In hypercompetitive industries (D’Aveni 2010) such as characterised by the present UK supermarket retail sector where competitive rules are changing fast with disruptive business models from new entrants like Aldi and Lidl (Savage 2014) continuing to pressure the market share of hitherto brand leaders like Tesco and Asda; brand differentiation can be an effective tool to counter the effects of resulting downward pressure on prices and profits (Kumar 2006; Matzler et al 2009). Understanding the expectations of the customer with respect to the brand is an important factor in the innovative process. This paper will analyse the dynamics that define customer based brand equity. The strategic elements involved in creating brand equity along with its inter-relationship with competitive advantage will be discussed. The implications and relevance of strong branding and customer based brand equity will be reviewed pertaining to the present UK supermarket business environment. A firm’s competitive advantage and the extent to which it differentiates its presence in the marketplace depend on how well it consistently fulfils the expectations of its targeted customers. It is emphasised that in achieving this consistently through a combination of visible and invisible processes, it is able to intuitively develop a distinct identity within its sector, an imprint or ‘branding’ on its products or services (Kapferer 2008).
The American Marketing Association (AMA) defines a brand as a ‘name, term, sign, symbol or a combination of them that is designed to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors’. Within industry however, it is common to define branding as injecting products and services with distinct attributes representing an organisation, creating specific awareness and identity in the marketplace (Keller 2002). Hence it can be concluded that specific advantages, attributes, ideals and benefits are associated with a brand other than its name and labelling that allow the product to stand out and be distinguished when compared to a competitor (Kapferer 2008). In other words, branding comes from within, transcending superficial identifications. Numerous studies have shown that the strength of a brand, nurtured through accumulation of innovations over time to exert influence on the perceptions of customers, their level of satisfaction and expectations also result in economic advantages (Aaker 1996; Keller 2002). The financial value as a result of these economic advantages is referred to as brand equity.
It can be inferred that an effective and strong brand will be reflected in a sustainable, loyal customer base whose collection of tangible and intangible experiences with the brand determines how the brand performs in the future (Aaker 1996; Keller 2002). According to Kapferer (2008), performance of the brand and its equity is reflected at three major levels:
Aaker (1996) contends that the advantages (or disadvantages) provided by a brand to its firm is embodied in five main categories:
Aaker (1996) developed a brand equity model which is based on the above assets explaining how the various categories interplay to add (or remove) value to a firm and seeks to connect this to future performance of the brand. A schematic view of the model is shown below: Figure 1: Illustration of Aaker’s Brand Equity Model Source: Aaker 1996, P.9 In considering brand equity mainly from the consumer behaviour viewpoint, Keller (2002) defines ‘customer based brand equity’ as consisting of the differential effect that the knowledge of and familiarity with a brand has on the behaviour of consumers to the marketing of the brand. The customer based brand equity (CBBE) model developed by Keller (2002) with respect to this definition will be examined in closer detail in the following section.
Within this model, a brand is considered to have positive customer based brand equity when consumer reaction to the marketing of a product is more favourable when that specific brand is mentioned as opposed to an unnamed or generic version of the product. To achieve this, the consumer has to be knowledgeable about the brand showing a high degree of awareness and familiarity along with corresponding strong and unique brand associations in memory (Keller 2002). To build a strong brand, Keller argues the importance of a number of sequential activities over time involving the development of a brand identity, defining brand meaning in the mind of consumers, repeatedly and consistently generating correct brand responses and ensuring a strong relationship with customers resulting in long term bonding and brand loyalty. These four stages according to Keller’s (2001) CBBE model is based on a brand establishing six core values forming the basis of a ‘brand resonance pyramid’ or a customer based brand equity pyramid. The six core values consist of brand salience, brand performance, brand imagery, consumer judgements, consumer feelings and consumer brand resonance. The six core values along with the elements of the four stages and four questions customers ask of brands as shown in figure 2 will be examined in greater detail. Figure 2: Customer Based Brand Equity Pyramid Source: Keller 2001, p.7
The UK supermarket marketplace consists of four major players, known as the ‘big four’; Tesco, Asda, Sainsbury and Morrisons (Dahlen et al 2010; Savage 2014). Other notable participants within the sector include Co-op, Waitrose, Aldi, Lidl and Iceland. Within the sector, different positioning strategies are employed to gain market share. Tesco is positioned based on convenience and affordability while Asda and Morrisons focus on these attributes but at lower prices in comparison (TNS Global 2012). Sainsbury and Aldi were identified as serving two different groups in the marketplace where Aldi focuses on price-positioning, Sainsbury focuses on quality positioning (Dahlen et al 2010). Waitrose is positioned more upmarket than Sainsbury while Lidl competes with Aldi within the downmarket sector. Aldi and Lidl, recognised for their strong price-positioned brands are increasingly taking market share from the big four with the market leader, Tesco suffering the most (Savage 2014). The supermarket sector faces a state of change and reorganisation as the affected firms look for solutions to eroding market share. However, it appears that brands such as Waitrose and Asda have fared reasonably well so far as shown in figure 3. Figure 3: Supermarket Sales Growth 2013/2014 (%) Source: Savage, 2014 This brief seeks to examine what factors influence customer loyalty and the intensity of brand relationship and how this may have played in the ability of different supermarkets to hold on to market share in the advent of intense competition. Research carried out by TNS Global in 2012 found that Waitrose was identified as being able to gain market share if it was to reduce prices while Tesco, Asda and Morrisons, though viewed favourably by most of the respondents were associated with feelings of ambivalence by consumers (TNS Global 2012). While the effects of loss aversion are in play here where customers see the opportunity to acquire otherwise high quality products at low prices (Hardie et al 1993; Putler D.S. 1992) it can also be argued, based on our knowledge of CBBE that Waitrose is able to draw on its brand equity to defend its market share. One of the ways a firm can draw on its brand equity to counter low price competition is in the creation of a middle brand drawing market share from the low cost rival (Jara and Cliquet 2008; Heath and Chatterjee 1995). Tesco, Sainsbury and Morrisons are the hardest hit firms based on figure 3. This could be explained in part by the fact that while Sainsbury seeks to position as an upmarket quality brand, there are elements of sameness between the three brands. Also in play is the dynamic that the three supermarkets are positioned in the middle of the market where the market share added to the downmarket sector is most likely to come from (Jara and Cliquet 2008; Heath and Chatterjee 1995). In the case of Asda, it has developed some recognition over time as a low priced option despite being similar in positioning to the other three. It would appear that this perception provides it a buffer to some extent from competitive attacks based on low-price positioning (Bronnenberg and Wathieu 1996; Kumar 2006)
In this study, it was sought to understand the various elements of customer based brand equity and to analyse how the concept relates to ongoing market share changes and reorganisation in the UK supermarket environment. The scope of this brief makes it difficult to draw definitive conclusions on the exact effects of CBBE on customer loyalties with respect to the supermarkets, however it is surmised that it does exert an important level of effect. It will be useful to investigate this further through empirical studies to gain better insights and understanding of the concept with respect to the supermarket environment.
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