an effective

continuation and extension of the business partnership, and on the other hand in a

recommendation of the supplier, the brand, the product or the services for other potential customers.” According to them, customer loyalty takes place when the customer keeps on maintaining the relation with the company in terms of repurchases and purchase intention which can predict future behavior, and on the other hand, the loyalty will result in re-patronizing the company to purchase other products

However, Martensen and Grønholdt (2004) also agree that loyalty is also portrayed

as certain attitudinal loyalty (this is characterized as affective loyalty by Oliver) where the customer thinks that the company is distinctive and particularly attractive compared to its rivals This is also in line with Oliver (1997) that the customer’s experiences with the company and its products are accumulated in a positive way as mentioned above (conative loyalty)

In the banking industry, research by Colgate and Norris (2000) into the reasons that the customers switch or stay with their bank after a service failure shows that a majority of customers “who felt a strong sense of loyalty to their bank” decide to stay According Colgate, this loyalty might result from the customer’s confidence with the relationship they have shaped with the service provider

H1: Rational evaluation is positively related to perceived service quality H2: Rational evaluation is positively related to price competitiveness H3: Rational evaluation is positively related to brand promise

H4: Rational evaluation is positively related to brand differentiation H5: Rational evaluation is positively related to brand trust and credibility H6: Emotional evaluation is positively related to perceived service quality H7: Emotional evaluation is positively related to price competitiveness H8: Emotional evaluation is positively related to brand promise

H9: Emotional evaluation is positively related to brand differentiation H10: Emotional evaluation is positively related to brand trust and credibility

Martensen & Grønholdt (2004) argue that emotional evaluation has positive

relationship i.e when the customers have a high liking for a brand, they tend to be more satisfied with the brand

H11: Rational evaluation is positively related to emotional evaluation

Customer- brand relationships

According to this model, customer-brand relationships do not directly relate to brand associations but through the customer’s evaluations Therefore, another set of hypotheses are proposed:

H12: Customer- brand relationships is positively related to rational evaluation H13: Customer- brand relationships is positively related to emotional evaluation 2.5 Conclusion

This chapter provides theoretical framework for the research However, with the reason regarding the product quality aspect as discussed above, a research model without the product quality component is suggested below (Figure 2.4) The researcher also assumes that there should be some adjustments of the measurement scale in order to make the research model more suitable for the banking industry in Vietnam Chapter 3 will discuss this matter in more details

Figure 2.4 Research Model of Customer-Based Brand Equity

Rational associations Brand Evaluations

Customer-Brand Relationship

Service quality

Price

Promise

Trust and Credibility

Rational Evaluation

Emotional Evaluation

Differentiation

H1 H2

H3

H4 H5

H6 H7 H8 H9

H10

H11

H12

H13

Rational and emotional associations

Source: Adapted from Martensen & Grønholdt (2004)

Chapter 3: METHODOLOGY

3.1 Introduction

The previous chapter provides theoretical framework for the research This chapter provides an overview of business research and introduces research methodology used to build and assess the measurement scales, the statistical techniques employed to analyze the data, and testing the research hypotheses and research model as well The chapter outline is shown in figure 3.1

Figure 3.1 Outline of chapter 3

3.2 Business research

Business research is defined “as a systematic inquiry whose objective is to provide information to solve a managerial problem” (Donald R.C & Pamela S.S., 2003) There are some ways to classify business research It can be classified based on characteristics of the data, source of the data, the purpose of research or the frequency of study

Based on the purpose of research, researchers often use one of the following three types

Exploratory study: This is the basic level of research Researchers use this type when there is a need to clarify the understanding of a problem, or when the researcher is uncertain about which theory is relevant or can be applied to explain the nature of phenomena

Descriptive study: The objective of descriptive studies is “to portray an accurate profile of persons, events or situations” (Robson, 1993) This may be an extension of an exploratory research It is necessary to have a clear picture of the characteristics of which the data will be collected prior to the collection of the data

Causal study: In this type of research, the emphasis is on studying a specific situation or a problem in order to explain the relationships between variables

Basing on the characteristics of data needed and research purpose, researchers can choose either qualitative or quantitative approach or a combination of these two types

Data can be acquired via a variety of strategies such as experiment, survey, case study, grounded theory or action research

3.3 Research design

The first step in business research is to determine what objectives the researcher wants to achieve Research design then enables the researcher to select appropriate methods in order to meet the research objectives in the most efficient way

To measure the customer-based brand equity constructs, the current study employs a descriptive method This method was chosen because it allows the researcher to describe the customer’s attitude towards the marketing elements for a brand, describe the relationships among variables…(Tho & Trang, 2007)

Data for this study was collected using a survey technique This technique

“provides a quick, efficient and accurate means of assessing information on a population, especially in the case of a lack of secondary data” (Zikmund, 1997- cited in Quan, 2006)

The research process of this study is shown in figure 3.2

3.4 Item generation

Measurement scales used to measure the research concept (constructs) in this study were generated based on previous studies that were discussed in the literature review Eight constructs contained in the research model include:1) service quality, 2) price, 3) brand promise, 4) trust and credibility, 5) differentiation and 6) customer-brand relationship The relationships among these constructs are measured through two mediating latent variables: 7) rational evaluation and 8) emotional evaluation

After carefully considering the theories, a pool of 38 candidate scale items to reflect the dimensions of CBBE ware selected to operationalize the research concepts A five-point Likert scale, which ranges from 1-strongly disagree to 5-strongly agree, was used in this study

3.4.1 Scale to measure rational associations

Scale to measure service quality.

As discussed in chapter two, banking is a service-dominant industry and a high contact service (except electronic banking) The SERQUAL scale is intentionally used to measure service quality in this study However, according to Trang & Tho (2003), the number and content of service quality components, as well as how to measure them, differ among different types of services and markets Therefore, to do research in a specific market, some amendment and complement might be needed

Figure 3.2 Research process

Testing hypotheses DROP

Item(s) with item-total correlation < 3

DROP Item(s) with factor

loading < 4 Interview

EFA: Exploratory Factor Analysis MLR: Multiple Linear Regression

To measure service quality in the banking service, this study adapted the scale developed by Spiros et al (2003) with which they measured the service quality in banking service in Greece Some complement and elimination have been done after discussion with the bank customers in group discussion The service quality scale consists of 14 items as follows

SQ_1: Bank [X] has up to date equipments

SQ_2: Bank [X]’s physical facilities are visually appealing SQ_3: Bank [X]’s employees are well dressed and appear neat SQ_4: I find it very convenient with the location of bank [X]

SQ_5: Bank [X] provides its services at the time it promises to do so SQ_6: When I have problems, bank [X] is sympathetic and reassuring SQ_7: I receive prompt service from bank [X]’s employees

SQ_8: Bank [X]’s employees are always willing to help me SQ_9: I feel safe in my transaction with bank [X]

SQ_10: Bank [X]’s employees are polite

SQ_11: Bank [X]’s employees know the bank’s product and service very well SQ_12: Bank [X]’s employees have necessary knowledge to answer my questions SQ_13: Bank [X]’s employees know what my needs are and how the bank’s products can satisfy them

SQ_14: Bank [X]’s employees give me personal attention

Scale to measure price

Price is one of the marketing mix elements Many studies have measured the bution of price to brand equity in terms of price premium In the banking industry, price is a sensitive factor and strongly influences the customer’s decision to deal with a bank Price in banking services can be measured in terms of deposit and loan interest rates, other service charges, fees and commissions To capture a general sense of price in the banking industry, this study does not break down these rates (deposit interest rate and loan interest rate) The word ‘interest rate’ means both kinds of interest However, the connotation of the term “price” used in this study indicates the price competitive-ness as an association of the brand, not a monetary or financial perspective

contri-Four observed variables measuring price are:

PC_1: Interest rates of bank [X] are very competitive PC_2: Service fees of bank [X] are very competitive PC_3: Bank [X] offers me price deals

PC_4: Bank [X] offers me very reasonable price

3.4.2 Scale to measure rational and emotional associations

This study adapts the scale developed by Martensen and Grønholdt (2004) to measure the rational and emotional associations Some changes have been made to make the scale more relevant to the banking services

Scale to measure brand promise

PR_1: Bank [X] creates meaningful promises for me PR_2: Bank [X] lives up to its promises

PR_3: Bank [X] creates positive associations and image

Scale to measure brand differentiation

DF_1: Bank [X] differs from other banks in a positive way DF_2: Bank [X] is unique compared to other banks

DF_3: Bank [X] offers advantages that other banks can not

Scale to measure brand trust

TR_1: Bank [X] communicates openly and honestly TR_2: Bank [X] is trustworthy and credible

TR_3: I have great faith in bank [X]

3.4.3 Scale to measure brand evaluations

Brand evaluations consist of two constructs: rational evaluation and emotional evaluation These two latent variables, on the one hand, act as dependent variables that are influenced by the brand associations On the other hand, they simultaneously play the roles of independent variables as predictors for customer-brand relationships This study adapted the scales developed by Martensen and Grønholdt (2004) Some items were not used as they seem not to be appropriate for banking services For example,

Brand X is a lifestyle more than a product or I really identify with people who use brand X

Rational evaluation scale

RE_1: Bank [X] provides good value for money RE_2: Bank [X] greatly meets expectations RE_3: Overall, I am very satisfied with bank [X]

Emotional evaluation scale

EE_1: When thinking of bank [X], I get a positive and warm feeling EE_2: Bank [X] means a lot to me

EE_3: I am proud to be a customer of bank [X]

3.4.4 Scale to measure customer- brand relationship

Five variables suggested by Martensen and Grønholdt (2004) are used in this study

RL_1: The next time I am going to transact with a bank, I am going to bank [X] again RL_2: I will recommend bank [X] to others

RL_3: Overall, I find bank [X] better than other banks RL_4: I am very interested in bank [X]

RL_5: It is important for me to maintain the relationship with bank [X] in the future

3.5 Pilot test

The purpose of pilot test was to refine the questionnaire to help respondents to avoid problems in answering questions and to increase the quality of data recorded for the main survey

This phase was carried out by two steps In the first step, an exploratory study was made with the purpose of assessing the first draft of measurement scale The first draft of questionnaire was developed in English It was then translated into Vietnamese During the translation, some references to previous researches of brand equity and service quality in Vietnam market have been made to improve the reliability and consensus of the items For example Tho & Trang (2007)’s and Trang & Tho (2008)’s