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Comparative Analysis of Advertising and Sales Promotion

Comparative role of sales promotion and advertising to overturn brand loyalty taking into consideration its important constructs like brand credibility, brand preference and brand commitment has not been explored empirically. Previous researches have focused brand loyalty either to establish it or to break in terms of brand switching. This research is an attempt to fill the literature gap regarding role of sales promotion and advertising to overturn true brand loyalty being essential for competition among brands. Underlying psychological pattern of repeat purchase resulting in sequential constructs of brand loyalty have been selected to evaluate true loyalty and the possibilities to overturn it either with the help of sales promotion or advertising. For empirical testing, SDS questionnaire was used to get feedback from 300 respondents of which 213 were useful. Collected data was analysed using factor analysis, regression and correlation coefficient. The results evidenced that sales promotion techniques especially free sample and buy1 get1 free offer are the superior toll to overturn brand loyalty. Although advertising is secondary, yet electronic media is more effective than print media in this regard. Introduction: In todays monopolistic competition, breaking the barriers to entry is a challenge as a few players occupy major market share everywhere in almost every product segment particularly in mature categories. Because loyalty is a strong determinant of purchase behaviour, it is used to create barrier for new brands to enter the market. So, it is probably the most important factor in competition. Extensive research literature is available on creating and maintaining brand loyalty which is second step in the ladder to climbing successful brand (e.g. Raj 1985, Raj 1982, Tellis 1988, Narasimhan 1988, Krishnamurthi, & Raj 1991, Fader et al 1993, Chaudhuri 1999, Jacoby et al 1978, Jacoby et al1973 etc.). The first step is to attract customers who purchase established brands. So, overturning brand loyalty is as much important as establishing and maintaining it. Designing successful marketing strategies require understanding of the pattern of the markets and framing promotional policies accordingly. In mature product categories, advertising and sales promotions are extensively used to attract, persuade, induce and remind the customer. Effects of advertising and sales promotion on brand health have been explored extensively in research literature (Begoa Alwarez et al 2005, Ehrenberg et al 1994, Pauwels 2002, Peckham 1981, Dawes 2004, Neslin and Shoemaker 1989, Aaker, 1991; 1996 Quelch, 1989 Alden et al.,

1999; Wansink and Ray, 1996 Demetrios et al 1999, Cobb-Walgren et al., 1995 Aaker et al, 1993 Jones, David 1994, David Stewart et al 1998, Reed, Peter et al 2004, Buzzell et al 1990; Mohr et al 1993 Scott Davis et al 1992, Peattie & Peattie 1995). Yet the relative efficacy of sales promotion and advertising to overcome brand loyalty has failed to attract due attention of researchers and academicians. Whatever research is available, it identifies groups of competing products based solely on brand switching. The impact of other promotion mix elements such as incentives and advertising on brand choice competition is not considered (e.g., see Fraser and Bradford 1983; Kalwani and Morrison 1977; Lehmann 1972; Srivastava, Leone, and Shocker 1981; Rubinson, Vanhonacker, and Bass 1981; Urban, Johnson, and Hauser 1984). This research intends to explore superior agent and a gizmo to overcome brand loyalty by evaluating consumer sales promotions and advertising for mature product categories in FMCG.

Theoretical Framework Advertising


In accordance with its objectives, advertising works as a channel that provides valuable information to consumers, enabling them to make rational choices by reducing informational product differentiation. Advertising also works as a device that persuades consumers by means of intangible and/or psychic differentiators (Banerjee & Bandyopadhyay 2003). It creates differentiation among products (Comanor and Wilson 1974), which at times may not be real (Tirole 1990). For most of the time, it is argued that advertising is the most favourable tool in promotion mix to acquire objectives like increasing market share, building brand image and equity etc. The impact of advertising on consumer attitude and brand equity has been studied extensively. The power of advertising in building strong brands has been proposed by marketing practitioners (e.g. Martin, 1989) and academics (Aaker, 1991; 1996). Most advertising dollars are directed at consumers and typically are accompanied by specific objectives to improve consumer attitudes (Quelch, 1989). By building a strong position in the market, advertising allows a firm to command higher prices for its products, and thus increases profits. This rationale is borne out by studies on the effects of advertising towards consumer attitudes e.g., Alden et al., 1999; Wansink and Ray, 1996). Aaker (1991) and Shimp (1997) propose that higher relative spending on advertising can generate favourable consumer attitudes towards the advertised product in the form of brand loyalty.

The role of advertising goes beyond creating favourable attitude towards a brand. Advertising was thought to facilitate choice in two ways. First, it stimulated competition, providing people with more alternatives, and, second, it told people about those alternatives (Stephanie ODonohoe 1994). So, according to one school of thought, advertising facilitates brand switching. But according to the other, advertising does not strongly influence brand switching; it does not facilitate market entry. Displays, features, and coupons are more effective in that respect (Gerard J. Tellis 1988). Overall, because advertising is one of the less important determinants of purchase behaviour, its power to deter or facilitate entry, or otherwise affect purchase behaviour, appears limited. Because loyalty is such a strong determinant of purchase behaviour, the order in which brands enter the market is probably an important factor in competition (Gerard J. Tellis 1988). Yet, according to another view, customers may be persuaded to increase their purchase of the advertised brand. It is frequently believed that the major effect of advertising is to persuade buyers of competitive brands to adopt advertised brand (Raj, S.P. 1982). In short, the existing literature is not only vague but contradictory also about the role of advertising to do away with loyalty for a specific brand.

Sales Promotion
Blattberg and Neslin (1990) describe sales promotion as an action-focused marketing event whose purpose is to have a direct impact on the behaviour of the firms customers. According to Lamb et al (1966) Sales Promotions consist of a diverse collection of mostly short-term incentives designed to motivate consumers or the trade to purchase a product immediately and/or in larger quantities by lowering the price or adding value (Lamb et al., 1996, p. 573). So, sales promotion techniques are intended to have a direct impact on buying behaviour. It is possible that consumers who do not buy the brand will want to acquire it because they are attracted by the sales promotion (Gupta, 1993). Bell et al (1999) decomposed product demand into primary and secondary type and validated the findings of Gupta (1988) and Ghiang (1991) that the dominant effect of promotion is on switching (secondary demand). Yet the long term impact of sales promotion on long term objective of building loyalty is controversial. Evidence is found in literature about both positive and negative effects of sales promotion on building brand loyalty. There are a number of well-documented negative effects which sales promotion activity has on the long-term strength of a brand (Buzzell et al., 1990; Mohr and Low, 1993). Price and non-price promotions are particularly important in this regard. Nevertheless, there is research gap regarding ability of sales promotion to overcome brand loyalty, and more conspicuously the relative power of sales promotion and advertising to overthrow brand loyalty taking into account

attitudinal constructs. At the same time, in so far we have studied; there is lack of empirical evidence to evaluate the effects of sales promotion techniques in conjunction to overcome brand loyalty, which is another important aspect of marketing.

Brand Loyalty
The development and maintenance of consumer brand loyalty is placed at the heart of marketing plans, especially in the face of highly competitive markets with increasing unpredictability and reducing product differentiation (Fournier and Yao, 1997). The interest in adopting this strategic approach derives from the value that brand loyalty generates to companies in terms of : a substantial entry barrier to competitors, an increase in the firms ability to respond to competitive threats, greater sales and revenue, and a customer base less sensitive to the marketing efforts of competitors. Given this, it is not surprising that in the academic field; a lot of consumer behaviour literature is concerned with the study of the sources of loyalty and mechanism trough which it comes about (Wernefelt 1991). It encompasses both psychological and behavioural processes (Knox, Simon et al 2001 ). In FMCG markets, where involvement is relatively low, consumers purchase on a portfolio basis as the norm rather than display single brand loyalty (Ehrenberg, 1988; Uncles et al., 1995; Kennedy and Ehrenberg, 2000). Consequently, we adopted the Jacoby and Chestnut (1978) definition since it provides the underlying psychological patterns of repeat purchasing and commitment within product categories. The biased (non-random) behavioural response (purchase) expressed over time by some decision-making unit with respect to one or more alternative brands out of a set of brands and is a function of psychological processes. Furthermore true loyal buyers who have consistent attitudes towards the brand tend to behaviourally loyal compared to those with inconsistent attitudes (Baldinger and Rubinson 1996). Therefore we suggest that the level of attitudinal loyalty is a better indicator of retention, rather than the level of behavioural loyalty. That is why we have adopted attitudinal / psychological loyalty for our research as it provided the constructs for true loyalty.

Short-term marketing activities such as promotional tools are traditionally used to induce brand switching. (Knox, 1996). These short-term tools have to be balanced with long-term activities, e.g. advertisement to create a favourable brand image. Deepak Agrawal (1996) views advertising as a "defensive" strategy used to build brand loyalty which helps in retaining the loyal customers, and price promotions as an "offensive" strategy used to attract the customers away from the rival brand. For example, one result is that the stronger brand invests less in advertising than the weaker brand. Anyhow, no broad comparative discussion is found in literature on the role of advertising and sales promotion to overcome brand loyalty. Moreover, compared to the literature on advertising, the literature on sales promotion expenditure is fairly meagre. Similarly, however, it contains inconsistent findings (Ortmeyer et al 1986). At a fundamental level, there is a lack of agreement about what sales promotions accomplish and how they should be viewed. In reviewing empirical findings on sales promotion, Bearden, Teel, and Williams (1981) note those promotions seem to be most effective for unfamiliar brands, and that promotions can generate immediate effects in terms of sales (discarding loyalty). The conflicting empirical results in the literature regarding advertising and sales promotion raise the importance as how appropriate it is to study the both in comparison to find out superior brand loyalty change agent. Here comes our major research objective May sales promotion and advertising overturn brand loyalty? Will it be Sales Promotion or advertising more important in this regard?

Brand Credibility
The brand credibility construct is similar to source credibility (Aaker and Brown, 1972). Hovland et al. (1953) proposed the most influential conceptualization of credibility in the marketing literature (Erdem and Swait, 2004; Goldsmith et al., 2000; Trimble and Rifon, 2006), in which source credibility components constitute a bidimensional model composed of source expertise and trustworthiness. They define expertise as the extent to which a communicator is perceived to be a source of valid assertions and trustworthiness as the degree of confidence in the communicators intent to communicate the assertions he considers most valid (Hovland et al., 1953, p. 21). Thus, brand credibility can be defined as the extent to which a consumer perceives that the brand expresses sincerity and goodwill (trustworthiness) and has the skill and experience necessary (expertise) to associate to the specified social cause. So, brand credibility has itself two components: trustworthiness (believability) and expertise (capability). If customers believe that the firm is delivering on its promises of quality, i.e. it is performing well; this should directly contribute to higher satisfaction and thus preference for the

brand, which ultimately leads towards brand loyalty. Thus, brands credibility subcomponents, trustworthiness and expertise, are drivers of brand loyalty. Credibility is time sensitive: the entitys perceived credibility today can differ immensely from its perceived credibility by the same firm on a previous or future date. Credibility is based on a firms intention; the entitys actions will either confirm or disconfirm the other firms beliefs in the entitys indications (Paul Herbig, 1997). Credibility exists when one can confidently use past actions to predict future behaviour. Any signal or message will be evaluated by the receiver by, among other factors, the credibility of the source. The higher the credibility, the more persuasive the source is (Sobel, 1985). To achieve credibility for high quality, a company must first develop a reputation for producing and delivering quality products. To achieve credibility a competitor must first develop a reputation (Bell, 1984) and it usually takes many periods before a reputation can be established. Credibility is therefore dependent on reputation as well as the just prior transaction. Credibility influences reputation only through the final outcome: promised quality must be delivered to build a positive reputation (Fitzgerald, 1988). It shows that free samples, demonstrations and occasional price reductions are more effective to establish brand credibility. There is no evidence in literature to show comparative efficacy of sales promotions and advertising on brand credibility. Our conceptualization of brand credibility in response to sales promotion and advertising will narrow the gap as indicted. Here emerges our research objective that is to find out Whether is it sales promotion or advertising more important to overturn brand credibility in terms of brand trustworthiness and expertise?

Brand Preference
After establishing credibility of a particular brand, the next important step in building brand loyalty is brand preference. Both advertising and sales promotion can play important role in this regard. Advertising has a small effect in winning new buyers but a relatively stronger effect in reinforcing intensity of preference (Tellis 1988). First, the only field study that addressed this issue (Raj 1982) also found advertising exposure to be more effective in increasing volume purchased than in promoting brand preference. If advertising affects loyal buyers more than non-loyal buyers, we should expect it to affect the quantity purchased of the preferred brand rather than which brand is purchased. Because of consumer inertia and selective information processing, untried brands probably require very high levels of exposure before they begin to

get their message across and induce trial. Indeed, it is consistent with conventional wisdom that new brands need heavy advertising (Michelle Roehm et al 2002). Without question, loyalty is the strongest determinant of purchase behaviour: brand loyalty on brand choice and volume loyalty on units bought. The other marketing variables, especially price, are also more effective than advertising. The strong effect of loyalty indicates that the preponderance of purchase behaviour is characterized by inertia or predetermined preferences (Tellis 1988). Separate studies have been conducted to evaluate consumer preferences in perspective of advertising and sales promotion like Scott, et al (1976), Papatla, et al (1996), Heerde et al (2003) Adeolu et al (2005) etc. But no study has been conducted to show whether it is sales promotion or advertising that can effectively facilitate the change in consumer preferences. It provides basis for another objective of our research Do sales promotions help diverting brand preference more effectively than advertising?

Brand Commitment
In our view, the next most important construct to brand loyalty is "brand commitment". In psychology, the concept of commitment is regarded as having intentional aspects, as evidenced by Kiesler's definition of commitment: "the pledging or binding of an individual to behavioural acts" (1971, p. 30) which is result of continuous brand preference. Contrary to many studies that viewed brand commitment as a direct indicator (i.e., a scale item) of brand loyalty, we regard it as most important construct preceding brand loyalty behaviour. In fact, recent literature has viewed brand commitment as a necessary and sufficient condition of brand loyalty (e.g., Knox and Walker 2001). The evidence presented in the literature is still co-relational rather than causal, however. Some scholars used brand commitment as an item of brand loyalty measurement (e.g., Bloemer and Kasper 1995), rather than a distinct and anteceding construct. Cunningham (1969) was one of a few early efforts viewing brand commitment as an antecedent of brand loyalty, but no distinction between true and spurious loyalty was made in the study. We do not agree with Warrington et al (2000) who consider brand commitment superior to brand loyalty saying in absence of a preferred brand, brand-loyal consumers are likely to switch to an alternative brand, whereas brand-committed consumers will not Rather we agree with Pascale et al (2003) Knox and Walker (2001) and Kimet et al (2008) who through empirical evidence have confirmed commitment as antecedent to true brand loyalty.

Specifically, we define the consumers commitment to the brand as his predisposition to purchase the brand across a range of conditions: those favouring the brands choice and those favouring the choice of other brands. The lowest level of commitment to a brand corresponds to routine avoidance across all promotional conditions. Strongest commitment corresponds to routine choice of a brand across all competitive conditions. Mid-range commitment (implying some commitment to more than one brand) corresponds to switching behaviour. A consumers commitment to a brand is related to his relative preference for the brand; in general, the more strongly preferred the brand, the greater the commitment to the brand. Ortmeyer et al (1986) studied the impact of advertising and promotion on brand switching behaviour of the switching consumer. They concluded that through successful advertising, the consumer who switches may become more predisposed to notice the advertised brand, and a promotion may be more likely to lead to purchase. In each case, advertising has encouraged a re-evaluation of the consumers purchase routines (i.e., why not include the advertised brand in the switching set?), while the promotion reduces the risk of trial. In combination, coordinated advertising/promotion plans can be used to trigger a re-evaluation and alteration of established purchase routines. As a whole, there is no evidence in literature about the impact of either advertising or sales promotion on diverting consumer commitment towards a brand. This lead to derive here another important research objective May sales promotions help more efficaciously than advertising to abandon brand commitment?

Conceptual Framework Research Hypothesis:


Based on the literature review, the following hypotheses have been formulated... H1: Advertising is more effective than Sales Promotion to overcome trustworthiness of an established competitor brand. H2: Advertising is more effective than Sales Promotion to overcome image of expertise of an established brand. H3: Advertising helps inducing brand preference of another brand more than Sales Promotion H4: Advertising is more effective than Sales Promotion to do away with commitment of preferred brand resulting in overturning brand loyalty.

H5: Advertising has more potential than Sales Promotion to overturn brand loyalty.

Figure 1. The Research Model Belief in Expertise Brand Trust Methodology & Data Analysis Data
In the consumer decision-making process, consumers spend a lot of time, effort, and energy for more expensive and personal products which are called high-involvement products (e.g. computers, automobiles and medical care); they spend less time, effort, and energy for inexpensive and less exciting products which are called low-involvement products e.g. soft drinks, cereals, and washing powders (Wells et al., 1995). Consumer loyalty in FMCG sector is not as committed as in high involvement products because the switching penalty may not be much higher. Furthermore, FMCG sector attracts more promotional budget than any other sector around the globe and hence selected for this research. FMCG sector can be classified into four categories i.e. household care, personal care, food and beverages and cigarettes. FMCG business growth is directly linked to the economy of a nation. The key demand drivers include rising disposable income, rapid urbanization and the deepening penetration of organized retail (Sobia Muhammad Din et al, 2008). The major portion of consumer spending is directed towards food and beverages sector in this sector. For example, although the consumer spending in FMCG sector in Pakistan is not as much as in countries with higher per capita income, yet the major household budget is consumed to buy FMCG products particularly food and beverages (Pakistan Household Economic Survey 2005-06). Again, it makes it an attractive sector for research. In so far advertising and sales promotion are concerned, we have selected the most popular types in the context of Pakistan. We have selected print and electronic media for advertising while for sales promotion four techniques have been chosen i.e. free sample, sales or price reduction, buy one get one free and lucky draws.

Research Instrument:
Semantic Differential Scale was used to develop instrument as it had been used as a measure of attitude in a wide variety of projects. Osgood, et al., (1957) report exploratory studies in which the Semantic Differential Scale (SDS) was used to assess attitude change as a result of mass media programs (pp. 305-311) and as a result of messages structured in different ways (pp. 240-241). Their chapter on attitude balance or congruity theory (pp. 189-210) also presents significant applications of the SDS to attitude measurement. Regarding its practical application in marketing, researchers have used it to measure attitude towards advertising and promotions (e.g. Burton and Lichtenstein, 1988; Lichtenstein and Bearden, 1989; Zaichkowskys 1985, Bruner and Hensel 1992). We developed 7-point, 9-item scale to get response from respondents. The scales were divided from -3 to +3 denoting Great, Fair and Little for both negative and positive poles with zero or neutral as centre point. A group of four faculty members at Institute of Management Sciences was formed to identify, discuss and finalize most appropriate adjectives for different constructs of loyalty. Scale was developed, originally, in English containing twelve questions in total. It was translated in Urdu as people in the area of study were more conversant with this language and they were expected to understand and answer the questions comfortably with greater intelligibility. The translation was vetted by two faculty members of Urdu Department and the more suitable Urdu adjectives were adopted according to their suggestions and recommendations. A pilot survey was conducted to affirm reliability of the instrument that was finalized. For this purpose, response on 40 questionnaires was obtained as per sample scheme. Calculated value Cronbachs alpha was .84, which indicated reliability as meritorious (Sharma 1996) for conducting further research.

Sample and sample size:


A non-random convenient sampling was used to collect the data. In order to qualify as our respondent, they were asked to report their level of involvement in purchase decision. They might have the highest level of responsibility or not at all, which was measured on a four-point scale (anchored by 1 = complete responsibility; 4 = not at all). The respondents, opting for point 1 and 2, were considered to qualify for inclusion in the data for analysis.

The questionnaire was served to 300 respondents to get their response. It was served to the customers in the market place with the logic that they would be having fresh purchase experience after comparing different alternatives. So, it was planned that the respondents should be familiar about the things they were going to be asked, and able to provide information which was required for the study. Of filled questionnaire, 213 were selected for analysis as 87 were rejected because of disqualification either due to low involvement in purchase decision or missing answers/values. Of qualifying respondents, 138 were male and 75 were females with 65 and 35 percent ratio respectively.

Data Analysis:
To test the appropriateness of factor analysis, two measures were used as shown in Table 1. The KaiserMeyerOlkin overall measure of sampling adequacy was .87, which falls within the acceptable level. In addition, Bartletts test of sphericity was 3626.376, df 435, significant at p .000, which showed a significant correlation among the variables (Hair, Anderson, Tatham, & Black, 1998), which showed that factor analysis can be administered on this data. In so far as reliability of the instrument is concerned, Cronbachs alpha was calculated. With a value of .927, it indicated the maximum reliabilityranked as marvellous by Sharma (1996). The reliability test was used to test internal consistency for each of the construct alsocredibility (brand trust and belief in manufacturers expertise), preference and commitment as given in Table 2. Calculated value of alpha for each of the construct is .673, .78, .811, .839 and .856 respectively showing reliability from acceptable to marvellous. In order to evaluate dimensions of our model (Figure 1), we calculated correlation coefficient of these dimensions for brand loyalty to check the validity of the model, as given in Figure 2. Calculated value of correlation, which is .475, demonstrates a positive relationship between brand credibility and brand loyalty. Similarly correlation between brand preference and brand loyalty is .590, which is again positive. Correlation between brand commitment and brand loyalty is .586. These values confirm that our model is logically valid for research. . We employed exploratory factor analysis for each construct of brand loyalty separately to find out the most effective promotional tool/ tools to knock over the allegiance for a brand. Instead of using cutoff eigenvalue of 1, we fixed the extraction to 2, as our objective was evaluation of two major factorssales promotion and advertising. In Table 2 percentage of variance explained by two factors for brand loyalty constructs (i.e. brand trust and belief in manufacturers expertise,

brand preference and brand commitment) and brand loyalty is given. The first component accounts for maximum variance for each construct which is 38.832, 47.888, 51.597 & 55.725 respectively. Percentage of variance for 2nd Factor, i.e. advertising, for the aforementioned constructs is 23.64, 17.112, 18.273 & 15.451. This result is further explained by rotated component matrix with the rule of .5 cutoff value. Rotated component matrix in Table 3 for each of the dimensions exhibits that promotional offer of buy1 get1 Free has the highest loadings followed by Free Sample except brand preference, where the order is reverse. Similarly, for advertising Electronic Media has the higher loading than Print Media. It is evidenced that Sales Promotion in general and free sample and buy1 get1 free offer in particular are the major components that subverts brand loyalty. Besides studying precursors of brand loyalty in a logical order, direct response to brand loyalty was also obtained because FMCG is low involvement sector and it is not necessary that a customer goes through that sequence to cast away loyalty of a particular brand. The last row of Table 2 shows that first Factor is responsible for maximum variance of 57.473, followed by the second, which is 15.873. Rotated component matrix in Table 3 shows that in the first factor, sales promotion technique of buy1 get1 free loads highest followed by a Free Sample. Regarding advertising, electronic media again loads higher than print media. This is consistent with the results about different dimensions of brand loyaltybrand credibility, brand preference and brand commitment.

Test of Hypotheses:
Table 4 presents the results for test of our hypotheses. Hypothesis 1 and 2 address the question of credibility and the comparative influence of advertising and sales promotion. Hypothesis 1 states that advertising is more effective than sales promotion to overcome trustworthiness of an established competitor brand, while hypothesis 2 stated that advertising is more effective than sales promotion to overcome image of expertise of an established brand. Brand credibility having two elements i.e. brand trust and belief in manufacturers expertise (Hypothesis 1& 2), is not affected by advertising as much as by sales promotion (t-value = .697 and .519 @ significance level = .2435 and .375 respectively for brand trust and belief in manufacturers expertise). Hypothesis 3 states that advertising helps inducing brand preference of another brand more than sales promotion. Results do not support the hypothesis as value of t = .618 with significance level of .2685 at 95% confidence interval. So, once again advertising appears to be secondary in importance to alter the preference for a brand.

Hypothesis 4, which states that Advertising is more effective than sales promotion to do away with commitment of a preferred brand resulting in overturning brand loyalty, is not supported. Our calculated t-vlaue .716 at significance level .2375 with 95% confidence interval again demonstrates that advertising cannot be considered a superior tool to distract brand commitment. Hypothesis 5 states that advertising has more potential than sales promotion to overturn brand loyalty. Calculated t-vale 1.028 at significance level .1525 does not support this assumption. Again, advertising fails to get primary position to overturn brand loyalty.

Discussion and Conclusion


Breaking away loyalty of established brands cannot be belittled as it is an imperative step for a new or weaker brand to get success in the market place. Brand Loyalty is not created haphazardly. Rather it goes through a sequence of attitudinal events like brand credibility, brand preference and brand commitment, whereas brand credibility diverges in two other attitudinal elements i.e. brand trust and belief in manufactures expertise in making that product. So, we followed this logical sequence to explore the affects of sales promotion and advertising on all these dimension of brand loyalty as per our objectives. According to our results of factor analysis and test of hypotheses, sales promotion is found to be a superior gizmo to overturn brand loyalty. All the constructs of brand loyalty including brand loyalty itself appear to be influenced predominantly by free sample and buy1 get1 free offer. It is consistent with previous findings to conclude that deals adversely affect brand loyalty (Joe A. Dodson et al 1978). But at the same time the study disapproves the previous research (e.g. Begoa Alvarez Alvarezet et al 2005) that price reduction is more important to influence brand choice. In so far advertising is concerned, not a single dimension is predominantly affected by it. Its position, throughout, remains secondary. Amongst advertising, electronic media has greater significance followed by print media.

Limitations and Further Research


The present study is a part of PhD dissertation. So, it has some limitations as it is part of a whole. It would be pertinent to point out the most conspicuous limitations here. Firstly, the study had been conducted in a big metropolitan city and hence the results may not be applicable to whole of the population as demographic variables do affect life style and spending patterns, preferences, commitment and allegiance to brands.

Secondly, the results are quite different form previous studies as mentioned earlier in discussion and conclusion section. We have found free sample and buy1 get1 free offer as most effective technique in lieu of price reduction. The results may be different due to cultural norms and values that vary from country to country and region to region. Nevertheless, this study attempted to present a broad-based, theoretically guided field study of the effects of sales promotion and advertising on brand loyalty based on consumers psychological states and resulting influences for subverting loyalty. The results are promising and indicate the possibility of fruitful future research. First, it would be helpful, for example, to ascertain the effects of other elements of promotion mix on defection of brand loyalty. Future research may include behavioral brand loyalty measures. Secondly, the area of research and demographics should be broadened to maximize the representation of whole population within a country or region. Finally, future research could examine the differences in other cultural contexts. Perceived brand loyalty may vary across cultures, as brand loyalty constructs may be perceived differently by people of different countries.

Table 1 KMO and Bartlett's Test


Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .870 Bartlett's Test of Sphericity Approx. Chi-Square 3626.376 Df 435 Sig. .000

Table 2

RESULT OF FACTOR ANALYSIS AND RELIABILITY TEST FOR CONSTRUCTS Construct Eigenvalue (Alpha) Total % of Variance Cumulative %
Brand Trust Sales Promotion (Factor I) Advertising (Factor II) 2.330 1.416 38.832 23.407 38.832 62.439 .673 Belief In Manufacturers Expertise Sales Promotion (Factor I)

Advertising (Factor II) 2.873 1.027 47.888 17.112 47.888 65.000 .78 Brand Preference Sales Promotion (Factor I) Advertising (Factor II) 3.095 1.096 51.579 18.273 51.579 69.852 .811 Brand Commitment Sales Promotion (Factor I) Advertising (Factor II) 3.344 .927 55.725 15.451

55.725 71.176 .839 Brand Loyalty Sales Promotion (Factor I) Advertising (Factor II) 3.446 .952 57.437 15.873 57.437 73.310 .856

Table 3 ROTATED COMPONENT MATRIXa & t-VALUE Construct Variable Component 1 Component 2
Brand Trust Electronic Media

.100

.868
Print Media .063

.873
Price Reduction

.679
.145 Free Sample

.802
-.024 Buy1 Get1 Free

.840
.048 Lucky Draw Prize

.612
.099 Belief In Manufactures Expertise Electronic Media .123

.878
Print Media .226

.800
Price Reduction

.594
.346 Free Sample

.787
.200 Buy1 Get1 Free

.817
.259 Lucky Draw Prize

.745
.007 Brand Preference Electronic Media .180

.878

Print Media .207

.873
Price Reduction

.624
.374 Free Sample

.869
.128 Buy1 Get1 Free

.868
.122 Lucky Draw Prize

.683
.217 Brand Commitment Electronic Media .185

.885
Print Media

.266

.847
Price Reduction

.659
.486 Free Sample

.823
.205 Buy1 Get1 Free

.833
.219 Lucky Draw Prize

.715
.160 Brand Loyalty Electronic Media .158

.888
Print Media .263

.829
Price Reduction

.539
.489 Free Sample

.864
.182 Buy1 Get1 Free

.859
.238 Lucky Draw

.742
.255

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 3 iterations Table 4 Test of Hypothesis (t-Test)

Hypothesis t-value d.f. sig. (1-tailed)


1. (Brand Trust) .697 212 .2435 2. (Belief in Manufacturers Expertise) .519 212 .375 3. (Brand Preference) .618 212 .2685 4. (Brand Commitment) .716 212 .2375 5. (Brand Loyalty) 1.028 212

.1525

Sales Promotion Advertising Brand Trust


t = .697 (.2435)

Belief in Expertise
t = .519 (.375)

Brand Credibility r = .475 Brand Preference


t = .618 (.2685)

Brand Commitment r = .590


t =.716 (.2375)

r =.586

Brand Loyalty
1.028 1.028 (.1525) (.1525)

Figure 2. Model Depicting Correlation of Constructs and Relative Effectiveness of Sales Promotion and Advertising to Overturn Brand Loyalty

COMPARATIVE ANALYSIS OF MARKETING STRATEGIES FOR MANUFACTURERS AND RETAILERS BRANDS Tsui-Yii Shih Department of International Business National Taipei College of Business Taipei (100), Taiwan ABSTRACT Manufacturers and retailers have chosen varied brand portfolio structures for business performance. This study surveys consumer attitudes toward manufacturers brands and retailers store brands chosen from Taiwan retailing outlets. Research findings indicate that manufacturers brands intensify high quality and high price strategies, pursue appropriate promotion activities, and develop brand equity helpfully to the purchase intention of consumers. Without a careful evaluation process, a brand endorsing strategy is disadvantageous to manufacturers. Another aspect, low prices, promotion activities, brand endorsed strategies, and increasing store images positively support to the brand equity and consumer purchase intentions of retailer store brands. Keywords: Marketing Strategy, Brand Alliance, Structure Equation Model 1. INTRODUCTION * More retailers have branded houses and use their corporate names to promote their store brands. Under these circumstances, manufacturers brands sold by almost all stores do not, however, differentiate the individual stores; this intensifies price competition or a brands image between store

markets [28]. In the Taiwan retail market, in order to gain a higher margin and support promotional activities, retail stores also develop numerous store brands with low prices to increase consumer purchase intentions. Major business types that develop store brands include: retail outlets, convenience store chains, and supermarkets. For example, Carrefour, a French chain of large volume retail stores operating in Taiwan, creates two types of store brands for low and high pricing strategies, each with divergent product quality. By contrast, RT-Mart, a similar chain of volume retailers operating in Taiwan, commits to a low price strategy for its store brand. All these products enjoy high sales growth in the market. Hence, marketing strategies of store brands such as a low pricing strategy or emphasizing perceived quality in terms of brand endorsed strategy by manufacturers brands are all applied by Taiwan retail stores. The increasing power of retailers store brands leads to strong pressure on manufacturers brands (Famous manufacturers possessing well known national brands). Current literatures that focus on comparative analysis of marketing strategies for

Corresponding author: trace@ms16.hinet.net manufacturer brands and retailers store brands are limited, and thus there is potential to conduct a study providing theoretical foundations and academic insights. This research creates a concept framework to verify the performance of marketing strategies from a consumer-based viewpoint, and to provide two practical brand management models for manufacturers and retailers store brands. Early researchers indicated that consumers purchase intentions are primarily influenced by marketing activities such as price, promotions, product quality of a company and its added values [1,12,24,29,41,44]. Another scholarship focused on the brand equity of firms which are decided in terms of brand image, perceived quality, brand awareness, brand loyalty, and brand associations, etc [1,34,41,46,47]. Notably, a variety of theoretical perspectives and frameworks have been advanced in the field [20,32,39,42,46]. In this study, the marketing strategies of manufuacturer brands dicussed include high prices, promotions, brand endorsing strategy. Another aspect under discussion, the marketing strategies of retailer store brands formatted in the conceptual framework include low

prices, promotions, brand endorsed strategies, and store image. By adopting an integrated perspective emphasizing the roles of marketing strategy and brand equity, this paper addresses these key gaps by developing empirical firm-marketing explanations of consumer purchase intentions for related academic research in terms of a two-level structure equation model method. The objective of this study is to investigate and evaluate the effects of business marketing strategy, brand equity on consumer T. Y. Shih: Comparative Analysis of Marketing Strategies for Manufacturers and Retailers Brands 57 purchase intentions and then examine their importance in allowing manufacturers (lean to hypotheses H1, H3 and H4) and retailers store brands (lean to hypotheses H2, H5 and H6) to develop a competitive position in the commercial marketplace. The study includes developing a questionnaire that builds from the following conceptual framework (See Figure 1). The rest of the paper is organized as follows. Section 2 gives a review of the literature in the areas of marketing strategies, consumer-based brand equity and purchase intention. Section 3 introduces the methodology used in the research. Section 4 presents the background of data sources and analysis and gives the research findings of the study. Finally, section 5 provides the discussion and

conclusion. Figure 1: Conceptual framework of manufacturer brands and retailers store brands 2. LITERATURE REVIEW Branded companies need to create the operation police, marketing strategy and brand management system for maintaining business performance. This section outlines literature reviews of former scholars and defines a theory base for this study. 2.1 The Effect of Consumer-based Brand Equity on Purchase Intention Brand equity has been considered in many contexts including brand loyalty, brand awareness, perceived quality, brand associations; the differential effect of brand knowledge; the difference between overall brand preference and multi-attributed preference based on objectively measured attribute levels; and overall quality and choice intention [41]. Some researchers [35] divide brand equity into attribute-based and non-attribute-based components, while other researchers [7,45,46], propose a brand equity measurement method that subdivides brand equity into different dimensions including brand awareness, brand associations, perceived quality and brand loyalty. Washburn et al. [41] suggest three

different viewpoints for considering brand equity: the consumer-based perspective; the financial perspective; and the combined perspective. Pappu et al. [34] argue that the definitions of brand equity can be broadly classified into two categories: the financial-perspective, and consumer-perspective or marketing-perspective. In the study, consumer-based brand equity is concerned and thus is measured for manufacturers and retailers store brands. Customer-based brand equity and its effect on consumption behavior become a widely discussed area of marketing. Looking at consumer-based brand equity, Aaker [1] considers brand awareness, brand associations, perceived quality, and brand loyalty to be the most important dimensions of consumer-based perspectives. Keller [22] indicates that customer-based brand equity consisted of two dimensions, brand knowledge and brand image. Yoo et al. [46] use confirmatory factor analysis to measure consumer-based brand equity as a three-dimensional construct, combining brand awareness and brand associations into one dimension. Pappu et al. [34] also find for support the hypothesized four-dimension (brand awareness, brand associations, perceived quality, and brand loyalty) model of consumer-based

brand equity. High brand equity levels lead to higher consumer preferences and purchase intentions [7] [47]. Firms with high brand equity usually have good performance [34]. In academia, purchase intention is a measure of the willingness to buy a product [9,14] and has also been operationalized as the probability that a consumer will buy a product [11,12]. Purchase intention is one type of judgment about how an 58 International Journal of Electronic Business Management, Vol. 8, No. 1 (2010) individual intends to buy a specific brand. Variables such as considering buying a brand, and expecting and recommending to buy a brand measure purchase intention [25,26,38]. Summarily, integrating the theory synthesis and dimension choices provided by the scholarly community, this study measures the effects of brand equity on purchase intentions for manufacturers brands and retailers store brands via consumer-based viewpoints. For simplifying the model and avoiding the choice complexity of broad branded staple goods, the research ignores two factors (brand awareness and brand associations) and choose three dimensions, including brand loyalty, brand image, and perceived quality to be the measurement factors of customer-based brand equity. Furthermore, we choose three items including willing

purchase, considering purchase and recommendation purchase to be the measure items of a purchase intention factor. Based on the theory base, the study includes two hypotheses as follows. H1: The brand equity (brand loyalty, brand image and perceived quality) of manufacturer brands relates positively to the degree of purchase intention of the consumer. H2: The brand equity (brand loyalty, brand image and perceived quality) of store brands relates positively to the degree of purchase intention of the consumer. 2.2 The Effects of Marketing Strategies on Brand Equity and Purchase Intention Marketing decisions affect brand equity and purchase intention. Managers need to evaluate the marketing activities and reduce or avoid brand-hurting activities. Yoo et al. [46] indicate marketing activities such as price, slogans, symbols, packaging, company image, country of origin, store image, advertising expenditures, and promotional events have important influence on the brand equity and purchase intention. In addition, some scholars have identified marketing activities (e.g. price, promotion, brand alliance and product trial, etc) as

major sources of effects on the brand equity and consumer purchase intentions [6,20,32,39,42]. Next, four marketing factors including price, promotion, endorsement strategy, and store image (one factor only for retailers store brand) are chosen in the study to introduce their effects on brand equity and consumer purchase intentions, as discussed below. 2.2.1 Price For consumer products, consumers use price as an important extrinsic cue and indicator of product quality or benefits. Customers often perceive high priced brands to be of higher quality and less vulnerable to competitive price cuts than low priced brands [12,21,46]. Activities based on lowering prices can place brands in danger by provoking consumer confusion; instability and variability leads to an image of unstable quality [43]. The pricing policy for the brand can create associations in consumers' minds with the relevant price level for the brand in the category, as well as with its corresponding price volatility [23]. In Taiwan, most manufacturer brands define the product using higher pricing strategy, but retailers store brands follow a low pricing strategy. This study thus uses price as one factor in the research analysis and examine its effect

on brand equity and purchase intention. 2.2.2 Promotion Sales promotions involving short-term price reductions, such as special sales, media-distributed coupons, package coupons, cents-off deals, price deals, rebates, and refunds, likely erode brand equity despite the short-term gain in financial performance. Frequent promotions may jeopardize brands in the long run because they cause consumer confusion based on unanticipated differences between expected and observed prices, which results in an image of unstable quality [43,46]. Consumers become more price and promotion sensitive over time because of increased promotions [30]. Further, Jedidi, Mela and Gupta [18] show that, in the long-term, promotions have a negative effect on brand equity. Price deals as incentives to increase sales have been shown to have a negative effect on brand equity [40]. However, reactance theory [4] indicated that consumers are more likely to purchase a product when their freedom is curtailed by a restriction (such as a time limited offer). Increased choice probability, or purchase intention in terms of firms short-term promotional activities, has also been shown empirically [11]. Therefore, while ignoring long term effects, this

study uses promotion as a factor and discusses its short-term influence on brand equity and purchase intention. 2.2.3 Brand Alliance: Brand Endorsing and Endorsed Strategies Two brands whose associations interact to form a new brand combination comprise a brand alliance [42]. A company can employ two of its own brands while in other cases the strategy takes the form of a branding alliance between two different marketing organizations [36,37,41]. Kim et al. [24] argue that how various types of brand alliances affect consumer evaluations of a product's attributes, and how product trials influence these evaluations, are important. Strong brand associations can affect the credibility of brands in an alliance, and consumers assume that high-equity brands will likely partner with other high-equity brands, increasing the value of the combination and the two individual brands as well [42]. The use of corporate brand endorsement as either a name identifier or logo identifies the product T. Y. Shih: Comparative Analysis of Marketing Strategies for Manufacturers and Retailers Brands 59 with the company and provides reassurance for the customer. Equally, negative effects or associations can do harm and have long-lasting effects across multiple product lines. Thus, both aspects need to be

weighed in determining the role of corporate brand endorsement in brand architecture [13]. Brand cooperation between retailers and manufacturers represents a corporate brand alliance. Retailers with strong brand equity will help to increase the output of branded manufacturers; similarly, manufacturers with high brand equity will help to increase the sales volume of retailers store brands. This study thus identifies two factors including brand endorsing (for manufacturer brands) and brand endorsed strategies (for retailer store brands) and exams their effects on brand equity and consumer purchase intentions. 2.2.4 Store Image For retailers store brands, the study uses store image as an additional factor. Martineau [29] states store image as the way in which the store is defined in the shopper's mind. Martineau [29] proposes that store image is part of the retail store's personality. Dodds et al. [12] find that store image has significant positive effects on perceived quality. The quality of a given brand is perceived differently depending on which retailer offers it. Good-image stores attract more attention, contacts, and visits from potential customers. Store image is an overall picture that is more than the sum of the parts, for the parts interacts

with one another in the consumer's mind [16]. Building from these concepts and integrating the scholars viewpoints, this research submits hypotheses for the development of questionnaire items, in order to explore the relationships among marketing strategy, brand equity and the degree of purchase intention of consumer for manufacturers brands and retailers store brands. The study constructs the following hypotheses: H3: The marketing strategies (high price, promotion activity and brand endorsing strategy) of manufacturer brands relates positively to the brand equity of manufacturer brands. H4: The marketing strategies (high price, promotion activity and brand endorsing strategy) of manufacturer brands relates positively to the degree of purchase intention of the consumer. H5: The marketing strategies (low price, promotion activity, and brand endorsed strategy and store image) of store brands relates positively to the brand equity of store brands. H6: The marketing strategies (low price, promotion activity, and brand endorsed strategy and store

image) of store brands relates positively to the degree of purchase intention of the consumer. 3. RESEARCH METHOD This study surveys consumer attitudes toward manufacturer brands and retailers store brands chosen from Taiwan retailing outlets. The basic concept frameworks designed for manufacturer brands and store brands are similar. However, the study adds store image as an additional marketing factor for store brands. In addition, the questionnaire items are designed and then modified to make them appropriate for assessing attitudes toward manufacturer brands and retailer store brands. In this study, manufacturer brands are identified as famous manufacturers possessing national brands. For example, Yuen Foong Yu Paper Manufacturing Co., Ltd. (YFY Paper), the pioneer of private paper manufacture in Taiwan, has several toilet paper brands including May Flower, Tender, etc. Uni-President, the famous food products manufacturer in Taiwan, which owns several national brands, such as Dr. Milker, UNI Puding, and Tung-I Snack Noodles etc. In spite of possessing well-known national brands, both of them offer OEM or ODM products for retailers. Therefore, during the survey process, we explained the definitions of manufacturer

brands and retailer store brands first, and then invited respondents to answer the question items. Five local retail chains, including RT-Mart, Carrefour, Geant, Welcome, and Watsons, were chosen as survey sites. Telephone interviews with the corporate head offices (five local retail chains) was conducted first to ensure the right survey places (which included target respondents regarding purchase experiences of both manufacturers and retailers brands). Then, five research assistants stopped passers-by in each retail store and talked about the survey with the respondents. Incentive gifts (NT$20 to NT$30 gifts were used depending on the degree of difficulty of the data collection) were used to encourage potential respondents involvement and to increase the response rate. The data are collected over a period of three months (July to September, 2007). Data analysis methods used in this research include factor and reliability analysis, and a two-level structural equation modeling method. 4. RESEARCH FINDINGS This section discusses the data source and analysis results of the survey. More than 100 questionnaires are administered in each retail outlet for a total of 530 questionnaires (including RT-Mart,

Carrefour, Geant, Welcome, and Watsons), with 491 valid questionnaires (93%) returned for this analysis. Based on the returned questionnaires, 46 percent of respondents are male, 54 percent of respondents are female. About 46 percent of the respondents are between 21 and 30 years old, and 44 percent have a university degree. Further, 50 percent of respondents have household incomes are between NT$51 60 International Journal of Electronic Business Management, Vol. 8, No. 1 (2010) thousand dollars and NT$100 thousand dollars per year. 4.1 Factors Identification and Analysis The questionnaire items of the study construct are listed as in Table 1 and Table 2. To verify the relationships among the factors, the study performs factor analysis and reliability analysis using SPSS statistical package [31]. This entails a two stage process. Factor analysis is undertaken to identify underlying constructs from among sets of many interrelated items. The principal-axis method is used for factor extraction, with factor interpretation carried out by Variamax rotation. Prior to the analysis, the research standardizes the factor analysis and variables for the data. One variable is standardized and included in the model, Store image, labeled STOM (Question item: The store image of retailer

is important to my evaluation of retailers store brands). Table 1 shows the factor analysis and reliability analysis for manufacturers brands. Factors including price strategy, promotion strategy, endorsing strategy, brand loyalty, brand image, perceived quality, and purchase intention are produced using factor analysis. With the exception of promotion strategy and brand loyalty, which have lower factor loadings and lower values for the item to total correlation, all factor loadings of variables exceed 0.6, while the values for the item to total correlation exceed 0.7. The reason for this exception may be that the study does not identify specific manufacturer brands, instead offering only broad concepts and explanations, perhaps leading some respondents to confuse the questions on brand promotion and brand loyalty, in turn causing lower factor loadings and values. Table 2 shows the factor analysis and reliability analysis for retailers store brands. Seven factors are produced using factor analysis. Except for the item promotion activity, which has lower factor loadings and a lower value for the item to total correlation, all factor loadings of other variables exceed 0.7, while the values of the item to total correlation

exceed 0.6. The seven factors of manufacturer brands and other factors of store brands appear to be appropriate for next two-level SEM analysis. 4.2 The Relationships of Marketing Strategies, Brand Equity and Purchase Intention Structural equation models are evaluated by chi-square significance tests supplemented with adjunctive fit indices, such as the comparative fit index (CFI: [2]), and the root mean square error of approximation (RMSEA), use to quantify the amount of model misfit. Sample size has little influence on the CFI and RMSEA indices [27]. Bentler [3] suggests that the CFI index value be at least 0.95 for confirmed models. Browne and Cudek [5] suggest that RMSEA values less than 0.08 imply an adequate model fit and values less than 0.05 imply a good model fit [15]. The LISREL 8.30 statistical package is used in the study [19]. Table 3 shows the properties of CFA for manufacturer brands and retailers store brands and the values and test standards of the Fit index for these two models. In the manufacturer brand model, the chi-square values are 51.64 with 24 degrees of freedom. The value of CFI for this model is 0.98, which certainly satisfies the criterion that the CFI

index value be at least 0.95. The root mean square error of approximation (RMSEA) value of 0.048 implies a good model fit. In the store brand model, the chi-square values are 102.89 with 30 degrees of freedom. The CFI for this model is 0.96. The RMSEA value of 0.07 implies an adequate model. Further, in store brand model, the errors between the price strategy and the endorsed strategy for store brands and are positively correlated; the errors between willing purchase and recommendation purchase are negatively and significantly correlated. Table 4 lists the effects of latent variables for two marketing models, which shows that the marketing strategies and brand equity all have significant positive effects on the purchase intention of consumers for both manufacturer brands and store brands. Further, the marketing strategies of manufacturer brand and store brand has significant positive effects on the brand equity. In sum, the results of the two-level structural equation modeling (SEM) analysis partly support H1 to H6, with the exception of brand endorsing strategy of manufacturer brands (See Table 3). The study results of H3 and H4 indicate that brand endorsement strategy appears to be negatively supported for the marketing

strategies adopted by manufacturers. In the manufacturer brands model shown in Table 4, the indirect effect of marketing strategy to purchase intention is 0.30, which is more than the direct effect of marketing strategy to purchase intention (0.19), derived from the intermediate effect of brand equity. Concerning retailer store brands model, the indirect effect of marketing strategy on purchase intention is 0.46, which is more than the direct effect of marketing strategy to purchase intention (0.20), similarly obtained from the intermediate effect conclusion of brand equity. Consequently, brand equity, either in manufacturer or retailer brands, can mediate the effects of marketing strategies on purchase intentions of consumer perceptions. Therefore, in spite of a firms good marketing strategies, positive generation of products brand equity and consumer purchase intentions, specific brand equity of products are helpful to advance the executive effects of marketing strategies adopted by firms regarding consumers purchase intentions. T. Y. Shih: Comparative Analysis of Marketing Strategies for Manufacturers and Retailers Brands 61 Table 1: Factor analysis and reliability analysis for manufacturer brands Factor names and question items Factor

loadings Eigenvalues Item-total correlation Cronbachs Price strategy (KMO: 0.65 *** ) 1.97 0.74 Manufacturer brands provide a high value in relation to the higher price than store brands. We must pay for it. 0.54 0.47 Manufacturer brands provide higher advertising promotions for the higher price than store brands. We must pay for it. 0.72 0.58 Manufacturer brands provide a higher image for the higher price than store brands. We must pay for it. 0.84 0.64 Promotion strategy (KMO: 0.50 *** ) 1.45 0.62 I think the promotion activities of manufacturer brands, in general, are very good.

0.67 0.45 In general, I like the promotion activities for manufacturer brands. 0.67 0.45 Endorsing strategy (KMO: 0.65 *** ) 2.27 0.84 If famous manufacturers endorse retailer brands, I increase the purchases of such manufacturer brands. 0.58 0.56 If famous manufacturers endorse retailer brands, I increase my quality evaluations of such manufacturer brands. 0.96 0.80 If famous manufacturers endorse retailer brands, I increase my brand image evaluations of such manufacturer brands. 0.87 0.76 Brand loyalty (KMO: 0.50 *** ) 1.38 0.55 I consider myself to be loyal to manufacturer brands. 0.62 0.38 Compared to store brand, I prefer manufacturer

brands. 0.62 0.38 Brand image (KMO: 0.50 *** ) 1.67 0.80 Manufacturer brands have a famous and strong personality. 0.82 0.67 Manufacturer brands have a strong image. 0.82 0.67 Perceived quality (KMO: 0.70 *** ) 2.31 0.85 Manufacturer brands offer very reliable products. 0.75 0.68 The likely quality of manufacturer brands is extremely high. 0.92 0.79 The likelihood that manufacturer brands will be satisfactory is very high. 0.76 0.69 Purchase intention (KMO: 0.69 *** ) 2.14 0.79 I am willing to pay money for manufacturer brands. 0.80 0.66 I consider buying manufacturer brands if I need to buy something.

0.84 0.69 I recommend manufacturer brands to other consumers. 0.63 0.56 Note: Extraction method: Principal Axis Factoring. *** p value is significant at the 0.000 level. In summation, in manufacturer brands model, high prices and promotion activities are positive supports, however, brand endorsing strategies are negatively supported to the brand equity and purchase intentions of manufacturer brands. Brand equity is significantly related to consumer purchase intentions, and has intermediate and helpful effects on marketing strategies to consumer purchase intentions. Another aspect, in retailer store brands model, low prices, promotion activities, brand endorsed strategies, and store image are positive supports to the brand equity and purchase intentions of retailer store brands. Brand equity is significantly related to consumer purchase intentions, and has intermediate and helpful effects on marketing strategies to consumer purchase intentions. Consequently, both manufacturers and retailers adopt well-evaluated marketing strategies to increase the 62 International Journal of Electronic Business Management, Vol. 8, No. 1 (2010)

brand equity of products, which will lead to higher consumer purchase intentions. Compared to low price strategies adopted by retailer store brands to obtain consumer recognition, manufacturer brands are suggested to adopt high price strategies to portray product quality or brand personality to win recognition from consumers. Furthermore, in addition to the positive effects of promotion activities and store image, this research suggests either manufacturers brands or retailers store brands add new features (e.g. distinguishing brand equity, brand alliance strategy, etc.) to products helpfully to enhance, maintain, and increase consumer recognition and purchase intentions. Table 2: Factor analysis and reliability analysis for retailers store brands Factor names and question items Factor loadings Eigenvalues Item-total correlation Cronbachs Price strategy (KMO: 0.72 ***

) 2.25 0.83 Store brands provide a low value in relation to the lower price than manufacturer brands. We must pay for it. 0.75 0.67 Store brands provide lower advertising promotions for the lower price than manufacturer brands. We must pay for it. 0.79 0.69 Store brands provide a lower image for the lower price than manufacturer brands. We must pay for it. 0.84 0.72 Promotion strategy (KMO: 0.50 *** ) 1.57 0.73 I think the promotion activities of store brands, in general, are very good. 0.76 0.57 In general, I like the promotion activities for store brands. 0.76 0.57 Endorsed strategy (KMO: 0.76 *** ) 2.58 0.92 If retailer brands are endorsed by famous

manufacturers, I increase the purchases of such retailer brands. 0.86 0.82 If retailer brands are endorsed by famous manufacturers, I increase my quality evaluation of such retailer brands. 0.92 0.85 If retailer brands are endorsed by famous manufacturers, I increase my brand image evaluation of such retailer brands. 0.88 0.83 Brand loyalty (KMO: 0.50 *** ) 1.64 0.78 I consider myself to be loyal to store brands. 0.80 0.64 Compared to manufacturer brand, I prefer store brands. 0.80 0.64 Brand image (KMO: 0.50 *** ) 1.62 0.77 Store brands have a famous and strong personality. 0.79 0.62 Store brands have a strong image. 0.79 0.62 Perceived quality (KMO: 0.73 ***

) 2.38 0.87 Store brands offer very reliable products. 0.82 0.74 The likely quality of store brands is extremely high. 0.89 0.79 The likelihood that store brands will be satisfactory is very high. 0.78 0.72 Purchase intention (KMO: 0.70 *** ) 2.21 0.82 I am willing to pay money for store brands. 0.75 0.66 I consider buying store brands if I need to buy something. 0.88 0.73 I recommend store brands to other consumers. 0.70 0.63 Note: Extraction method: Principal Axis Factoring. *** p value is significant at the 0.000 level. T. Y. Shih: Comparative Analysis of Marketing Strategies for Manufacturers and Retailers Brands 63 Table 3: Properties of CFA for manufacturer brands and retailers store brands Manufacturer brands Standardized loading (T-value) Store brands Standardized loading (T-value) Marketing strategy Price strategy 0.67 ( 8.08) 0.55 ( 5.19) 0.33 ( 6.23) 0.89 (14.74) Promotion strategy 0.29 ( 4.94) 0.92 (14.58) 0.72 (13.64) 0.48 ( 8.15) Brand endorsing/endorsed strategy -0.25 (-4.28) 0.94 (14.89) 0.54 (10.65) 0.71 (12.89)

Store image 0.33 ( 6.25) 0.89 (14.89) Brand equity Brand loyalty 0.66 (12.08) 0.57 (14.35) 0.69 (13.29) 0.52 (14.47) Brand image 0.89 (14.72) 0.21 ( 7.74) 0.91 (16.17) 0.17 ( 8.74) Perceived quality 0.90 (14.82) 0.19 ( 7.28) 0.92 (16.25) 0.16 ( 8.07) Purchase intention Willing purchase 0.80 (16.87) 0.36 ( 9.79) 0.84 (14.34) 0.30 ( 8.17) Considering purchase 0.84 (17.34) 0.30 ( 8.14) 0.78 (16.28) 0.39 (12.04) Recommendation purchase 0.63 (13.39) 0.60 (13.62) 0.81 (13.94) 0.35 ( 9.08) Errors correlate Price strategy 0.30 ( 6.81) Willing purchase Recommendation purchase -0.15 (-5.12) Brand endorsed strategy

Model standards and Fits Chi-Square/df < 3 51.64/24=2.15 102.89/30=3.43 GFI > 0.9; AGFI > 0.9; CFI > 0.95 GFI=0.98; AGFI=0.96; CFI=0.98 GFI=0.96; AGFI=0.93; CFI=0.96 NFI > 0.9; NNFI > 0.9; CN > 200 NFI=0.97; NNFI=0.97; CN=408 NFI=0.95; NNFI=0.95; CN=230 RMSEA < 0.05; RMR < 0.05 RMSEA=0.048; RMR=0.024 RMSEA=0.070; RMR=0.034 Table 4: Effects of latent variables for manufacturer brands and retailers store brands Brand equity Purchase intention Latent Variables Standardized loading T-value Standardized

loading T-value Manufacturer brands Marketing strategy Direct effect 0.56 5.36 0.19 2.16 Indirect effect 0.30 Total effect 0.49 Brand equity Direct effect 0.54 6.26 Indirect effect Total effect 0.54 Store brands Marketing strategy Direct effect 0.68 8.23 0.20 2.82 Indirect effect 0.46 Total effect 0.66 Brand equity Direct effect 0.67 8.00 Indirect effect Total effect 0.67 64 International Journal of Electronic Business Management, Vol. 8, No. 1 (2010) 5. DISCUSSION AND CONCLUSION This study explores marketing strategies and brand issues in the Taiwan manufacturing and retailing industries. Consumers are surveyed and

statistical methods are used to verify key factors of a firms marketing and branding strategies. The contribution of this research is to incorporate marketing strategies and brand issues, as well as firms strategies and performance in order to construct a meta-dialogue for their relationships in terms of consumer-based viewpoints. Manufacturing firms and retailers are both increasingly establishing explicit brand architecture to guide this evolution and facilitate improved cohesion of marketing strategy across their markets [13]. Consumers rely on a brand or vendor reputation to alleviate the risk of making a poor purchasing decision. In this study, the empirical results support the hypotheses. Except for the endorsement strategy, a high/low price strategy and promotion activities of manufacturer/store brands enhance the brand equity and the degree of purchase intention of consumers. Further, the brand equity of manufacturer brands and retailer store brands both positively enhance the degree of purchase intention of a consumer. Based on the foregoing discussion, the study submits the following management implications: For manufacturer brand, Wulf, OdekerkenSchrder and Ossel [44] find that the national brand

is still quite powerful compared to the store brands despite the promotional efforts made by these store brands. Apparently, when consumers are aware of the brand, they have strong, positive brand associations [22]. Therefore, compared to retailers brands, manufacturer brands should commit to a brand image of high price and high quality and adopt the appropriate promotion activity. For manufacturer brands, the study results indicate that a brand endorsing strategy decrease the brand equity and consumer purchase intention of manufacturer brand. Therefore, before performing a brand endorsing strategy, the manufacturer should intensify product quality and brand equity to reduce the negative influence on sales of the manufacturers brands. Through channel evaluations and complementary endorsement strategies, manufacturers brands can cooperate with various channels including both a real and virtual channel (e.g., TV shopping and Internet stores) to increase brand recognition. After careful evaluation of the cooperating retailers store brands, the brand endorsement strategy executed by the manufacturers brand increases the degree of recognition of the brand name, but does not harm its brand image and therefore, increases product sales in

terms of OEM (original equipment manufacturing) / ODM (own designing & manufacturing) / OBM (own branding & manufacturing) strategies. On the other hand, a growing number of retailers develop their own brands to win customer brand loyalty and market share. An imitative strategy by the retailer is always valid if the volumes of its own brand are sufficient to obtain reasonable economies of scale, so that the retailer can sell at a low price [10]. Wulf et al. [44] indicated that, for a retail brand or a store brand, firms do not always invest directly in the individual "brand", preferring instead to rely on the successful promotion of the store itself. The store brand lives off of the credibility and image of the store rather than owning a specific brand value in and of itself. However, the study findings show that the brand equity of retailers store brands gives consumers confidence and increases their purchase intentions. Retailers should improve the store image, enhance the products perceived quality, and establish brand equity and brand loyalty among consumers. Endorsement by famous manufacturers, low price strategies, and appropriate promotional activities all enhance the brand equity of store brands and the degree of purchase intention of

consumer. In increasingly M-shaped income distribution, low priced store brands may be able to acquire recognition among low-income consumers. However, retail store executives should not ignore the consumption ability of high-income and quality emphasized consumers. Retailers could provide varied positioning store brands for distinct customer groups [8]. In commercial environments, firms exist in the markets in terms of varied product positions. Therefore, in addition to large manufacturer brands, certain (usually, small sized) manufacturers may promote their brands as economic items (products with lower prices). Such manufacturer brands, without specific brand personalities, are not the targets of this research, which led to limitations of this research. Future study can identify manufacturer brands with distinguishing levels, and then compare with varied retailer brands concerning marketing strategy applications, brand equity, and consumer purchase intentions. Another limitation of this research is that it is based on only 491 respondents. However, it does consist of respondents who are involved in the decision and execution of the product purchase process. Future research could enlarge the

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brands versus national brands, The Journal of Consumer Marketing, Vol. 22, No. 4/5, pp. 223-232. 45. Yoo, B. and Donthu, N., 2002, Testing cross-cultural invariance of the brand equity creation process, The Journal of Product and Brand Management, Vol. 11, No. 6/7, pp. 380-398. 46. Yoo, B., Donthu, N. and Lee, S., 2000, An examination of selected marketing mix elements and brand equity, Journal of the Academy of Marketing Science, Vol. 28, No. 2, pp. 195-211. 47. Zeithaml, V. A., 1988, Consumer perceptions of price, quality and value: A means-end model and synthesis of evidence, Journal of Marketing, Vol. 52, No. 3, pp. 2-22. ABOUT THE AUTHORS Tsui-Yii Shih is an Assistant Professor in the Department of International Business at the National Taipei College of Business. She received her Ph.D. degree in Department of Management Science at National Chiao-Tung University (NCTU) in 2005. Her research interests include international business, marketing, industrial analysis and decision science.

Her research has been published or accepted in such journals as the Service Industries Journal, European Journal of Operational Research and International Journal of Technology Management. (Received December 2008, revised April 2009, accepted June 2009) T. Y. Shih: Comparative Analysis of Marketing Strategies for Manufacturers and Retailers Brands