Academic Research学术研究连载

走进中国工业品牌管理与竞争的新常态

Entering into the “IB and HB branding management Era”

                               by Dr. Yang XiaoTong

 Edited by Eric and authorized for release

OVERVIEW

In the following parts to continue our discussion of branding effects early on, we would like to put it into some specific perspectives by making a number of different assumptions, in order to illustrate that the quality-based branding strategy applied in a highly competitive B2B context is truely powerful to earn you far better performance than your rivals, largely determined by how much of trust and loyalty customers have towards a particular brand that represents your business.                     

3.2 Assumptions

A lot of research prior to ours has demonstrated that quality orientation is helpful in improving organization-wide performance (Rust et al., 1994; Mohr-Jackson, 1998), and in creating more value to their customers as well (Douglas & Judge, 2001; Zeithaml, 1998). It is particularly true of B2B market where quality orientation is typically a dominating business strategy that has been taken by a large number of industrial manufacturers (Fornell, Huff & Anderson, 1994).

Quality is fundamentally important for ensuring sustained business development. Whatever the marketing strategy is to be set, the quality of product or service is still what you can’t do without. In general, the higher a product or service is in quality, the more it will make customer satisfied. It’s worth noting that, making purchase from B2B market is subject to a much more complicated procedure than from B2C market, thus requiring more rational decision to be taken. This is a decisive factor of assessment revolving around the quality of product when either large-sized or high-valued equipment is to be purchased. So it makes a lot of sense for the manufacturers to stick with improving quality for increased customer satisfaction. It is fair to say that, the more a firm is quality oriented, the more it will be perceived credible by the customers. The best way of giving the customers a full assurance of quality management is to subject products to certification by an independent 3^rd party, the reason why we have various 3^rd party certification agencies available on the market, such as ABS, DNV, Lloyd, MA (an industry standard mandated for manufacturers of coal-mining equipment within China), and the widely recognized certification of ISO9000 Quality Management System. In most cases, there are far few suppliers of industrial equipment on the market, providing customers with quite a limited room to make choice from. As purchase of those industrial equipment is an incredibly complicated process and is of great importance, customers often tend to choose from the suppliers they know well to reduce any risks or uncertainties that may be involved in this process (Michell et al., 2001; Mudambi, 2002; Mudambi et al., 1997). In other words, customer loyalty in B2B market is partly down to two factors, one is perceived risks and the other one is limited options (Jarivs & Wilcox, 1977).

Brand is now of a great symbolic meaning to the quality of a product or service and is helpful in creating entry barriers to other competitors (Keller, 1993; Srivatava & Shocker, 1991). In the minds of customers, an attitude or equally a point of view will come into form depending on their quality-based evaluations in the first place (Srivatava et al., 2001). Unlike competitions among most consumer products in B2C market, quality orientation is naturally thought to be a long-term business strategy to stick with by most equipment manufacturers, to create competitive barriers and to retain market shares with increased customer recognition. Meanwhile, it is also a continued way to keep or raise the perceived quality of a brand name to the customers. Quality has been confirmed by a lot of prior research a leading factor to build up customer satisfaction, which can be applied to brand marketing as well (Anderson & Sullivan, 1993; Chruchill & Suprenant, 1982; Cronin & Taylor, 1992; Fornel, 1992; Oliver & DeSarbo, 1988; McCarthy & Norris, 1999). So, in our study, it is supposed to be a most decisive factor to reducing barriers to purchase of industrial equipment and to influencing assessment to be made by the corporate customers. In theory, the core positive effect quality-centric strategy has on brand marketing can be divided in two aspects, Catching and Anchoring, which are reflective in customer satisfaction and customer loyalty (the latter being more susceptible to other constraints like price movement). To host brand, it is even more fundamental and irreplaceable to maintain both perceived quality of high level and positive quality-based evaluation from customers. In summary, the above analysis leads us to make the following assumptions,

Assumption 1a: The stronger quality orientation is, the more satisfied a customer will be.

Assumption 1b: Quality orientation is positively related to customer loyalty.

Assumption 2: Quality orientation is positively related to the quality of host brand.

In B2C context, a lot of research has been done on how assessment or judgment is made by the customers based on all the information from both inside and outside (McCarthy & Norris, 1999). With a particular product or service, internal information includes those physical attributes, such as taste, size, ingredients and functionality, while external information includes those non-physical attributes, such as brand, price and word of mouth. Furthermore, it’s also demonstrated that brand as an outstanding part of external information is most representative of quality (Alison & Uhl, 1964; Dodds et al., 1991; Jacoby et al., 1971; Rao & Monroe, 1989; Richardson et al., 1994). As a result of that, brand will affect how a product or service is assessed (Jacoby et al., 1971; LeClerc et al., 1994; Tootelian et al., 1988). With different assessments made from different perceptions, customer satisfaction and/or customer loyalty will also be affected (Anderson & Sullivan, 1993; Churchill & Suprenant, 1982; Aaker & Joachimsthaler, 2000; Keller, 1993; Fornell, Huff & Anderson, 1994). The ultimate result is, purchasing decision will be affected (Rice, 1990; Kotler, 2000; Martinez & De Chernatony, 2004). As far as equipment manufacturing is concerned, host brand quality is extremely critical for a given firm to enter into a long-term strategic cooperation with customers based on fulfilled customer satisfaction and resultant brand trust. Basically, it is a good way to boost repeat purchase for building of brand trust. In this case, we take a step forward to make further assumptions as follows,

Assumption 3a: host brand quality is positively related to customer satisfaction.

Assumption 3b: host brand quality is positively related to customer loyalty.

As we have previously discussed, brand is very important to signaling quality (Keller, 1993) and to creating competitive barriers to competitors (Srivastava & Shocker, 1991). Furthermore, it has significant effect on customer satisfaction as well as customer loyalty (Anderson & Sullivan, 1993; Churchill & Suprenant, 1982; Aaker & Joachimsthaler, 2000; Keller, 1993; Fornell, Huff & Anderson, 1994). Conceptually, there is no significant difference between an ingredient brand and a consumer brand or brand of a finished product (Kotler & Pfoertsch, 2010). Accordingly, as an integral part of host branded equipment, ingredient branded product is expected to have positive effect on it to raise its overall perceived quality under the same mechanism, which can lead to the increase in both customer satisfaction and customer loyalty. Admittedly, this is also dependent on the extent to which that ingredient branded product is thought to be critical from the perspective of customer. In our opinion, the effect of perceived quality of host brand is supposedly delivered by execution of quality orientation within a firm. With critical ingredient brand being a major symbol of quality, as Michael and Donald pointed out in their findings (See figure 7), incorporation of highly credible ingredient branded product will be a good way to raise perceived quality of host branded product. Allowing for that expected uplifting effect, a well-known ingredient brand name may also have multiple effects among those host brand customers (Aaker & Keller, 2002). Considering the possibility that in customer’s mind a host brand in combination with recognized ingredient brand is better than it is in combination with self-owned but less well known ingredient brand, due to the power of association, ingredient brand is able to make host brand more credible after being incorporated. The worst case scenario is, that ingredient brand can be signaled to host brand customers at least (Desai & Keller, 2002). Another view we are holding in our study here is that, getting ingredient products branded is also an effective way of making the entire process for buying decision to be taken within business organizations more simplified and more efficient than it was, particularly with those trust-based products of which it’s quite hard to find an easy way to make assessment (Darby and Karni, 1973). A classic example is with coal-mining equipment AFC, a subject on which customers will keep control of any possible misjudgment when purchasing assessment is made, to reduce the risk associated with this process to the lowest. As technology advances over time, we see market competitions getting intensified more and more, and as a result of that significant change happens with distinctive technical edge for some products over others becoming possible (Zeithaml, 1988). In reflection of that ongoing change, it even goes further for technical edge to be translated into the process of trust building in ingredient brands. Interestingly, such a strong association with ingredient brand also applies to B2B industrial market. It is even more the case with self-owned ingredient brand of high quality, which is likely to bring more trust to host brand than non self-owned ingredient dose. In study, trust in ingredient brand is thought to be an extremely critical element to consider before quality assessment is made with the host brand. Theoretically, trust in ingredient brand contributes a lot to boosting customers’ confidence in what they are in exchange for as a whole, in terms of both reliability and degree of consistency (Morgan & Hunt, 1994). With respect to B2B industrial market, trust is built on the relationship between purchasers and suppliers, which can be reinforced by a particular critical ingredient brand that can assist in addressing what concerns customer the most in purchasing. Our findings are, those firms endeavoring for brand construction are regularly perceived of the highest quality in the eyes of customer. Apart from that, trust also lays the foundation for making cooperation possible during the course of negotiation between different parties and for pushing the opposite party to stay loyal even more (Schurr & Ozanne, 1985). It’s already known that, ingredient brand trust can affect the perceived quality of the host branded product (See figure 7), especially when that host brand is either an average one or a worse one. In such a circumstance, it can positively make a difference in marketing (McCarthy & Norris, 1999). Broadly speaking, ingredient brand trust has effect on a wide range of things including perceived quality of host brand, quality orientated business strategy, customer satisfaction and customer loyalty. Likewise, when a customer becomes aware that the critical ingredient brand inside is owned by the same owner of the host brand, experience of using it will further make the host brand, along with its owner, more trustworthy to the customers due to the effect of association. Unfortunately, this is what we hardly see from other host brand owners who get ingredient products outsourced to external suppliers. In nature, critical ingredient product weights most in the minds of customers for assessment of OEM host machine and can make the entire process of assessment much simplified, to cater for their demand of stable functionality to eliminate any possible uncertainty or risk (Michell et al., 2001; Mudambi, 2002; Mudambi et al., 1997). This is also what drives the host brand manufacturers to stick with continuously improved quality (Fornell, Huff & Anderson, 1994) for higher customer satisfaction and customer loyalty, so as to accommodate the rational mentality of those industrial customers in making purchase. In some cases, expectations for joint research & development can be inspired due to high degree of quality-based satisfaction and loyalty.

To host brand owners who aim at pushing into the high-end market, development of self-owned ingredient brand is very critical for giving them an unique competitive advantage that is valuable, scarce, inimitable and irreplaceable (Barney, 1991; Wernerfelt, 1984). As a whole, brand trust is the extent to which a product or service under a particular brand name is recognized to a customer in terms of satisfying his or her functional demand (Chaudhuri & Holbrook, 2001). Meanwhile, trust is also a fundamental thing on which customer loyalty is built up (Berry, 1993; Reicheld and Schefter, 2000). It is even fair to say that, in relationship marketing, brand trust alone is the most influential medium (Berry, 1995). With trust present, perceived quality of host brand products can be improved significantly to guarantee continued and boosted customer satisfaction (Anderson & Sullivan, 1993) and customer loyalty (Oliver, 1996). Additionally, competitive barrier can also be raised to make it harder for existing customers to switch their suppliers, including suppliers of those ingredient brands (Oliver, 1996). In this case, overall business performance of host brand owners will be improved continuously as well (Mohr-Jackson, 1998; Douglas & Judge, 2001). Zeithaml once made a summary in his reflection on the role quality plays in marketing and that is, perceived quality means the overall assessment that is made by a customer with all sorts of merits or excellence a product or service has taken into account. In this context, self-owned ingredient brand happens to be what is perceived by customers as a differentiating element to constitute that merits or excellence, which can dominate customers’ assessment of host brand products. In return, it will give self-owned ingredient brand owners a differentiated competitive advantage over their competitors who outsource ingredient products to others. Regarding a self-owned ingredient brand, especially one that works as a key part of host brand, trust provides an access for customers to better know about its quality-oriented business strategy. Therefore, based on further analysis we have done from above, we believe self-owned ingredient brand is more powerful than expected to influence many things, which are quality orientation, host brand quality, customer satisfaction and customer loyalty, and four (4) more assumptions can be made,

Assumption 4: Self-owned ingredient brand trust is able to adjust the relationship between quality orientation and perceived host brand quality. Additionally, such a relationship will get significantly stronger when self-owned ingredient brand trust increases.

Assumption 5: Self-owned ingredient brand trust is able to adjust the relationship between quality orientation and customer satisfaction. Additionally, such a relationship will get significantly stronger when self-owned ingredient brand trust increases.

Assumption 6: Self-owned ingredient brand trust is able to adjust the relationship between quality orientation and customer loyalty. Additionally, such a relationship will get significantly stronger when self-owned ingredient brand trust increases.

Assumption 7: Customer satisfaction is positively related to customer loyalty.

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For contact with the author, please email to shanshan@towermind.com;

For contact with the editor, please email to yangls@skiplifting.com