Corporate brand endorsement : the corporate brand as a signal of quality

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Corporate Brand Endorsement: The Corporate Brand as A

Signal of Quality

Master Thesis

___________________________________________________________________________ Student: Maren Martina Schug (10828400)

Programme: MSc. in Business Administration – Track Marketing Email: maren.schug@googlemail.com

Adress: Eeerste Atjehstraat 120A 1094 KS Amsterdam

Supervisor: Dr. Karin Venetis Submission Date: 29th June 2015 University: University of Amsterdam Word Count: 21.430

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Statement of Originality

This document is written by student Maren Martina Schug who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

Amsterdam, 29.06.2015 _________________________________

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Acknowledgements

First and foremost, I would like to thank my supervisor Dr. Karin Venetis for her valuable feedbacks, dedication and patience during the time writing this thesis.

Writing this thesis was an intense and demanding, but very precious and enlightening process, within which I learned to decide independently and confident of my knowledge acquired during my master studies at the University of Amsterdam.

Special thanks goes to my parents and grandparents for their unconditional support, for affording me all the opportunities I had, and for giving me the freedom in my choices.

I would like to also thank my friends, my relatives, my sister, and Michael in particular, for having always believed in me, and for being at my side not only in happy, but also in tough times.

Finally, I hope this thesis has brought me one step closer to fulfilling my dream of owning a house with a pool!

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4 Methodology ... 30 4.1 Pretests ... 31 4.2 Main Study ... 40 5 Results ... 45 5.1 Data Preparation... 45 5.2 Manipulation Check ... 51 5.3 Descriptive Analysis ... 55 5.4 Experimental Conditions ... 60 5.5 Hypotheses Testing ... 61 5.5.1 Hypothesis one ... 61 5.5.2 Hypothesis two ... 61 5.5.3 Hypothesis three ... 62 5.5.4 Hypothesis four ... 63 5.5.5 Hypothesis five ... 67

5.6 Overview Results of Hypotheses ... 70

6 Discussion ... 71

6.1 Discussions of the Results ... 71

6.1.1 The Influence of Corporate Brand Endorsement on Perceived Product Quality ... 71

6.1.2 The Differential Effect of a Corporate Brand versus a Seal of Approval Endorser on Perceived Product Quality ... 73

6.1.3 The Moderating Effect of Negative Publicity ... 74

6.1.4 The Effect of Quality Endorsement on WTP and Purchase Intention ... 76

6.2 Theoretical Implications ... 77

6.3 Managerial Implications ... 79

7 Conclusion ... 82

7.1 Summary ... 82

7.2 Limitations and Directions for Future Research ... 83

References ... 85

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List of Figures

Figure 1: Conceptual framework ... 22

Figure 2: Outline of the research ... 30

Figure 3: Mean scores quality associations with product categories ... 36

Figure 4: Mean scores fit between companies and care cosmetics ... 36

Figure 5: Main effect of quality endorsement on perceived product quality ... 65

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List of Tables

Table 1: Mean scores familiarity... ... 34

Table 2: Mean scores likeability... ... 34

Table 3: Mean scores credibility... ... 35

Table 4: Mean scores quality……. ... 35

Table 5: One-sample t-test of the product descriptions ... 38

Table 6: One-sample t-test of the negative publicity scenarios ... 39

Table 7: One-sample t test of the product ... 40

Table 8: Overview of scenarios ... 40

Table 9: Experimental conditions ... 45

Table 10: Sample distribution1... 46

Table 11: Overview demographics ... 47

Table 12: Overview scenario similarity ... 48

Table 13: Reliability of scales... 50

Table 14: Overview means and standard deviation of endorser quality per scenario ... 52

Table 15: Overview means and standard deviation of familiarity per scenario ... 52

Table 16: Overview means and standard deviation of fit per scenario ... 53

Table 17: Overview means and standard deviation of involvement per scenario ... 54

Table 18: Overview of means and standard deviation for neutral versus negative publicity scenario ... 55

Table 19: Perceived product quality, WTP and purchase intention in the different scenarios 56 Table 20: Correlation matrix ... 59

Table 21: Regression analysis – Influence of control variables on perceived product quality 60 Table 22: Effect of corporate brand endorsement on perceived product quality ... 61

Table 23: Effect of seal endorsement on perceived product quality ... 62

Table 24: Effect of corporate brand endorsement versus seal endorsement in the neutral condition ... 63

Table 25: Effect of corporate brand endorsement versus seal endorsement in the negative publicity condition ... 64

Table 26: Main and moderation effects on perceived product quality ... 65

Table 27: Main effect of quality endorsement on perceived product quality ... 65

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Table 29: Effect of quality endorsement on WTP ... 68 Table 30: Effect of quality endorsement on purchase intention ... 69

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List of Abbreviations

FMCG Fast Moving Consumer Goods

NP Negative Publicity

PI Purchase Intention

SPSS Statistical Package for the Social Sciences

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Abstract

Many companies, especially in the fast-moving consumer goods industry, increasingly start to pursue a branding strategy that uses the corporate brand as an endorsement for their product brands (Laforet, 2011). Why does this trend seem so popular? The answer lies in the ability of the corporate brand to transfer quality associations in order to increase a product brand’s equity (Muzellec & Lambkin, 2009). In light of this emerging movement, the goals of this research are (1) to contribute to the effect of a corporate brand endorsement and its effect on the quality perceptions of a product, (2) to investigate the differential effect of a corporate brand versus a seal of approval on perceived product quality and (3) to inquire into how these effects are moderated by negative publicity about the product. The findings of the factorial experiment reveal that the use of the corporate brand does not significantly add to the perceptions of a product’s quality, but a seal of approval does. However, there is no significant difference between the two endorsers in their impacts on perceived product quality – neither in the neutral conditions, nor when negative publicity is present. In fact, the quality associations consumers hold with each of the endorsers are indicators for a product’s perceived quality. In addition, although the willingness to pay more for a product neither increases with the presence of the corporate brand nor a seal of approval, the intent to purchase does. Nevertheless, it is to be considered that consumers were yet willing to pay more when the product was endorsed by the corporate brand than by a seal of approval. In light of these findings, managers are advised to establish a strong corporate brand in order to leverage quality associations to a greater extent than a seal of approval is able to do.

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1 Introduction

“P&G, Unilever and Reckitt: the corporate brands that came out of the shadows.”

- Eleftheriou-Smith, 2011

This headline of an interview with three executive managers of the leading FMCG power-houses Procter & Gamble (P&G), Unilever and Reckitt Benckiser from 2011 highlights to the point that companies are moving towards an endorsed branding strategy by using their corporate brand as an endorser for their product brands (Eleftheriou-Smith, 2011). Besides practitioners, this trend has also been observed by scholars (Laforet, 2011) and is interesting insofar as most companies have been primarily organizing their brands according to a “house of brands” architecture where the majority of products are promoted as individual brands (Aaker & Joachimsthaler, 2000). Hence, the corporate brand was hitherto hardly known to the consumer. Nevertheless, consumers are gradually becoming more aware that there are huge corporations behind these individual brands, even if the corporations themselves may not be visible (Aaker, 2004). As a result, the influence of the corporate brand on the product brand is increasing, and its importance for a company’s value rising (Knox & Bickerton, 2003). Therefore, this research will, as one objective, investigate how and to what extent the corporate brand adds value.

There may be several reasons for the transition from a house of brands towards an endorsement strategy. First, tremendous changes in markets are forcing managers to strive for means to improve the resource allocation of their brand portfolios by reducing the number of individual brands (Aaker & Joachimsthaler, 2000). This tends to make the corporate brand more manifest (Uggla, 2004). Second, endorsing the product brand with the corporate brand generates ascending sales (Saunders and Guoqun, 1997, Eleftheriou-Smith, 2011, Pring, 2013). Increased sales derive, among other things, from strong brand equity (Aaker, 1996).

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Researchers and practitioners alike assert that the most significant source of brand equity is rooted in the corporate brand, and that it can serve as a primary source of association leverage for a product (Hartman, 2015; Uggla, 2004). Thus, one way companies try to increase brand equity is to leverage and transfer certain images and associations from the corporate brand to the product brand (Aaker & Joachimsthaler, 2000; Aaker & Keller, 1990; Keller, 1993; Muzellec & Lambkin, 2009). By revealing the corporate brand name, corporate associations become highly accessible, thereby influencing the evaluation of the product brand by the consumer (Berens et al. 2005).

One dimension of brand equity is the perceived product quality (Aaker, 1991). Evidence exists that brand names have significant effects on consumers’ perceptions of quality (Gardner, 1971, Laforet, 2011). A brand name serves as an extrinsic cue to evaluate perceived quality by providing information about the product for the consumer (Zeithaml, 1988). Another extrinsic cue to evaluate the perceived quality of a product is a seal of approval, which provides the consumer with a degree of dependable assurance (Parkinson, 1975). Recently, such quality seals have become more important, as consumers have become increasingly concerned about the quality of products (Haenraets et al., 2012). Especially, in times of negative press releases and scandals regarding product quality, consumers become increasingly insecure about the product quality, resulting in rises in information asymmetry to the detriment of the consumer. To reduce such uncertainty towards product quality, research has indicated that quality seals can be a particularly suitable means to improve evaluations of the product (Jahn et al., 2005; Moussa & Touzani, 2008). Accordingly, both a corporate brand and a seal of approval can serve as extrinsic cues to improve consumer evaluations of a product (especially concerning product quality) and, therefore, to increased brand equity, which in turn is reflected in sales.

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1.1 Research Question

Perceived quality can be seen as an important driver for consumers’ product evaluations driving a brand’s equity (Aaker, 1991). As the corporate brand name contributes to more positive evaluations of a product brand (Berens et al., 2005), this research assumes that the corporate brand name can transfer quality associations to the product brand. However, there is a lack of research on the influence of the corporate brand on the quality perceptions of a product brand, especially regarding to what extent this influence differs from a third-party endorsement, such as a seal of approval. It is interesting, therefore, to examine if either the corporate brand or the seal of approval has a stronger effect on perceived product quality when a product’s quality is called into question by negative publicity. Hence, the research question has been postulated as follows:

To what extent does corporate brand endorsement influence perceived product quality? What is the differential effect on the perceived product quality of a corporate brand endorser versus a seal of approval, and to what extent is this effect moderated by negative

publicity?

The following sub-questions present the components of this research question that will form the basis of the subsequent analysis:

• What is the difference between a corporate brand and a product brand?

• What role does brand architecture play, and how is the endorsement strategy defined? • What are the benefits of an endorsement strategy?

• What is brand equity, and how does the corporate brand endorsement strategy contribute to brand equity, especially in terms of perceived product quality?

• What are the related concepts behind the endorsement strategy that enable the influence of perceived product quality?

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• To what extent does a seal of approval influence perceived product quality?

• What role does negative publicity play with respect to consumers’ perceptions of product quality?

1.2 Contribution

Theoretical Contribution

The literature on corporate branding consists for the most part of descriptive work (Knox & Bickerton, 2003) and has hitherto mainly concentrated on shareholders and employees, leaving aside the consumer (Fetscherin & Usunier, 2012). Due to the limited experimental and longitudinal studies, research on corporate branding seems to deficit in making profound claims, especially from a consumer perspective. One reason for this might be that FMCG companies only recently started to proactively connect their individual products with the corporate brand. Hence, until lately, consumers were not aware that a certain product belongs to a specific corporation. The present thesis considers corporate branding from a customer-based brand equity perspective, assuming that the value of the product brand depends in a large part on the consumer (Keller, 2003a). Thus, the focus is set on the impact a corporate brand has on increasing the brand equity of a product brand.

It is well established that consumers use corporate associations to evaluate the quality of a product (Brown & Dacin, 1997). Companies, in turn, devote tremendous resources to corporate image creation in an effort to influence consumers’ product evaluations (Gürhan-Canli & Batra, 2004). Although, there is a long history of research on the corporate image, only few studies have examined the actual benefits of such investments (Gürhan-Canli & Batra, 2004). Even though Milberg et al. (1997) already suggested that image transfer from the corporate brand might be stronger when the corporate brand is visible, Berens et al. (2005) were the first who tested this hypothesis. At the conclusion of their study, they

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proposed the need to replicate their findings for other companies, industries and products outside the financial service sector

There is a general assumption that seals of approval positively influence a product’s quality perceptions (cp. Kroeber-Riel et al., 2009). However, among the vast amount of studies on such seals, there are only limited investigations into the influence of seals on the quality perceptions of a product (Dean & Biswas, 2001; Feng et al., 2008). Thus, discrepancy remains regarding the usage of such seals. In light of this, Haenraets et al. (2012) propose to resolve if strong brands need seals. Transferred in the context of this thesis it is to resolve if a strong corporate brand even needs a seal to enhance a product’s quality evaluations.

In conclusion, the aim of this thesis is not only to further investigate the effect of a corporate brand endorsement on the consumers’ quality perceptions of a product brand in a different context, but also to determine to what extent and under which conditions the effect differs from using a seal of approval. In short, the present work tries to determine and compare the relative effects of a corporate brand and a seal of approval, respectively, on the quality perceptions of a product.

Managerial Contribution

In view of the current developments in the FMCG industry and the urgent need for marketers to “prove” marketing productivity (Rust et al., 2004a), this thesis aims to obtain clarity if a corporate brand can serve as an indicator for perceived product quality, and, if so, to what extent. Furthermore, the distinction between a corporate brand and a seal of approval as a quality signal is to be verified. The insights this thesis provides should aid managerial decision making regarding the choice between a corporate brand endorsement strategy and other endorsement strategies. And in particular, if the corporate brand can serve as a

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marketing tool to increase brand equity by letting the product appeal of a higher perceived quality to the consumer in order to generate competitive advantage and higher sales. As such, this thesis shall yield further benefits from investments in the corporate brand, not only encouraging managers to put great effort in the corporate brand but also explaining the current movement towards a corporate brand endorsement strategy.

1.3 Thesis Outline

The thesis is divided into seven chapters: Introduction, Literature Review, Framework and Hypotheses, Methodology, Results, Discussion, and Conclusion. The first chapter (Introduction) reveals the background as well as the current significance of the topic. Furthermore, it delineates the existing gaps in research and contextualizes the theoretical and managerial contributions this thesis makes. The second chapter (Literature Review) provides a thorough review of the relevant literature and concepts on corporate branding, brand architecture, brand equity, cue and signaling theory, as well as association transfer. In the third chapter (Framework and Hypotheses), a framework illustrates the scientific approach of this thesis. Here hypotheses are developed on the basis of the framework and an in-depth investigation of the literature. The fourth chapter (Methodology) explains the methodology and the research design. First, the pretests are outlined and analyzed. Second, the overall experiment design, the manipulations used and the sampling are described. Third, the operationalization of the stimuli and measurements is discussed. And finally, the procedure of the research is explained. The fifth chapter (Results) deals with the primary findings of the study. First, the data was prepared. Second, manipulations were checked. Finally, the hypotheses were tested. The sixth chapter (Discussion) reflects on the results in reference to the existing literature and discusses their theoretical and managerial implications. The seventh chapter (Conclusion) concludes the thesis with a summary of the findings, as well as limitations and suggestions for further research.

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2 Literature Review

2.1 Corporate Brand vs. Product Brand

Many corporations have recently begun to manage their corporate brand more proactively, with managers drawing on various concepts of product branding (Knox & Bickerton, 2003). Therefore, a distinction between the corporate brand and the product brand seems necessary. In general, a brand is defined as "a name, term, sign, symbol, or design, or combination of them which is intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors" (Kotler, 1991, p. 442). The corporate brand and the product brand may sometimes be considered as equivalent insofar as both share the same objective of creating differentiation and preferences (Knox & Bickerton, 2003). However, corporate branding goes beyond product branding as it disregards product attributes (Muzellec & Lambkin, 2009). Hence, the influence the corporate brand has on consumers’ evaluation of a product differs from the influence the product brand can have (Keller & Aaker, 1997).

A corporate brand is seen as the highest-level brand in the brand hierarchy consisting of the whole product offering. The company behind the whole product offering is the subject of the corporate brand (Ormeno, 2007). Therefore, the associations the consumer holds towards the company primarily determine the corporate brand (Aaker, 2004). Corporate brands pursue a higher strategic focus than product brands, and focus on internal as well as external targets (Muzellec & Lambkin, 2009). In sum, the corporate brand is a holistic concept that involves the whole organization. A product brand, in contrast, is a lower-level brand in the brand hierarchy. It is unique within the range of product offerings (Ormeno, 2007) and directly targets certain associations that consumers hold towards that specific offering (Keller, 2003b).

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Associations developed towards a corporate brand are based on several sources of information about the corporation and center around a set of core values representing it (Hatch & Schultz, 2001). As “corporate brands are seen as a guarantee of quality“ (Balmer & Gray, 2003, p. 973), they can serve as information cues that increase consumers’ evaluations of the product. Along these lines, Berens et al. (2005) argue that corporate brands are able to transfer corporate associations onto specific products. When the corporate brand is dominantly visible, these associations strongly influence attitudes toward the product (Berens et al., 2005).

Three types of corporate brands exist: the trade name, the business brand, and the holistic corporate brand. When a corporate brand serves as a trade name there is no connection between the corporate name and the individual brands, and consumers do not connect corporate associations with product associations. The strategy behind trade names involves a “house of brands”, where the corporate name serves as an umbrella. The business brand primarily addresses stakeholders, and tries to build strong associations among them, but it remains hidden from consumers. The holistic corporate brand is a corporate and consumer brand at the same time. Hence, consistency between the corporate brand’s image and the product is required in order to easily transfer associations (Muzellec & Lambkin, 2009). Henceforth , the latter definition will be used when it is referred to corporate brand.

2.2 Brand Architecture

Branding is increasingly important for the corporate brand itself, as it is identified as a strategic tool to create and maintain value (Knox & Bickerton, 2003). Most notably it serves to create and maintain product differentiation due to rising imitation and homogenization of products and services (Hatch & Schultz, 2003). Corporate branding is defined as a systematic process that aims to create and sustain a favorable corporate image, which results in a

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favorable company reputation (van Riel, 2001). A strong corporate brand can significantly affect a consumer’s evaluation of a product (Brown & Dacin, 1997). In order to leverage a strong corporate brand, companies have to rethink the relationships between their brands in which the corporation should play a more important role (Aaker, 2004, Muzellec & Lambkin, 2009).

2.2.1 House of Brands and Branded House

To understand the concept of corporate brand endorsement, it is essential to comprehend the diverse types of brand architectures a company can pursue. According to Aaker (2004), a brand architecture determines the structure and roles of brands, as well as the relationships between brands within a brand portfolio. Therefore, pursuing consistent brand architecture results in “clarity, synergy, and leverage rather than market weakness, confusion, waste, and missed opportunities” (Aaker & Joachimsthaler, 2000, p.8). The relationship between a corporate brand and a product brand, as well as the extent to which they create synergies, depend on the brand architecture (Varadarajan et al., 2006). The types of brand architecture span a continuum from a “house of brands” to a “branded house”, which address the allocation of the driver role between the product and the corporate brand. The allocation of the driver role is based on the driving force regarding the purchase decision or usage (Aaker & Joachimsthaler, 2000). In the brand relationship spectrum postulated by Aaker and Joachimsthaler (2000), several types of brand architectures exist. On one extreme of the continuum, companies organize their brands in a “house of brands”. In this form, most of the products are promoted as individual brands, with each product brand having its own driver role. The corporate brand and product brand are separated from each other to avoid association transfer. This portfolio strategy aims either to create new associations with the corporate brand, or to avoid existing ones. For “endorsed brands”, the endorser plays a subordinate driver role that serves to add some associations. For “sub-brands”, the driver role

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is equally allocated between both brands (Aaker & Joachimsthaler, 2000). And finally, at the other extreme of the spectrum, is the “branded house” architecture, where the corporate brand and product brand have the same name and the corporate brand is the main driver for shared brand associations (Saunders & Guoqun, 1997). As the corporate brand provides an umbrella for multiple products, the associations a company evokes directly influence consumers’ perceptions of its products (Muzellec & Lambkin, 2009). Moving towards a “branded house” architecture creates stronger synergies between the corporate brand and the product brand, because the corporate brand (1) adds associations that improve the value proposition, (2) provides credibility, (3) offers visibility and (4) enhances communication efficiency (Aaker & Joachimsthaler, 2000).

2.2.2 Towards a Corporate Brand Endorsement Strategy

Due to increasingly dynamic markets, companies have to continuously modify their brand architecture, even though the current brand architecture might seem appropriate and adds value (Aaker & Joachimsthaler, 2000; Muzellec & Lambkin, 2009). This process is called rebranding, and allows companies to choose between a separation or an integration strategy. Separation is used when companies want to isolate their corporate brand from the products they sell. If this is the case, companies try to create different images for different stakeholders. The integration strategy that leads towards a “branded house,” however, is more common (Muzellec & Lambkin, 2009). The current developments in the FMCG industry have shown that most companies are moving towards such an integration strategy by endorsing their product brand with the corporate brand name (Laforet, 2011). This shift reflects the realization that pursuing an endorsement strategy can have significant financial benefits (Saunders & Guoqun, 1997). The descending extension of the corporate brand downwards to its products is an attempt to leverage corporate brand associations and extend them to lower levels (Aaker, 2004; Muzellec & Lambkin, 2009). Thus, the endorsement

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strategy enables the transference of functional associations, such as quality attributes, from the corporate brand onto the product brand, thereby providing consumers with reassurance and establishing credibility. External drivers, such as emerging market complexities, competitive pressure, channel dynamics, and globalization, also lead companies to adopt the endorsement strategy (Aaker & Joachimsthaler, 2000). As does the increasing consumer awareness of the corporate brand behind the product brand (Aaker, 2004).

According to Aaker and Joachimsthaler (2000), there are three different endorsement strategies: shadow endorsement, token endorsement and strong endorsement. When a company pursues a shadow endorsement strategy the corporate and the product brand are separated and not visibly connected, but consumers may be able to observe the existing link between them. A token endorser adds features to the endorsed brand but has no primary driver role, and the product brand still maintains its own associations. In a strong endorsement, the corporate brand is visibly connected with the product brand. Yet although associations are actively transferred from the corporate brand to the product brand, the primary driver role still resides with the individual product (Aaker & Joachimsthaler, 2000). Therefore this thesis will focus on the latter definition of strong endorsement, henceforth. On the flip side, however, some companies are also moving from a “branded house” strategy towards an endorsed branding strategy. If companies following a “branded house” strategy face bad publicity, they may feel in danger of losing their reputation, which can affect their entire range of offerings. To decrease this risk, companies move away from corporate branding towards a strategy in which the corporate brand only serves as an endorser for each product brand (Laforet & Saunders, 2005). As this separation strategy is less common (Muzellec & Lambkin, 2009) and beyond the scope of this thesis, however, it will not be considered further.

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2.3 Brand Equity and Perceived Product Quality

2.3.1 The Concept of Brand Equity

A review of the existing literature clearly shows that the concept of brand equity has already been the subject of numerous scholarly investigations (Aaker, 1991; Keller, 1993; Yoo and Donthu 2001; Simon and Sullivan, 1993). The definition of the concept, however, remains a subject of some debate.

Brand equity generally refers to the value of a brand that exceeds the physical assets associated with a product (Biel, 1992). Aaker (1991), for instance, defines brand equity as “a set of brand assets and liabilities linked to a brand, its name, and symbol, that add […] or subtract […] value” (Aaker, 1991, p. 15). These assets and liabilities influence the customer’s evaluation of a product. Five categories of assets contribute to brand equity: brand loyalty, name awareness, perceived quality, brand associations and other proprietary brand assets (Aaker, 1991).

Keller (1993) extends this concept by stating, among other things, that the leverage of secondary associations from another entity can build brand equity by creating favorable, strong, and unique brand associations. He defines brand equity from a customer-based viewpoint in terms of how the different levels of brand knowledge that consumers have are reflected in their different responses towards a product. In order to increase brand equity, consumers need to have strong brand knowledge, which consists of a brand’s image and awareness. Brand image is based on associations and grounded in customer attitudes towards a brand that include the brand’s perceived product quality (Keller, 1993). The more consumers are aware of a brand, the more accessible such associations in memory will be and therefore easier to retrieve (Keller, 2003a). Hence, in order to increase customer-based brand equity, a company can leverage secondary associations, such as quality perceptions from an

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endorser (Keller, 1993).

In the context of the present research, it is assumed that the corporate brand can contribute to brand equity as a source of secondary knowledge (Keller, 2003a). Building strong brand equity is of especially great importance for low-involvement-products, of the type primarily found in the FMCG industry (Rust et al., 2004b). Hence, in light of the general assumption that strong brand equity leads to ascending sales (Aaker, 1996), managers and researchers alike agree that endorsing the product brand with the corporate brand generates ascending sales (Eleftheriou-Smith, 2011; Pring, 2013; Saunders & Guoqun, 1997).

Perceived Product Quality

As the previous section introduced and elaborated the concept of brand equity, the following subsection will discuss perceived product quality as a dimension of brand equity and a crucial variable in the underlying thesis.

Perceived quality is “the consumer's judgment about a product’s overall excellence or superiority” (Zeithaml, 1988, p. 3). As it is based on an impalpable feeling about the brand or product, it needs to be distinguished from objective quality, product- or manufacturing-based quality (Aaker, 1991). Objective quality describes the true superiority or excellence of a product, which is measured and verified with the help of predetermined standards. However, there is no agreement on what the ideal standard should be (Zeithamel, 1988). Hence, Maynes (1976) for instance, argues that no such standards exist and objective quality is a chimera, as every quality evaluation is in some way subjective. Product-based quality is constituted of the specific product attributes and ingredients, whereas manufacturing-based quality refers to the processes and standards of the manufacturer (Garvin, 1983). Perceived quality, in contrast, is an abstract attribute based on consumer’s perceptions of specific

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product or manufacturing attributes. It is a holistic assessment closely resembling a general attitude. Hence, a difference can be drawn between the affective and cognitive formation of quality perceptions. Whereas cognitive quality formation mostly occurs in high-involvement situations where quality attributes can be assessed before purchase, affective quality formation occurs when the quality attributes can be only observed during consumption (Lutz, 1986).

In order to comprehend how consumers form quality perceptions, Steenkamp (1990) argues that it is essential to differentiate between quality cues and quality attributes. Whereas quality cues serve as an observable source of information before consumption, quality attributes refer to the benefits and consequences of the product and are unobservable before consumption. Hence, consumers use quality cues to make judgments prior to purchase. The value of such a quality cue for the consumer depends on the benefits or quality attributes the cue is able to predict. The actual formation of quality attributes can be descriptive, informational and inferential (Steenkamp, 1990). Since quality attributes are formed based on direct observations, and without the help of quality cues, they are therefore irrelevant for this research project and will not be considered further. Informational formation states that consumers form their quality perceptions based on outside sources such as friends or advertisements that offer direct information on product’s quality (Steenkamp, 1990). This thesis considers the seal of approval as such an outside source. Inferential formation is obtained when consumers infer quality beliefs based on quality cues for which descriptive beliefs exist, as for instance a reputable corporation behind the product. Inferential formation of perceived quality is based on prior beliefs about the quality cues that are retrieved from memory, as well as from newly gained information (Steenkamp, 1990).

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Perceived Product Quality and its Effect on WTP and Purchase Intention

Achieving a high level of perceived quality creates value for the brand and leads to a competitive advantage by erecting a barrier to competitors, increasing consumers’ reasons to buy and enhancing the likelihood of a higher willingness to pay (WTP) (Aaker, 1991).

Perceived quality increases the likelihood that a product will be considered by a consumer making a purchase decision, and therefore enhances the purchase intention. Perceived quality is especially influential when there is no possibility to objectively judge the product (Aaker, 1991). In addition, a positive price-quality linkage exists (Teas & Agarwal, 2000). The absence of objective information on the product leads the customer to believe that the higher the price the higher the quality, in accordance with the adage “you get what you pay for” (Beneke et al, 2013; Völckner & Hofmann, 2007; Zeithaml, 1988). Hence, consumers are willing to pay a price premium when the quality of a product is perceived to be superior.

2.4 Drivers of Perceived Product Quality

2.4.1 Antecedents of the Drivers of Perceived Product Quality

In recent years, it has become more difficult to reach an adequate level of perceived quality due to permanent product improvements that increasingly enhance consumer’s aspirations of quality (Sherman, 1992). Therefore, the need rises to provide consumers with quality hints that give them some assurance and increase their quality evaluations (Laforet, 2011; Parkinson, 1975). In the following subsections the cue theory, the signaling theory as well as the associative network memory will be determined in order provide a profound theoretical foundation for the drivers of perceived product quality.

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Cue Theory

According to cue theory, consumers use extrinsic and/or intrinsic cues in order to judge the quality of an object. Extrinsic cues refer to the physical attributes of a product but are not part of it (Zeithaml, 1988). In light of this research the corporate brand name and the seal of approval are seen as extrinsic cues. As such, they help consumers in their evaluations of a product’s quality (Haenraets et al., 2012; Teas & Agarwal, 2000). Extrinsic cues can serve as a proxy for quality evaluations by providing information about the product to the consumer, especially if the consumer has little or no access to the intrinsic or search attributes of a product, the evaluation of quality requires great effort, or quality is difficult to evaluate (Zeithaml, 1988).

Intrinsic cues, on the other hand, are part of the product, and therefore directly related to a product’s attributes. Intrinsic cues are most notably relevant when the cue serves as a search attribute or has a high predictive value, and therefore is considered as a better indicator of quality (Olson & Jacoby, 1972). However, in most purchase situations extrinsic cues play a much larger role, since the consumer has insufficient knowledge about a product brand, and therefore is not able to count on intrinsic cues. This is especially true for experience goods and goods that have been newly introduced or constitute a brand extension. In such situations, information asymmetry between the consumer and the seller occurs. The seller has full information about the product’s quality, while the consumer has not (Kirmani & Rao, 2000). In this case, seller and customer will not get into a market interaction, since consumers want credible information about the quality upon which they can base their decisions (Feng et al., 2008; Spence, 1973).

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Signaling Theory

According to signaling theory, a quality signal communicating the unobservable characteristics of the product can help to decrease information asymmetries (Spence, 1973). Thus, revealing such a signal benefits the product in terms of the consumer’s quality perceptions. However, this is only the case when the product itself is of high quality, i.e. only high quality firms profit from sending signals, while low quality firms run a high risk of suffering from sending quality signals when the actual quality is revealed (Kirmani & Rao, 2000). To actually benefit from a signal, the quality signal needs to have certain characteristics: honesty, reliability, observability, fit, frequency and consistency. Honesty refers to the signal’s genuineness. Reliability, or credibility, is determined by a signal’s honesty and fit. Observability represents the strength of a signal. Fit refers to the extent to which the signal is seen to actually demonstrate unobservable quality. Frequency is defined by the rate at which the same signal is sent out, and consistency by the consistent signaling from one source (Conelly et al., 2011). By applying signaling theory to corporate brand and seal of approval endorsement, one can see that both can serve as quality signals to ensure the consumer about the product’s unobservable quality characteristics. In this light, both the corporate brand and the seal of approval, respectively, can become part of a product brand’s associative network, and thereby contribute to a product brand’s equity.

Associative Network Memory Model

Brand image is composed of a network of attributes and associations regarding a brand that is stored in the memory of the consumer (Biel, 1992) and generates brand equity (Keller, 2003b). Keller (1993) refers to this network as the associative network memory model that represents memory as a set of nodes and their interconnecting links in the consumer’s mind. Within this model nodes represent stored information, and links the strength of associations

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between this information (Keller, 1993). When a person is reminded of a certain stimulus, a node for this stimulus is activated. Simultaneously, this activation is transmitted to other nodes in the network depending on the distance from the stimulus node (Collins & Loftus, 1975). In other words, the stronger the links between the nodes are, the more likely they are to be activated. According to Biel (1992), three components contribute to an associative network that makes up the image of a brand: the image of the product itself, the corporate image and the user image. However, other external drivers, too, such as celebrity endorsers, places or third-party endorsements like seals, can become part of the associative network of a product brand (Keller, 2003a). According to Keller (2005), the product brand can leverage secondary associations from other sources in order to broaden or strengthen its associative network. Owing to the fact that consumers can identify the brand with another source, they may infer that the brand shares associations with that entity (Keller, 2005). Hence, when consumers receive quality signals for a product they will connect this signal to the product and integrate it in their associative network about the product. This process depends on the strength with which the consumer is able to connect the external source with the product brand. Therefore, the different brand architectures, discussed in chapter 2.2.1, define the strength between the nodes of the source and the product, as well as the extent to which associations about this source become part of the associative network of the product brand (Chen, 2001).

2.4.2 Corporate Brand

By using an integration strategy, companies try to transfer images and associations from the corporate brand towards the product brand (Muzellec & Lambkin, 2009). They leverage the image and associations of the corporate brand to enhance the product brand (Aaker & Keller, 1990). How strongly the product brand is influenced and shaped by the corporate brand depends on the brand architecture explained in chapter 2.2.1 (Aaker & Joachimsthaler, 2000;

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Muzellec & Lambkin, 2009).

In order to benefit from the advantages the corporate brand offers, a strong knowledge of the corporate brand first needs to be developed. The extent to which the corporate brand can be leveraged depends on knowledge about the corporate brand and its potential, the meaningfulness of the corporate brand for the product, and the transferability of the corporate knowledge towards the product (Keller, 2003a). According to Keller (1993), brand knowledge consists of brand awareness and brand image. Brand awareness, including recall and recognition of a brand, needs to be developed before it can be part of a consumer’s consideration set. Brand image can be defined as the brand associations stored in the minds of consumers (Keller, 1993). Such corporate brand associations can contribute to product image (Berens et al., 2005) by adding value to the product, serving as a credibility cue, providing visibility and creating communication efficiencies (Aaker & Joachimsthaler, 2000). The appearance of the corporate name on the product brand influences the product’s image. By revealing the corporate brand name, corporate associations become highly accessible for the consumer and can positively increase consumer evaluations (Berens et al., 2005). Consumers use such associations as a basis for inferences more when other product attributes are not accessible (Brown & Dacin, 1997). As a result, the corporate brand name serves as an extrinsic cue that can have a positive impact on the consumer’s product evaluations, thereby adding value to the product brand and consequently enhancing the reason to buy as well as the willingness to pay a higher price (Hatch & Schultz, 2001; Laforet, 2011; Saunders & Guoqun, 1997; Souiden et al., 2006). However, a corporation can only leverage on its quality aspects, (1) if consumers know about the corporate brand, (2) if the quality associations of the corporate brand are relevant and (3) if these associations can become linked to the product (Keller, 2003a). Hence, when consumers do not have associations with the corporation, no quality associations can be transferred and the corporate brand cannot serve as a signal.

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2.4.3 Seal of Approval

In academic studies, a seal of approval is classified as an extrinsic quality signal that is related to the product, but not directly to the physical product attributes (Gierl & Satzinger, 2000; Gierl & Stich, 1999). According to Gierl and Stich (1999), quality signals are features or characteristics that provide the consumer with information about the quality of a product. Hence, quality signals facilitate the ability to discern and understand a product’s quality attributes and aids consumers to better evaluate a product (Gierl & Stich, 1999).

Many terms for quality signals exist, and they are often used synonymously (Haenraets et al., 2012). In general, they are presented by a logogram or icon that pledge a minimum level of quality control by the respective issuer of that signal (Sattler, 1991). According to Sattler (1991), such quality signals make a holistic statement about the overall or partial quality of a product, and the assessment criteria can range from very strict to nearly nonexistent (Moussa & Touzani, 2008). Furthermore, such signals can be released from individual manufacturers, a collective of manufacturers, an institution or neutral organizations. They are used to create associations with a product or service in order to demonstrate such things as the quality of a product or service (Phelps, 1949).

The current thesis refers to such signals as seals of approval. The particular seal of approval focused on in this research is based on so called consumer tests that provide clarity on the objective quality of a product based on expert judgments (Haenraets et al., 2012). These seals are assigned to products by neutral organizations, and serve to protect consumers by creating market transparency (Kroeber-Riel et al., 2009). Hence, the manufacturer cannot influence the execution of the tests or the publication of their results (Sattler, 1991). Although, the manufacturer does not have to render payments for such tests, fees do apply if the manufacturer uses the results for marketing or other self-beneficial purposes (Burkell, 2004). Kirmani and Rao (2000) classify these types of seals as default-independent signals. Such

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signals involve the up-front expenditure of money to decrease the information asymmetry that is usually to the detriment of the consumer. With the help of such pre-purchase signals about quality, these asymmetries can be reduced (Boulding & Kirmani, 1993). The objective assessment given by the test, provides the consumer with information that serves as a degree of assurance and helps the consumer to evaluate and judge the quality of a product. Consequently, high evaluations reflect superiority, and lead to higher purchase intentions for the products that receive them (Parkinson, 1975). Nevertheless, a seal of approval can only signal quality if it solely endorses products of high quality. Once this prerequisite has been violated, i.e. the seal of approval has been used to endorse low quality products, it will begin to loose reputation, reliability and honesty upon which it is based, and will therefore be unable to further endorse high quality products (Feng et al., 2008).

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3 Framework and Hypotheses

3.1 Framework

Figure 1 shows how the corporate brand and seal of approval endorsement (independent variable) influence perceived product quality, purchase intention, and WTP (dependent variables), as well as how the relationship between quality endorsement and perceived product quality is influenced by negative publicity. This research first examines how a corporate brand and a seal of approval endorsement affect perceived quality of a product (H1 and H2), as well as their differing effects on it (H3). Next, the moderating effect of negative publicity on the relationship between the independent variable and dependent variable will be investigated with the intent of determining whether the corporate brand or the seal of approval endorsement has a stronger impact on perceived product quality when negative publicity is received (H4). In addition, the consequences of quality endorsers, such as a corporate brand and a seal of approval, on WTP and purchase intention will be clarified (H5).

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3.2 Hypotheses

3.2.1 Corporate Brand Endorsement

Companies have long invested huge amounts of money and effort to promote their corporate brand and influence the way consumers think about a company (Belch, 1995). In doing so, companies seek to change corporate brand knowledge by increasing their awareness and strengthening their image. One way these changes can be brought about is through association transfer from the company to the product (Biehal & Sheinin, 1998). Image is viewed as the total impression an individual holds about an entity (Dichter, 1985). A corporate image reflects the individual consumer’s information about a company, and therefore may vary widely (Brown & Dacin, 1997). According to Brown and Dacin (1997), corporate associations are the sum of all this information, including beliefs, moods, emotions, knowledge and evaluations, that come to mind when an individual thinks of a certain company. Different types of information exist: corporate abilities and success, interaction with exchange partners, interaction with employees, social responsibility and contributions, marketing considerations and product considerations, including quality perceptions (Brown & Dacin, 1997). In this research, however, the focus will be restricted to the latter, because the belief that a company produces products of high quality is seen as an important corporate association (Brown, 1998).

As previous research has shown, corporate associations function as a means to fill the gap in a consumers’ knowledge about specific product attributes, and can be used to enhance or balance associations individuals hold towards product brands (Biehal & Sheinin, 1998; Brown & Dacin, 1997; Uggla, 2006). Consumers connect the product with the company in order to transfer corporate associations to the product (Brown & Dacin, 1997). Furthermore, the corporate brand is seen as having a stronger effect than other cues on consumer’s

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perception about a product brand (Saunders & Guoqun, 1997; Souiden et al. 2006). It serves as an extrinsic information cue for the consumer to evaluate a product brand by harnessing important information from a company’s image (de Ruyter & Wetzels, 2000). Hence, marketers can leverage any association the consumer holds about the company to the advantage of the product (Brown & Dacin, 1997; Keller, 1993). The extent to which such associations can be transferred toward a product brand depends on the visibility of the corporate brand. Hence, the branding strategy a company chooses affects the relationship between corporate associations and product brand associations. The more dominantly visible the endorsement with a corporate brand is, the more impact corporate associations have on the product brand (Berens et al. 2005). Brown (1998) states that quality associations are very important for a company’s image. As these associations can be transferred from the corporation to the product brand, it can be assumed that perceived quality associations increase for the product brand.

H1: Under neutral conditions, if the corporate brand endorses the product, perceived product quality is higher than if the corporate brand does not endorse the product.

3.2.2 Seal of Approval Endorsement

A seal of approval is another extrinsic cue providing the consumer with a measure of safety and quality assurance, thereby benefiting the brand (Parkinson, 1975). As safety has become an increasingly major component of the purchasing decision, consumers have heightened their awareness of seals of approval and begun to actively search for them (Haenraets et al., 2012). Usually information asymmetry between the consumer and the seller exists. In order to reduce such asymmetries, companies use quality signals (Boulding & Kirmani, 1993). These help the consumer to evaluate the quality of a product and provide the consumer with information that helps to decide which product to purchase (Parkinson, 1975). Such quality signals are particularly suitable to reduce uncertainty regarding quality issues before the

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actual purchase (Krischik, 1998). A seal of approval represents a quality signal and helps the consumer to convert credence attributes into search and experience attributes, which are much more reliable. The seals are assigned from neutral organizations that examine and verify the quality according to specified criteria (Haenraets et al., 2012). Hence, they offer the highest possible level of credibility and believability and are crucial criteria for a consumer’s judgment on quality issues (Krischik, 1998; Parkinson, 1975). These judgments depend on the reputation of the seal, its awareness and trustworthiness (Haenraets et al., 2012) – the more highly estimated, the more positive the evaluation of quality will be. Hence, when a consumer is confronted with a product brand on which a seal of approval is visible, quality associations with the product brand rise and are evaluated on a higher level.

H2: Under neutral conditions, if the seal of approval endorses the product, perceived product quality is higher than if the seal of approval does not endorse the product.

3.2.3 The Differential Effect of Corporate Brand versus Seal of Approval Endorsement on Perceived Product Quality

There has been a rise in the use of seals of approval in the FMCG industry due to the fact that consumers now consider the quality aspects of products more intensively (Haenraets et al., 2012; Moussa & Touzani, 2008). Although a seal of approval is seen as a particularly good indicator of quality and is highly credible (Haenraets et al., 2012), the benefits a seal of approval offers decrease in line with the level of consumer awareness about the brand it assesses (Sattler, 1991). This dynamic can be also assumed for a corporate brand that endorses the product brand. The better the knowledge of the consumer about the corporation endorsing the product, the higher the value for the product brand will be (Idoko et al., 2013; Saunders & Guoqun, 1997). Regarding secondary knowledge transfer from the corporate brand to the product brand (Keller, 2003a), it can likewise be assumed that the higher the quality perceptions of the company are, the higher the quality perceptions of the product

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brand will be. In addition, especially in times when there are many almost homogenous seals asserting quality, the consumer gets confused easily and pays more attention to other cues (Langer et al., 2008) – for instance the endorsement by a company. In line with the association transfer model (Keller, 1993), the higher the quality associations with a seal, the higher the perceptions towards a product brand in terms of quality. However, the criteria a product brand has to fulfill to obtain a seal of approval depend on the minimum standards of these criteria (Osmud et al., 2011). As the quality perceptions of the corporate brand related to the product brand can be higher than the minimum standards a product has to meet to receive a seal of approval, it can be assumed that the corporate brand can contribute to a larger extent to perceived product brand quality than it is possible for the seal of approval to do.

Beyond that, the overall image of an endorser influences the impact it has on the product brand (Biehal & Sheinin, 1998). Image describes how consumers think about an endorser abstractly and therefore represents mainly intangible aspects of it (Brown & Dacin, 1997). Consumers hold a host of attitudes towards the two endorsers. For instance, a company that is known for high quality and innovation can contribute to the overall image of a product. According to the associative network model, once a company becomes linked with the product, quality associations with the endorser can spread over to the product (Keller, 1993). This link becomes even stronger the more frequently and obviously the product is endorsed with the corporate brand and the more consistent the images of both entities are (Collins & Loftus, 1975). As such, the corporate brand can become an important part of the associative network of the product. The same holds for a seal of approval. Once a product is endorsed with a seal of approval, quality perceptions of the seal can spill over to the product – the seal of approval becomes part of the product’s associative network (Keller, 2005). However, a seal of approval also endorses other products from other companies, leading to a much

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broader associative network. As a consequence, its image might be less consistent with the product than is the case between the corporate brand image and the product image. Hence, the seal of approval may be integrated less strongly in the associative network of the product, leading to a lesser likelihood of quality perceptions being transferred to the product. For this reason, it can be assumed that the corporate brand can lead to a higher evaluation of perceived product quality than the seal of approval.

H3: Under neutral conditions, the positive impact of the corporate brand on perceived

product quality is stronger than the impact of the seal of approval.

3.2.4 The Moderating Role of Negative Publicity

Changes in consumer preferences and in the market environment, as well as the involvement in scandals or product recalls due to quality issues, can endanger the future of a brand. In order to rebuild brand equity, essential changes in image are necessary. When a brand’s value (for instance its quality associations) has been violated, the revitalization of such a brand works best if these quality associations are clear and relevant in the mind of the consumer. Furthermore, the quality attributes of the brand itself need to be genuine to return the brand to its initial quality level. In order to dull negative associations, reinforce lost ones and add new positive associations about the product brand’s perceived quality, secondary knowledge from an endorser can be leveraged (Keller, 2003b) through the use of the corporate brand or a seal of approval.

There are two reasons why it can be better to leverage quality aspects from a seal of approval rather than from a corporate brand when there is negative publicity regarding a product’s quality. First, a study by Dean and Biswas (2001) shows that third-party endorsements, like seals of approval, have a stronger impact on consumer quality perceptions than other forms of endorsement, such as those given by celebrities. That is for one thing the accounted salience

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of seals by consumers in present times and for another thing consumers’ preference for an independent and objective statement on a product brand’s quality over a quality certification on behalf of the company (Haenraets et al., 2012). Second, when pursuing an endorsement strategy for a product brand that has received negative publicity regarding its quality, the company behind the product brand is strongly connected with the product brand and will therefore forfeit its image (Keller, 1993). The functional benefits of a corporate brand endorser are then expected to no longer play a role in evaluating the product brand’s quality. As a seal of approval is an objective assessor, its functional benefits might be stronger than those of the corporate brand. As a result, it is quite unlikely that an endorsement by the corporate brand will be able to increase quality perceptions of the product brand.

Hence, it can be assumed that the seal of approval is capable of revitalizing the product brand to a greater extent than the corporate brand when there is negative publicity surrounding a product brand. An example can be seen in the Pampers scandal in 2010, which arose when mothers complained that a certain type of diaper caused irritations on babies’ skin (DIE WELT, 2010). In such a case, consumers who are aware of the scandal would probably pay more attention to the objective quality evaluation of a seal of approval than to the quality associations they have with the company that owns the product brand.

H4: If the product has received negative publicity about its quality, the positive impact of the seal of approval on perceived product quality is stronger than the impact of the corporate brand.

3.2.5 The Effect of Extrinsic Quality Cues on WTP and Purchase Intention

Several studies (Fotopoulos and Krystallis, 2003; Kim et al., 2009) have shown that consumers are willing to pay more for a product of high quality, especially when the quality has been verified by an outside authority. When using such quality signals, information

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asymmetry between the consumer and the seller decreases, which, in turn, leads to a higher WTP of the consumer, as they can better evaluate the product and assess a price (Akerlof, 1970; Greiff et al., 2013). However, this does not automatically entail a higher likelihood of purchase (Haenraets et al., 2012). When it comes to purchase decisions, consumers rather count on product brands and price than on quality signals (Fotopoulos & Krystallis, 2003). Not only is a quality signal in most purchase decisions in the FMCG industry not relevant (as the purchase of such products depends on consumer habits) (Krischik, 1998), but the extensive use of quality signals also rather confuses consumers (Langer et al., 2008). Hence, the use of extrinsic cues, such as a corporate brand or a seal of approval, to enhance perceived product brand quality, does not always lead to a higher purchase intention.

H5: Under neutral conditions, extrinsic quality cues like the corporate brand or a seal of approval lead to higher WTP than without extrinsic quality cues, but not to higher purchase intention.

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4 Methodology

In this chapter, the pretest findings and the set-up of the main study are discussed. The latter considers the experimental design, the sample, the measurements and stimuli regarding the dependent, independent, moderation and control variables, as well as the procedure of the main study. The illustration below outlines an overview of the full research.

Figure 2: Outline of the research

* indicates an item scale (see Appendix A2) ** indicates an item scale (see Appendix A4)

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4.1 Pretests

For the current research project, two pretests were conducted. The aim of the first pretest was to determine which corporate FMCG brand, seal of approval and product category were used in the main experiment. The second pretest was executed to determine if participants perceive the negative publicity condition as negative and the product description as neutral. The present research used a FMCG corporate brand because corporate brand associations are more likely to affect product evaluations when people have low involvement with a product (Berens et al., 2005). As low involvement is one characteristic of FMCGs, the choice seemed appropriate (Lemon et al., 2001). Additionally, an ongoing shift in the FMCG industry towards corporate endorsement is observed. Using corporations that are not part of the FMCG industry were, therefore, considered to be less interesting to research. To enhance the external validity of the research, actual corporate FMCG brands were used. Finally, due to the huge number of FMCG corporations that produce in various product categories, this research focused on FMCG corporations that produce products in categories other than food and beverages. This decision was based on the great amount of research about seals of approval that has already been done in the area of food and beverage (cp. Haenreats et al., 2012). Hence, to contribute and generalize in this area of research it seemed appropriate to use other product categories. Furthermore, only FMCG companies with products in diverse product categories were chosen, in order to enhance the likelihood of fit between the results for a certain product category and the FMCG corporation. This means that FMCG corporations that produce products solely for food and beverages such as PepsiCo, Heineken and Coca Cola as well as FMCG corporations whose portfolio is bounded to one industry sector such as Beiersdorf or Kao, were excluded from this pretest. The selection of the six corporations was based on interviews with ten participants who were asked to recall FMCG companies (see Appendix A1). The seals of approval tested, are common seals used in the

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FMCG industry. As there are no international seals, Germany has been chosen as the country of origin for the seals of approval used.

Pretest 1

The objective of the first pretest was to choose an appropriate corporate brand, a seal of approval and a product brand. First, the pretest needed to ensure that participants hold similar perceptions of the two endorsers. Otherwise, the impact of the endorsers on the perceived product quality would have been biased. The two endorsers had to be similar in terms of the following criteria: Familiarity, likeability, credibility and quality associations. Second, participants had to state their quality perceptions with the eight different product categories and their fit to the provided FMCG companies. The former was essential for the purposes of the research, since quality perceptions were to be transferred from the endorser to the product brand. The latter was especially important, because fit is seen as a prerequisite for association transfer (cp. Berens et. al, 2005).

In order to pinpoint the corporate brand for the main study, the pretest was given to 14 voluntary participants, who were similar to the actual sample in the main study. Six different corporate logos were presented, followed by questions regarding their familiarity, likeability, credibility, and quality associations (see Appendix A2). All questions had to be ranked on a 5‐point Likert scale. The same questions were asked to pinpoint the seal of approval for the main study (see Appendix A2).

In the second part, participants were asked about their quality perceptions of eight different product categories and their perceived fit to each of the six FMCG companies on 5-point Likert scales (see Appendix A2). The eight product categories used for the pretest were

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selected based on interviews with ten people, who were asked for which consumer goods quality is relevant to their decision making (see Appendix A1).

In order to choose a corporate brand and a seal of approval, results regarding the corporate brand and the seal had to be satisfying, and both endorsers had to be rated similarly in order to guarantee comparability. First, respondents needed to be familiar with the corporation and the seal, in order to ensure association transfer from the endorser to the product (Aaker, 2004; Haenraets et al., 2012). To ensure this, the means of familiarity needed to be higher than 3. Second, likeability needed to score between 2.5 and 3.5, to ensure that participants were holding relatively neutral perceptions about the corporate brand as well as the seal of approval (Keller & Aaker, 1992). This was important because likeability could have biased the participants’ quality perceptions of the two endorsers. Furthermore, the corporation and the seal needed to be highly credible, as this is likewise important for the transfer of quality perceptions (Aaker, 2004; Conelly et al., 2011; Erdogan, 1999). Here, the means score needed to be at least 3. Moreover, quality associations needed to be also rated significantly above 3 to ensure that quality perceptions of the endorsers were diagnostic and accessible (cp. Feldman & Lynch, 1988).

The results of the first pretest are shown in tables 1 to 4. Most of the participants were highly familiar with Henkel (M=4.64, SD=.610) and Nestlé (M=4.92, SD=.276) and unfamiliar with Reckitt Benckiser (M=2.29, SD=1.532). Johnson & Johnson (M=3.43, SD=1.294), P&G (M=3.71, SD=1.030) and Unilever (M=3.79, SD=1.319) were rated only marginally above 3, but are still appropriate for the main study. Regarding likeability, Unilever scored highest (M=3.89, SD=.583) ahead of P&G (M=3.52, SD=.530) and Johnson & Johnson (M=3.47, SD=.616). Even if those means were slightly above the proposed range, the chosen corporation needed to be comparable with the seal of approval. As the seals were rated highly in terms of likeability (see table 2), the corporate brand used should be comparable. Hence,

Corporate brand endorsement : the corporate brand as a signal of quality