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Testing a Model of CUSTOMER-BASED BRAND EQUITY In The Vietnamese Banking Service























MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HOCHIMINH CITY








Lâm Hồng Phong

Testing a Model of
CUSTOMER-BASED BRAND EQUITY
In The Vietnamese Banking Service



MASTER’S THESIS




In
Business Administration
Ology code: 60.34.05

Supervisor
Dr. Trần Hà Minh Quân






Ho Chi Minh City 2009

i

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.






ii


Abstract

This study reports on the research results by testing the model of customer-
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.






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






iii


TABLE OF CONTENT


Acknowledgement.............................................................................................................i
Abstract ............................................................................................................................ii
TABLE OF CONTENT ................................................................................................. iii
LIST OF FIGURES..........................................................................................................v
Chapter 1: INTRODUCTION..........................................................................................1
1.1 Introduction ............................................................................................................1
1.2 Research background..............................................................................................1
1.3 Problem statement .................................................................................................2
1.4 Research objective..................................................................................................3
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
2.1 Introduction ............................................................................................................7
2.2 A brand versus a product........................................................................................7
2.3 Brand equity .........................................................................................................11
2.3.1 Brand associations .........................................................................................13
2.3.2 Brand evaluations .........................................................................................19
2.3.3 Customer-brand relationship .........................................................................22
2.4 Generation of hypotheses .....................................................................................24
2.5 Conclusion............................................................................................................25
Chapter 3: METHODOLOGY.......................................................................................27
3.1. Introduction .....................................................................................................27
3.2. Business research ............................................................................................27
3.3. Research design...............................................................................................28
3.4. Item generation................................................................................................29
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

iv

3.6.2 Sampling ......................................................................................................35
3.6.3 Sample size ...................................................................................................36
3.7. Conclusion.......................................................................................................36
Chapter 4: DATA ANALYSIS AND FINDINGS........................................................38
4.1 Introduction ..........................................................................................................38
4.2. Descriptions of sample ........................................................................................38
4.3. Scales assessment ................................................................................................40
4.3.1 Reliability testing...........................................................................................40
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
4.5.1 Findings .........................................................................................................56
4.5.2 Conclusion .....................................................................................................58
Chapter 5:
CONCLUSIONS AND IMPLICATIONS.....................................................................59
5.1 Introduction ..........................................................................................................59
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










v


LIST OF FIGURES


F
IGURE
1.1.

O
UTLINE OF CHAPTER
1 ................................................................................1
F
IGURE
1.2.

S
TRUCTURE OF THE STUDY
...........................................................................6
F
IGURE
2.1.

T
HE STRUCTURE OF
C
HAPTER
2....................................................................7
F
IGURE
2.2.

A
BRAND VERSUS A PRODUCT
.......................................................................9
F
IGURE
2.3

O
RIGINAL
M
ODEL OF
C
USTOMER
–B
ASED
B
RAND
E
QUITY
.........................14
F
IGURE
2.4.

R
ESEARCH
M
ODEL OF
C
USTOMER
-B
ASED
B
RAND
E
QUITY
......................26
F
IGURE
3.1.

O
UTLINE OF CHAPTER
3 ..............................................................................27
F
IGURE
3.2.

R
ESEARCH PROCESS
....................................................................................30
F
IGURE
4.1.

O
UTLINE OF CHAPTER
3 ..............................................................................38
F
IGURE
4.2.

A
GE GROUPS OF RESPONDENTS
..................................................................39
F
IGURE
4.3

F
REQUENCY OF TRANSACTIONS
..................................................................40
F
IGURE
4.4.

R
ELATIONSHIPS BETWEEN RATIONAL EVALUATION
AND THE BRAND ASSOCIATIONS
..............................................................................47
F
IGURE
4.5.

R
ESULTS OF MODEL
I ..................................................................................50
F
IGURE
4.6.

R
ELATIONSHIPS BETWEEN EMOTIONAL EVALUATION
AND THE BRAND ASSOCIATIONS
..............................................................................51
F
IGURE
4.7.

R
ESULTS OF MODEL
II ................................................................................53
F
IGURE
4.8
A


H
YPOTHESIS
11

T
ESTING RESULT
...........................................................54
F
IGURE
4.8
B
.

R
ESULTS OF MODEL
III
B
..........................................................................55
F
IGURE
4.9.

A
DJUSTED MODEL OF
CBBE
IN BANKING SERVICE
...................................58
F
IGURE
5.1



O
UTLINE OF CHAPTER
5 ............................................................................59



vi


LIST

OF

TABLES


T
ABLE
4.1



S
AMPLE CHARACTERISTICS
........................................................................39
T
ABLE
4.2



R
ELIABILITY OF THE MEASUREMENT INSTRUMENT
....................................41
T
ABLE
4.3



R
OTATED COMPONENT MATRIX
.................................................................44
T
ABLE
4.4



EFA
RESULT FOR INDIVIDUAL MEASUREMENT SCALES
.............................45
T
ABLE
4.5



C
ORRELATION MATRIX
...............................................................................48
T
ABLE
4.5
A
.

M
ODEL SUMMARY
.....................................................................................49
T
ABLE
4.5
B


C
OEFFICIENTS
A
........................................................................................49
T
ABLE
4.6



S
UMMARY OF HYPOTHESES TESTING RESULTS
(M
ODEL
I).........................50
T
ABLE
4.6
A
-

M
ODEL
II

S
UMMARY
...............................................................................51
T
ABLE
4.6
B
-

C
OEFFICIENTS
A
.........................................................................................52
T
ABLE
4.7



S
UMMARY OF HYPOTHESES TESTING RESULTS
(M
ODEL
II)........................52
T
ABLE
4.7
A
-

M
ODEL
III
A
S
UMMARY
...........................................................................53
T
ABLE
4.7
B
-

C
OEFFICIENTS
A
.........................................................................................54
T
ABLE
4.8
A
-

M
ODEL
III
B
S
UMMARY
...........................................................................55
T
ABLE
4.8
B


C
OEFFICIENTS
A
........................................................................................55
T
ABLE
4.9



S
UMMARY OF HYPOTHESES TESTING RESULTS
(M
ODEL
III
A
,
B
).................56
T
ABLE
5.1.

S
UMMARY OF HYPOTHESES
..........................................................................60


1

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

2

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

3

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

4

(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
service?
1.5 Scope and methodology of the study
1.5.1 Scope of the study
In the banking sector of Vietnam, there are four types of bank: the State-owned banks
(including commercial banks and specialized banks such as ‘social policy bank’);
100% foreign-invested banks; joint venture banks and the rest are Vietnamese
commercial joint stock banks.
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

5

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








6

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

7

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
2.1 Introduction
2.2 A brand versus a product
2.3 Brand equity
2.4 Generation of hypotheses
2.5 Conclusion

8

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.

9

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
User Imagery
Brand-Customer
Relationships
Self-
Expressive
Benefits
Emotional
Benefits
PRODUCT
Scope
Attributes
Quality
Uses
BRAND



Source: David A. Aaker (1996a)

10

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”.

11

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

12

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

13

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).


14


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
Product quality
Service quality
Price
Promise

Trust and
Credibility



Rational
Evaluation




Emotional
Evaluation


Differentiation


Rational and emotional associations
Source: Martensen &
Grønholdt (2004)





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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

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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

17

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.

18

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

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