An Evaluation of the Effects of Brand Equity on Consumer Willingness to Pay Price Premium

Norzieiriani Ahmad,Suleiman Garba Aminu

doi:10.46281/ijmri.v2i1.106

Abstract

The purpose of this study is to evaluate the outcome of brand equity on consumer responses by specifically investigating the effects of the overall brand equity on consumer willingness to pay premium price. The paper also empirically investigated the causal relationship among brand awareness, brand association, perceived quality, and brand loyalty as antecedents of brand equity. Using the automobile product category in Malaysia as stimuli, cross-sectional survey data were collected and analyzed using partial least square structural equation modeling technique. Result showed that brand equity plays a significant role in firms by creating and developing additional value to organizations and their products. A causal relationship among the antecedents of brand equity was also established. Among the antecedents of brand equity, brand loyalty was found to be the dominant driver of overall brand equity. Moreover, the effect of brand equity on consumers’ willingness to pay price premium was substantiated and found to be positive. The limitation of the paper is that the study used a single high involving product category. Future studies should use product categories with short consumption length and high purchase frequency. Findings of this study provide more insight to managers on how to manage brand equity. Outcomes of brand equity can be used to measure the performance of brand in the market. The study also provides additional clarification to the existing literature on the need for managers to develop a post-brand equity marketing strategy in order to achieve sustainable competitive advantage.

Highlights

The practice of branding is as old as history itself when craftsmen and artists tried to distinguish their products from those of others by way of marking or signing (Hakala et al, 2012)
All the items in the questionnaire were labeled with a code as follows; brand awareness items were labeled AW1-AW5, perceived quality PQ1-PQ4, brand association ASS1-ASS9, brand loyalty LO1-LO3, overall brand equity OBE1-OBE, and price premium PPR1-PP
When consumers gain awareness of a particular brand, they develop a positive or negative association of the brand which is tied to their knowledge of the brands’ performance. This finding has been corroborated by similar study conducted in Malaysia by Sasmita&Suki (2015). This finding is in agreement with a similar study conducted in Europe where perceived quality positively influence brand equity (Buil et al, 2013), Torres et al, (2015) argued that, the influence of perceived quality on brand equity is mediated by brand loyalty

Summary

Introduction

The practice of branding is as old as history itself when craftsmen and artists tried to distinguish their products from those of others by way of marking or signing (Hakala et al, 2012). With the increasing need to differentiate products, the brand has become one of the most powerful marketing tools used by organisations. A brand adds dimensions to products or service, differentiate it in some ways from other products or services produced to satisfy the same needs Leone et al, (2006) argue that contemporary marketing interest has been centered on brand equity and customer equity without commensurate research attempts to reconcile the relationship between the two concepts. Still in the same vein, many researchers have observed that in international marketing, the role that brand equity plays has not been examined in detail (Pappu et al, 2006; Broyles et al, 2010). Brand equity is regarded as a key indicator of how healthy or otherwise a brand is, and observing it constantly is considered to be a necessary step in effective management of the brand (Aaker, 1991, 1992)

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