Name: Student ID: Group: Submission Date: Advanced Entry MBA Campus-Based(October, 11)

An examination of the relationship between perceived risk and brand equity: A comparison of supermarket retailers

Table of Contents 1. Introduction: ........................................................................................................................ 4 1.1. 1.2. 1.3. 1.4. 2. Working Title: .............................................................................................................. 4 Purpose: ........................................................................................................................ 5 Research question: ........................................................................................................ 5 Aim and Objectives of Dissertation: .............................................................................. 6

Literature Review: ............................................................................................................... 6 2.1. 2.2. Scope:........................................................................................................................... 6 Conceptual underpinnings: ............................................................................................ 7 Creation of brand image:........................................................................................ 8 Categories of brand equity: .................................................................................... 8 Models for brand equity: ........................................................................................ 8 Levels of brand equity and measurement: .............................................................. 9 Perceived risk: ....................................................................................................... 9 Types of perceived risk: ......................................................................................... 9 Relationship between perceived risk and brand equity: ........................................ 10 Comparison between two famous retailers of UK: ............................................... 11

2.2.1. 2.2.2. 2.2.3. 2.2.4. 2.2.5. 2.2.6. 2.2.7. 2.2.8. 3.

References: ........................................................................................................................ 13

1. Introduction:
The importance of brand equity is increasing with introduction of every new brand and on the other hand the perceived risk associated with brands is also a matter of concern for the marketers. As they have a strong relation with each other hence they are often discussed in relation with each other (Aaker, 2004). This proposal majorly constituents two part; introduction of the topic or idea and the related literature review. The literature review helps to connect the past efforts made by the researchers and this assignment. It presents the scope of the idea. The last part is of Harvard referencing.

1.1. Working Title: The proposal is designed around a major issue of the marketer i.e. the relation between the perceived risk and the brand equity followed by the comparison between two retailers of UK. This working title is strong and influencing. It helps to lessen the gap between corporate world and researchers as its outcomes will be helpful for the practitioners. There are two major variables in this study; brand equity and the perceived risk. Here the brand equity is a dependent variable while the perceived risk is independent variable. They are strongly related with each other(Ferrell and Pride, 2003). The effects on profitability have increased the significance of their relation. The dissertation structure will be followed. The contents of the dissertation include; y Acknowledgement contains appraisal to those who provided helping hands in accomplishment of the assignment. y Abstract -- this portion includes the brief summary of the entire assignment. It will help the readers to analyze the content and quality of the dissertation. y Chapter 1- constituents the introduction part. It will be the face of the project presenting its content y Chapter 2 the literature review will be comprised of chapter 2. It will contain the over view of the past efforts of the researchers and their effective contribution in finding the helpful results about the relation of brand equity and the perceived risk.

Chapter 3 this part of the project is specific for the discussion on the research methodologies. This part is significant as it assists the readers in knowing about the methods which can be used in conduction of good research. The tools used for this project will also be mentioned in this part.

Chapter 4this chapter is based on the presentation of the assignment. It is quite important to show data in a presentable manner after putting effort in collection and research. This chapter satisfies this need.

Chapter 5 contains the conclusion of the entire effort. It also has a part of recommendations in which I will suggest few things on the basis of my research and literature review.

References as told earlier, the Harvard referencing system will be followed to accomplish the project.

Appendices contains the tables and figures taken to assist the project.

1.2. Purpose: This piece of work will be done to focus on the relation between the perceived risk and the brand equity. It will be supported by the examples of two famous retailers of U.K; that are Tesco and Asada Groups. It will reinforce the importance of these dependent elements for the corporations and retailers in 21st century.

1.3. Research question: After working on the idea, the research question which I have generated is; What is the impact of the perceived risk on the brand equity? Explain with comparison of the retailers. This research question is developed after rational thinking on the research idea. The brief literature review helped to design it.

1.4. Aim and Objectives of Dissertation: The aim of the research project is to interpret the relation between the perceived risk and the brand equity. This will be done with the help of the comparison of two retailers in UK. In order to achieve this objective, I have designed few objectives. These are; y y y y To identify the influence of perceived risk on the brand equity. To identify the relation of brand image and brand loyalty with the brand equity. To analyze the extent to which perceived risk affects the brand equity. To suggest the marketers few tips on this important issue.

In this scenario, I will discuss the relationship between the perceived risk and the brand equity. This discussion will be supported by the comparison of the perceived risk and brand equity of two most famous retailers of UK i.e. Tesco and Asada groups.

2. Literature Review:
This considered the most important part of the research project. It not only explains the scope of the research but also contains a part of the models and research works done before. Those research projects are well assisted by the efforts of the researchers. Following is the scope and conceptual underpinnings of the research idea.

2.1. Scope: Despite of all the efforts made by the researchers to investigate the brand equity and all the factors (brand loyalty, brand image, perceived risk, etc.) associated with it, still there is room for research as the marketers are not satisfied with the outcomes yet. On the other hand, these research papers are not sufficient to develop a clear understanding of the topic and enforce its importance(Aaker, and Robert, 2001). There are limited numbers of studies which are actually helping. There is another issue concerned with the brand equity i.e. it is influenced by variety of factors like marketing mix, customer satisfaction and product line structure. All of the above discussed factors are very closely related with one another and their implementation change with time to time and place to place. This is the major reason that corporations need to develop new strategies for different

markets and update the developed strategies with change in culture or trend. Another thing supporting the fact that this topic has a broad scope is the importance of converting the CBBE (Customer based brand equity) into brand market performance. This field has a room to be explored like discussion on the awareness, attitude, activities, financial positions, attachment, association, etc. and their impact on the performance of the brand market.There are no empirical evidences to prove these issues. It is always difficult for the researchers to link these factors with the financial performance. In order to add more to this research, this project will be very helpful. This is from the side of the researchers(Ailawadi et.al, 2003). When we look at the issue from the view point of the firms, I will have a lot more to find out with the help of this research project. The emerging needs of the firms make this project attractive. The firms manage separate departments to deal with the brand port -folio strategies. The successful firms always try to make their portfolio effective and attractive. This discussion justifies the selection of this research idea. No doubt that this research idea has huge scope and a wide room to explore but care is needed to conduct the research. This topic is exciting and motivating.

2.2. Conceptual underpinnings: The brand equity is one of the most commonly discussed issues but the demands of the subject change with the passage of time. The brand equity is defined as the marketing outcomes of the product when it has a brand name and the marketing effects on the product which lacks brand name (Keller, 2003). Brands with high brand equity enjoy many other factors of good business like sustained price premiums, profitability and competitive structure. It has many financial benefits for the firms (Keller, 2003). The success of the brand depends on the abilities of the company to select the brand meanings i.e. choosing image of the brand and its maintenance with time. The brand image is also considered as one of the most important features of the brand. It is a complex of the perception of the consumers. The brand image is the kind of impression in the mind of the customers and a clear image of the brand helps the producers to position the brand.

2.2.1. Creation of brand image: In order to explain the brand equity, Keller (2003) developed the value chain model. This model explains the brand investments and their effect on the profitability of the organizations due to change the mind- set of the customers. The companies invest in the marketing department and focus on various programs (R&D, communications, advertisements, promotions, etc.). These efforts change the image of the product in consumers mind and helps in evaluation. The other features of the customers buying behavior include awareness, activities, experience, etc. This mindset of the consumer helps the corporations to predict the buying trend of consumers in the market(Aaker, 1991). On the basis of the performance of the brand in the market, the marketers assess the value of the brand. The important metrics are market share of brand, stock price and price ratio.

2.2.2. Categories of brand equity: The brand image is divided into two categories; functional and symbolic. There are various views behind the motivational level of the consumption behavior. The brand is placed in either of the brand image. The functional position of the brand is more intuitive than the symbolic(Keller and Kevin, 2008).

2.2.3. Models for brand equity: The economic model says that the consumers do rational buying and intend to maximize the utility of the product. A draw- back of this model is that it believes that the customers will use their time and abilities to compare and judge the products before buying. Another school of thought is of the opinion that the consumers are not always rational especially in case of shopping for emotional reasons (personal criteria like desire, taste or pride.)(Keller and Kevin, 2008).

2.2.4. Levels of brand equity and measurement: There are three measures for brand equity. These are; y y y Individual level Product/brand level Firm level

An approach to measure the mind set of the customers is the brand. It is called the consumer based brand equity (CBBE). The measures of this class include loyalty, attitude, attachment, awareness and affordability (Lahmenn, 2001). The firm level measurements of the brand equity have these components; net profit, market share, price premium, loyalty and revenue. These are very important for the firm as these attributes decide the profitability of the organization. These metrics have ability tobe accessed easily and objectively. Besides this, these measures are closely linked with the financial returns linked with the brand. At individual level, the measures are subjectively measured. It is difficult to put the potential of the brand into a formula at individual level(Ahluwalia and Zeynep, 2000).

2.2.5. Perceived risk: It is the risk associated with the consumers belief regarding the purchase of a commodity from a specific retailer. This belief may or may not be correct. In order to make sales successfully, the retailers try to overcome the perceived risks of the buyers. The risk is dependent on various factors like the purpose of buying and relationship with the retailers. If a customer buys for the first time from a specific retailer, the risk level goes up(Berman and Joel, 2005). Similarly, if the price of the good is high then the risk also increases.

2.2.6. Types of perceived risk: When the marketers talk about the perceived risks, they discuss the importance of inherent and handled risk. The handled risk arises when the buyer chooses the brand while the inherent risk appears at later stages(Biehal and Daniel, 2007).On the basis of types of buying, the risk is divided into following six types;

Physical (Few products may physical hurt the users. This issue becomes more sensitive in case of children commodities like toys.) Social (The image of the consumer in the peer group is always an important issue. The customers are image conscious. They tend to maintain their status in front of their family and friend.)

Psychological (The reasoning behind the buying behavior plays vital role in the development of perceived risk.) Functional (what function does the product do which is being bought?) Financial (The monetary concerns play crucial role. The purchasing capacity of the consumers affects the brand equity. ) Time (The time value cannot be ignored and its value changes with requirement.)

y y

No matter, in which type of perceived risks the consumer is involved, the brand equity is directly affected and so does the sales of the retailers.

2.2.7. Relationship between perceived risk and brand equity: We have already discussed the importance of brand equity and impact of perceived risk. It is eminent that they have strong relation and are inversely dependent. With the increase in the perceived risk, the brand equity increases. It is important to manage their relationship up to the level of profitability for both, the producers and the retailers. In order to control the perceived risk, the companies put efforts of get the customer satisfaction. We use the term customer-satisfaction engineering to explain marketing. Despite of importance of this phenomenon, the marketers define it in their own way. According to the psychologists, the reduction of the drive activity is the satisfaction. The economists express different view. They say that satisfaction is a utility. The customers use it and feel satisfied when the get maximum of it(Aaker and Erich, 2000). The successful marketers observe and control the entire process of buying in order to enhance brand equity and lessen the perceived risk. The purchase behavior starts from the formation of

motive and end up at the evaluation of the product by customers after its sale. According to this statement, the consumption experience and post purchase evaluation are equally important. The controlled perceived risk leads to the customers satisfaction and consequently the increased brand equity. But another conflict appears on the screen in process of discussing the brand equity i.e. the customer satisfaction is not enough for customer loyalty. The brand equity is supported by the brand loyalty. The generation of loyalty is an important concern for the producers and retailers. Loyalty is defined as the attitude of the individuals toward the brand. No doubt that it is a competitive advantage. The loyal consumers stick to their brands, retailers and suppliers. Even they do not mind giving a big share of their wallet to their desired brand. It is not just about earning the loyalty of consumer but also about profitability. The loyal consumer who buys less often is not desired by the retailers(Carlotti, et.al, 2004). The perceived risk influences the brand loyalty and brand equity. To elaborate the situation, we focus on the brand loyal which is following the two divergent streams; the deterministic and the stochastic approach. In the stochastic approach, loyalty is the behavior. A person who buys a product consistently is called loyal. It involves proportion and probability of purchase. According to the deterministic approach, element of attitude is added along with behavior. It states that the customers loyalty can be generated by number of factors. This favors the brand imaging and the brand loyalty. The efforts made to minimize perceived risk include the brand imaging. The brand imaging helps to create a desired position of brand in mind of customers and ultimately develops brand equity(Brandweek, 2006).

2.2.8. Comparison between two famous retailers of UK: The comparison between these two famous retailers will help to generate a broad vision of this research idea. These companies will be discussed with reference to the brand equity and the perceived risk. As told earlier, the trust on the retailer is very important to lessen the risk(Laforet, and John, 2005). We will study these two firms and analyze the impact of perceived risk on the brand equity of these brands.

Prior to explaining the status of these two famous retail shops of UK, it is important to know that these two firms enjoy the maximum market share; Tesco is at the top and Asada Groups is second in ranking. Tesco: Tesco started business in 1919 with sales of surplus grocery from a stall. This brand appeared later in 1924 as a relatively big name. The brand continued its success story and it became a private limited company. It is the most popular and respected brand. It has a long history of profitability and performance. The brand equity is not just immense but attractive too. When we compare the brand equity of the Tesco with the perceived risk, we find that the firm has successfully minimized the risk. That is way the company has earned brand equity. Asada Groups: The Asada Groups solely owned Wal-Mart for a long time. It is the largest company in UK. It is also famous as the most ruthless employer. Its take- over is a long process. The take over of WallMart by Asada Groups had severe consequences on the retailers. Asada was criticized by the misleading advertisement campaign. It was mentioned that it was a part of the illegal practices of employment. Asada Groups wiped out the jobs from local market. Asada is the second biggest market owned by Wal-Mart with the market share of 17 %. Its business includes sales of non- food items. It was formed in 1965 and expanded in 70s and 80s. In 1991, this company turned into a food retailer with significantly cheaper rates. With new strategies, it left all its competitors behind. This goal was achieved with by concentrating on the prices rather than on loyalty schemes.

3. References:
Aaker, A. (2004), Brand Portfolio Strategy: Creating Relevance, Differentiation, Energy, Leverage, and Clarity, Free Press. New York

Aaker, A. (1991), Managing Brand Equity. The Free Press: New York.

Aaker, A. and Robert, J. (2001), The Value Relevance of Brand Attitude in High-Technology Markets, Journal of Marketing Research, 38(4), 485-93.

Aaker, A. and Erich, J. (2000),Brand Leadership: The Next Level of the Brand Revolution, Free Press: New York

Ahluwalia, R. and Zeynep, C. (2000), The Effects of Extensions on the Family Brand Name: An Accessibility- Diagnosticity Perspective, Journal of Consumer Research, 27 (December), 37181.

Ailawadi, L., Donald, L. and Scott, N. (2003), Revenue Premium as an Outcome Measure of Brand Equity, Journal of Marketing, 67(October), 1-17.

Berman, M. and Joel, E. (2005),Retail Management, A Strategic Approach, 9th Ed., Prentice-Hall, Inc. New Jersey.

Biehal , J. and Daniel, S. (2007), "The Influence of Corporate Messages on the Product Portfolio, Journal of Marketing, 71 (April), 12-25.

Brandweek, (2006), "What Those Numbers Mean, Brandweek Jun 19, 2006, 47 (25),S20.

Carlotti, J., Mary, C. and Jesko, P., (2004), Making BrandPortfolios Work. McKinsey Quarterly, 4: 24-36.

Ferrell, M. and Pride, C. (2003), Marketing, Concepts and Strategies, 12th Ed. Houghton Mifflin Company, Boston and New York.

Keller and

Kevin L. (2003), Strategic Brand Management: Building, Measuring, and

Managing Brand Equity, 2nd ed. Upper Saddle River, Prentice Hall: NJ

Keller and Kevin L. (2008), Strategic Brand Management: Building, Measuring, andManaging Brand Equity, 3rd ed., Upper Saddle River, Prentice Hall: NJ

Laforet, S. and John, S. (2005), "Managing Brand Portfolios: How StrategiesHave Changed, Journal of Advertising Research, 2005 (September), 314-27.