Marketing Communication and Price Promotion

The impact of marketing communication and price promotion
on brand equity


Abstract
This paper establishes a theoretical and empirical basis that shows the impact of marketing communications and price promotion on brand equity. The theoretical review supports applying analysis techniques based on structural equations models to confirm empirically the relationship between marketing communication efforts and the dimensions of brand equity: perceived quality, brand loyalty, brand awareness and brand image. This measurement model is verified on a sample group of families which purchased durable goods — in this case a washing machine. The results indicate the positive effect of marketing communication on brand equity, and offer strong support
for the measures of perceived quality, brand loyalty, brand awareness and brand image as antecedents of brand equity.

CONCEPTUAL FRAMEWORK AND RESEARCH HYPOTHESES
This paper starts with the proposal formulated by Aaker7 on the brand equity concept and the components that integrate and explain it: perceived quality, brand loyalty and brand aware- ness. In this context, brand equity is defined as a set of assets and liabilities linked to the brand, which add value to or subtract value from a product in its relationship with customers. Various authors (Leuthesser,8 Farquhar9 and Nomen10) indicate that brand equity is
a strategic aspect of marketing manage- ment and can be created, maintained and intensified by strengthening one of its dimensions. Likewise, it is recog- nised that any marketing action has a potential effect on brand equity, since brand equity represents the accumu- lated impact of investment in the brand.


Establishing the hypotheses for verification
The proposed structural model recog- nises that brand equity is influenced by thedifferent marketing efforts
made by companies. These causal
relationships condition the formulation of hypotheses that explain the direct effect of previous marketing com- munications on brand equity, and the effect of marketing communications tools on the dimensions of brand equity.
In the current research, two marketing communications variables were collected from the marketing mix that measure the positive effect of perceived advertising spending on brand equity, and the negative effect on this value of offering price deals. The perceived advertising spending contributes to the successful creation of brand equity, as stated in some studies (Maxwell,11 Chay and Tellis,12
Simon and Sullivan,13 Boulding et
al.14). For its part, the use of price deals has a negative effect on brand equity, since it is considered that the consumer perceives a negative relationship between brand equity and the need to use incentives for sales that affects the established level of prices.15,16 Therefore, brand equity is influenced by two marketing com- munications tools used by the company: advertising and price deals

METHODOLOGY

Proposed measurement scales
The complete formulation of the measurement scales used in the re- search can be seen in Table 1.
In order to develop the measure- ment process for the different elements involved, Bollen’s recommendation45 has been followed: (1) identify the dimensions and latent variables that represent the concept to be measured;
(2) create indicators based on the past theoretical position; and (3) specify the relationship between the observable indicators or variables and the latent concepts or variables that they ex- plain.
The consumer normally has a per- ception of the brand in terms of the marketing communications spending made on it by the company. Advertis- ing expenditure, as the main marketing communications tool in the consumer market, should be considered when determining the effects of marketing

communications on consumers, and the perceptions that the messages are provoking among different tar- get individuals. The scale developed to measure the advertising spending perceived by the consumer consists of seven indicators. Price deals are measured with a very similar scale to that used to measure the effect of advertising.
Perceived quality is defined as a subjective judgment made by the consumer regarding the excellence or superiority of a product.46 The con- sumer’s opinion about the product’s quality and its attributes with regard to its expected performance forms the measurement scale indicator of the brand quality perceived by in- dividuals.
Brand loyalty plays an outstanding role in generating brand equity, not only because of its capacity to keep customers loyal,47,48 but also because that customer loyalty extends to other brands in the company’s portfolio.49

EMPIRICAL RESEARCH AND FINDINGS

This paper attempts to test a measure- ment model for brand equity. There- fore, in order to test the effectiveness of

the proposed method, research should

focus on one product category and the brands that operate in this market. The choice of washing machines as the product category is justified based on three criteria: (1) the influence of brands in the consumer market for washing machines and the buyers’ sen- sitivity to brands are higher; (2) there is tough competition between washing machine brands in Spain, with none of them having significant differences from the others; (3) the high rate of use

(between 98 and 99 per cent) of wash- ing machines in Spanish homes.

The technical data sheet for the

research, included in Table 2, sum- marises the design of the empirical work performed. The proportional af- fixation was performed based on the different urban areas of the city.





Analysis and evaluation of the measurement tools

This section evaluates the measurement scales used in the research (Likert,

1–7). The validity and internal consis- tency of the measurement scale were estimated. To evaluate the measure- ment scales: (1) Cronbach’s alpha was applied — this statistic is considered an adequate index of the inter-item con- sistency of independent and dependent variables50 as supplied by the SPSS program; and (2) confirmatory factor analysis was performed to, first, test the one-dimensional qualities of the scales, secondly, test the construct validity of each of them, and, thirdly, provide a more robust reliability measurement through internal consistency.

RESEARCH CONCLUSIONS AND LIMITATIONS

Managerial and theoretical implications
A company’s advertising spending was represented by the perceived advertis-

ing spending as an exogenous variable
in the structural model. A positive relationship was established between this spending and perceived quality, so that the more resources a com- pany dedicated to enhance a particular brand, the higher perceived quality the brand was seen to have. Also, spending on advertising affected the perceived quality, because it increased the as- sociated value of the brand, which helped in the purchase decision.53
It has not been demonstrated that the intensity of the marketing com- munications and a company’s high per- ceived advertising spending on a brand have a positive effect on consumers’ professed loyal behaviour towards the brand. This situation can be explained due to, first, the product in question being durable goods with a low buying frequency, and, secondly, the validated indicators for measuring brand loyalty mainly refer to the purchase intention.





Likewise, in the case of durable goods,
it was seen that the level of brand satisfaction can affect perceived adver- tising spending. When brand satisfac- tion was low, the perceived spending acted in the opposite way to that noticed in the structural model.
Brand awareness is reached through
a company’s marketing communica- tions efforts towards brand equity. Per- ceived advertising spending favourably conditions and affects brand awareness. In fact, brand recognition and aware- ness can imply a rise in the level of confidence regarding the product’s expected performance. When buying durable goods, it is normal to look for
a recognised brand with a high level of brand awareness to reinforce the pur- chase.
The associations that consumers make regarding a brand and its image are configured by their own ex- perience, the non-formalised informa- tion they receive about the product, and also by the information transmitted by the companies with regard to their product’s quality and excellence. Espe- cially in the consumer market, this information is transmitted through a company’s advertising.
To summarise, perceived advertising spending showed a favourable causal relationship for three of the four dimensions of brand equity. The higher the spending on advertising for the brand, the better the quality of the product as perceived by the consumer, the higher the level of brand aware- ness and the more associations linked to the product, forming its brand image.
Regarding theoretical implications, the positive effect of brand aware- ness on the perceived brand image for consumers was presented. The

group of associations linked to the
brand increased the favourable attitude towards the product as its recognition and the level of awareness increased. This causal relationship is significant and quantitatively important for the researched goods, leading to the con- clusion that brand awareness and name recognition for washing machines en- hance consumers’ attitudes towards a brand and improve its image.
Price deals as incentives to increase sales have been shown to have a negative effect on brand equity. Al- though they can cause a short-term benefit to the consumer,54 from a strategic perspective (when the brand was evaluated) they showed negative effects. These effects can affect the perceived quality of the product ad- versely, since benefits gained through price promotion are not enduring, and
do not transmit the security or the confidence that a brand should inspire with regard to its expected utility.