UNIVERSIT DE LAUSANNE COLE DES H AUTES TUDES COMMERCIALES

THE IMPACT OF PERCEIVED CORPORATE BRAND VALUES ON BRAND PREFERENCE: AN EXPLORATORY EMPIRICAL STUDY

Sandor Czellar Guido Palazzo

January 2004

Institut Universitaire de Management International (IUMI) cole des HEC Universit de Lausanne CH 1015 Lausanne Tl. 021 692 33 10, Fax 021 692 34 95 E-mail : Admin.mim@hec.unil.ch Contact Authors: Tl. 021 692 33 73, Fax 021 692 33 05 E-mail : Sandor.Czellar@hec.unil.ch

Abstract In this paper, we build on consumer-company identification and identity consumption theory to investigate the impact of perceived corporate values on brand preference. Our model proposes that brand value attractiveness (defined in terms of perceived corporate values and value importance) positively affects brand preference and that this main effect is moderated by individual differences (defined in terms of self- monitoring and materialism). We expect that brand values should be more important for low self- monitors than for high self- monitors; in the same vein, non- materialists should give more weight to values in their preferences than materialists. A first empirical study using six well-known brands and 150 participants provides support for our model. Managerial implications and future research directions are discussed on the basis of the findings.

Keywords: List of Values, Corporate Branding, Brand Preference, Identity

The Impact of Perceived Corporate Brand Values on Brand Preference: An Exploratory Empirical Study Nowadays, we are witnessing a shift from product branding to corporate branding (Aaker, 1996; de Chernatony, 1999; Hatch and Schultz, 2001, 2003; Keller, 2003). Corporate branding goes far beyond the well-established tradition of product branding: It does not explicitly deal with product features, but rather transports a well-defined set of corporate values (Aaker and Joachimsthaler, 2000; Hatch and Schultz, 2003; Schultz and de Chernatony, 2002). The general aim of corporate branding is to build a sustainable bond between the branded company and its customers through a clear value proposition (Schultz and de Chernatony, 2002). Despite the vivid interest of brand managers for promoting corporate brand values and despite the existence of a considerable body of anecdotal evidence, systematic research on consumer attitudes and preferences vis--vis corporate brand values remains scarce. The topic is of considerable importance, however. If corporate brand values prove indeed to enter consumer preference structures, a strong case can be made for the development of specific value-focussed strategies, over and/or in addition to other benefit- focussed positioning. In a similar way, if consumer segments based on life values exist for the brand, differentiated corporate value positioning may be developed to reach each of them. In addition, the investigation of the impact of corporate brand values on consumer behavior may also provide insights about brand strategy effectiveness. In this paper, we build on identity consumption theory (Belk, 1988; Elliott and Wattanasuwan, 1998) and consumer-company identification (Bhattacharya and Sen, 2003) to investigate the impact of perceived corporate values on brand preference. We focus specifically on terminal, end- goal values represented by corporate brands (Kahle, 1983). We

also include two individual difference factors, self- monitoring and materialism, as possible moderators of the impact of corporate values on brand preference. The paper is organized as follows. We first present the theoretical underpinnings of our model and three research hypotheses. We then provide details about the methodology of our empirical study. Results are then presented and discussed, from both a theoretical and managerial perspective. A reflection on future research directions concludes the paper. Conceptual Framework A corporate brand tries to establish a coherent perception of the company for its different stakeholders and reflects a good corporate reputation in the eyes of the general public (Hatch and Schultz 2003; Schultz and de Chernatony 2002; Urde, 2003). Nevertheless, the single most important public of a corporate brand is its end consumers, who are drowning in the overwhelming abundance of brands and brand communication. Against the background of brand multiplication, the complexity-reducing corporate brand promises stable, trustworthy criteria for purchase decisions (Gabriel and Lang, 1995; Schmitt and Simonson, 1997). Questions of personal identity ("Who am I?") and collective identity ("Who are we?") are ranked highly on the agenda of today's postindustrial societies (Giddens, 1991). Through brand preference, choice and consumption, consumers create meaning and try to define or strengthen their identity (Belk, 1988; Bhattacharya and Sen, 2003; Elliott and Wattanasuwan, 1998; Fournier, 1998; McCracken, 1986). The core thesis of this research is the idea of identity being (at least partly) the result of consumption and consumer decisions conversely being the result of identity needs. By strongly focussing on values, corporate branding strategies try to protrude deeply into people's life-world. With their normative kernel and their lifeworld-rooted narrative they can successfully address the growing desire for normative orientation in society. This is why some corporate brands promise to be credible and authentic (e.g., "Coca Cola, the real thing").

They reach beyond the purely rational and purely economic level to spark feelings of closeness, affection and trust (Berry, 2000) and are perceived as resources for individual identity projects. The discussion on the influence of life values on consumer decisions has a long tradition (Carman, 1978; Henry, 1976; Kamakura and Novak, 1992; Novak and MacEvoy, 1990; Pitts and Woodside, 1983). Within the identity-driven context of corporate branding, the link between values and consumption becomes even more salient. Values build the evaluative framework that helps to reconstruct, maintain and express a role-transcending and cross-situationally consistent personal identity (Hitlin, 2003; Taylor, 1989). Therefore, valuedriven brands help to express or sometimes even to define personal moral preferences; in addition, they can transport specific aspects of consumer personalities. Through meaningful values, corporate brands bring continuity into a fragmented experience, they compensate for the lack of community in our individualistic society (Bhattacharya and Sen, 2003; Elliott, 1993). Corporate brands create micronarratives around their normative kernel; and consumers use these micronarratives for their individual and communal projects of identity reconstruction. The growing importance of identity needs for consumer decisions leads to discussions on the consequences for corporations. Drawing on research in individual and organizational psychology, Bhattacharya and Sen (2003) have recently proposed an integrative framework of consumer-company identification. According to the them, the core values of a corporate identity (embodied in its mission, operating principles and leadership) are communicated to diverse stakeholders - in the first place to consumers - by a variety of communicational elements. These elements can be more or less controllable: for instance, the corporate brand's marketing- mix or the company's annual report are highly controllable elements; whereas distributor activity, press releases by consumer associations and NGO activism are less

controllable elements. At a minimum, the controllable identity communicators should carry the corporate values to consumers and other audiences in a clear and integrated way (Bhattacharya and Sen, 2003). Ideally, corporate values should be evident throughout all dimensions of corporate behavior (de Chernatony, 1999; Hatch and Schultz, 2001; Simoes and Dibb, 2001; Tilley, 1999; Urde 1999; 2003). Bhattacharya and Sen (2003) propose that a key antecedent of consumer-company identification is corporate identity attractiveness. Corporate identity attactiveness is in a great deal determined by identity similarity - that is, "the more similar consumers perceive a company identity to be to their own" (Bhattacharya and Sen 2003, p. 80). Identity attractiveness is a function of consumer-company identity similarity for the reasons articulated by the theory of identity consumption: If there is a true match between corporate and consumer identity, the purchase of the corporate brand should enable consumers to define more clearly and completely who they are or where they belong to. In the next section, we theorize that corporate values play a key role in this process. Model and Hypotheses Based on the conceptual developments outlined above, we discus s in the following lines the customer-based conceptual model represented in the figure. By adopting a multiattribute perspective, we define corporate brand value as the sum of the products of perceived values offered by the corporate brand and the importance placed on values by the customer. The focal point of the model is the hypothesized impact of corporate brand value attractiveness on brand preference (H1). The individual difference variables of selfmonitoring (H2) and materialism (H3) are represented as moderators between corporate brand value attractiveness and brand preference. We now present the three research hypotheses. INSERT FIGURE AROUND HERE Corporate brand values and brand preference

Based on our conceptual framework, a strong link between consumer brand preference and corporate brand value attractiveness can be expected. Both classical identity consumption theory (e.g. Belk, 1988) as well as the more recent consumer-company identification model (Bhattacharya and Sen, 2003) emphasize the importance of identity similarity and attractiveness in shaping consumer attitudes, preferences and choices. From a corporate branding perspective, the impact of corporate values on consumer attitudes, preferences and choices follows the same logic: Corporate brand values are a component of corporate identity; and brand value similarity is a subset of identity similarity that leads to corporate brand value attractiveness. In turn, corporate brand value attractiveness that itself contributes to favourable consumer attitudes, preferences and choices. Our interest focusses on this issue at the preference level.We therefore propose the following hypothesis: H1 The more attractive the perceived corporate brand values, the higher the consumer's preference for the brand. We next propose two moderators of the main effect of corporate brand value attractiveness on brand preference. These moderators are individual trait differences: selfmonitoring and materialism. Past studies have already conceptualized both self- monitoring (e.g. DeBono, 2000) and materialism (e.g. Bloch, 1995; Boch, Brunel and Arnold, 2003) as a moderator variable at different stages of consumer behavior. Our contribution lies in the application of these moderators to the relation between perceived corporate brand values and brand preference. The moderating role of self-monitoring According to self- monitoring theory, people differ substantially in the way they regulate themselves in social situations (Gangestad and Snyder, 2000; Snyder, 1974). Low self- monitors tend to project towards others a stable self in diverse settings of social interaction. Their behavior is guided more by inner beliefs, attitudes and values than social

influences. High self- monitors, on the other hand, exert more expressive control over their social behavior. They tend to adapt their appearance and acts to specific situations and specific people; personal beliefs, attitudes and values have therefore less impact on their behavior than social cues. There is strong evidence that low self- monitors are more receptive than high selfmonitors to product quality claims serving a value-expressive function; whereas high selfmonitors are more receptive than low self- monitors to symbolic claims serving a socialadjustive function (DeBono, 1987; DeBono and Harnish, 1988; Shavitt, Lowrey and Han, 1992; Snyder and DeBono, 1985). We expect such a pattern of evidence with regard to corporate brand values, too. Low self- monitors, driven by their personal values, should give more importance in their brand preferences to brands that carry values important to them; high self- monitors, on the other hand, are expected to attribute less importance to corporate brand values since they tend to give priority to the social-adjustive function of brands. Therefore: H2 The relation between corporate brand value attractiveness and brand preference is moderated by the individual's self- monitoring level. Specifically: a low self- monitoring level leads to a stronger relation between corporate brand value attractiveness and brand preference; a high self- monitoring level leads to a weaker relation between corporate brand value attractiveness and brand preference. According to Richins and Dawson (1992), materialistic consumers are characterized by a strong emphasis on possession acquisition. They think about possessions as an essential means in the pursuit of happiness and tend to view success in terms of possessions, too. As a consequence, materialists "value possessions and their acquisition more than other life goals and more than their relationships with other people" (Richins and Dawson, 1992, p. 308). However, we do not argue that materialists would not have any life goals apart from the mere

acquisition of goods (Cskszentmihlyi and Rochberg-Halton, 1978). Rather, our expectation is that materialists, being strongly focussed on the acquisition of possessions, would form brand preferences on the basis of product features signalling specific attributes, quality, prestige or status. Highly abstract brand featur es - such as the terminal values represented by the corporate brand - would therefore have relatively less importance for them for forming brand preferences; non-materialists, on the other hand, should place more importance on corporate values for forming preferences. Therefore: H3 The relation between corporate brand value attractiveness and brand preference is moderated by the individual's materialism orientation. Specifically: a non- materialistic orientation leads to a stronger relation between corporate brand value attractiveness and brand preference; a materialistic orientation leads to a weaker relation between corporate brand value attractiveness and brand preference. Methodology As a preliminary step, we selected six widely known brands from a screening study with 55 students. These were two international sportswear brands: Nike and Puma; two Swiss retailers: Migros and Denner and two European fashion brands: Benetton and H&M. The following measurement scales were used: Kahle's (1983) List of Values for measur ing value importance (nine items, seven points ranging from 1="Very unimportant" to 7="Very important"); Snyder and Gangestad's (1986) scale for measuring self- monitoring (18 items, ranging from 1="Strongly Disagree" to 7="Strongly Agree"); Richins and Dawson's (1992) scale for measuring materialism (18 items, ranging from 1="Strongly Disagree" to 7="Strongly Agree"). Brand value perception was measured using Kahle's scale, too, but this time by asking participants to think about what they know and have experienced about a particular brand and then rate how much the brand reflected each of the nine values by using a 1-7 ("Strongly Disagree" to "Strongly Agree") format. Corporate brand value attractiveness

was obtained through a multiattribute model, by calculating, for each value, value importance * value perception and summing these products across the nine values. Finally, for brand preference, we asked participants to give relative preference scores to four brands in a particular industry including the brand pairs under investigation, by applying the common relative preference elicitation technique (e.g. Park and Srinivasan, 1994). For example, in international sportswear, the task was to rate Nike, Puma, Adidas and Reebok on a 1 to 10 scale, by giving 1 to the least liked brand and 10 to the most liked brand. Then, participants gave a score between 2 and 9 to the remaining two brands in a way that reflected their relative preferences. One-hundred fifty students took part in a paper-and-pencil survey (35 % female, mean age 21.8). The study was administered to students in two stages, with a one-week lag between the two. A first questionnaire contained brand preference measures, the LOV scale, the selfmonitoring scale and the materialism scale. A second questionnaire contained the perceived brand value scale for each of the six brands studied. The order of the two questionnaires was counterbalanced across two parts of the sample. Discussion of Results Scale reliabilities using Cronbach's were the following: List of Values (.680), brand values (.934), self- monitoring (.670), materialism (.846). To test our three hypotheses, we ran a multiple regression with interaction terms, with brand preference as a dependent variable (see table). Results indicate that brand value attractiveness has, as expected, a positive and significant impact on brand preference. The two interaction terms, again as expected, are negative and significant. These results lead to the non-rejection of our three hypotheses and confirm our conceptual model. That is, higher brand value attractiveness leads to higher

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preference for the brand and this relation is indeed negatively moderated by self- monitoring and materialism. INSERT TABLE AROUND HERE All three hypotheses have received empirical support. Note that the standardized coefficient of corporate brand value attractiveness is more than three times larger than that of the interaction terms. This means that the main effect has considerably more impact than the moderator variables on the dependent variable. It seems that corporate brand values - as assessed by the LOV scale at least - are important to all consumers. For example, perceptions about the values represented by Nike, Puma etc. serve as criteria for forming preferences among competing brands in the sports fashion industry. From a managerial perspective, it seems worth undertaking a corporate brand strategy built around terminal values, since the results point to the strong main effect of corporate brand value attractiveness. However, some market segments may be more sensitive to such a strategy than others: Specifically, low self- monitors and non- materialistic people. It is also possible that these potential consumers react less favourably to concrete social-symbolic brand cues like high price, brand prestige, allusions to fashion, association with opinion leaders etc. The converse of this is true of high self- monitors and materialistic people. It would be interesting to link these results to other segmentation criteria, too. For instance, Richins and Dawson (1992) had shown that materialists tend ed to buy more items for themselves and give less money to others and charities. If consumer segments along these characteristics exist for the brand, differentiated value positioning may be developed to reach them. Furthermore, managers may want to have a look at detailed brand- level and valuelevel analyses. For example, if brand strategy involves a clear emphasis on certain types of

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terminal values (such as, for instance, "enjoyment and fun" or "freedom of choice" for Nike), insights may be gained about its effectiveness using our methodology. Future Research We focussed our preliminary investigation on six brands in only three product categories: sportswear, retailing and fashion. It would be interesting to extend our study to more brands in more product (and service) categories to investigate the effects related to the social-symbolic role of brands in different categories. Theoretically, value-based branding may be developed in any product/service category. It is an empirical question whether corporate brand values play a more important role in predominantly hedonic and symbolic categories (perhaps with the exception of luxuries) rather than in functional categories (such as grocery, electrical appliances etc.). The impact of corporate values on brand attitude is another topic for future research. In this paper, we used an overall measure of brand attitude - preference among four brands. More detailed attitude measures in terms of the tripartite attitude model (Eagly and Chaiken, 1993) may explain whether it is at the cognitive, affective or intentional level of attitude that corporate values have most impact. Another, largely unexplored path for future studies is the investigation of the effectiveness of identity communicators in transmitting desired brand values. As we mentioned it in the conceptual part of this paper, marketing- mix elements at the corporate level may be used to convey a corporate identity, and, by the same token, corporate values (Bhattacharya and Sen, 2003). But which marketing elements are the most effective for conveying the desired values? For instance, would corporate advertising be more effective than corporate social initiatives in the communication effort? Also, are less controllable communicators (e.g. customer groups) potentially more beneficial (or damaging) for enhancing perceived corporate values? All these questions remain open for future inquiry.

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In a different perspective, extension of the proposed model may be undertaken to develop an integrated model of the corporate brand value - brand attitude/preference/choice link. Specifically, other moderators could be included in the framework, both individual differences (like age, gender, gender identity, consumer expertise etc) and manipulated variables (like mood, involvement, information load etc). In addition, mediating variables like a critical attitude toward "big business" could be analyzed, too. Note also that we have only included terminal, end-goal values in our study (Kahle, 1983). Another extension concerns the distinction between instrumental- vs. terminal values in the sense defined by Rokeach (1968, 1973). Our expectation is that materialism and self- monitoring may have different effects for instrument al values than for terminal values (it may be that the interaction effects would be positive for instrumental values, whereas, as we have shown, they are negative for terminal values). Other individual differences may also have an impact on the relative weight of instrumental and terminal values (gender effects in particular), opening up intriguing avenues for further inquiry.

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Table Regression with Interaction Terms, Dependent Variable: Brand Preference

Independent Corporate Brand Value

Standardized Coefficients

p-value

.408 Attractiveness Brand Value Attractiveness x -.124 Self- monitoring Brand Value Attractiveness x -.117 Materialism Notes. F=38.23 (p=.000), R2 =.113, adj. R2 =.111.

10.7

.000

-2.09

.037

-2.01

.045

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Figure -Conceptual Model Selfmonitoring Perceived brand values Materialism

H2 Corporate brand value attractiveness

H3 Preference for the corporate brand

H1

Value importance

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