Significance of Marketing Mix in Brand Equity - Research Paper Example

Business and Management Research Module Part II – Mini Report on Collected and Analyzed Data based on Evaluated Published Research Executive Summary Using 5-point likert scale survey questionnaires, this study aims to determine how the marketing mix (4P’s) could affect perceived quality in a Starbucks coffee, brand association, brand awareness, and brand loyalty and how these four factors affect consumers’ response Using structural equation modelling (SEM) method, descriptive statistic, and SPSS 11.0, this study concludes that marketing mix (4Ps) could affect brand equity in a positive way and that brand loyalty (β=0.472) has the strongest link to customer response followed by perceived quality (β=0.439), brand association (β=0.428), and brand awareness (β=0.410). Table of Contents Executive Summary ………………………………………………….........…. 9 Table of Contents ………………………………………………….........……. 10 I. Introduction ……………………………………………………… 11 II. Literature Review ………………………………………………... 11 a. Significance of Marketing Mix (4P’s) in Brand Equity .. 11 b. Importance of Perceived Quality in a Product, Brand Association, Brand Awareness and Brand Loyalty ..... 11 III. Research Methodology ………………..………………………. 12 a. Research Framework .............................................. 12 b. Research Hypothesis ................................................... 13 c. Research Survey Questionnaire Design ...................... 14 d. Target Population, Sample Size and Research Venue . 14 e. Research Evaluation Method …………………………. 15 IV. Analysis of Research Findings and Results ……………..….. 15 V. Conclusion, Limitations and Recommendations …………… 18 Appendix I – Summary of Structural Research Framework ......................... 19 Appendix II – Research Survey Questionnaire ............................................ 20 Appendix III – Reliability Analysis with the Use of Cronbach’s Alpha Coefficient ............................................................................. 22 Appendix IV – Levene’s Test Results ...................................................... 23 Appendix V – Summary of Levene’s Test ............................................... 24 Appendix VI – Summary of Income Distribution ...................................... 25 Appendix VII – Summary of Mean and Standard Deviations .................... 26 Appendix VIII – Summary of Fit Indices ................................................... 27 Appendix IX – Summary of Standardized Structural Coefficient ............. 28 Appendix X – Summary of Standardized Structural Coefficient .............. 29 Appendix XI – Summary of Multiple Regression .................................... 30 Appendix XII – Summary of Multiple Regression ................................... 31 References ………………………………….……………………..........…… 32 – 33 Chapter I – Introduction Brand management is one factor that contributes to the success of a business. Managers could increase a company’s brand equity by preventing the business from becoming vulnerable to market competition (Yoo et al. 2000). Marketing activities increases brand equity. Using Levene’s test on the homogeneity of variances, this report will examine how the marketing mix (4P’s) could significantly affect perceived quality in a Starbucks coffee, brand association, brand awareness, and brand loyalty. Eventually, relationship between product, brand association, brand awareness, and brand loyalty with the consumers’ response will be identified. Chapter II – Literature Review Significance of Marketing Mix (4P’s) in Brand Equity Brand equity is referring to positive perception consumers have over a given brand. In line with this, marketing managers can contribute to satisfied consumers through effective marketing intervention (Keller 2003). In a market place that is readily accessible to consumers, the ability of marketing manager to offer high quality product at a reasonable price could significantly increase consumers’ perceived quality, brand association and brand awareness (Ailawadi, Lehmann and Neslin 2003). Yoo et al. (2000) revealed that perceived quality, brand loyalty, brand association, and brand awareness are parts of developing a strong brand equity. In line with this, marketing managers can effectively create brand awareness by creating attractive store image or by offering affordable prices of goods. As a result establishing a strong brand equity, companies are able to keep their target consumers loyal with the brand. Importance of Perceived Quality in a Product, Brand Association, Brand Awareness and Brand Loyalty Perceived quality in terms of product and services enables retailing companies enjoy economies of scale since more customers would purchase homogenous product retailers that offers high quality product with competitive services at a much cheaper price other retailers of homogenous product could offer. According to Moilanen and Rainisto (2009, p. 12), perceived quality could increase customers’ satisfaction. Since perceived quality is one factor that consumers consider when deciding to purchase a product, the ability of marketing managers to increase perceived quality increases the ability of the retailers to compete within the national retailing industry. As explained by McLoughlin and Aaker (2010, p. 179), “brand association is anything that is directly or indirectly linked in the consumers’ memory to a brand”. It means that each time a consumer creates a positive perception with a product, the buyer also creates a strong association with the brand. Even before consumers establish brand association, target consumers should be introduced to a brand. By continuously promoting a brand, marketing managers contribute to increase in brand awareness (McLoughlin and Aaker 2010, p. 176). As soon as consumers could develop a strong brand association, consumers can become loyal to the brand. Since satisfied customers can promote a brand through word-of-mouth, retail companies could enjoy the benefit of long-term profits (McLoughlin and Aaker 2010, p. 103; Wiegandt, 2009, p. 98). Chapter III – Research Methodology Research Framework A structural framework was designed to summarize how the primary research study will be conducted. Based on the assumption, marketing mix (4P’s) contribute to the increase in perceived quality in Starbucks coffee, brand association, brand awareness, and brand loyalty. In relation to the marketing mix, exogenous variables includes: the level of pricing, images of stores, product distribution, money spent on advertisements, and price promotion whereas endogenous variable(s) that contributes to higher brand equity includes: perceived quality, association with the brand, creation of brand awareness, and brand loyalty. Given that the elements of marketing mix is composed of exogenous and endogenous variables, dimensions of brand equity will be considered as mediator variable in the model whereas other variables will be treated as latent variables. Aside from examining the relationship between endogenous variables (i.e. perceived quality) with the establishment of brand association, awareness of the brand, and brand loyalty (Joon-Wuk Kwun and Oh 2007), this study will determine the impact of market mix (4Ps) on exogenous variables (i.e. brand equity and consumer response) (Engle, Hendry and Richard 1983). (See Figure I – Summary of Structural Research Framework on page 19) Research Hypothesis The following research hypothesis will be tested in this study: List of Hypothesis H1: Higher the brand price leads to higher perceived quality (γ1) H2: The better the store image, the higher the brand perceived quality (γ2) H3: Frequent use of price discount leads to lower the perceived quality (γ3) H4: Frequent use of price discount leads to negative brand association (γ4) H5: Frequent use of marketing activities leads to increase in perceived quality (γ5) H6: Frequent use of marketing activities leads to increase in brand association (γ6) H7: Frequent use of marketing activities leads to increase in brand awareness (γ7) H8: Frequent use of marketing activities leads to increase in brand loyalty (γ8) H9: Higher perceived quality leads to positive consumer response (β1) H10: Higher brand association leads to positive consumer response (β2) H11: Higher brand awareness leads to positive consumer response (β3) H12: Higher brand loyalty leads to positive consumer response (β4) H13: Higher brand price leads to better consumer response (α1) H14: Better store image leads to better consumer response (α2) H15: Frequent price discount leads to negative consumer response (α3) H16: Frequent use of marketing activities leads to better consumer response (α4) Yoo et al. (2000) explained that consumer’s perception on brand will be measured based on the product prices, image of the store, market distribution, money spent on advertising and price discount. Likewise, this study will measure these variables by distributing a research survey questionnaire that is composed of 5-point likert scale questions. In line with this, 5 means “strongly agree” whereas 1 represent “strongly disagree”. (See Appendix II – Research Survey Questionnaire on page 20) Research Survey Questionnaire Design The research survey questionnaire design for this study will be divided into four major parts. The first part will gather the research respondents demographic information which includes gender and monthly income. The second part which is represented by questions 3 to 12 measures the impact of Starbuck’s marketing activities. In line with this, questions about how the research respondents feel about Starbuck’s store image, advertising expenditure and its effectiveness in terms of capturing the interests of its target consumers, and consumer’s attitude with regards to the market price of Starbucks coffee will be addressed in this section. Represented by questions 13 to 25, the third part of the questionnaire focuses on measuring Starbuck’s customers’ point-of-view with regards to perceived quality, brand association, brand awareness and brand loyalty. Represented by questions 26 to 28, the last part focuses on measuring consumer response to Starbucks coffee particularly with regards to brand recommendation. Target Population, Sample Size and Research Venue Regardless of age, sex, cultural background and nationality, target population for this study includes coffee drinkers in UK. In line with this, the personal opinion of the randomly selected target population will be used in enabling the researcher determine the significance of marketing mix (4Ps) with the development of perceived quality in a Starbucks coffee, brand association, brand awareness, and brand loyalty. According to Kline (1998), the use of structural equation modelling (SEM) method in research requires a large number of sample size in order to avoid coming up with invalid research findings. For this reason, the researcher will exert extra effort in gathering and invite a minimum of 200 highly qualified research survey respondents. According to Saunders, Lewis and Thornhill (2003), convenience sampling means the researcher will gather sample population that is readily available or accessible to the researcher. Using convienience sampling method, the researcher will conduct the actual research study at ______ between the 1st of January to 22nd of January 2011. Research Evaluation Method Descriptive statistic, multiple regression (SPSS 11.0), and structural equation modelling (SEM) methods were used in this study. In examining the validity and reliability of the test, the value of Cronbach’s Alpha should be higher than 0.71. To examine homoscedasticity of relationship between and among the variables being tested (Levene 1960), Levene’s homogeneity of variance test was utilized. Descriptive statistics measures the frequencies and percentages whereas SEM statistical method measures not only regression but also analyzes the confirmatory factors. To determine the relationship between each of the elements in marketing mix with brand equity, marketing mix with customer response, and brand equity with the customer response, SPSS 11.0 will be utilized to enable the researcher measure multiple regression. Chapter IV – Analysis of Research Findings and Results The researcher was able to randomly invite a total of 232 highly qualified research respondents. However, a total of 14 research survey forms were disregarded due to input errors coming from the research respondents. To avoid misrepresenting the research study findings, the researcher decided to disregard survey questionnaires with invalid answers. i.e. some research respondents provided two answers in a single question. According to Nunnally (1978, p. 25), higher than 0.7 Cronbach’s Alpha value means that the questionnaire is highly consistent with the research topic. Based on the computed Cronbach’s Alpha Coefficient, the variables being tested in the survey questionnaire is reliable. Almost all the variables being tested in this study is highly acceptable in terms of its consistency except for brand association with 0.68 Cronbach’s Alpha result. Given that this figure is close to 0.7, this variable will still be included throughout the primary research study. (See Appendix III – Reliability Analysis with the Use of Cronbach’s Alpha Coefficient on page 22) Upon measuring paired variables gathered from the research survey questionnaire, Levene’s test show that paired variables tested were non-significant because the values were below 1.0. It means that the research hypothesis being tested in this study should be accepted. (See Appendix IV – Levene’s Test Results on page 23; Appendix V – Summary of Levene’s Test on page 24) A total of 120 and 98 out of 218 research respondents were male (55%) and female (45%) respectively. In line with this, research respondents are earning below £1,000 (60.6%), £1,001 - £2,000 (29.8%), and £2,001 - £3,000 (9.6%). (See Appendix VI – Summary of Income Distribution on page 25) In general, the higher the mean value indicate that the research respondents agree that the said variable has a significant impact over brand equity. Upon analyzing the figure presented on Appendix VII, the standard deviations of brand loyalty, brand awareness and brand association are 1.05, 1.21, and 1.20 respectively. Since a high value of standard deviation of more than 1.0 means that the data being tested is not close to the mean, it means that the research respondents do not agree that these three variables has a significant impact over brand equity. (See Appendix VII – Summary of Mean and Standard Deviations on page 26) According to Mckone, Schroeder and Cua (2001), SEM method allows researcher to have better understanding with regards to the nature of relationship between two variables. When measuring goodness-of-fit index (GFI) and comparative fit index (CFI), x2 of GFI and CFI should be equal or greater than 0.9 (Bentler and Bonett 1980). Upon testing the structural framework concerning the effects of the marketing mix on brand equity and consumer response, the result is not so good since the GFI and CFI values are 0.868 and 0.853 respectively. Since these figures are close to 0.90, it is still safe to consider the test results as fairly acceptable. When measuring root mean residual index (RMR) and root mean square error of approaximation (RMSEA), value should be less than 0.1 such that 0.05 suggest good fit is present in the research model (Steiger 1990). Since the test result of RMR and RMSEA is 0.028 and 0.054 respectively, it means that the structural framework is a very good fit. (See Appendix VIII – Summary of Fit Indices on page 27) Using p Read More