An executive summary for

managers and executive Performance consequences of

readers can be found at the
end of this article brand equity management:
evidence from organizations in
the value chain
Artur Baldauf
Department of Strategic Management, University of Bern, Bern,
Switzerland
Karen S. Cravens
The University of Tulsa, Tulsa, Oklahoma, USA
Gudrun Binder
Department of Marketing, University of Vienna, Vienna, Austria

Keywords Brand equity, Intangible assets, Value chain, Financial performance,

Customers
Abstract Evaluating the consequences of brand equity management is one of the most
important measurement issues for intangible assets in the new economy. Studies have
validated the effect of brand equity on the value of the firm and addressed the capital
market effects of intangible associations such as brand value. Yet, there is not sufficient
evidence on which dimensions of brand equity should be measured and monitored to
support financial performance. Using regression analysis on a sample of managers in
Austrian organizations, this study investigates the effect of perceived brand equity on
brand profitability, brand sales volume, and perceived customer value. Results indicate
strong support for measures of perceived quality, brand loyalty, and brand awareness as
antecedents of firm performance, customer value and willingness to buy.

In recent years, management accounting has been criticized for not providing
information to management that is useful in decision making (Kaplan and
Johnson, 1987). Most performance indicators focused on aggregate, financial
accounting-based measures that were at best, very much lagging indicators
of performance. At worst these indicators often had little information content
for managers in terms of the effect of their actions on firm performance.
Balance sheet Brands are not capitalized on the balance sheet in most countries, which
counteracts a long-term management focus on the value of any internally-
developed brands. Therefore, cash flow and short-term profits are more often
used as important performance parameters. Strategically, strong brands
represent a key component of competitive advantage and function as the
main source of a company's future earnings. For firms with strong brands,
performance indicators should incorporate brand-based performance
measures instead of concentrating on cash flow and short-term profits. Brand
equity research has a more established conceptual logic than other areas of
intangibles, making it a viable segment for considering performance
measurement implications. Brand equity is defined as ``a set of brand assets
and liabilities linked to a brand, its name, and symbol, that add to or subtract
from the value provided by a product or service to a firm and/or to that firm's
customers'' (Aaker, 1991, p. 15). Information about measurement issues
relating to brand equity can yield ancillary benefits by contributing to the
research foundation on measurement issues for other types of intangibles. If

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 management is knowledgeable about brand equity strength it can use this
information together with financial databases to develop appropriate
incentive plans and brand management programs (Aaker, 1996b).
Intangible asset We examine one particular intangible asset ± the equity of the organization's
brands ± since for a significant number of firms, the brand is the central asset of
the company (Aaker, 1996a; Barwise, 1993; Shocker et al., 1994). Our research
is intended to provide evidence as to the efficacy of using specific brand equity
measures to evaluate financial performance. Specifically, the research objective
is to consider whether dimensions of brand equity are important antecedents of
firm performance such as sales and profitability. Moreover, as customers
ultimately decide about a firm's success or failure we also examine the linkage
between brand equity dimensions and value to customers.
We begin our investigation by examining the conceptual foundations for
brand equity and performance and develop the specific directional
hypotheses tested. The methodology section contains the sampling plan, the
construct measures used in our study of Austrian managers, and analytical
issues. We present the results of the empirical study and conclude with
implications and suggestions for future research.

Conceptual foundations and research hypotheses

Brand equity Our research considers a segment of Aaker's (1991) original framework of
brand equity, which proposes that various organizational efforts contribute to
developing the dimensions of brand equity. These dimensions of brand
equity then have a positive impact on providing value to the firm as well as
to the customer. For example, a brand with strong equity can be leveraged to
launch new products and serves as a cue in repeat purchases. In this research
we test the portion of the model that focuses on the effect of the dimensions
of brand equity in providing value. The underlying conceptual logic of a
strong brand equity is that it is an asset which is expected to enhance
customer value, increase customers' purchase intentions, and increase the
organization's market performance. Brand equity reflects the price premium
of a strong brand in combination with the sales it attracts compared to an
average brand (Aaker, 1996a; Barwise et al., 1989).
Figure 1 shows potential antecedents and consequences of brand equity
(Aaker, 1991, p. 17). Aaker (1991, p. 17) notes that specific antecedents of

Figure 1. Antecedents and consequences of brand equity

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003 221

 brand equity comprise brand loyalty, brand awareness, perceived quality,
brand associations, and other proprietary assets. Together these dimensions
most succinctly represent the assets or liabilities that are linked to a brand, its
name, or symbol. The resulting brand equity thus provides a basis for
strategic initiatives which create value directly for customers and the firm. In
addition, by providing value to customers, brand equity indirectly enhances
value to the firm. Aaker (1991, p. 17) describes how brand equity enhances
value to customers in terms of their processing and interpretation of
information, confidence in the purchasing decision and use satisfaction.
Brand equity and customer value in turn provide value to the firm by
enhancing: ``efficiency and effectiveness of marketing programs, brand
loyalty, prices/margins, brand extensions, trade leverage, and competitive
advantage'' (Aaker, 1991, p. 17).
Brand-building Yoo et al. (2000) build on Aaker's (1991, p. 17) basic model to incorporate
the brand-building efforts that influence the various dimensions of brand
equity and are also influenced by the provision of value to the firm. Yoo et al.
add a separate construct of brand equity that was not present in Aaker's
original model. The major focus of Yoo et al.'s (2000) research was to
explore the brand-building efforts and the resulting effect on the dimensions
of brand equity. They investigated the effects of price, store image,
distribution intensity, advertising spending, and price deals on three
particular dimensions of brand equity: perceived quality, brand loyalty, and
brand awareness. We continue the focus on these three dimensions of brand
equity.
Performance We examine whether the brand awareness, brand loyalty, and perceived
quality dimensions of brand equity do affect performance as conceptualized
by brand profitability performance, brand market performance, and customer
perceived value. These are core equity dimensions and are expected to be
relevant predictors of value. We also include in the model the ultimate test of
perceived value in terms of the customers' purchase intention. Intention to
purchase is an indication of how likely the customer will purchase the brand
(ranging from definitely will buy to definitely will not buy). If the perception
of the brand's value is favorable and the customers indicate purchase
intention, a purchase of the product or service will generate brand
profitability and market performance. The conceptual model which guides
our study is shown in Figure 2.
The brand equity dimensions of perceived quality, brand loyalty, and brand
awareness are proposed as antecedents to brand profitability and brand sales

Figure 2. The effect of brand equity dimensions on performance

222 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003

 volume. Two customer oriented value components are incorporated:
perceived customer value and purchase intention. The research model
focuses on a special stage in the value chain ± resellers. This is an important
perspective on brand equity which has not received research attention.
Hence, these resellers will assess the dimensions of brand equity from their
perspective. They will also indicate their perceptions concerning customer
value provided and willingness to buy as well as their firms' market and
profitability performance (the value to the trade).

Brand equity dimensions

Three dimensions The three dimensions of brand equity that we examine are also predicted to
affect performance through the overall positive effect of brand equity. As
brand equity increases, the firm is expected to enjoy a positive financial
return and the customer receives higher value (Aaker, 1991; Aaker and
Jacobson, 1994; Keller, 1998; Lane and Jacobson, 1995). Instead of
considering a single construct of brand equity, we propose to focus on the
separate dimensions of brand equity as contributing to performance.
Previous research has validated the dimensions of brand awareness,
perceived quality, and brand loyalty as relating to a higher order construct of
brand equity (Yoo et al., 2000; Yoo and Donthu, 2001).
Brand awareness. A major goal of brand management is developing and
maintaining brand awareness because of the impact of awareness on
consumer decision making and overall effect on firm values. Brand
awareness is defined as ``the ability for a buyer to recognize or recall that a
brand is a member of a certain product category'' (Aaker, 1991, p. 61).
Generating and maintaining brand awareness is important as only those
brands of which customers are aware enter into the consideration set of
brands for possible purchase, and brand awareness influences the selection of
products from the consideration set (Hoyer and Brown, 1990). Hence, only
brands which customers recognize can be identified, categorized and
ultimately purchased.
Brand value Perceived quality. Perceived quality is another dimension of brand value that
ultimately compels the consumer to select a good or service to purchase
(Aaker, 1991; Zeithaml, 1988). Notably, product quality is a firm's essential
resource for achieving competitive advantage (Aaker, 1989). Perceived
quality is defined as the consumer's judgment (perception) about a product's
overall excellence or superiority with reference to substitutes (Aaker, 1991;
Zeithaml, 1988). Hence, perceived quality is the ``perceived ability of a
product to provide satisfaction `relative' to the available alternatives''
(Monroe and Krishnan, 1985, p. 212). Since the selection of important
attributes and comparison standards for a product are chosen by an
individual, quality is not an objective measure. Consequently, quality
assessment is subjective (Zeithaml, 1988).
Brand loyalty. Brand loyalty is defined as ``a deeply held commitment to
rebuy or repatronize a preferred product or service consistently in the future,
despite situational influences and marketing efforts having the potential to
cause switching behavior'' (Oliver, 1997, p. 392). An important
characteristic of loyal customers is that they consistently favor a brand and
refrain from switching to other brands (Grover and Srinivasan, 1992).
Both Aaker (1991) and Keller (1993) discuss brand loyalty in their
conceptualizations, though from somewhat different perspectives. Aaker (1991)
notes the differences of brand loyalty from the other brand equity dimensions
because of its connection to the usage experience. Loyalty develops via brand

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003 223

 usage. In contrast to brand awareness or perceived quality, brand loyalty only
exists if people have already bought and consumed a product. Purchase and
consumption, however, are not necessary for obtaining brand awareness and
perceived quality. Nonetheless, the dimensions of brand equity are causally
interrelated but as loyalty is tied to a brand, brand loyalty is a dimension of
brand equity (Aaker, 1991). We follow this approach in our research.

Brand equity consequences

Having conceptualized the dimensions of brand equity, we now consider the
consequences of these constructs. Specifically, we discuss the effects on
market and profitability performance as well as on customer value, and
provide a supporting logic for the proposed hypotheses.
Goal divergences At this point, it is important to note that goal divergences between
manufacturers and resellers in the value chain exist. Indeed, manufacturers
and resellers who compete for added value follow different goals in
allocating resources. The main goal of resellers is to achieve profitability,
and therefore this channel member is not interested in interbrand price wars.
In contrast, a manufacturer is primarily interested in generating cash flows
although profitability achievement is essential as well. Hence, the sales
volume in comparison to competing brands is important (Lassar, 1998).
Recognizing these different objectives of channel members, we focus on two
distinct types of performance measures.
Brand profitability performance. Profitability performance is used as an
indicator of the financial contribution of a brand to the profit of the reseller.
Brand awareness is expected to be positively related to profitability
performance. The underlying logic is that higher levels of awareness will
lead to higher levels of purchase. Customers who are unaware of a brand are
unlikely to consider it in their purchasing decision.
Several studies have examined the effect of perceived quality on profitability
(e.g. Jacobson and Aaker, 1987). Most prominent among the studies examining
the quality and performance relationship are the findings from PIMS-projects,
such as Phillips et al. (1983), who found a strong positive effect of quality on
return on investment. Their findings were used as support in studies conducted
by Jacobson and Aaker (1987). A positive effect of perceived quality on stock
returns was also reported by Aaker and Jacobson (1994).
Brand loyalty High levels of brand loyalty should substantially enhance sales of a brand.
Loyal buyers are less affected by price competition. Higher sales are
expected to increase brand profitability, assuming no disproportionate
increase in expenses. For example, after break-even occupancy levels are
reached by hotels, additional occupancy provides major contributions to
profit.
We propose the following hypotheses in examining the relationship of brand
equity dimensions to profitability:
H1a. Brand awareness is positively related to brand profitability
performance.
H1b. Perceived quality is positively related to brand profitability
performance.
H1c. Brand loyalty is positively related to brand profitability performance.
Brand market performance. Brand market performance considers the
demand side of the market and refers to indicators such as sales volume and

224 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003

 market share (Lassar, 1998). The relationship of brand equity dimensions
and brand market performance has received very limited research attention.
Yet, conceptual support is provided by Webster (2000) who argues that a
major benefit of brand equity is its positive impact on demand. Brand
awareness, quality, and loyalty are expected to enhance brand market
performance. These dimensions of brand equity help the organization to
attract and retain customers. Due to the support of the manufacturer, brand
associations in terms of brand awareness (e.g. co-op advertising, displays)
can be established and, therefore, brand equity dimensions should be
positively associated with brand market performance. The following
hypotheses consider these relationships:
H2a. Brand awareness is positively related to brand market performance.
H2b. Perceived quality is positively related to brand market performance.
H2c. Brand loyalty is positively related to brand market performance.
Quality and value Customer value. There is some debate in the literature concerning the
difference between quality and value (Zeithaml, 1988). Customer value is
defined as ``the consumer's overall assessment of the utility of a product
based on perceptions of what is received and what is given'' (Zeithaml, 1988,
p. 14). According to Monroe and Krishnan (1985) and Dodds et al. (1991),
perceived quality is positively related to perceived value. Recognizing a
brand name or logo can lead to positive customer assessments in terms of
considering a product as good value for money or a good bargain. A higher
level of brand awareness reduces the consideration set. Also, it is more likely
that customers will buy familiar products and are more willing to pay a price
premium. Hence, brand awareness should positively affect perceived value.
A higher perceived quality, for many people, is the reason to buy a product,
and some would also be willing to pay a price premium. Brand loyalty
should positively impact customer value. Loyal customers recognize the
favorable benefit/cost opportunity. Given these relationships, we propose the
following hypotheses:
H3a. Brand awareness is positively related to customer value.
H3b. Perceived quality is positively related to customer value.
H3c. Brand loyalty is positively related to customer value.
Executives Purchase intention. Executives recognize the importance of purchase
intentions as it is less expensive to retain existing customers instead of
prospecting for new ones (Spreng et al., 1995). Customers who perceive
superior value are more likely to buy the same brand in the future (Aaker,
1991). Hence, there is an expected direct relationship between perceived
customer value and purchase intention. Moreover, high levels of purchase
intentions should enhance a brand's market and profitability performance.
The following hypotheses are offered:
H4. Customer value is positively related to purchase intention.
H5. Purchase intention is positively related to market performance.
H6. Purchase intention is positively related to profitability performance.

Methodology
Sampling design and data collection
Our research, conducted in Europe, examines a stage in the value chain that
is relatively unexplored in terms of brand equity and performance

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 relationships in general ± resellers of tiles[1]. Specifically, tiles are used in a
variety of construction applications though their main uses are for floor and
wall decorations. Tiles are used for brand equity assessment since the
product is relatively homogenous and does not lend itself to multiple product
subcategories. In Europe, there is a high level of brand identity associated
with tiles. Tiles are used for the same basic function and typically vary in
perceived quality and brand image. Thus, it is possible to assess the
dimensions of brand equity without having to control for a wide range of
product variations.
Assessment of customer We selected tile resellers to solicit the most comprehensive assessment of
perceptions customer perceptions along with collecting measures of market performance.
The perspectives of resellers provide unique insights since they act at the
customer and manufacturer interface. Resellers possess knowledge regarding
the perceptions and preferences of their customers and also are aware of the
market performance and relative profitability of the suppliers' brands that
they distribute. Hence, using responses from intermediaries provides an
opportunity for consideration of customer perceptions along with firm
performance.
Based on existing literature and insight from experts, we developed and
pretested a standardized questionnaire. The questionnaires were mail
distributed to executives from 794 tile resellers in Austria carrying products
from manufacturers located in various countries. We studied the perceptions
of Austrian tile resellers distributing tiles manufactured in Italy, the Czech
Republic, and Slovakia. Because of Austria's central location linking
Western Europe and the former Eastern European countries, it was
considered as an appropriate research site to examine brand equity and its
consequences. Also, we were able to collect information from quasi-neutral
people about different brands, produced by tile manufacturers from Italy, the
Czech Republic, and Slovakia. Thus, major manufacturers are represented
without adding substantial home country source bias. The sample group was
derived from an industry list of companies and the ``golden pages'' of the
Austrian Chamber of Commerce.
Response rate To enhance the response rate of our mail survey, we provided pre-addressed
and pre-stamped envelopes, assured anonymity, and offered a summary of
the research findings as an incentive to the participants. After several follow-
up procedures (e.g. telephone calls, new mailings), responses from 189
executives were obtained. Due to missing information, the final sample
consisted of information from 154 managers. In addition, 30 questionnaires
were returned as undeliverable. Considering this information we achieved a
20 per cent response rate. Of these 154 managers, 52 (33.8 per cent) assessed
the Italian, 51 (33.1 per cent) the Czech, and 51 (33.1 per cent) the Slovakian
brand. Of the respondents, 115 (74.7 per cent) were male and 39 (25.3 per
cent) female. The median number of years the managers had been doing
business in the industry was 22.
Non-response bias was examined using the method proposed by Armstrong
and Overton (1977). A viable check for non-response bias is to split the
sample into early and late respondents. No significant differences at the 0.05
level between the two groups were found which leads us to conclude that
non-response bias is not a major issue.

Scale construction
The scales used for both the elements and consequences of brand equity are
described in Table I.

226 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003

 Scale items
Scale measure: 1 strongly disagree Standardized
Construct to 5 strongly agree unless noted Source loading t value
Brand awareness I know what X looks like Yoo et al. 0.81 ±
2/df = 4.8 I can recognize X among other brands (2000) 0.75 9.76
AGFI = 0.82 I am aware of X 0.71 9.13
CFI = 0.91 Some characteristics of X come to my
RMSEA = 0.10 mind quickly 0.71 9.94
I can quickly recall the symbol or logo
of X 0.64 7.98
I have difficulty in imagining X in my
mind 0.61 7.56
Perceived quality X is of high quality Yoo et al. 0.83 ±
2/df = 2.6 The likelihood that X would be (2000) and
AGFI = 0.85 functional is very high Dodds et al. 0.69 9.42
CFI = 0.95 X appears to be of very poor quality (1991) 0.59 7.65
The likelihood that X is reliable is very
RMSEA = 0.08 high 0.68 9.22
The workmanship of X would be high 0.69 9.41
X must be of very good quality 0.78 11.04
The likelihood that X is dependable is
very high 0.80 11.51
X seems to be durable 0.70 9.53
Brand loyalty I consider myself to be loyal to X Yoo et al. 0.82 ±
2/df = 7.8 X would be my first choice (2000) and 0.62 6.84
Beatty and
AGFI = 0.84 I will not buy other brands if X is Kahle
CFI = 0.91 available at the wholesaler (1988) 0.43 4.73
If X were not available at the wholesaler,
it would make little difference to me if I
RMSEA = 0.11 had to choose another brand 0.66 7.36
When another brand is on sale, I will
generally purchase it rather than X 0.70 7.69
Brand profitability Compared to all other brands available Lassar
performance in our trade area the profitability for (1998)
2/df = 1.2 carrying X is . . . (1 = lowest-highest = 5) 0.86 ±
AGFI = 0.96 Relative to all other brands we carry the
CFI = 0.99 realized margin for X is . . . (1 = lowest-
RMSEA = 0.04 highest = 5) 0.79 9.36
Overall, X is financially very attractive
for us 0.65 7.87
What percentage of your total profit
derived from the sale of tiles is
attributable to X? (percentage value) 0.54 6.46
Brand market What percentage of your tile sales Lassar
performance volume is attributable to X? (%) (1998) 0.76 ±
2/df = 0.14 Compared to all other tile brands we
AGFI = 0.99 carry X generates the larges sales volume 0.82 10.04
Relative to all other tile brands we carry
CFI = 1.00 the sales potential for X is . . .
RMSEA < 0.01 (1 = lowest-highest = 5) 0.77 ±
Customer My customers consider X to be . . . Dodds et al.
perceived value (1 = very poor value for money- very (1991)
2/df = 5.11 good value for money = 7) 0.65 ±
AGFI = 0.88 At the usual price my customers consider
CFI = 0.94 X to be . . . (1 = very uneconomical-very
RMSEA = 0.07 economical = 7) 0.75 7.86
The product is considered to be a good
buy (1 = strongly disagree-strongly
agree = 7) 0.78 7.80
My customers consider the usual price for
X to be . . . (1 = very unacceptable-very
acceptable = 7) 0.76 7.64

(continued)
Table I. Scale development for constructs

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003 227

 Scale items*
Scale measure: 1 strongly disagree Standardized
Construct to 5 strongly agree unless noted Source loading t value
X appears to my customers to be a
bargain (1 = strongly disagree-strongly
agree = 7) Del. ±
My customers are satisfied when they buy
X (1 = strongly disagree-strongly
agree = 7) Del. ±
The decision of customers to buy X is
confirmed (1 = strongly disagree-strongly
agree = 7) 0.69 6.09
The likelihood that my customers
Purchase intention purchase X is . . . (1 = very low-very Dodds et al.
2/df = 0.07 high = 7) (1991) 0.88 ±
AGFI = 0.99 If a customer is going to buy X, he/she
CFI = 1.00 would consider buying X at the usual
RMSEA < 0.01 price (1 = strongly disagree-strongly
agree = 7) Del. ±
At the usual price, my customers would
consider buying X (1 = strongly disagree-
strongly agree = 7) Del. ±
The probability that my customers
consider buying X is . . . (1 = very low-
very high = 7) 0.93 19.22
The willingness of my customers to buy
X is . . . (1 = very low-very high = 7) 0.89 ±
a
Notes: Where X is the brand of interest; AGFI = adjusted goodness of fit index;
CFI = comparative fit index; RMSEA = root mean square error of approximation

Table I.

Perceived quality. The scale for perceived quality is based on Dodds et al.
(1991). Yoo et al. (2000) employed perceived quality to address the overall
evaluation of quality and to avoid considering specific elements of quality.
There are eight items in the scale for perceived quality. The scale allows a
response from ``1'' (strongly disagree) to ``5'' (strongly agree) to statements
such as: ``X is of high quality,'' ``The likelihood that X is reliable is very
high,'' and ``The likelihood that X is dependable is very high.''
Brand loyalty. The scale for brand loyalty was developed by Beatty and
Kahle (1988) and has been adapted by Yoo et al. (2000). The scale includes
five items. With a five-point response scale ranging from ``1'' (strongly
disagree) to ``5'' (strongly agree), statements for the scale items include: ``X
would be my first choice'' and ``I will not buy other brands if X is available
at the wholesaler.''
Brand awareness. The scale for brand awareness consists of six items
developed by Yoo et al. (2000). Respondents used a five-point scale
anchored by ``1'' (strongly disagree) to ``5'' (strongly agree) to statements
ranging from ``I can recognize X among other brands,'' to ``Some
characteristics of X come to my mind quickly.''
Brand profitability performance. The scale for brand profitability
performance has four items as developed by Lassar (1998). Three of the
items allow a scale response, such as: ``Compared to all other brands
available in our trade area the profitability for carrying X is . . . '' with ``1'' =
lowest ± highest = ``5''. Another item asks ``What percentage of your total
profit derived from the sale of tiles is attributable to X?'' Resellers are able to
make this assessment since the product offerings to the reseller are indeed
based upon the incentives offered to choose particular brands.

228 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003


Benefits and sacrifices
Pairwise comparisons
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003
Brand market performance. We employ brand sales volume as a measure of
market performance and use the three-item scale developed by Lassar
(1998). One item asks for the percentage of sales volume attributable to X.
The other two items are scale responses: ``Compared to all other tile brands
we carry, X generates the largest sales volume'' (1 = strongly disagree ±
strongly agree = 5) and ``Relative to all other tile brands we carry, the sales
potential for X is . . . '' (1 = lowest ± highest = 5).
Customer perceived value. Based on the conceptualization of perceived
value as a trade-off between benefits and sacrifices (costs), the scale for
customer perceived value is obtained from Dodds et al. (1991). This scale
uses seven-point responses and the seven statements included relate to items
such as value for money and satisfaction: ``The product is considered to be a
good buy'' (1 = strongly disagree ± strongly agree = 7) and ``My customers
are satisfied when they buy'' (1 = strongly disagree ± strongly agree = 7).
Purchase intention. Purchase intention includes five items such as: ``The
likelihood that my customers purchase X is . . . (1 = very low ± very high = 7)
and ``At the usual price, my customers would consider buying X'' (1 =
strongly disagree ± strongly agree = 7). This scale is based on Dodds et al.
(1991).
Reliability and validity assessments
Given the multiple-item nature of the scales used in this research, we
assessed their psychometric properties following the recommendations of
Churchill (1979) and Gerbing and Anderson (1988). First, each scale was
subjected to exploratory factor analysis loading on the dominant factor (at
least at 0.5) with a sum of the items in the factor explaining more that 50 per
cent of the factor's variance. Second, reliability analyses were conducted
(Cronbach, 1951). The alpha coefficients range from 0.80 to 0.93 and are
well above the 0.70 level suggested by Nunnally (1978). Third, based on
Gerbing and Anderson (1988), we also performed confirmatory factor
analysis (CFA) using maximum likelihood estimation procedures for
measure validation. The results indicate both acceptable model fits and item
properties and are shown in Table I. The overall model fit indices, chi-
square/degrees of freedom, adjusted goodness of fit index (AGFI),
comparative fit index (CFI), and root mean square error of approximation
(RMSEA) indicate acceptable model fits. All items significantly load on
their corresponding construct (lowest t-value is 4.73), demonstrating
adequate convergent validity.
Following the recommendations of Bagozzi et al. (1991) pairwise
comparisons of the constructs within our models were conducted, to examine
convergent and discriminate validity. We arranged the measures into
subgroups with the first measurement model comprising the brand equity
constructs and the second measurement model consisting of the
consequences constructs. All latent-trait correlations are significantly
different at one because each phi-value plus or minus twice the standard
error does not include one, thus indicating discriminant validity. Tables I
and II provide the summary statistics for the constructs used in testing the
hypotheses. Table III shows the correlations within the constructs.
To summarize, the psychometric properties of the measures are acceptable.
For further analyses, the individual items of each measure were combined by
calculating the arithmetic means. The items relating to reseller performance
were first standardized.
229
 Coefficient Mean
Constructs (number of items) alphas (standard deviation) Range
Brand awareness (6) 0.86 3.94 (0.81) 1.00-5.00
Perceived quality (8) 0.90 3.51 (0.67) 1.63-5.00
Brand loyalty (4) 0.80 2.41 (0.86) 1.00-4.40
Brand profitability (4)a 0.80 na na
Brand market performance (3)a 0.83 na na
Customer perceived value (8) 0.87 4.30 (1.02) 1.17-6.83
Purchase intention (3) 0.93 3.20 (1.28) 1.00-6.67
Notes: na = not applicable; adue to different scales used as measures for the items the
scale was standardized

Table II. Summary statistics for constructs

Analysis and results

The primary tests of the hypotheses employed (linear) single and multiple
regression analysis (Cohen and Cohen, 1983). The findings obtained from
these analyses are reported in Table IV. Both single and multiple regression
analyses results show significant (p < 0.01) F-values (lowest F-value: 11.42)
indicating good overall model fit. Examining the magnitude of the adjusted
R-squared value also leads us to conclude that acceptable amounts of the
variance of the dependent variables can be explained (lowest R-squared:
0.17). Multicollinearity was not a problem as the variance inflation factors
are well below the critical level of 10. All of the coefficients are significant
at p < 0.01 with the exception of one coefficient (brand awareness) in one
model, which is significant at p < 0.05. Moreover, the coefficients are all
positive as hypothesized.
Equity dimensions In the first model, the three brand equity dimensions, brand awareness (0.16),
perceived quality (0.28), and brand loyalty (0.33), are significant predictors
of brand profitability performance. Together, the three predictors explain 34
percent of the variation in profitability performance. Therefore, strong
support for the first three hypotheses (H1a-H1c) is found.
Using brand market performance as the dependent variable, the standardized
coefficients (brand awareness: 0.18; perceived quality: 0.22; brand loyalty:
0.34) of the independent variables are significant which supports H2a, H2b,
and H2c.
Of the variance of customer value, 31 per cent is explained by the three
brand equity dimensions. The estimated standardized coefficients of the
three independent variables (brand awareness: 0.18; perceived quality: 0.21;
brand loyalty: 0.19) are all significant. Hence, support is found for H3a, H3b,
and H3c.
Regression analyses Performing single regression analyses, the findings indicate a significant
relationship between customer value and purchase intention (coefficient:
0.54) which supports H4. Also, when purchase intention is regressed on
brand market performance (coefficient: 0.62) and brand profitability
performance (coefficient: 0.55), significant results are obtained. Therefore,
the analyses provide strong support for H5 and H6.

Conclusion and implications

The objective of this study was to investigate the effects of using measures of
brand equity as indicators of performance. Perceived quality, brand loyalty,
and brand association were selected as measures of brand equity. Results
indicate that all three measures are significant predictors of performance

230 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003
Brand Brand sales Customer
Brand awareness Perceived quality Brand loyalty profitability volume perceived value Purchase intention
Brand awareness
Perceived quality 0.22
Brand loyalty 0.34 0.46
Brand profitability performance 0.34 0.47 0.52
Brand market performance 0.39 0.41 0.50 0.70
Customer perceived value 0.29 0.33 0.35 0.38 0.31
Purchase intention 0.34 0.47 0.52 0.55 0.62 0.54
Notes: All correlations significant at p < 0.01

Table III. Correlation coefficients by construct

231
 Standardized
Initiative for manufacturers
Research results
232
Independent -coefficient Adjusted
Dependent variables variables (t-value)* F-value* R2
Brand profitability performance Brand awareness 0.16 (2.33) 27.76 0.34
Perceived quality 0.28 (3.76)
Brand loyalty 0.33 (4.35)
Brand market performance Brand awareness 0.18 (2.50) 23.34 0.31
Perceived quality 0.22 (2.84)
Brand loyalty 0.34 (4.27)
Customer perceived value Brand awareness 0.18 (2.27)** 11.42 0.17
Perceived quality 0.21 (2.46)
Brand loyalty 0.19 (2.22)**
Purchase intention Customer
perceived value 0.54 (7.93) 62.93 0.29
Brand market performance Purchase intention 0.62 (9.63) 92.66 0.38
Brand profitability performance Purchase intention 0.55 (8.02) 64.36 0.29
Notes: *Significant at p < 0.01 unless noted; **Significant at p = 0.05
Table IV. Results of single and multiple regression analysis
measures. This was true for all three indicators of performance: brand
profitability, brand sales volume, and customer perceived value.
The standardized coefficients from the regression analysis in Table IV
provide some indication of the relative importance of the three brand equity
measures as predictors of performance. Intercorrelations exist among the
measures as brand awareness and perceived quality will ultimately affect
brand loyalty. The standardized coefficients reflect this relationship since the
coefficient for brand loyalty is almost double that of brand awareness.
Loyalty is an important predictor of performance. Given the difficulty in
selecting a parsimonious yet comprehensive set of performance measures,
managers might consider the greater potential information content of a
measure such as brand loyalty.
Building brand loyalty is an actionable initiative for manufacturers. Possible
actions include creating a reason-to-buy, differentiation/positioning, creating
value chain member interest, and making brand extensions (e.g. new tile
designs) (Aaker, 1991). Brand loyalty increase can be measured on a
longitudinal basis. Our research supports the relevance of tracking resellers'
perceptions of brand loyalty.
The brand equity constructs have been validated in previous research, and
our study lends support to these scales from a unique perspective in the value
chain ± resellers. The significance of the brand equity measures has
important implications for developing measures of other intangible assets.
Our results supported a relationship between non-financial measures and
indicators of performance. Without a link to performance, the measures are
unlikely to generate results that support the strategic objectives of a firm.
A major implication of our research results refers to strategic channel
partnerships (Narus and Anderson, 1986). Given the positive relationships
among channel partners, the sacrifices and benefits of manufacturers and
resellers have to be assessed and continually developed. Although, not
examined in this research, problems of channel conflict, like power or
opportunism, are also of central issue (Webster, 2000). More importantly, as
the new economy compels less traditional and more cooperative ways of
conducting business, it is essential to consider the impact of these
cooperative ventures on performance measurement.
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003

Subjective information
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003
It is apparent from the study results that factors other than brand equity also
impact performance since the variations in performance explained by brand
equity ranges from 17 to 34 percent (Table IV, R-squared values). Brand
equity is an important predictor of performance, but other factors, such as
competition, prices, and expenses, also impact performance. A shortcoming
of our research is the focus on cross-sectional data. Hence, we are not able to
explore the long-term effects of brand equity on performance. Clearly, future
studies could refer to longitudinal data. Tracking at the reseller level of the
value chain should be more feasible than end-user tracking of brand equity.
The reliance on subjective information in our study might be a matter of
concern as well. While brand equity from a customer-based perspective and
perceived customer value require quasi subjective information by definition,
an alternative view might suggest that objective assessments are necessary
with respect to performance measures. However, Dess and Robinson (1984)
found no significant differences comparing the validity of subjective and
objective performance measures. Nonetheless, in future research the model
could be replicated using more objective performance data.
Note
1. We term these intermediaries resellers as they distribute the products (tiles) to both
businesses and customers.
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&

234 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003

 This summary has been
provided to allow managers
and executives a rapid
appreciation of the content
of this article. Those with a
particular interest in the
topic covered may then read
the article in toto to take
advantage of the more
comprehensive description
of the research undertaken
and its results to get the full
benefit of the material
present
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003
Executive summary and implications for managers and
executives
Brand investment benefits sales and the firm's value
The debate around brand equity and brand valuation has, in many ways,
settled into two camps ± the consumer-based approach (mostly marketers)
and the aggregate sales approach (mostly accountants). I appreciate that
this is a gross over-simplification of the distinction between different
approaches and that many models (and much of current theory) endeavour
to join together the two approaches. However, it is important for marketers
to appreciate that they have yet to fully convince others of the validity of
consumer-based approaches to the measurement of brand equity.
Baldauf et al. set out to produce further validation of the consumer-based
model by examining how the dimensions of brand equity are antecedents of
firm performance and especially sales and profitability. This consideration is
important since much of the brand valuation debate concerns the treatment
of the brand on the balance sheet rather than its impact on the profit and loss
account. And, while marketers will always argue that brands are important
intangible assets (thereby meriting inclusion within the balance sheet) much
of our work as marketers is intended to influence sales and profitability.
The antecedents of brand equity
Baldauf, Cravens and Binder draw on Aaker's model of brand equity in their
study focusing on the three most important antecedents of brand equity ±
brand loyalty, brand awareness and perceived quality. Aaker's argument is
that where a brand has loyal customers, high levels of market awareness and
is perceived to be of high quality it will have a high level of equity ± it is
more valuable to the firm.
This means that the firm's strategy needs to address each antecedent ±
focusing on one or other element will not necessarily deliver brand value.
However, given that we are concerned here with the effect on sales volumes
and profits, we need to ask whether achieving positive effect in this area
requires a different balance within the strategy. Indeed, there could
conceivably be a conflict between strategies aimed at increasing the firm's
value (a balance sheet strategy) and strategies aimed at increasing sales (a
profit and loss strategy).
There is a concern that the latter approach to strategy can result in a sales
promotion led approach to marketing as a complement to the corporate
focus on cash flow and short-term profits. Therefore, being able to
demonstrate that strategies aimed at increasing brand value also produce
short-term benefits in terms of sales and profitability means being able to
justify important brand strategies in a climate of short-term focus.
Brand equity is not the only thing influencing performance
While brand strategies are important we have to recognise (and Baldauf
et al. remind us) that performance is not solely influenced by brand equity.
Marketers have to pay attention to other factors and especially to issues
often dismissed as tactical or mere implementation. The marketing director
who fails to appreciate that tactical errors and sloppy implementation can
wreck a strategy should not keep his job!
Baldauf et al. identify three influences other than brand equity ± competition,
pricing and expenses. Since these clearly have an impact on performance
any marketing strategy needs to be flexible enough and the firm needs also to
235
 pay attention to its performance in terms of cost containment. In addition the
impact of pricing and competition requires a regular reality check against
what is actually happening in the market.
However, too many firms concentrate on these other issues and respond to
market changes by fine tuning tactics, undertaking reactive sales promotions
and trimming costs. Often the equally important task of developing brand
equity gets lost in the tactical war with competitors ± firms must remember
that investing in brand equity has a direct impact on sales (elsewhere in this
issue of JPBM, Ataman and UÈlengin provide a substantive assessment of this
impact) as well as contributing ± accounting approaches allowed ± to the
firm's overall value.

Brand equity strategies ± options

We have noted that the dominant elements of Aaker's brand equity model are
brand loyalty, brand awareness and perceived quality but this does not
provide us with a direct guide to the setting of strategies. Aaker also included
in his model brand associations and other proprietary assets such as
intellectual property and for some brands these considerations are of
considerable importance.
The brand strategy first strikes a balance between investing in awareness ±
telling people about the brand ± and investing in brand loyalty and repeat
purchase. While it remains the case that securing repeat purchase is (all
things being equal) more easy than recruiting a new customer, we cannot
overlook the need to maintain and extend our brand's position within the
portfolio of brands from which the consumer chooses.
Brand investment therefore should consist of general advertising primarily
aimed at building brand awareness and merchandising, sales promotions,
direct marketing and packaging that reinforces the choice made by
consumers. The price details of the mix depend on the stability of markets,
rates of market growth or decline, competitor activity and the tactical
demands of distribution channels (and especially retailers).
Baldauf et al. provide further evidence that brand investment contributes to
overall firm performance and while such investment should not be to the
exclusion of other factors (price, competition, etc.) that affect performance it
is a central element of successful consumer goods marketing. What is very
clear is that investing in the brand is about sales and profits as well as the
overall value of the brand itself.

(A preÂcis of the article ``Performance consequences of brand equity

management: evidence from organizations in the value chain''. Supplied by
Marketing Consultants for Emerald.)

236 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003