Impact of Brand Name on Consumer Decision Making

Impact of Brand Name on Consumer Decision Making Brand Name Consumer Todays generation follows the pattern of capitalism where human values are measured by, ‘you are known by what you have not by what you are’. This naturally leads to a social structure where everyone seeks uniqueness by possessing things which sets them apart from everybody else. Nowadays, brands not only represent the symbol of a company or product but also define the daily life of a person to a large extent . Products used by a person often reflect the persons tastes, status in society, and economic background. When customers purchase products, the consumer’s choice is frequently affected by brand name. Some customers purchase specific brand products only due to brand name. The purpose of this thesis is to create a deeper consideration about how brand name affects consumers when they gor for purchasing a car. Moreover the author wants to identify if there is any connection between brand name and consumer decision making. The research method involved a critically analysed review on secondary research upon the subject. It provides the reader with an understanding of the relation between companies and consumers in terms of brand equity, emotional branding, consumer behaviour, and consumer decision making. From the secondary research, the basis for primary research was created. The use of a questionnaire allowed the author to identify individual feelings when people go for purchasing car. All of the respondents answered every question upon which quantitative data and findings were produced. The findings and analysis of the research conducted, concluded that brand name is the most important aspect when people go for purchasing a car. Furthermore, the results show that most people prefer brand products which signify consumer status and social status. The paper concludes with an evaluation of the study, limitations, and recommendations for further research. Reasons for choice of topic Every brand differs in names or symbols like logo, trade mark, design and packing. A brand name is a signal to protect the customer from similar brands and protect the producer from the competitors (Aaker, 1991). Brand names present many things about a product and give number of information about it to the customers and also tell the customer or potential buyer what the product means to them (Hansen Christensen, 2003). Brand names affect consumers purchasing behaviour enormously. It is important for companies to find out customer’s decision process and pinpoint the criteria, which customers apply while making decision (Cravens Piercy, 2006). In today’s business environment, companies must work harder than ever before to achieve some degree of differentiation in their products. Many companies have sought to achieve this differentiation by branding their products, simply putting the company’s name on a product (Aaker, 1991). The author has chosen the topic to try to gain further knowledge about the subject of how brand name affects consumer decision in car choice. The reasons for attempting to gain further knowledge are simply based upon the author‟s great interest towards the car industry and consumer behaviour. The author is particularly interested in why customers prefer brand products in case of brand cars. Also the effect of brand name on consumer decision making will be of great curiosity to the author. Academic objectives of dissertation This study attempts to highlight and tackle the extent to how brand name affects consumer decision in car choice. This is to allow a greater understanding of the relation between companies and consumers in terms of brand equity, emotional branding, consumer behaviour, and consumer decision making. In order to achieve this main aim, the following objectives have been produced: To discover any assets and liabilities of brand equity in case of adding or subtracting value for customers. To understand why emotional branding creates feelings and what kind of feelings. To explore how individuals select, purchase, and use or dispose products to satisfy their needs and desires. To investigate consumer decision making and the way of information search when customers go for purchasing a car. Outline of chapters As the introduction is chapter one, the surplus of this study is organised and structured as followed: Chapter Two- This chapter is to set the scene for the study. It presents the background of the current situation of the car industry and the influence of brands in society. Chapter Three This chapter is a review of earlier research and literature on brand name and the effect it has on the consumers purchase decision. In this chapter the earlier literature is critically analysed upon its relevance and importance to the study. Chapter Four The methodology of the study is addressed in this chapter. It involves a description of the research undertaken for the study and a justification of why. The approaches and methods of research are detailed here and justified. Chapter Five This chapter is the findings and analysis of primary research as well as secondary research undertaken towards the study. The findings from the primary research are analysed against the earlier literature and research from chapter three. Chapter Six- This chapter is a conclusion, commenting on the initial objectives of the study. The limitations and recommendations for further research are also discussed in this chapter. Car Industry Background The European Union is the worlds largest car manufacturing region and the worlds biggest market, not only in size terms, but also due to the intensity of competition (Lung, 2003). Europe constitutes a true â€Å"automobile space†, inasmuch as the routing and regulation of the supply and demand for automobile products here has mainly taken place at a regional level (Carrillo, Lung, van Tulder, 2004). We can therefore say that we are in the presence of what can be called a European automobile system (Lung, 2001). From the perspective of car manufacturers the competitive pressure is increasing and their established role is threatened (Selz Klein, 1998). Franchising dominates automobile distribution because of the need to decentralize pricing and control of decisions (Vazquez, 2004). The sales and distribution sector is set to experience considerable change (Eurofund, 2004). The aim of the Commission regulation is to promote competition and a better deal for consumers. It separates new car sales, repair and parts supply, and gives more autonomy to dealers and repairers (Eurofund, 2004). The idea is that such liberalization will promote intrabrand competition, that is, competition between dealers of the same brand (Verboven, 2006). Furthermore, cars of different manufactures look increasingly similar. Product differences are reduced to design aspects, and thus require new branding concepts. At the same time, we move away from the simple durable good car to a complex bundle, incorporating diverse s and after-sales s (Dudenhà ¶ffer, 1997). When a company is deciding which new products to add to its line, it should consider two key factors: First, which new product contenders best fit its distribution system, and second, whether the distribution system will add value to the product in the eyes of the end user (Fites, 1996). Brands in Society Todays generation follows the pattern of capitalism where human values are measured by, ‘you are known by what you have not by what you are’. This naturally leads to a social structure where everyone seeks uniqueness by possessing things which sets them apart from everybody else. Brands not only represent the symbol of the company or product but to a larger extent define the general life of a person. Brand is a combination of name, symbol and design. Brands represent customer perceptions about the performance of a product. A powerful brand is which resides in the mind of the consumer. Brands differ in the amount of power and worth they have in the market place. Brands with high awareness have a high level of acceptability and customers do not refuse to buy such brands as they enjoy the brand performance (Kotler et al., 2005). The history of branding goes back when people utilized burned mark on cattle in order to identify quality (Bengtsson, 2002). Brands differ in name or symbol, trade mark, design and packing. Products are recognized through these elements and thus make it possible to differentiate one product from the other. A brand is a signal to protect the customer from similar brand names and protect the producer from the competitors (Aaker, 1991). Usually people do not buy certain brands because of design and requirements, but also in an attempt to enhance their self esteem in society (De Chernatory McDonald, 1992). Brand names present many things about products and give a number of information to customers. When customers consider to purchase they evaluate the product immediately by reconstructing the product from memory (Hansen Christensen, 2003). In today’s business environment, companies must work harder than ever before to achieve some degree of product differentiation. Many companies have sought to achieve this differentiation by branding their products, simply putting the company’s name on a product (Aaker, 1991). In this respect companies offer different packages to customers in this competition war for raising awareness among the customers about the branded product. Brand and Consumer Perceptions In every industry corporate executives are finding that to be competitive they must increase the communication and contact between their company and their customers (Girsky, 2003). Automotive is no exception: car manufacturers face mounting pressures related to acquiring and retaining customers. While many dealers have assumed that customers make decisions primarily on a rational, fact-driven basis, the truth is that most purchase decisions also involve emotion, intuition and impulse (Zaltmann, 2003). The reason customers buy cars is more connected to the overall experience of the purchase and ownership of an automobile than it is to any traditional impetus such as brand loyalty, price, or personal relationship with the dealer (Bolton, 2002). In this environment, competitive advantage will shift to the player whose value net is most tightly linked and built around the customer: To attract new customers, and sell more to each of them over a lifetime, manufacturers need to move away from their traditional build it and they will come approach to capture customer wallet share (IBM, 2003). To facilitate increased revenue capture over the customer lifecycle, dealers should work to create a collaborative business environment. Increased collaboration will help dealers manage customer touchpoints more efficiently and effectively, increase personalization and establish emotional bonds between themselves and their customers (IBM, 2003).Seeing, touching, and driving the product are still cruc ial to the purchase decision for most consumers (Helper, 2000). The evolution of customer needs advances continually (IBM, 2003). Successful marketing requires understanding how customers relationships with an organization change over time. Todays interactive generation demands products that are valuable to them and that enhance and enable their lifestyle as well. In this environment, quality and price are no longer enough, customers want to make purchases that improve their quality of life – and their buying power will go to the companies that offer them the best (IBM, 2003). Product differentiation is no longer adequate to ensure profits. Traditional customer-focused marketing to determine the needs and wants of target markets is still largely product, rather than customer, focused. Even customer satisfaction itself is no longer enough (IBM, 2003). Customer Touchpoints A car companys marketing instruments have different effects on customer behavior and ultimately on customer lifetime value (Bolton, 2002). Customer lifetime value is characterized by the length, depth and breadth of each customer’s relationship with a dealer in terms of the customers purchase behavior (Verhoef 2001). Length and depth are also reflected in upgrading behavior, which is the purchasing of premium higher margin products instead of low cost variants (Bolton, 2002). Loyal customers are sometimes assumed to be willing to pay higher prices (Reichheld 1996a; Reichheld 1996b) but in some markets loyal customers pay lower prices due to discounts. The breadth of a relationship primarily concerns â€Å"cross- buying† or â€Å"add-on buying† that is, the number of additional (different) products purchased from a company over time (Blattberg, Getz and Thomas 2001). In addition to purchase behavior, customer lifetime value is influenced by non-purchase behaviors, such as word-ofmouth behavior and the provision of new product ideas that may be more difficult to observe and predict (Bettencourt 1997). It is important to know how each of these categories of marketing instruments differentially influence relationship duration, customer usage and cross-buying of products. These marketing activities generate revenues via their effect on individual customer behavior (Bolton, 2002). Satisfaction and Quality Management Marketers typically assume that satisfied customers are more loyal (Szymanski and Hise 2001). However, studies of actual customer behavior have established that the effect of satisfaction on relationship length is complex. Bolton (1998) argues that satisfaction is an indicator of the subjective expected, and finds a positive effect of satisfaction on relationship length that is enhanced by relationship age. Mittal and Kamakura (2001) show that demographics, such as age and gender, moderate the effect of satisfaction on relationship length. Negative discrepancies between a customer’s satisfaction with of a product provider and its competitor (i.e., competitor performs better than company) influence customer retention, whereas positive discrepancies do not (Kumar 2002). A positive link between satisfaction and usage has been documented by Bolton and Lemon (1999). The underlying rationale for this link is that higher satisfaction scores reflect a higher utility of the provided product. This higher utility will be reflected in higher future usage rates. However, a customers’ experience with a particular product will not necessarily transfer to additional products offered by the same organization (Verhoef, Franses and Hoekstra (2001). Relationship Management In direct marketing it is distinguished between marketing instruments that directly stimulate product sales, and those that focus on the maintenance and development of customer relationships (McDonald 1998). Marketing instruments can also be classified based upon whether they provide economic gains or social benefits to the customer (Bhattacharya and Bolton 2000). But these effects of relationship marketing variables have not been extensively investigated (Jain and Singh 2002). Since direct marketing focuses on creating immediate sales, direct marketing is not expected to influence the length of the customer-firm relationship. However, in the case of successful direct marketing policies, direct marketing may positively affect the depth and/or breadth of the relationship (Bolton, 2002). A key objective of concentrating on loyalty is to enhance relationship depth, although it is also intended to increase customer-firm relationship length (Bolton, 2002). Although there is considerable anecdotal evidence that loyalty programs strengthen social bonds between customers and product providers (Sharp and Sharp 1997). In existing relationships, direct marketing is an important tool to sell additionals (Roberts and Berger 1999). Direct marketing often offers attractive propositions to customers, such as economic benefits (Bolton, 2002). Brand Equity Most observers define the brand equity in term of marketing impact that exceptionally attribute to a brand. Brand equity relates to the information that usually gets different results from marketing of a product (Keller, 2003). Brand equity is a set of brand assets and liabilities linked to a brand, its name and symbol that add to or subtract from value provided by a product to a company and/or to the companies customers (Aaker, 1991). Brand awareness, brand loyalty, perceived quality and brand association are the core assets for the brand equity. These are important assets for building strong brand equity helps in increasing the brand awareness in the market. The perceived quality and its association with the brand name can effect the customer’s satisfaction and gives him the reason to purchase. This results in the high brand loyalty among the customer and greater share in market (Chen, 2001). A power full brand enjoys a high level of customer brand awareness and loyalty. Company can have a competitive advantage through high brand equity (Kotler et al., 2005). Brand equity provides a great value for customers; brand equity assets help the customers to capture and process the brand and store large number of information about it. Brand equity can help to attract new customers and/or to maintain the loyalty and faith of old customers (Aaker, 1991). Customer based brand equity arises when customers are well acquainted with the brand name and keeps some favorable, strong and unique about brand association in memory (Keller, 2003). Brand equity also involves the value added by a product through customer relations and perceptions about a specific brand name (Wood, 2000). Brand equity supports the company in facing the competition. If a brand has a strong position in the segment, another brand will find a very difficult to compete in the same segment as they already correlate various characteristics with the recognised brand (Papanastassiu Rouhani, 2006). Brand Loyalty Brand loyalty shows customer preferences to purchase a particular brand; customers believe that the brand offers the enjoyable features, images, or standard of quality at the right price. Initially customers will purchase a brand for trial, after being satisfied, customers will keep on buying the product from the certain brand (Bolton, 2002). Brand loyalty represents an encouraging approach towards a brand resulting in regular purchase of the brand over time (Tuominen, 1992). Brand Loyalty reflects the ratio of regular buyers to satisfied buyers who like the product This is more useful in marketing the product to existing customers because of good brand loyalty it will cost less effort and money, than to attract new ones (Tuominen, 1992). When loyal customers see any lack to a brand attribute, then they immediately transfer to other brand products that offer a better deal. The reason for buying a same product from a familiar brand saves time and reduces risks (Bloemer Kasper, 1995). Perceived Quality and Brand Association Perceived quality defines a customer’s perception about product superioty. Perceived quality provides fundamental reasons to purchase. Perceived quality provides greater beneficial opportunity of charging a premium price. Perceived quality enables a strong brand to extend on a large scale (Hoyer Brown, 1990). Mostly customers prefer to buy products from a well-known and familiar brand, rather than opting for unknown or new brands (Rust et al, 1999). Perceived quality of a brand influences decision making of consumers. This influence is important when customers are unable to analysis the quality of a product (Aaker, 1991). All customers are conscious about product quality. The majority of people prefer to go for well-known brands which have high reputation in the market. Favorability, strength, and uniqueness of brand associations are the dimensions distinguishing brand knowledge that play an important role in determing responses that makes up brand equity, especially in high involvement decision settings (Chen, 2001). There are values of a brand that are not as visible as other brands. These values can be based on brand association with certain factors that provide confidence and credibility among customers. Companies try to associate certain attributes to their brand, which makes it harder for the new brands to enter the market (Aaker, 1991). Brand Name Awareness Brand name awareness plays an important role in consumer decision making; if a customer has already heard a brand name, the customer would feel more comfortable at the time of decision making. Customers do not prefer to buy unknown brands. Therefore companies’ strong brand name is a wining track as customers choose brand products (Aaker, 1991). People generally tend to buy brands that they are familiar with and in which they have confidence. Brand awareness is responsible for loyal customers, for which unknown brands have to face tough competition (Hoyer Brown, 1990). However, well-known brands are always more likely to be recognized and therefore it is more likely that customers prefere brand products. Emotional Branding At present, successful companies have built relationships with consumers by attractively engaging them in a personal communication which responds to their needs. Marketers have done so by connecting with customers and creating strong emotional bonds with their brands (Brand Week, 2001). When companies want to know what consumers feel about them, they have to build a personal communication with them. This is the good way for a company to consider itself because customer perceptions are very important for companies. However a company can learn a lot by listing to its customers views (Daryi, 2000). For companies it is essential that its brand corresponds with its products to create emotion; thereby products become connected with a brands image in the customer’s mind (Papanastassiu Rouhani, 2006). Emotional branding is the fine approach that clarifies the values of a company to its customers (Marken, 2003). Pricing Strategies The effect of price on customer behavior in their relationships with companies do not focus only on actual prices. They also focus on price perceptions, such as price fairness or payment equity (Bolton and Lemon 1999). Higher absolute prices lead to lower perceptions of price fairness, but price fairness is also be affected by competitors’ pricing policies (Rust, Zeithaml and Lemon 2000). Negative changes in price perceptions over time (e.g., price fairness decreases), will probably have a larger influence than positive changes (Tversky and Kahneman 1991). Furthermore, differences between the price perception of the dealer and its competitors can lead to regret (Tsiros and Mittal 2000). Positive price perceptions relative to competitors have a large effect on customer retention, and negative price perceptions relative to competitors have a small effect (Bolton, Kannan and Bramlett 2000). Price plays an important role in the acquisition of new customers. In contrast, after the relationship has been established, the role of price tends to become less prominent and experiential aspects of the relationship, such as quality, become more important (Zahorik and Keiningham 1995). Brand Name The name of a brand is the fundamental indicator of the brand. The name of the brand is the basis for raising awareness of the brand and communication efforts. Often even more important is the fact that it can generate association which serves to describe the brand (Aaker, 1991). Brand name is a significant choice because sometimes it captures the central theme or key association of a product in a condensed and reasonable fashion. Brand names can be extremely successful means of communication (Keller, 2003). Some companies assign their products with a brand name that in reality has nothing to do with the emotional experience but is catchy and a name that people can easily memorize. The core base of naming a brand is that it should be unique, that it can be easily differenciated from other names, that is easy to remember, and that it is attractive for customers (Papanastassiu Rouhani, 2006). Symbol and Logo Symbols have a long history which shows brand identification of the company. Logos and symbols are an easy way to recognize a product. It is a greater success if symbol and logos became a linked in memory to corresponding brand name and product to increase brand recall. Customers may perhaps identify definite symbols but be unable to link them any particular brand or product (Keller, 2003). Logos helps companies to develop the brand equity through raised brand identification and brand loyalty. Logos are very important assets, companies spend enormous time and money to promote brand logos and symbols (Hem Iversen, 2003). Experience All brands create feelings; some brands are designed to give customers more experience in the true sense of the word than other brands. The most powerful brand goes beyond the traditional means to steal customers’ heart away and take on special meaning to customers through their product. With time and experience, consumers learn about the brands, they find out which brands satisfy their needs and which ones do not (Daryi, 2000). Customers have used a same branded car for many years, because customers have good experience company brands product. Self esteem Usually people have some pre-conceptions about themselves, which is the image of ideal self and also reflects the person’s desire how he would like to be. When the person tries to think about himself he tries to compare it to the people who are well known in society and have high image in the society. It is a very basic and natural tendency of a human being to look into his self esteem and personality by comparing it to others (Solomon, 2005). Self-esteem refers to person’s self-concept. When people have a bad self-esteem it shows that they will not perform well and they think that when they will do a certain work and they might be rejected or fail (Solomon, 2005). When self esteem advertising is done, there are attempts to change product attribute by motivating a positive feeling about the self. One approach of doing this is to challenge the customer self esteem and then it shows a product with a linkage of that can provide a solution (Solomon, 2005). Consumer Behaviour The Consumer behaviour study involves how an individual or groups select, purchase, use or dispose of products, s ideas, or experience to satisfy their need and desires (Solomon, 2005). The consumer environment influences how the consumers feel, consider and act. The environmental features are, for instance, comments taken from other customers, advertising, packing, price, and product appearance etc (Peter Olson, 2005). Consumer behaviour is related to the physical action of a consumer, which can be measured directly. Frequency of visiting stores or shopping malls can be measured. To select a specific store then to go there is very difficult to choose and observe directly. Where different types of behaviour can be measured including a shopping pattern in stores. This kind of measurement is very hard. The behaviour can be analyzed in different ways, by offering lower price, better and good quality (Papanastassiu Rouhani, 2006). Consumer behavior mainly sheds light on how consumers decides to spend their various resources like time, money etc. on various products so as to meet their needs and requirement. Consumer behavior encompasses study of what, when, why and where the consumers will buy their products. It also focuses on how often the consumers use the products. Furthermore, it also sheds light on how the consumers evaluate the products after the purchase and the effect of evaluations on their future purchases (Schiffmann, 2004). Consumer Decision Making The consumer decision making process defines different steps when a consumer goes through to purchase a product. If customer wants to make a purchase he or she takes a sequence of steps in order to do complete this purchase. Problem recognition includes when consumer feel a significant difference between the current state and ideal so consumer thinks there is some problem to be solved. The problem may be small or big. In the second step, the consumer seeks information about the product. The extent of information search relies on the level of consumer involvement. In case of expensive products, the level of involvement is high. Conversely, in case of relatively cheap products the level of involvement is usually low. In the third step, the consumer evaluates the different attributes of the brands. Consumer may consider the product attributes and compare brand products. In the final step consumer makes his choice about a product (Solomon, 2005). It’s true that a consumer may not necessarily go through all the decision making steps for every purchase he or she makes. At times, consumer makes his or her decision automatically and the decision may be based on heuristics or mental shortcuts. Other times, in case of highinvolvement products consumer may take a long time before reaching a final purchase decision. It depends on consumers’ importance of the products like purchase of a car or home (Solomon, 2005). More over consumers try to make an estimated brand universe on the basis of available information about the brands, and to make an estimated the utility function on the basis of past consumption experience (Davies, 1986). Decision Rules Consumers apply decision rules to attributes and alternatives chosen. A decision rule can be explained as a strategy used by the consumer when selecting from the alternatives. If a purchase decision is habitual, a simplistic decision rule is likely to be applied. The consumer may simply decide to buy the same brand as last time. The complexity of the decision rule depends much on the level of involvement and the perceived importance of the outcome of the purchase decision. There is clear division between more complex rules, which are compensatory and non compensatory (Solomon, 2005). Social Class Social class is an invisible stratification of the inhabitants of the society into different groups based on some traits of the people. Inhabitants in a society can be divided into different social classes according to their income level, occupation, education and so forth (Hawkins, 2004). Social class of a person is determined by a wide variety of set of variables including income, family background and occupation (Solomon, 2005). People of a certain social class will also have different choices and preferences for different products. Members of a specific class will also vary in taste. People form higher social class will have preferences for reputed branded products as they buy products not only to satisfy their needs but also to say who they are through the products (Schiffmann, 2004). Purchase Intention The purchase intention shows customers preference to purchase the product, whose image is very close to customer. Moreover customers are well aware of certain brand name through advertising, from their past experience or information form their friends and relatives (Solomon, 2005). The intention of a consumer to purchase a particular